1. WHITE GOLD MARINE SERVICES INC vs PIONEER INSURANCE AND SURETY CORPORATION ; STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD> Insurance contract : PD612 S2(2) : whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event> Nature of the promise, the act required to be performed and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite determines WON a contract is insurance, not by what it is called.

→ WGMSI : procured a protection and indemnity coverage for its vessels from ←SMUA(B) Ltd. through ← PISC- ← PISC issued a certificate of entry and acceptance in favor of → WGMSI- ← PISC also issued receipts evidencing payment for the coverage- → however failed to fully pay its accounts, causing ←SMUA to refuse renewal of the coverage

← SMUA : filed a case against → for collection of sum of money to recover →’s unpaid balance

→ WGMSI : filed an [administrative] complaint before the IC- ←SMUA violated PD612 S186 [capital and asset requirements + IC certification] and S187 [IC certification of authority]- ←PISC violated PD612 S299 [IC license for insurance brokers] S300 [Entity acting as a broker shall be liable as insurance agent] and S301 [Entity acting as a broker shall

be liable as insurance broker]

IC ↓ dismissed →’s complaint- No need for ←SMUA to obtain a license since it was not engaged in the insurance business

o ←SMUA was a “Protection and Indemnity Club”- No need for ←PISC to obtain another license as insurance agent or broker since ←SMUA was not engaged in the insurance business

o ←PISC was already licensed, a separate license solely as an agent/broker of ←SMUA would be superfluous

CA ↓ affirmed decision of the IC- Protection and Indemnity Club is different from conventional insurance ; ←PISC merely acted as a collection agent for ←SMUA

→ and ← admit that- ←SMUA is a protection and indemnity club and that it had no license to conduct business locally ; thus ←PISC is its resident agent

o Relationship is reflected by IC’s certification

I. WON ←SMUA [a P&I Club] is engaged in the insurance business? YES ; IT IS A MUTUAL INSURANCE COMPANY ENGAGED IN MARINE INSURANCE BUSINESS

→ : ←SMUA is engaged in the insurance business- ↑Hyposung Maritime Co. Ltd vs CA : P&I Club = an association composed of shipowners in general who band together for the specific purpose of providing insurance

cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of third parties- ←SMUA’s primary purpose is to solicit and provide protection and indemnity coverage ; engaging PISC as its agent

← SMUA : it is not engaged in the insurance business- Merely an association of vessel owners who come together to provide mutual protection against liabilities incidental to shipowning- ↑ Hyposung Maritime Co. Ltd vs CA is not applicable because the issue in the case involves the jurisdiction of the court over Hyposung

PD612 S2(2) (2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include (a) Making or proposing to make, as insurer, any insurance contract; (b) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

↓ Nature of the promise, the act required to be performed and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite determines WON a contract is insurance, not by what it is called.

↓ Insurance contract = contract of indemnity- PD612 S2(1) x x x one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event- Marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to marine adventure- PD612 S99 lists the coverage of marine insurance

o SS(1) Insurance against loss or damage to: Vessels, craft, aircraft, vehicles, goods, freights, cargos, merchandise, effects, disbursements, profits, moneys, securities x x x and all other kinds of property x x x in

respect to x x x any and all risks of navigation, transit or transportation, or while being assembled, packed, x x xor similarly prepared for shipment x x x Person or property in connection with x x x marine, inland marine, transit or transportation insurance, including x x x loss or damage x x x [in] construction, repair,

operation, maintenance, or use of the subject matter Precious stones, jewels, jewelry, precious metals, whether in the course of transportation or otherwise Bridges, tunnels and other instrumentalities of transportation and communication [excluding buildings, their furniture and fixings x x x] piers, wharves, docks and

slips, and other aids of navigation and transportation, including dry docks and marine railways, dams x x x waterway controlso SS(2)Marine protection and indemnity insurance against or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering,

maintenance, use, repair, or construction of any vessel, craft, or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person

↓ Mutual insurance company = a cooperative enterprise where the members are both the insurer and the insured- Members all contribute, by a system of premiums or assessment- Aggregate fund used to pay for liabilities and losses- Profits are divided among themselves in proportion to their interest

↓ Mutual insurance associations / Clubs provides three types of coverage- War risks = covers damage due to acts of war [invasion, insurrection, rebellion and hijacking ; weapons of mass destruction]- Defense costs = club provides [legal] defense [expense] to its insured-members- Protection and indemnity = insurance against third party liability ; 3rd party is anyone other than the P&I Club and its members

o Thus by definition, ←SMUA is a mutual insurance association engaged in the marine insurance business

↓ : ←SMUA is doing business without the requisite certificate of authority mandated by PD612 S187- It maintains a resident agent [PISC] to solicit insurance and to collect payments in its behalf- ←SMUA even renewed its P&I Club cover until it was cancelled due to non-payment of the calls- Thus, ←SMUA or through its agent ←PISC must secure a license from the insurance commission

o Contract of insurance involves public interest making State regulation a necessity ; PD612 S187 [IC Certificate of Authority]

II. WON ←PISC needs a license as an insurance agent/broker of ←SMUA? YES ; ALTHOUGH ← PISC HAS THE CERTIFICATE OF AUTHORITY / LICENSE TO CONDUCT INSURANCE BUSINESS, PD612 S299 REQUIRES A SEPARATE LICENSE FROM THE IC TO ACT AS AN AGENT

↓ : ←PISC is the resident agent of ←SMUA as evidenced by the certificate of registration issued by the IC- Licensed to do or transact business by virtue of the certificate of authority issued by the same agency- However, ←PISC does not have a separate license to be an agent/broker of ←SMUA

↓ : ←PISC is already licensed as an insurance company, but it still needs a separate license to act as insurance agent for ←SMUA

PD 612 S299 x x x No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter.

↓ : The Court cannot grant →WGMSI’s request for the revocation of ←PISC’s COA and removal of its directors and officers because it is not the proper forum

2. VERENDIA, RAFAEL vs CA ; FIDELITY & SURETY CO. of the Philippines [Fire policy ; burned-down residential building; over-insurance ; uberrimae fidei]> Insurance Contracts require uberrimae fidei [utmost good faith]> Terms and conditions of the insurance contract are the measure of the insurer’s liability

→ : Insured his residential building located in Tulip Drive, Beverly Hills, Antipolo, Rizal- With P← FSCP Fire Insurance Policy for P385K ; effective between 1980/06/23 to 1981/06/23 with Monte de Piedad Savings Bank as the beneficiary- With Country Bankers Insurance [CBI] for P56K ; expires on 1981/05/12- With Development Insurance [DI] for P400K ; expires on 1981/06/30

1980/12/28 : Insured property was completely destroyed by the fire- → informed P←FSCP but despite demands the latter refused payment under its policy

o → thus filed a complaint with COFI Quezon City praying for the payment of the P385K sum + legal interesto ←FSCP : policy was avoided by reason of over-insurance + → maliciously represented that the building at the time of fire was leased to a certain Garcia,

Roberto on 1980/06/25 when it actually was leased to Garcia, Marcelo

1983/05/24 COFI ↓ : ruled in favor of P←FSCP sustaining the defenses it set up- Insurance Policy P3 was violated by → when it failed to inform P← of his other insurance coverages with CBI and DI

1986/03/31 IAC ↓ reversed the COFI ruling- No misrepresentation concerning the lease contract [Marcelo signed in the name of Roberto Garcia]- Insurance Policy P3 was waived by P← FSCP when it attempted to settle the claim of →

o 1986/04/04 : P← received a copy of the IAC decision which will reach finality by 1986/04/19o 1986/04/21 : P← Filed a motion to extend for 3 days within which to file its MFR [since 1986/04/19 fell on a Saturday and the following day was a Sunday],

which was later granted by the IAC on 1986/04/30o 1986/04/24 : P← filed its MFR but was denied on 1986/10/21

PROCEDURAL ISSUE↑ Garcia vs Buenaventura [1944] : Pendency of a motion for extension of time to perfect an appeal does not suspend the running of the period sought to be extended

- However ROC do not expressly prohibit the filing of a motion for extension of time to file a motion for reconsideration in regard a final order or judgment ; thus resulting in conflicting opinions between magistrates

