CONSTRUCTION OF INSURANCE CONTRACT

CALANOC vs. CA Facts: Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of Oroquieta and Zurbaran streets. Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional sum of P2,000 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability. It is contended in behalf of the company that Basilio was killed which "making an arrest as an officer of the law" or as a result of an "assault or murder" committed in the place and therefore his death was caused by one of the risks excluded by the supplementary contract which exempts the company from liability. This contention was upheld by the Court of Appeals. Hence, this petition. Issue: Whether or not the death of the victim comes within the purview of the exception clause of the supplementary policy and, hence, exempts the company from liability. Held: NO. Basilio was a watchman of the Manila Auto Supply which was a block away from the house of Atty. Ojeda where something suspicious was happening which caused the latter to ask for help. While at first he declined the invitation of Atty. Ojeda to go with him to his residence to inquire into what was going on because he was not a regular policeman, he later agreed to come along when prompted by the traffic policeman, and upon approaching the gate of the residence he was shot and died. The circumstance that he was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his part to expose his life to danger considering the fact that the place he was in duty-bound to guard was only a block away. In volunteering to extend help under the situation, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it being a matter that affects the security of the neighborhood. No doubt there was some risk coming to him in pursuing that errand, but that risk always existed it being inherent in the position he was holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer of the law, as contended, simply because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman. Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. In the first place, there is no proof that the death of Basilio is the result of either crime for the record is barren of any circumstance showing how the fatal shot was fired. Perhaps this may be clarified in the criminal case now pending in court as regards the incident but before that is done anything that might be said on the point would be a mere conjecture. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life.

BIAGTAN vs. INSULAR LIFE ASSURANCE Co. FACTS: Juan Biagtan was insured with Insular for P5k and a supplementary contract “Accidental Death Benefit” clause for

another P5k if "the death of the Insured resulted directly from bodily injury effected solely through external and violent means

sustained in an accident . . . and independently of all other causes." The clause, however, expressly provided that it would not

apply where death resulted from an injury "intentionally inflicted by a third party." One night, a band of robbers entered their

house. Juan went out of his room and he was met with 9 knife stabs. He died. The robbers were convicted of robbery with

homicide. The family was claiming the additional P5k from Insular under the Accidental Death Benefit clause. Insular refused

on the ground that the death resulted from injuries intentionally inflicted by 3rd parties and was therefore not covered.

Biagtans filed against Insular. CFI ruled in favor of Biagtans.

ISSUE:

WON the injuries were intentionally inflicted by a third party?

HELD:

Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer, it cannot be

denied that the act itself of inflicting the injuries was intentional. The exception in the accidental benefit clause invoked by the

appellant does not speak of the purpose — whether homicidal or not — of a third party in causing the injuries, but only of the

fact that such injuries have been "intentionally" inflicted — this obviously to distinguish them from injuries which, although

received at the hands of a third party, are purely accidental.

In Calanoc vs. CA: Where a shot was fired and it turned out afterwards that the watchman was hit in the abdomen, the wound

causing his death, the Court held that it could not be said that the killing was intentional for there was the possibility that the

malefactor had fired the shot to scare the people around for his own protection and not necessarily to kill or hit the victim. A

similar possibility is clearly ruled out by the facts in this case. For while a single shot fired from a distance, and by a person

who was not even seen aiming at the victim, could indeed have been fired without intent to kill or injureb inflicted with bladed

weapons at close range cannot conceivably be considered as innocent insofar as such intent is concerned.

FINMAN GEN INSURANCE CORP vs. CA

FACTS: Petitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in applying the principle of “expresso unius exclusio alterius” in a personal accident insurance policy since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former as indicated by the location of the lone stab wound on the insured. Therefore, said death was committed with deliberate intent which, by the very nature of a personal accident insurance policy, cannot be indemnified.

ISSUE:

Whether or not death petitioner is correct that results from assault or murder deemed are not included in the terms “accident” and “accidental”.

HELD:

NO. Petition for certiorari with restraining order and preliminary injunction was denied for lack of merit.

HELD:

The terms “accident” and “accidental” as used in insurance contracts have not acquired any technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without one’s foresight or expectation — an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected.

[I]t is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary.

ZENITH INSURANCE CORP vs. CA FACTS: On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2) months, Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed. Aside from actual

damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which, the private respondent rejected. On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. ISSUE: The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein by petitioner. HELD: The award of damages in case of unreasonable delay in the payment of insurance claims is governed by the Philippine Insurance Code, which provides: Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount of the claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim.