↑ Habaluyas Enterprises, Inc vs Japson [1986] : Rule shall be strictly enforced that no motion for extension of time to file a motion for new trial or reconsideration shall be filed- Instant case came before formal prescription of the new rule

I. WON the contract of lease submitted by → constituted a false declaration which would forfeit his benefits under S13 of the policy? YES ; TERMS AND CONDITIONS CONSTITUTE THE MEASURE OF INSURER’S LIABILTY ; S13 THEREOF PROVIDES ALL BENEFITS ARE FORFEITED WHEN ANY CLAIM IS MADE WITH FRAUD] + VIOLATION OF THE PRINCIPLE OF UBERRIMAE FIDAE [Utmost good faith]

GENERAL RULE : In Review for Certiorari under ROC R45, Court is limited to the review of errors of lawEXCEPTION : (1) When the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (2) When the inference made is manifestly absurd, mistaken, or impossible; (3) When there is grave abuse of discretion in the appreciation of facts; (4) When the judgment is premised on a misapprehension of facts; (5) When the findings of fact are conflicting [Findings of COFI and IAC are conflicting](6) When the Court of Appeals in making its findings went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee

↓ Contract of lease submitted by → to support his claim was entered between → and Garcia, Roberto on 1980/06/25, a few days after effectivity of the insurance contract- However, on the day of the fire, an investigative report prepared by Patrolman Buenviaje stated that the building had no occupant and that Garcia was renting

another portion of the compound- Garcia disappeared after the fire, and only on 1981/10/09 was he located by an adjuster- Garcia executed an affidavit before the National Intelligence and Security Authority [NISA] : he was not the lessee of →’s house ; signature was forged

↓ : → latter admitted that it was Robert’s cousin Marcelo Garcia who was paying rent all the while [did not provide reason for the ruse]

P←FSCO : → shifted blame to “lessee” ; Inflated the value of the property by the alleged monthly rental of P6,500 per month- Provincial Assessor of Rizal : Fair Market Value of only P40,300- Insured the property for the total of P900K and created a dead-end for the adjuster by the disappearance of Robert Garcia

↓ Contract of insurance is a contract of indemnity- Contract is the law between the party- Terms and conditions constitute the measure of insurer’s liability and compliance therewith is a condition precedent to the insured’s right to recover - Also a contract of adhesion [terms and conditions are set by one party ; other party has little or no ability to negotiate more favorable terms = take it or leave it]

o Thus should be liberally construed in favor of the insured and strictly against the insurer which usually prepares it

↓ However, since → used a false lease contract to support his claim, the terms of the policy should be strictly construed against the insured →.

- → failed to live by the terms of the policy , specifically S13 [All benefits shall be forfeited if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy]

- → by presenting a false lease contract, reprehensibly disregarded the principle that contracts are uberrimae fidae and demand the most abundant good faith

II. WON in submitting the subrogation receipt in evidence, P←FSCP had in effect agreed to settle →’s claim in the amount stated in the receipt? NO ; P← DID NOT SIGN IT ; RECEIPT FURTHER STATES THAT → ALREADY RECEIVED THE AMOUNT WHICH IS CONTRADICTORY TO HIS PRESENT CLAIM

↓ P←’s submission of the subrogation receipt does not bind P← to a “mutual agreement” to settle →’s claim in consideration of the amount of P142,685.77- Although receipt appears to have been a filled-up form of P←, no representative of P← had signed it- Receipt is incomplete

o Blank spaces for witnesses + no address providedo Receipt states that → already received the amount [which he had not because → filed a claim]

3. RIZAL SURETY & INSURANCE COMPANY vs CA and TRANSWORLD KNITTING MILLS, INC [Fire insurance policy ; four-span lofty storey building ; annex building ; Adhesion ]> Terms of the policy constitute the measure of the insurer's liability

1980/03/13 : → Rizal Insurance issued a Fire Insurance Policy in favor of P← Transworld initially for P1M which was later increased to P1.5M [1980/08/14 to 1981/03/13]

"‘On stocks of finished and/or unfinished products, raw materials and supplies of every kind and description, the properties of the Insureds and/or held by them in trust, on commission or on joint account with others and/or for which they (sic) responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound at MAGDALO STREET, BARRIO UGONG, PASIG, METRO MANILA, PHILIPPINES, BLOCK NO. 601.’ x x x x x x x x x

‘Said building of four-span lofty one storey in height with mezzanine portions is constructed of reinforced concrete and hollow blocks and/or concrete under galvanized iron roof and occupied as hosiery mills, garment and lingerie factory, transistor stereo assembly plant, offices, warehouse and caretaker's quarters. x x x

P← also insured the same property with New India Assurance Company Ltd [NIAC, Ltd]

1981/01/12 : A fire broke out in P←’s compound- Middle portion of its four-span building was razed ; Left and right sections were partly gutted- A 2-storey building [behind the four-span building] with fun and amusement machines and spare parts are stored was also destroyed by the fire

1982/05/26 P← filed its claim against → and NIAC, Ltd to no avail thus prompting it to file an action for collection with COFI, Rizal- → RSIC and NIAC to pay P2,747,867.00 + legal interest ; P400K as AF’s + ED + P50K Expenses of Litigation + Cost of suit

→ : Insurance policy only covered the contents of the four-span building which was partly burned and not the damage caused to the 2-storey building

1990/01/04 COFI ↓ : Dismiss the case against NIAC, Ltd ; → to pay P← P826,500 [actual value of the losses] ; costs against →

1993/07/15 CA ↓ : Modified COFI ruling- NIAC, Ltd to pay P1,818,604.19 [Out of its policy claim of P5.8M]

o NIAC, Ltd appealed to the SC allegedly because P← had no insurable interest in the razed 2-storey building SC ↓ denied the appeal with finality

- RSIC to pay P470,328.67 [Out of the its policy claim of P1.5M]o Both → and P← interposed a MFR before the CA

CA ↓modified its earlier ruling by imposing legal interest

I. WON → RSIC’s fire policy covered the two-storey building? YES ; 2-STOREY BUILDING IS COVERED BY THE TERMS AND CONDITIONS OF THE POLICY

→ : policy protected only the contents of the main building [four-span] and did not include those stored in the 2-storey annex buildingP← : “Annex” building was not an annex but an integral part of the four-span building therefore covered by the same policy

Fire Insurance Policy : xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx

↓ Clearly, the policy is not limited to what were stored in the four-span building- COFI correctly provided the concurring requirements that would place the destroyed fun and amusement machines in the coverage of the policy

o That the property were contained or stored in the areas occupied by P←o That said areas must form part of the building described in the policy

↓ Factual findings of the CA are conclusive on the parties and not reviewable by the Court- Carries more weight when affirmed by the findings of fact by the lower court

o Both COFI and CA found that the so-called “annex” were not annex buildings but integral and inseparable from the four-span building o Thus the machines and spare parts stored within were covered by the policy

- Letter-report of the Manila Adjusters and Surveyor’s Company [which → cited and invoked] described the “annex” building as:o 2-storey building x x x is constructed under a g.i. roof which is adjoining and intercommunicating with the repair of the first right span of the lofty storey

building and thence by the property fence wall

↓ Thus it is a permanent structure within the purview of the coverage of the policy↓ Further the two-storey building was already existing when the insurance was perfected ; → should have excluded it specifically

Doubt as to the coverage of the policy

CC A1377 The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity- Thus that doubt should be resolved against →, whose lawyers / managers drafted the policy

II. WON P← has an insurable interest in the fun and entertainment machines and spare parts? YES ; ALREADY RESOLVED IN NIAC vs CA

↓ : already resolved in ↑ New India Assurance Co vs CA : conclusiveness of previous judgment applies to the subsequent case on matters directly controverted and determined- CA also held that → was liable for P470,328.67 it being the total loss and damage suffered by P←

4. PHILAMCARE HEALTH SYSTEMS, INC vs CA ; TRINOS, JULITA [HCA ; Heart Attack ; Question of Opinion ; Contract of Adhesion]> HCA are in the nature of non-life insurance which is a contract of indemnity, thus payment should be made to the one who paid for the expenses [P← although she is not the legal wife paid for the expenses]> Elements of an insurance contract [listed below]> Requisites for the cancellation of an HCA

P←’s deceased husband Trinos, Ernani applied for a health care coverage with →PHSI ; answered no in the following question:- Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or

peptic ulcer? (If Yes, give details).

→ : approved the application for 1 year ; 1988/03/01 – 1989/03/01- Hospitalization benefits [ordinary or emergency] + out-patient benefits [annual physical exams ; preventive health care ; other out-patient benefits]- Upon termination, the same was extended from 1989/03/01 – 1990/03/01 then from 1990/03/01 -1990/06/01

o Amount of coverage was increased to the maximum of P75,000.00 per disability

Trinos, Ernani suffered a heart attack and was confined at the Manila Medical Center for 1 month [1990/03/09]- P← tried to claim the benefits which → denied because allegedly the agreement was void ; she paid the P76,000.00 hospitalization herself- → : there was concealment regarding the medical history

o Doctors discovered that Ernani was hypertensive, diabetic and asthmatic, contrary to his answer in the application form.- Ernani was discharged from the MMC and was attended by a PT at home

o Latter admitted to the Chinese General Hospital but was brought home again because of financial difficultieso 1990/04/13 : Ernani had a fever and was brought to the CGH again where he died

1990/07/24 P← : filed an action for damages with the RTC against → and its president Dr. Reverente ; damages + MD + AF

RTC ↓ : In favor of P← ; → to pay/reimburse medical and hospital coverage of P76K plus interest + P10K MD + P10 ED + P20K AF

CA ↓ : Affirmed decision of RTC but deleted all awards for damages and absolved Dr. Reverente

→ : petition for review ; Health Care Agreement is not an insurance contract thus “incontestability clause” under PD612/1460 S48does not apply- Agreement grants “living benefits” such as medical check-ups and hospitalizations which a member may enjoy so long as he is alive upon effectivity until

its expiration 1 year thereafter- HCAs also provide that benefits are given without any indemnification unlike in an insurance contract [where the insured is indemnified for loss]- HCAs are only for a period of one year, as compared to insurance contracts which last longer thus the incontestability clause does not apply [because

the latter requires an effectivity period of at least 2 years]- It is not an insurance company [thus not under the IC] but a Health Maintenance Organization [under the DOH]

I. WON the health care agreement is an insurance contract? YES ; THE AGREEMENT HAS ALL THE ELEMENTS OF AN INSURANCE CONTRACT ; HCAs ARE IN THE NATURE OF NON-LIFE INSURANCE

↓ PD612 S(2)(1) a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event

INSURANCE CONTRACT ELEMENTS1. The insured has an insurable interest;2. The insured is subject to a risk of loss by the happening of the designated peril;3. The insurer assumes the risk;4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and5. In consideration of the insurer’s promise, the insured pays a premium.

PD612 S3 : Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured againstPD612 S10 : Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; x x x

↓: P←’s husband had an insurable interest in his own health- HCA was in the nature of a non-life insurance = a contract of indemnity- If a member incurs hospital, medical or any other expense arising from sickness et al or other stipulated contingent, the health care provider must pay for the same

II. WON P←’s husband concealed a material fact in his application? NO ; IT IS A QUESTION OF OPINION AND WHEN ANSWERED IN GOOD FAITH and WITHOUT INTENT TO DECEIVE, WILL NOT AVOID A POLICY EVEN IF UNTRUE ; FURTHER, CONCEALMENT IS AN AFFIRMATIVE DEFENSE THUS REQUIRED TO BE ESTABLISHED BY THE INSURER

HCA Stipulationsx x x that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members

x x x any and all information relative to any hospitalization, consultation, treatment or any other medical advice or examination. This authorization is in connection with the application for health care coverage only. x x x

x x x Failure to disclose or misrepresentation of any material information in the application/medical examination, whether intentional or unintentional, x x x automatically invalidates the Agreement from the very beginning and the liability of Philamcare shall be the return of all membership fees paid. x x x Information is material if it would result in declination of the applicant or the assessment of a higher membership fee x x x

↓ : Answer assailed by → are questions of opinion rather than fact especially coming from the deceased husband who was not a medical doctor- Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue

↓ Fraudulent intent of the insured must be established to warrant a rescission of the insurance contract- Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory

and convincing evidence rests upon the provider or insurer

PD612 S27 Concealment entitles the injured party to rescind a contract of insurance

↓ The right to rescind should be exercised previous to the commencement of an action on the contract- No rescission was made in this case

↓ Further cancellation of HCAs in insurance policies require the concurrence of the following- Which none were fulfilled

CANCELLATION OF HCAs ; Requisites1. Prior notice of cancellation to insured;2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based

↓ When the insurance contracts contain limitations on liability, they should be construed in such a way as to preclude the insurer from non-compliance- Insurance contracts are contracts of adhesion, thus they are to be construed strictly against the party that prepared the contract and liberally in favor of the insured

o Principle is applicable in HCAs

↓ Anent the incontestability, the RTC was correct in holding that : under the title Claims procedure of expenses, ← had 12 months from date of issuance of the HCA within which to contest the membership of the patient if he had previous ailment of asthma, and 6 months from issuance if the patient was sick of diabetes or hypertension.

- The periods expired without ← contesting the membership, thus the defense of concealment or misrepresentation no longer lie

↓ Although P← was not the legal wife [deceased was previously married to another woman who was still alive], HCA is in the nature of a contract of indemnity- Thus payment should be made to the party who incurred the expense [which P← paid for]

CONCLUSION : Affirm CA decision

5. FORTUNE INSURANCE AND SURETY CO, INC vs CA ; PRODUCERS BANK OF THE PHILIPPINES [ Casualty insurance ; robbery ; armored vehicle ]> Casualty insurance : insurance against loss/liability from accident or mishap [except fire / marine and motor vehicles]

P← filed a case against → to recover P725K under the policy issued by →

Stipulation of facts by both parties- Sum was allegedly lost during a robbery of P←’s armored vehicle while in transit in Taft Avenue, Pasay City [Pasay City Branch to Makati Head Office]- Driver Magalong and Guard Atiga were charged together with Bantigue, Aquino and John Doe of violation of PD532 Anti Highway Robbery Law- → refused to pay the amount because the loss is excluded from the coverage of the insurance policy [exclusion for the criminal acts of employees]- P← argued that the driver and guard were not their officers, employees, or trustee or authorized representative at the time of robbery

1990/04/26 RTC, Makati ↓ : → to pay P← P540K as liability under the policy [mitigated by special clause deduction P40K + recovered sum of P145K] with interest + 30K AF - Magalong and Atiga were not employees / representatives of P←

o They were offered by PRC Management and by Unicorn Security respectively [they paid the salaries and exercises control over them]

CA ↓ agreed with the conclusion of the RTC that Magalong and Atiga were neither employees nor authorized representatives of P←- Labor code definition of employee cannot be applied since the insurance policy did not provide for its application ; thus its ordinary meaning controls- Magalong and Atiga cannot be considered as employees because P← had no power to hire or dismiss them under the contracts

→ : Magalong and Atiga were either- Authorized representatives : in the care and custody of the money- Employees : existence of E-E relationship is determined by law [Labor Code] and not subject by agreement [thus stipulation that P← is not the employer would not

obliterate relationship]- Standards for determining employment relationship (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3)

the presence or absence of a power to dismiss; and (4) the presence and absence of a power to control the putative employee's conduct [most decisive]- PRC Management System and Unicorn Security are but “labor-only” contractors under PD442 S106 [making them merely agents]- ↑ Timber Corp vs NLRC : if a contractor is a “labor-only” contractor = there is E-E relationship between the project owner and the employees of said contractor

P← : Magalong and Atiga were not their employee- Nothing to do with selection and engagement ; payment of wages ; dismissal ; nor control of their conduct- ↑ Timber Corp vs NLRC is not applicable to all cases ; only to prevent circumvention/violation of PD442- P← paid PRC Management System for the services rendered by Magalong- P← : Security Contract stipulation : Guards are in no sense employees of the “Client”.