SUN INSURANCE OFFICE LTD vs. CA FACTS:

Emilio Tan took from Sun Insurance Office a P300,000.00 property insurance policy to cover his interest in the electrical

supply store of his brother. Four days after the issuance of the policy, the building was burned including the insured store. On

August 20, 1983, Tan filed his claim for fire loss with Sun Insurance Office, but on February 29, 1984, Sun Insurance Office

wrote Tan denying the latter’s claim. On April 3, 1984, Tan wrote Sun Insurance Office, seeking reconsideration of the denial of

his claim. Sun Insurance Office answered the letter, advising Tan’s counsel that the Insurer’s denial of Tan’s claim remained

unchanged.

ISSUES:

(1)WON the filing of a motion for reconsideration interrupts the 12 months prescriptive period to contest the denial of the

insurance claim; and

(2)WON the rejection of the claim shall be deemed final only of it contains words to the effect that the denial is final.

HELD:

(1) No. As the terms are very clear and free from any doubt or ambiguity whatsoever, it must be taken and understood in its

plain, ordinary and popular sense. Tan, in his letter addressed to Sun Insurance Office dated April 3, 1984, admitted that the

received a copy of the letter of rejection on April 2, 1984. Thus, the 12-monthprescriptive period started to run from the said

date of April 2, 1984, for such is the plain meaning and intention of Section 27 of the insurance policy. The condition contained

in an insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement

but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance

suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared.

(2) No. The Eagle Star case cited by Tan to defend his theory that the rejection of the claim shall be deemed final only of it

contains words to the effect that the denial is final is inapplicable in the instant case. Final rejection or denial cannot be taken

to mean the rejection of a petition for reconsideration. The Insurance policy in the Eagle Star Case provides that the insured

should file his claim, first, with the carrier and then with the insurer. The final rejection being referred to in said case is the

rejection by the insurance company.

VILLACORTA vs. INSURANCE COMMISSION FACTS: Villacorta had her Colt Lancer car insured with Empire Insurance Company against own damage, theft and 3rd party

liability. While the car was in the repair shop, one of the employees of the said repair shop took it out for a joyride after which

it figured in a vehicular accident. This resulted to the death of the driver and some of the passengers as well as to extensive

damage to the car. Villacorta filed a claim for total loss with the said insurance company. However, it denied the claim on the

ground that the accident did not fall within the provisions of the policy either for the Own Damage or Theft coverage, invoking

the policy provision on “Authorized Driver Clause”. This was upheld by the Insurance Commission further stating that the car

was not stolen and therefore not covered by the Theft Clause because it is not evident that the person who took the car for a

joyride intends to permanently deprive the insured of his/ her car.

ISSUE: Whether or not the insurer company should pay the said claim

HELD: Yes. Where the insured’s car is wrongfully taken without the insured’s consent from the car service and repair shop to

whom it had been entrusted for check-up and repairs (assuming that such taking was for a joy ride, in the course of which it

was totally smashed in an accident), respondent insurer is liable and must pay insured for the total loss of the insured vehicle

under the Theft Clause of the policy. Assuming, despite the totally inadequate evidence, that the taking was “temporary” and

for a “joy ride”, the Court sustains as the better view that which holds that when a person, either with the object of going to a

certain place, or learning how to drive, or enjoying a free ride, takes possession of a vehicle belonging to another, without the

consent of its owner, he is guilty of theft because by taking possession of the personal property belonging to another and using

it, his intent to gain is evident since he derives there from utility, satisfaction, enjoyment and pleasure.

FIGURACION VDA DE MAGLANA vs. HON FRANCISCO CONSOLACION

FACTS:

Lope Maglana was an employee of the Bureau of Customs whose work station was at Lasa, here in Davao City. On December 20, 1978, early morning, Lope Maglana was on his way to his work station, driving a motorcycle owned by the Bureau of Customs, he met an accident that resulted in his death. He died on the spot. The PUJ jeep that bumped the deceased was driven by Pepito Into, operated and owned by defendant Destrajo. From the investigation conducted by the traffic investigator, the PUJ jeep was overtaking another passenger jeep that was going towards the city poblacion. While overtaking, the PUJ jeep of defendant Destrajo running abreast with the overtaken jeep, bumped the motorcycle driven by the deceased who was going towards the direction of Lasa, Davao City. The point of impact was on the lane of the motorcycle and the deceased was thrown from the road and met his untimely death. Consequently, the heirs of Lope Maglana, Sr., here petitioners, filed an action for damages and attorney's fees against operator Patricio Destrajo and the Afisco Insurance Corporation (AFISCO for brevity). On December 14, 1981, the lower court rendered a decision finding that Destrajo had not exercised sufficient diligence as the operator of the jeepney. Petitioners filed a motion for the reconsideration of the second paragraph of the dispositive portion of the decision contending that AFISCO should not merely be held secondarily liable because the Insurance Code provides that the insurer's liability is "direct and primary and/or jointly and severally with the operator of the vehicle, although only up to the extent of the insurance coverage." 4 Hence, they argued that the P20,000.00 coverage of the insurance policy issued by AFISCO, should have been awarded in their favor.

ISSUE:

Whther or not the Insurance Code does not expressly provide for a solidary obligation, and that the presumption is that the obligation is joint.

HELD:

The above-quoted provision leads to no other conclusion but that AFISCO can be held directly liable by petitioners. As this Court ruled in Shafer vs. Judge, RTC of Olongapo City, Br. 75, "[w]here an insurance policy insures directly against liability, the insurer's liability accrues immediately upon the occurrence of the injury or even upon which the liability depends, and does not depend on the recovery of judgment by the injured party against the insured." However, we cannot agree that AFISCO is likewise solidarily liable with Destrajo. In Malayan Insurance Co., Inc. v. Court of Appeals, 10 this Court had the opportunity to resolve the issue as to the nature of the liability of the insurer and the insured vis-a-vis the third party injured in an accident. We categorically ruled thus:

While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the insurer, however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is based on tort.

PERLA COMANIA DE SEGURO vs. CA FACTS: The Lim spouses opened a chattel mortgage and bought a Ford Laser from Supercars for Php 77,000 and insured it with Perla Compania de Seguros. The vehicle was stolen while Evelyn Lim was driving it with an expired license. The spouses requested for a moratorium on payments but this was denied by FCP, the assignee of rights over collection of the mortgage amount of the car. The spouses also called on the insurance company to pay the balance of the mortgage due to theft but this was denied by the company due to the spouses’ violation of the Authorized Driver clause stating (driving with an expired license before being carnapped): Any of the following: (a) The Insured (b) Any person driving on the Insured's order, or with his permission. Provided that the person driving is permitted, in accordance with the licensing or other laws or regulations, to drive the Scheduled Vehicle, or has been permitted and is not disqualified by order of a Court of Law or by reason of any enactment or regulation in that behalf. Since the spouses didn’t pay the mortgage, FCP filed suit against them. The trial court ruled in its favor ordering spouses to pay. The appellate court reversed their decision. FCP and Perla appealed to the SC. ISSUES: 1.Was there grave abuse of discretion on the part of the appellate court in holding that private respondents did not violate the insurance contract because the authorized driver clause is not applicable to the "Theft" clause of said Contract? HELD: No, No. Petition dismissed. The car was insured against a malicious act such as theft. Therefore the “Theft” clause in the contract should apply and not the authorized driver clause. The risk against accident is different from the risk against theft. The appellate court stated: The "authorized driver clause" in a typical insurance policy is in contemplation or anticipation of accident in the legal sense in which it should be understood, and not in contemplation or anticipation of an event such as theft. The distinction — often seized upon by insurance companies in resisting claims from their assureds — between death occurring as a result of accident and death occurring as a result of intent may, by analogy, apply to the case at bar. There was no connection between valid possession of a license and the loss of a vehicle. Ruling in a different way would render the policy a sham because the company can then easily cite restrictions not applicable to the claim.

GEAGONIA vs. C FACTS: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year policy and covered thestock trading of dry goods. The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against the private respondent in the Insurance Commission for the recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence of the other two policies. But, he said that he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies and this requirement was not mentioned to him by the private respondent's agent. The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks.