↓ Insurance policy entered into by the parties is a theft or robbery insurance = form of casualty insurance

PD612 S174 Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of insurance such as fire or marine. It includes, but is not limited to, employer's liability insurance, public liability insurance, motor vehicle liability insurance, plate glass insurance, burglary and theft insurance, personal accident and health insurance as written by nonlife insurance companies, and other substantially similar kinds of insurance

I. WON → was liable for the casualty insurance? YES ; MAGALONG AND ATIGA ARE AUTHORIZED REPRESENTATIVES / AGENTS FOR THE TRANSFER OF THE SUM

↓ Except w/ respect to compulsory motor vehicle insurance, the IC contains no other provision applicable to casualty insurance or to robbery insurance in particular- Therefore, contracts are governed by the general provisions applicable to all types of insurance- Outside of those, rights and obligations are governed by the terms of the contract along with its purpose and general principles of insurance laws

↓ In burglary, theft and robbery insurance, opportunity to defraud the insurer is so great that countless restrictions are put in place- Such as exceptions of the insured’s own service and employment [have unrestricted access to the property]- Service and employment are generally associated with the idea of selection, control and compensation- Contract of adhesion discussion : Limitations of liability should be regarded with extreme jealousy and must be construed in such a way, as to preclude the insurer

from noncompliance with its obligation

Stipulation in the policy : GENERAL EXCEPTIONS : The company shall not be liable [for] x x x (b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee, or authorized representative of the Insured whether acting alone or in conjunction with others

↓ “Employee” as intended by → in the stipulation, is any person who qualifies as such generally and universally understood / as under the 4 standards / as statutorily declared under PD442 S106

↓ : Issue of employment is a question of fact- However → and P← submitted the case for judgment on the basis of their stipulation of facts [limited to the insurance policy, contracts of PRC Management Systems

and Unicorn Security, the complaint for violation of PD532, and information filed with Pasay City Fiscal] ; ↓ cannot determine if employees under PD442 S106

↓ : Even if PRCMS and US were not labor-only contractors ; Magalong and Atiga were authorized representatives as much as its teller Alampay, Maribeth [custodian]- The 3 were entrusted with the specific duty to safely transfer the armored vehicle, thus they were “agents” of P←- Representative = one who represents or stands in the place of another; one who represents others or another in a special capacity, as an agent, and is

interchangeable with "agent."

6. GULF RESORTS , INC vs PHILIPPINE CHARTER INSURANCE CORPORATION> Provisions of the insurance policy are to be read together to ascertain the true intent of the parties

→ owner of Plaza Resort [Agoo, La Union] and had its properties insured originally by American Home Assurance Company [AHAC-AIU]- 1st 4 insurance policies [1984-1988] : risk of loss from earthquakes extended only to 2 swimming pools (item 5) [thus earthquake shock endorsement]- 5th insurance policy 1988/03/14 – 1989/03/14 : Earthquake endorsement clause deleted [thus it appears that all properties were covered]- However, the entry under endorsements/warranties read that → renewed its policy from 1989/03/14 – 1990/03/14

o This included under endorsement/warranties at time of issue had earthquake shock coverage for P10,700 and paid the premium of P42,658.14

← had properties insured with → under policy 31944 [1990/03/14 – 1991/03/14] for P10,700,600 for a total premium of P45,159.92 with the following breakdown- One stipulation provided that : this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence

of earthquake

Breakdown of property valuation and rates for premium [AHAC-AIU’s last policy]P7,691,000 – Clubhouse only @ .392%P1,500,000 – Furniture contained in building above @.490%P393,000 – on two swimming pools only [against peril of earthquake shock only] @.100% [P393.00 premium]P116,000 – other buildings with their furniture fixtures

Premium P37,420.60 F/L [Under ← PCIC]2,061.52 Typhoon1,030.76 EC393.00 ESDoc. Stamps 3,068.10F.S.T. 776.89Prem. Tax 409.05

1990/07/16 : An earthquake struck Central and Northern Luzon damaging →’s property

→ advised ← that it would make its claim under policy 31944 for damages on its properties by the earthquake- ← instructed → to make a formal claim then assigned the investigation to independent claims adjuster Bayne Adjusters and Surveryors- BAS VP reported that there were extensive damages caused by the earthquake to the clubhouse and to the 2 swimming pools- 1990/08/11 → made formal demands for damages ; however ← denied the claim : insurance policy only afforded earthquake shock coverage to the 2 pools- 1991/01/24 → filed a complaint with RTC Pasig [P5.4M for actual losses ; P428K / month as continuing losses ; P500K ED ; P500K AF and expense of litigation

1994/02/21 RTC ↓ : In favor of ←- → paid the premium of P393.00 against earthquake shock, the same premium it paid against shock only on the 2 swimming pools in the policies issued by AHAC-AIU- Thus the endorsement rider (Exhibit 7-C]) means that only the two swimming pools were insured against earthquake shock- Contract is clear and unambiguous ; Only the 2 swimming pools had earthquake shock coverage- ←’s adjuster valuated the damage to the pool at P386,000 ; thus ← is liable for that amount - No basis for ED since ← was willing to settle the amount [at least the lower and “proper” amount]

CA ↓ Affirmed RTC decision- Last two insurance contracts with AHAC-AIU upon which ←’s policy 31944 was based/copied covered an extended earthquake shock insurance on all properties

I. WON the PCIC policy accorded protection to all the properties or only to the 2 swimming pools? ONLY TO THE 2 SWIMMING POOLS

Item 3 - P393,000.00 – On the two (2) swimming pools only (against the peril of earthquake shock only)Premium payments section – Amount : P393K ; Rate : .100% E/S ; Premium : P393.00Policy condition 6 - This insurance does not cover x x x (a) Earthquake, volcanic eruption or other convulsion of natureRider attached : Extended Coverage Endorsement (To Include the Perils of Explosion, Aircraft, Vehicle and Smoke x x x Earthquake endorsement : this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this Policy occasioned by or through or in consequence of Earthquake.

→ : rider attached did not place any qualification on earthquake shock coverage ; thus coverage extends to all insured properties- ↑ Ruiz vs Sheriff of Manila : All provisions should be examined and interpreted in consonance with each other [similar to Ut res magis valeat quam pereat]

↓ : All parts of the contract is reflective of the true intent of the parties- Policy cannot be construed piecemeal ; stipulations cannot be segregated and then made to control- Thus → cannot focus on the earthquake endorsement to the exclusion of other provisions- All provisions and riders indubitably show that the parties intended to extend earthquake shock coverage to the 2 pools only

INSURANCE CONTRACT REQUISITES1. The insured has an insurable interest;2. The insured is subject to a risk of loss by the happening of the designated peril;3. The insurer assumes the risk;4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and5. In consideration of the insurer's promise, the insured pays a premium

↓ Premium : the consideration paid an insurer for undertaking to indemnify the insured against a specified peril- Premium payable becomes a debt as soon as the risk attaches- No premium payments were made except for the 2 pools

↓ : →’s citation of the phrase : Subject to: Other Insurance Clause, Typhoon Endorsement, Earthquake Shock Endorsement, Extended Coverage Endorsement, FEA Warranty & Annual Payment Agreement on Long Term Policies in the policy is misplaced ; it is merely an enumeration of the descriptive titles of the riders and clauses

- Interview of witnesses : deletion of original phrase in AHAC-AIU policy was merely inadvertent

7. MANILA MAHOGANY MANUFACTURING CORPORATION vs CA ; ZENITH INSURANCE CORPORATION [Mercedes Benz ; collision ; deficiency ; release of claim ; subrogation]> Insured may seek the deficiency from the wrongdoer but cannot release the latter from future actions> Should the insured release the wrongdoer to the detriment of the insurer, the latter may seek reimbursement of its payments to the former> Payment of the proceeds of the policy subrogates the insurer to whatever rights the insured may have against the wrongdoer

→ insured its Mercedes Benz 4-door sedan with P← for the period of 1970/03/06 – 1971/03/06 - 1970/05/04 the vehicle was bumped and damaged by a truck owned by San Miguel Corporation- P← paid → P5K in amicable settlement ; →’s GM executed a release of claim, subrogating P← to all its right of action against SMC

P← wrote to Insurance Adjusters, Inc to demand reimbursement from SMC of the amount it paid to →- Insurance Adjusters, Inc refused to reimburse P← since SMC already paid → of P4,500 for the damages [evidenced by cash voucher and a release of claim of →]

P← demanded reimbursement of the sum of P4,500 paid by SMC which → refused, prompting P← to file a suit with City Court, Manila

CC, Manila ↓ : →should pay P← P4,500COFI ↓ affirmed CC, Manila decision in totoCA ↓ affirmed with modification of amount to P5,000.00

→ : not bound to pay P4,500 or P5000 to P← since subrogation in the release of claim was conditioned on recovery of the total amount of damages- Total damages was valued at P9,486.43 ; P← only paid P5,000.00 so it sought P4,500 from SMC- P← release of claim did not provide for →’s alleged qualification

→ cites- CC A2207 If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or

breach of contract complained of the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

- CC A1304 A creditor, to whom partial payment has been made, may exercise his right for the remainder, and he shall be preferred to the person who has been subrogated in his place in virtue of the partial payment of the same credit.

I. WON → can still claim the alleged remainder of its claim from SMC and refuse to pay P←?

↓ No evidence to support “gentleman’s agreement” [that → may seek “balance” from SMC and that the release of claim was conditioned on full claim of damages]

↓ CA correct in holding that:- Even if → had the right to file a deficiency claim against SMC on legal basis without prejudice to the insurer’s right to subrogation, → nevertheless executed a release

of claim in favor of SMC discharging the latter from all actions, claims, demands and ROA” after insurer paid the proceeds of the policy- → released SMC thereby defeating P← of its right of subrogation ; thus P← may recover the P5,000.00 sum it earlier paid

↑ PAL vs Heald Lumber Co : If a property is insured and the owner receives the indemnity from the insurer, it is provided in [Article 2207 of the New Civil Code] that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party is the one entitled to recover the deficiency. ... Under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured

↓ CA also correct in holding that:- → is entitled to keep P4,500 that was paid by SMC- However, when → released SMC from any liability

↓ If insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the remainder- The insurer can be subrogated to only as such rights as the insured may have [thus the insurer has the right of subrogation for that amount it paid]- However, if the insured, after being indemnified, releases the wrongdoer who caused the loss, the insurer loses his rights against the latter

o In such case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the release was made with the consent of the insurer

8. FEDERAL EXPRESS CORPORATION vs AMERICAN HOME ASSURANCE COMPANY ; PHILAM INSURANCE COMPANY INC[Veterinary biological / vaccines ; refrigerated when not in transit / perishable ; subrogation of insurer in the place of consignee ; airway bill stipulations ; Warsaw convention ; notice of claim ; prescription]> For shipments, the shipper/consignee [or the insurer when subrogating the former] must give a notice of claim to the carrier within the time limitations

1994/01/26 Smithkline Beecham of Nebraska, USA delivered to Burlington Air Express [Burlington ; agent of → FEC] a shipment- 109 cartons of veterinary biological : to be delivered to consignee Smithkline and French Overseas Company in Makati City- Shipment was covered by Burlington Airway Bill with the words refrigerate when not in transit and perishable stamp marked on its face- Burlington insured the cargoes in the amount of $39,339.00 with ← AHAC and turned over the same to FEC- 1994/01/29 : First shipment of 92 cartons arrived in Manila and stored in Cargohaus Inc’s warehouse- 1994/01/31 : Second shipment of 17 cartons arrived in Manila ; likewise stored in the same warehouse

Prior to arrival of the cargoes, FEC informed GETC Cargo International Corporation [the customs broker hired by consignee] to facilitate the release of its cargoes from BOC- 1994/02/10 : Dioneda, Dario [non-licensed custom broker of GETCCIC] found out that only 2 air-conditioners, instead of refrigerators were used to cool the goods

o Cargohaus Inc employees stated that the vaccines specifically indicated that it should not be subjected to hot or cold temperatureso Dioneda did not proceed with the withdrawal but took samples for testing with the Bureau of Animal Industry

ELISA reading of vaccinates sera are below the positive reference serum.

Smithkline thus abandoned the shipment declaring a total loss- Filed a claim against ← through its representative in the Philippines, P←- P← paid Smithkline for the whole insured amount of $39,339.00 ; latter filed an action for damages against → imputing negligence

1997/03/18 RTC ↓ : → solidarily liable ; Actual damages of $39,339.00 + interest ; AF P50K

CA ↓ Affirmed RTC decision- USDA Test Report was found inadmissible as evidence- Shipping receipts were prima facie proof that the goods had been delivered to the → in good condition

o Shipping receipts show that the goods were delivered to the carrier and good conditiono Carrier then delivered the goods in a damaged conditiono Thus there is a presumption that the damage occurred through the fault or negligence of the carrier

I. WON the SC may review the petition? YES ; QUESTION OF LAW [of the legal conclusions drawn from the undisputed facts]

↓ Correctness of legal conclusions drawn by the CA from undisputed facts is a question of law cognizable by the SC- Facts are undisputed and → is only questioning the conclusions drawn from such facts

II. WON →FEC is liable for damage or loss of the insured goods? NO ; THE CLAIM HAS ALREADY PRESCRIBED SINCE ← FAILED TO FILE A CLAIM WITHIN THE LIMITATIONS SET FORTH IN THE AIRWAY BILL / WARSAW CONVENTION

→ : ← had no personality to sue [thus no COA] because the payment made to Smithkline was erroneous- Both parties cite the Certificate of Insurance, each having different interpretation of what their rights are under the terms

PROPER PAYEECertificate : that loss of or damage to the insured cargo is "payable to order x x x upon surrender of this Certificate.

- Wording : right of collecting [proceeds of the insurance] on any such damage/loss is on the holder of the certificate- Burlington representative signed the back of the certificate : thus it was indorsed in blank = bearer instrument- Smithkline was in the possession of the certificate thus that latter had the right of collecting or being indemnified for loss/damage as if the policy were covered by

a special policy in the name of the holder + they had an insurable interest in the goods

SUBROGATION↓ Upon receipt of the insurance proceeds, the consignee [Smithkline] executed a subrogation receipt in favor of ←

- Thus ← was authorized to file claims and begin suit against any such carrier, vessel, person, corporation or government- Upon payment to the consignee of an indemnity, the insurer’s entitlement to subrogation pro tanto [to such extent] equips it with a COA in case of contractual

breach or negligence- Jurisprudence upholds the insurer's subrogatory right to sue for recovery under the bill of lading in case of loss of or damage to the cargo- In the exercise of its subrogatory right, an insurer may proceed against an erring carrier

o To all intents and purposes, it stands in the place and in substitution of the consignee A fortiori, both the insurer and consignee are bound by the contractual stipulations under the bill of lading

PRESCRIPTION OF CLAIM

↓ From initial proceedings up to the present, → has tirelessly pointed out prescription- ← and the consignee never filed with → any written notice or complaint regarding its claim for damages/loss to the subject cargo w/in the period required by the

Warsaw Convention and/or in the airway bill [never denied by ← and evidenced by record]

→’s agent Burlington Air Express Airway Bill : 6. No action shall be maintained in the case of damage to or partial loss of the shipment unless a written notice, sufficiently describing the goods concerned, the approximate date of the damage or loss, and the details of the claim, is presented by shipper or consignee to an office of Burlington within (14) days from the date the goods are placed at the disposal of the person entitled to delivery, or in the case of total loss (including nondelivery) unless presented within (120) days from the date of issue of the [Airway Bill].