The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 with interest and attorney’s fees. CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC. ISSUES: 1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby violated Condition 3 of the policy. 2. WON he is prohibited from recovering HELD: Yes. No. Petition Granted Ratio: 1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original. 2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom they are intended to operate. With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

Fortune Insurance and Surety Company vs. CA FACTS: On June 29, 1987, Producer’s Bank of the Philippines’ armored vehicle was robbed, in transit, of seven hundred twenty-five thousand pesos (Php 725,000.00) that it was transferring from its branch in Pasay to its main branch in Makati. To mitigate their loss, they claim the amount from their insurer, namely Fortune Insurance and Surety Co.. Fortune Insurance, however, assails that the general exemption clause in the Casualty Insurance coverage had a general exemption clause, to wit: GENERAL EXCEPTIONS The company shall not be liable under this policy in respect of xxx xxx xxx (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. . . . And, since the driver (Magalong) and security guard (Atiga) of the armored vehicle were charged with three others as liable for the robbery, Fortune denies Producer’s Bank of its insurance claim. The trial court and the court appeals ruled in favor of recovery, hence, the case at bar. ISSUE: Whether recovery is precluded under the general exemption clause. HELD: Yes, recovery is precluded under the general exemption clause. Howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would carry the money; and

Atiga to provide the needed security for the money, the vehicle, and his two other companions. In short, for these particular tasks, the three acted as agents of Producers. A "representative" is defined as 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." 23 In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the insurance policy.

Edilon vs. Manila Bankers Life FACTS: Sometime in April 1969, Carmen O, Lapuz applied Manila Bankers for insurance coverage against accident and injuries. She filled up the blank application form given to her and filed the same with the respondent insurance corporation. In the said application form she gave the date of her birth as July 11, 1904. On the same date, she paid the sum of P20.00 representing the premium for which she was issued the corresponding receipt signed by an authorized agent of Manila Bankers. Upon the filing and the payment of the premium, the respondent insurance corporation issued to Carmen O. Lapuz its Certificate of Insurance. The policy was to be effective for a period of 90 days. During the effectivity of the certificate of insurance Carmen Lapuz died on a vehicular accident in the North Diversion Road. On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the named beneficiary in the policy, filed her claim for the proceeds of the insurance, submitting all the necessary papers and other requisites. However, her claim was denied by the respondent corporation hence her filing of complaint in the Court of First Instance of Rizal on August 27, 1969. The respondent insurance corporation asserts that since Carmen Lapuz was over 60 years of age the policy in question was null and void because there is a provision in the certificate of insurance excluding its liability to pay claims under the policy in behalf of persons who are under the age of sixteen (16) years of age or over the age of sixty (60) years. The trial court dismissed the complaint. Hence, this petition. ISSUE: Whether or not the acceptance by the private respondent insurance corporation of the premium and the issuance of the corresponding certificate of insurance should be deemed a waiver of the exclusionary condition of overage stated in the said certificate of insurance HELD: Yes. The age of the insured Carmen 0. Lapuz was not concealed to the insurance company. Her application for insurance coverage which was on a printed form furnished by private respondent and which contained very few items of information clearly indicated her age of the time of filing the same to be almost 65 years of age. Despite such information which could hardly be overlooked in the application form, considering its prominence thereon and its materiality to the coverage applied for, the respondent insurance corporation received her payment of premium and issued the corresponding certificate of insurance without question. The accident which resulted in the death of the insured, a risk covered by the policy, occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was applied for. There was sufficient time for the private respondent to process the application and to notice that the applicant was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If the private respondent failed to act, it is either because it was willing to waive such disqualification; or, through the negligence or incompetence of its employees for which it has only itself to blame, it simply overlooked such fact. Under the circumstances, the insurance corporation is already deemed in estoppel. Its inaction to revoke the policy despite a departure from the exclusionary condition contained in the said policy constituted a waiver of such condition

Perla Compania de Seguro vs. CA FACTS: Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA COMPANIA DE SEGUROS,

INC (PCSI). The bus figured in an accident in Cavite, injuring several of its passengers. One of them, Perea, sued Cayas for

damages in the CFI, while three others agreed to a settlement of P4,000.00 each with Cayas.

After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with damages. Cayas filed a

complaint with the CFI, seeking reimbursement from PCSI for the amounts she paid to ALL victims, alleging that the latter

refused to make such reimbursement notwithstanding the fact that her claim was within its contractual liability under the

insurance policy.

The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which states:

IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff Cayas the sum of

P50,000.00 under its maximum liability as provided for in the insurance policy; …

In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by private respondent to

Perea and only up to the amount of P12,000.00. It altogether denies liability for the payments made by private respondents to

the other 3 injured passengers totaling P12,000.00

ISSUE: how much should PCSI pay?

HELD:

The decision of the CA is modified, petitioner only to pay Cayas P12,000,000.00

The insurance policy provides:

5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written consent of the

Company …

It being specifically required that petitioner’s written consent be first secured before any payment in settlement of any claim

could be made, private respondent is precluded from seeking reimbursement of the payments made to the other 3 victims in

view of her failure to comply with the condition contained in the insurance policy.