12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the case:12.1.1 Of visible damage to the goods, immediately after discovery of the damage and at the latest within fourteen (14) days from receipt of the goods;12.1.2 Of other damage to the goods, within fourteen (14) days from the date of receipt of the goods;12.1.3 Delay, within twentyone (21) days of the date the goods are placed at his disposal; and12.1.4 Of nondelivery of the goods, within one hundred and twenty (120) days from the date of the issue of the air waybill.12.2 For the purpose of 12.1 complaint in writing may be made to the carrier whose air waybill was used, or to the first carrier or to the last carrier or to the carrier who performed the transportation during which the loss, damage or delay took place

Warsaw Convention ART. 26.(1) Receipt by the person entitled to the delivery of baggage or goods without complaint shall be prima facie evidence that the same have been delivered in good condition and in accordance with the document of transportation.(2) In case of damage, the person entitled to delivery must complain to the carrier forthwith after the discovery of the damage, and, at the latest, within 3 days from the date of receipt in the case of baggage and 7 days from the date of receipt in the case of goods. In case of delay the complaint must be made at the latest within 14 days from the date on which the baggage or goods have been placed at his disposal.(3) Every complaint must be made in writing upon the document of transportation or by separate notice in writing dispatched within the times aforesaid.(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in the case of fraud on his part

↓ Filing of claim with the carrier within the time limitation therefor is a condition precedent to the accrual to a right of action against a carrier for loss/damage to goods- Shipper / consignee must allege and prove the fulfillment of the condition [of filing the claim]

o Failing to do so results in no ROA accruing in their favor

Reason for the requirement(1) To inform the carrier that the cargo has been damaged, and that it is being charged with liability therefor; and (2) To give it an opportunity to examine the nature and extent of the injury [to investigate a claim while the matter is fresh and easily investigated]

↓ When an airway bill / or any contract for carriage has a stipulation that requires a notice of claim for loss/damage and the stipulation is not complied with, enforcement can be prevented and the liability cannot be enforced against the carrier

↓ Notice of claim is a condition precedent- There is neither an allegation nor a showing of ←’s compliance with the requirement

↓ : ← still has recourse against Cargohaus Inc : →’s codefendant which the RTC has held as liable for actual damages of $39,339 or its peso equivalent which was affirmed by the CA and is final and executory

9. ETERNAL GARDENS MEMORIAL PARK CORPORATION vs PHILIPPINE AMERICAN LIFE INSURANCE COMPANY [ Group life insurance ; Burial lots ; Construction of insurance]> Insurance contract = contract of adhesion ; liberally construed in favor of insured ; strictly construed against insurer

1980/12/10 ←Philamlife entered an agreement denominated as Creditor Group Life Policy with →- Clients of → who purchased burial lots from it on installment basis would be insured by ←- Amount of insurance coverage depended upon the existing balance of the purchased burial lots- Effective for 1 year, renewable on a yearly basis

ELIGIBILITY.Any Lot Purchaser of the Assured who is at least 18 but not more than 65 years of age, is indebted to the Assured for the unpaid balance of his loan with the Assured, and is accepted for Life Insurance coverage by the Company on its effective date is eligible for insurance under the Policy.

EVIDENCE OF INSURABILITY.No medical examination shall be required for amounts of insurance up to P50,000.00. However, a declaration of good health shall be required for all Lot Purchasers as part of the application. The Company reserves the right to require further evidence of insurability satisfactory to the Company in respect of the following:

1. Any amount of insurance in excess of P50,000.00.2. Any lot purchaser who is more than 55 years of age.

LIFE INSURANCE BENEFIT.The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the unpaid balance of his loan (including arrears up to but not exceeding 2 months) as reported by the Assured to the Company or the sum of P100,000.00, whichever is smaller. Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under the Policy.

EFFECTIVE DATE OF BENEFIT.The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company

→ was required under the policy to submit to ← a list of all new lot purchasers + copy of all applications + amounts of the respective unpaid balances of all insured lot owners- 1982/12/29 submitted a letter with a list of insurable balances of its lot buyers for 1982 October which included a certain Chuang, John who had a balance of 100K- 1984/08/02 Chuang died- 1984/08/20 → sent a letter to ← which served as an insurance claim for Chuang’s death

o Letter contained certification of death ; Identification Certificate ; Certificate of Claimant ; Certificate of Attending Physician ; Assured’s Certificateo ← wrote → requiring : (1) Certificate of Claimant (with form attached); (2) Assured’s Certificate (with form attached); (3) Application for Insurance

accomplished and signed by the insured, Chuang, while still living; and (4) Statement of Account showing the unpaid balance of Chuang before his deatho 1984/11/14 → Complied with the requirements which after a year, was not replied to by ←

1986/05/20 ← denied →’s claim- Chuang was 59 years old when he purchased 2 lots from → for a total insurable of P100,000.00 each- No application for Group Insurance was submitted- Policy requires declaration of good health for all lot purchasers- Policy : no insurance if the application is not approved by the Company- Acceptance of premiums not connoted as approval per se but are held in trust for the payor until the prerequisites are complied with- Engages to return the premiums

RTC ↓ in favor of →- ← to pay the sum of P100K with legal interest + AF P10K- → submitted Chuang’s application as evidenced by a letter on 1982/12/29- ←’s inaction from this submission to Chuang’s death as well as their acceptance of the premiums is deemed as approval- Since the contract is a group life insurance : once proof of death is submitted, payment must follow

CA ↓ reversed and set aside RTC ruling- Factual finding that Chuang’s application was not enclosed in →’s 1982/12/29 letter- Non-accomplishment of the submitted application form violated PD612 S26

o Thus no application form = no insurance

I. WON Chuang is covered by the insurance policy? YES ; ←’s INACTION, RECEIPT OF PREMIUMS AND STAMPING → ‘s 1982/12/29 LETTER WITH APPLICATIONS DEEMED AS APPROVAL ; AMBIGUITY OF EFFECTIVE DATE CONSTRUED AGAINST INSURER

↓ : In →’s 1982/12/29 letter [which ← stamped as received]- Insurance forms for the attached list of burial lot buyers were attached in the letter- ←’s stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments

o Burden of proof shifted to ← which must prove that the letter did not contain Chuang’s insurance application ← failed to discharge that burden

Testimonies of →’s witnesses : contain minor inconsistencies that are too trivial to affect credibility

↓ : ← Philamlife assumed the risk of loss without approving the application

Policy stipulation EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with theAssured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

↓ Ambiguity between first and second sentence- Insurance contract = contract of adhesion

o Liberally construed in favor of the insured ; strictly construed against the insurero ↑ Philamcare Health Systems vs CA : When the terms of insurance contract contain limitations on liability, courts should construe them in such ao way as to preclude the insurer from noncompliance with his obligation

- Thus vague contractual provision must be construed in favor of the insured and the effectivity of the insurance contract

↓ Harmonizing the stipulation :- Insurance contract is effective upon purchase/loan with →- But rendered ineffective / terminated upon ←’s disapproval

o Second sentence interpreted as resolutory conditiono Moreover, mere inaction of the insurer on the application must not work to prejudice the insured

↓ Reverse CA ; RTC decision modified : ← to pay → P100K + 6% interest from time of extrajudicial demand until receipt of 1996/05/29 RTC decision + 12% legal interest from 1996/06/17 until payment of this award + AF P10K

10. ENRIQUEZ, RAFAEL [Admin. of the estate of the late Herrer, Joaquin] vs SUN LIFE ASSURANCE COMPANY OF CANADA> An acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge [Cognition theory]>

1917/09/24 Herrer applied for a life annuity [insurance : annuitant receives payments for lifetime after retirement] with ← - Paid P6,000.00 to ←’s manager- Was given a provisional receipt ; receipt stated that application was subject to medical examination and approval of ←’s Central Office- Application was immediately forwarded to the Head Office in Canada - 1917/11/26 The head office gave its notice of acceptance by cable to Manila [ Herrer was allegedly received notice of acceptance : subject issue of the case]- 1917/12/04 The policy was issued at Montreal- 1917/12/18 Atty Torres wrote to the Manila Office stating that Herrer desired to withdraw his application- 1917/12/19 Manila Office : policy already issued + 11/26 notice ; Atty Torres received this letter on 12/21- 1917/12/20 Herrer died

→ : sought to recover the P6,000 sum paid by Herrer for life annuity← : No liability since acceptance was not transmitted to applicant

TC ↓ : ← Not liable [not explained why]

I. WON the life annuity contract was already perfected by reason of Herrer’s disputed receipt of the notice of acceptance? NO ; THE LETTER OF ACCEPTANCE WAS NOT SENT AND THUS COULD NOT HAVE BEEN RECEIVED BY THE APPLICANT ; PROVISIONAL RECEIPT REQUIRED, INTER ALIA, THE COMMUNICATION OF ACCEPTANCE BY THE COMPANY TO THE APPLICANT

←’s Manila Branch’s Chief Clerk testified that he prepared the 1917/11/26 letter and handed it to the local manager Mr. White for signing- During cross-examination, the witness admitted that he knew nothing of further development regarding the letter- Mr. White testified to having received the cablegram accepting the application from the home office

o Further admitted that he signed a (different) letter to Herrer of said acceptance, sending the same to the chief clerk and placed the same on the mailing desk for transmission but could not tell if the letter was actually been placed in the mails

- Mr. Tuason [chief clerk on 1917/11/26] was not called as a wiotness

→’s Atty Torres, Manuel testified of having to prepare the will of the late Herrer, Joaquin- While drafting the will, Herrer mentioned his application of the life annuity and revealing the only document relating to such as the provisional receipt- → Rafael searched through Herrer’s possession but could not find any letter of notification

↓ : Deduction of evidence : letter of notification was prepared and signed by the local office but was never sent

↓ Until effectivity of the recent insurance laws, life insurance was governed by the Code of Commerce and the Civil Code- CoComm : BIII, TVIII and BIII TIII SIII ; CC : BIV TXII- 1915/07/01 Act 2427 CIV governs life and health insurance, repealing the provisions of the Code of Commerce on life and health insurance- The Insurance Act and the CC [old] superseded all this previous laws

↓ Insurance Act dealt with life insurance but it is silent as to the methods followed for perfection of said contracts

↓ [Old] CC, A1802 [now A2021] The aleatory contract of life annuity binds the debtor to pay an annual pension or income during the life of one or more determinate persons in consideration of a capital consisting of money or other property, whose ownership is transferred to him at once with the burden of the income.

- [Old] CC A16 [now A18] In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code- [Old] CC A1262 [reproduced in A1319] : Consent is shown by the concurrence of offer and acceptance with respect to the thing and the consideration which are to

constitute the contract. An acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The contract, in such case, is presumed to have been entered into at the place where the offer was made

↓ Applying CC, acceptance made by letter shall bind the person making the offer only from the date it came to his knowledge- an acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract- US Jurisprudence : Mailing of acceptance, it has been said, completes the contract of insurance, as the locus poenitentiae is ended when the acceptance has passed

beyond the control of the party [Expedition theory]

↓ However, the law applicable in this case is in [Old] CC A1262 2nd paragraph : An acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge

↓ According to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; [not raised](2) There had to be approval of the application by the head office of the company; and (3) This approval had in some way to be communicated by the company to the applicant [absent]

↓ Admitted facts:1. Montreal Office accepted the application and cabled its Manila Office [thus it issued the policy]2. Letter of notification was not sent and thus not received by the applicant

↓ No contract of life annuity because it is not proven that the acceptance of application ever came knowledge of the applicant ;

SIDE NOTE

1. Manifestation Theory - The contract is perfected from the moment the acceptance is declared or made2. Expedition Theory - The contract is perfected from the moment the offeree transmits the notification of acceptance to the offeror3. Reception Theory - The contract is perfected from the moment that the notification of acceptance is in the hands of the offeror4. Cognition Theory - The contract is perfected from the moment the acceptance comes to the knowledge of the offeror. [used locally]

11. DEVELOPMENT BANK OF THE PHILIPPINES vs CA ; Estate of the Late Dans, Juan [Rep by Dans, Candida (wife)] ; DBP MORTGAGE REDEMPTION INSURANCE POOL [ ]> An insurer is not liable for an insurance contract which does not exist> An [insurance] agent that exceeds its authority without giving the party sufficient notice of his powers is personally liable to the party he contracts with

1987/05 : Dans, Juan along with Candida (wife), his son and daughter-in-law applied for a loan of P500,000.00 with →DBP- Juan then 76 years of age, was advised by →DBP to obtain a MORTGAGE REDEMPTION INSURANCE [MRI] with P← DBP Mortgage Redemption Insurance Pool- 1987/08/04 A reduced loan of P300,000.00 was approved by → and released on 1987/08/11 ; → DBP deducted the amount of P1,476.00 for the MRI premium- 1987/08/15 Dans, Juan accomplished and submitted the MRI application for Insurance and the Health Statement for DBP MRI Pool- 1987/08/20 → DBP credited the savings account of P← DBPMRIP of the MRI premium less the DBP service fee of 10% and informed the latter of the same

1987/09/03 : Dans, Juan died of cardiac arrest- DBP informed DBPMRIP of the event ; P←DBPMRIP notified → DBP that Dans was not eligible for MRI Coverage being over the acceptance age limit of 60 years old

1987/10/21 : → DBP informed P← Candida of the disapproval of the MRI application - → offered to refund the premium but P← Candida refused the same, demanding payment of the face value of the MRI- → offered an ex gratia settlement of P30,000.00 but was again refused

1987/02/10 : P← estate, filed a complaint with RTC against → DBP and P← DBPMRIP for “Collection of Sum of Money with Damages.”- Dans became insured by DBPMRIP when DBP, with full knowledge of Dans’ age at the time of application required him to apply for MRI and collected the premium- Prayer to return P139,500 it paid under protest ; mortgage debt to be declared fully paid ; damages be awarded- → DBP and P← DBPMRIP admitted all documents submitted by P← estate in pre-trial

RTC ↓ : Decision in favor of P← Estate and against DBP - DBPMRIP however is absolved from liability, since there was no privity of contract between P← estate and P←DBPMRIP- → DBP was in estoppel for leading Dans to apply for MRI and actually collecting the premium despite knowledge of age ineligibility

CA ↓ : Affirm in toto ; later, also denied →’s MFR

I. WON a contract of insurance exists upon which DBPMRIP may be held liable? NO ; THE MRI CONJUNCTIVELY REQUIRED APPROVAL AND FULL PAYMENT OF THE PREMIUM IS MADE DURING THE APPLICANT’S GOOD HEALTH, BOTH OF WHICH WERE NOT MET

↓ When Dans applied for MRI he personally filled up and signed a "Health Statement for DBP MRI Pool" which contained- “I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the best of my knowledge and belief and form

part of my application for insurance. It is understood and agreed that no insurance coverage shall be effected unless and until this application is approved and the full premium is paid during my continued good health”

↓ Thus the MRI shall take effect when1. The application shall be approved by the insurance pool ; and2. When the full premium is paid during the continued good health of the applicant

o These conditions are joined conjunctively and thus must concur

↓ Thus the power to approve the MRI application is lodged with the DBPMRIP- P← DBPMRIP did not approve the application- There was no showing of acceptance of the premium [aside from the crediting of → DBP of its savings account]- Thus there is no perfected contract of insurance and DBPMRIP cannot be held liable on a contract which does not exist

II. WON DBP may be held liable for the MRI? YES, BUT NOT FOR THE FULL AMOUNT IN THE FORM OF MORAL DAMAGES IN THE AMOUNT OF P50,000

↓ : →DBP required Dans to secure MRI coverage instead of allowing him to look for his own insurance carrier- When the loan was released, →DBP already deducted from the proceeds thereof the MRI premium- Dans was made to fill up and sign his MRI application as well as his health statement- DBP itself submitted the forms to DBPMRIP Main Building in Makati and deducted from the premium given its service fee of 10%

↓ : In dealing with Dans, → DBP assumed two roles : as a lender and as an insurance agent- →DBP, as an insurance agent, led the family to believe that they had already fulfilled the MRI requirements and the issuance thereof forthcoming- →DBP had full knowledge that the application was never going to be approved

o Group Mortgage Redemption Insurance Policy, Article 1 clearly prescribed the age limitation of 60 years

CC A1897 The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers

↓ DBP was not authorized to accept MRI applications when its clients are more than 60 years of age- Thus it exceed its authority when it accepted Dans’ application- The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers.

o There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI.

↓ : However, DBP’s liability cannot be for the entire value of the insurance policy- Despite the concealment, Dans probability of securing an MRI with other providers is highly speculative- CC2199 Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.

Such compensation is referred to as actual or compensatory damages.- Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a reasonable degree of certainty- Speculative damages are too remote to be included in an accurate estimate of damages

↓ While Dans is not entitled to actual/compensatory damages, he is entitled to moral damages- Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated. The assessment of

such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case.- Considering that →DBP offered an ex gratia settlement of P30,000.00, an award of MD of P50,000 is reasonable

12. GREAT PACIFIC LIFE ASSURANCE COMPANY vs CA/ MONDRAGON, LAPULAPU vs CA ; NGO HING [20-year endowment policy on “special” daughter; Binding Deposit Receipt]> Where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent> The binding slip/receipt does not insure by itself> Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance> Concealment is a neglect to communicate that which a party knows and ought to communicate

1957/03/14 P←Ngo Hing applied with → GPAC a 20-year endowment policy for P50,000.00 on his daughter’s [Go, Helen] life- Endowment policy : life insurance contract to pay a lump sum after a specific term [on maturity] or on death ; typically 10/15/20 years up to a certain age limit

o P← Ngo Hing paid the annual premium of P1,077.75 going over to →GPAC and was given the corresponding binding deposit receipto P← Ngo Hing retained P1,317.00 as his commission [he was an agent of → GPAC too]

- 1957/04/30 However, →GPAC disapproved the insurance application because the 20-year endowment plan is not available for minors below 7 years oldo It however recommended the Juvenile Triple Action Plan and asked for the submission of the Juvenile Non-Medical Declaration

1957/05/06 → Mondragon did not communicate the disapproval to P← Ngo Hing but again insisted on approval because applicants have been requesting coverage since 1954

1957/05/28 : Go, Helen died of influenza with complication of bronchopneumonia- P← Ngo Hing thus sought payment of the proceeds of the insurance but was denied thus constraining him to file the action for recovery before COFI Cebu

COFI ↓ : → GPAC and Mondragon are solidarily liable to pay P← Ngo Hing the amount of P50,000.00 with 6% from date of filing of complaint and P1,077.75 without interestCA ↓ affirm in toto

I. WON the binding deposit receipt constituted a temporary contract of the life insurance in question? NO ; THE BDR PROVIDED CONDITIONS PRECEDENTS THAT WERE NOT FULFILLED NEGATING THE CONCLUSION OF AGREEMENT OF MINDS BETWEEN THE PARTIES THUS THERE IS NO INSURANCE CONTRACT

↓ The binding deposit receipt had condition precedents written on its back that required the following before a deposit is considered being a binding receipt- A. If the Company or its agent, shan have received the premium deposit ... and the insurance application, ON or PRIOR to the date of medical examination ... said

insurance shall be in force and in effect from the date of such medical examination, for such period as is covered by the deposit ..., PROVIDED the company shall be satisfied that on said date the applicant was insurable on standard rates under its rule for the amount of insurance and the kind of policy requested in the application.

- D. If the Company does not accept the application on standard rate for the amount of insurance and/or the kind of policy requested in the application but issue, or offers to issue a policy for a different plan and/or amount ..., the insurance shall not be in force and in effect until the applicant shall have accepted the policy as issued or offered by the Company and shall have paid the full premium thereof. If the applicant does not accept the policy, the deposit shall be refunded.

- E. If the applicant shall not have been insurable under Condition A above, and the Company declines to approve the application the insurance applied for shall not have been in force at any time and the sum paid be returned to the applicant upon the surrender of this receipt.

↓ : Provisions show that the binding deposit receipt is intended to be merely a provisional / temporary insurance contract and only upon compliance of:1. That the company shall be satisfied that the applicant was insurable on standard rates2. That if the company does not accept the application and offers to issue a different plan, the insurance contract shall not be binding unless the latter offer is accepted3. That if the applicant is not insurable according to the standard rates and the company disapproves the application, the insurance applied for shall not be in force at

any time and the premium paid shall be returned to applicant

↓ Clearly, the BDR is merely an acknowledgement that the company branch received from the applicant the insurance premium and accepted the application for processing- Since → GPAC disapproved the application, the BDR never became in force- Thus the BDR, by its own provision, is merely conditional and does not insure outright- Where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent

o Acceptance is merely conditional and is subordinated to the act of the company in approving / rejecting the applicationo ↑ De Lim vs Sun Life Assurance Company of Canada : In life insurance, the binding slip/receipt does not insure by itself

↓ : → GPAC in its 1957/04/30 letter to → Mondragon, disapproved the application since the plan was not offered to children less than 7years of age- It instead offered the Juvenile Triple Action, which P← Ngo Hing failed to accept- In the absence of meeting of the minds and non-compliance of the mentioned condition precedents, there could have been no insurance contract duly perfected- ↑ De Lim vs Sun Life Assurance Co. of Canada : a contract of insurance, like other contracts, must be assented to by both parties either in person or by their

agents ... The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement

↓ : P←’s contention that failure of → Mondragon to communicate the disapproval did not have any adverse effect on the “contract” is not persuasive- There was no perfected contract between the parties- P←, being an authorized agent of → GPAC, knows that the company does not offer the life insurance applied for

o He only took chance that the same will be approved based on →’s recommendation- P← had an insurable interest on the life of his daughter thus he should have followed and known the progress of processing and cannot pretend ignorance of events

II. WON P← Ngo Hing concealed the state of health and physical condition of Go, Helen which rendered void the binding deposit receipt? YES ; CONCEALED THE FACT OF HIS DAUGHTER’S CONGENITAL PHYSICAL DEFECT

↓ : When P← Ngo Hing supplied the required essential data for the insurance application, he was fully aware that his daughter is typically a mongoloid child [case’s phrasing]- Congenital physical defect could never be ensconced nor disguised

o P← in bad faith, withheld the fact material to the risk to be assumed by → GPAC- Contract of insurance is one of uberrimae fidae [good faith, absolute and perfect candor or openness and honesty]

o Concealment is a neglect to communicate that which a party knows and ought to communicateo Whether intentional or unintentional, the concealment entitles the insurer to rescind the contract of insurance

13. SPOUSES CHA, NILO and STELLA ; UNITED INSURANCE CO, INC vs CA ; CKS DEVELOPMENT CORPORATION

1988/10/05 → : entered a lease contract with P← CKSDC- Paragraph 18 : The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased

premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit;

- Despite the restriction, → procured a fire insurance policy for the merchandise inside the leased premises with P→ UICI for P500K without the written consent of ←

On the day the lease contract was to expire, a fire broke out inside the leased premises- CKS, upon discovery of the insurance, wrote a demand letter to P→UICI, asking that the proceeds be paid directly to it, based on the lease contract stipulation 18- Co-→ UICI refused to pay P←CKSDC- P← CKSDC filed a complaint against → and Co-→

RTC ↓ : P→ UICI should pay P← CKSDC P335,063.11 ; → to pay P← CKSDC P50,000 as ED ; P20,000 as AF and cost of suit

CA ↓ Affirm RTC decision with modification : delete awards of ED and AF ; deny subsequent MFR

I. WON the Stipulation 18 is valid? THE STIPULATION IS VOID FOR BEING AGAINST LAW [PD612 S18 : contract or policy is unenforceable because the beneficiary does not have an insurable interest in the property] ; PROCEEDS RIGHTFULLY BELONGS TO →

↓ Basic in law of contracts that stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy CC1409(1)

PD612 S18 No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.

↓ Non-life insurance policy [like the policy taken by → over their merchandise] is primarily a contract of indemnity- Thus insurable interest must exist at the time the insurance takes effect [is perfected] and at the time the loss occurs [PD612 S19]- Section 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the

life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.- Reason for the rule : public policy : to prevent a person taking out an insurance policy on property upon which he has no insurable interest and collecting the

proceeds of said policy in case of loss of the property

↓ When there is no insurable interest in the property, the contract becomes a mere wager is void- PD612 S25 Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or

that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void.

↓ It cannot be denied that P← CKS has no insurable interest in the goods and merchandise inside the leased premises under PD612 S17- PD612 S17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof.

↓ Therefore, P← CKS [or any beneficiary/insured for that matter] cannot, under PD612, be validly a beneficiary of the fire insurance policy taken by → over their merchandise- → [as owners] have insurable interest over the merchandise- Lease contract Paragraph 18 is void for being contrary to law and/or public policy

↓ The proceeds of the fire insurance policy thus rightfully belongs to the insured [→ ]- Insurer [Co-→] cannot be compelled to pay the proceeds to a person [P← CKS] who has no insurable interest in the property insured

↓ The liability of → for violating their lease contract is a separate and distinct issue which cannot be resolved in this case.

CONCLUSION : SET ASIDE CA DECISION ; PROCEEDS OF THE POLICY AWARDED TO →