Also, the insurance policy involved explicitly limits petitioner’s liability to P12,000.00 per person and to P50,000.00 per

accident

Clearly, the fundamental principle that contracts are respected as the law between the contracting parties finds application in

the present case. Thus, it was error on the part of the trial and appellate courts to have disregarded the stipulations of the

parties and to have substituted their own interpretation of the insurance policy.

We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable for the amount of

P50,000.00, the maximum liability per accident stipulated in the policy. This is patent error. An insurance indemnity, being

merely an assistance or restitution insofar as can be fairly ascertained, cannot be availed of by any accident victim or claimant

as an instrument of enrichment by reason of an accident.

Crispona vs. CA

White Gold Marine Services, Inc. vs. Pioneer Insurance and Surety Corporation and

Steamship Mutual Underwriting Association FACTS: Petitioner White Gold bought a protection and indemnity coverage for its ships from Steamship Mutual through Respondent Pioneer. Certificates and receipts thus were given. However, Petitioner failed to fulfill its payments thus Steamship refused to renew its coverage. Steamship then filed for collection against Petitioner for recovery of unpaid balance. Thereafter, Petitioner also filed a complaint against Steamship and Respondent before the Insurance Commission for violations (186,187 for Steamship and 299,300,301 in relation to 302 and 303 for Respondent) of the Insurance Code-license requirements as an Insurance company for the former and as insurance agent for the latter. Said commission dismissed the complaint which decision was affirmed by the CA. ISSUE: Whether or not Steamship Mutual is a Protection and Indemnity Club engaged in the insurance business in the Philippines HELD: Steamship Mutual as a P & I Club is a mutual insurance company engaged in the marine insurance business. An insurance contract is a contract of indemnity. This means that one party undertakes for a consideration to indemnify another party against loss, damage, or liability arising from an unknown or contingent event. While to determine if a contract is an insurance contract we can look at the nature of the promise, the act to be performed, exact nature of the agreement in view of the entire occurrence, contingency or circumstance where the performance is mandated. The label is not controlling. While under Section 2(2) of the Insurance Code the phrase “doing an insurance business” constitutes the following: 1) making or proposing to make, as insurer, any insurance contract; 2) 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; 3) 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; 4) doing or proposing to do any business in substance to any of the foregoing in a manner designed to evade the provision of this code. Taking all of these in to consideration, Steamship Mutual engaged in marine insurance business undertook to indemnify Petitioner White Gold against marine losses as enumerated under sec. 99 of the Insurance Code. It is immaterial whether profit is derived from making insurance contract and that no separate or direct consideration is received since these does not preclude the existence of an insurance business.

REPUBLIC vs. SUNLIFE ASSURANCE COMPANY OF CANADA FACTS:

On October 20, 1997, Sun Life filed with the CIR its insurance premium tax return for the third quarter of 1997 and paid the premium tax in the amount of P31,485,834.51. For the period covering August 21 to December 18, 1997, petitioner filed with the CIR its declaration returns and paid the total amount of P30,000,000.00.

On December 29, 1997, the CTA rendered its decision in Insular Life Assurance Co. Ltd. v. CIR, which held that mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST. Sun Life surmised that being a mutual life insurance company, it was likewise exempt from the payment of premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax credit of its alleged erroneously paid premium tax and DST for the aforestated tax periods. Sun Life stood firm on its contention that it is a mutual life insurance company vested with all the characteristic features and elements of a cooperative company or association as defined in [S]ection 121 of the Tax Code. Primarily, the management and affairs of Sun Life were conducted by its members; secondly, it is operated with money collected from its members; and, lastly, it has for its purpose the mutual protection of its members and not for profit or gain.

ISSUE:

Whether Respondent Is Exempted from Premium Taxes and DST

HELD:

Having determined that respondent is a cooperative that does not have to be registered with the CDA, we hold that it is entitled to exemption from both premium taxes and documentary stamp taxes (DST).

The Tax Code is clear. On the one hand, Section 121 of the Code exempts cooperative companies from the 5 percent percentage tax on insurance premiums. On the other hand, Section 199 also exempts from the DST, policies of insurance or annuities made or granted by cooperative companies. Being a cooperative, respondent is thus exempt from both types of taxes

It is worthy to note that while RA 8424 amending the Tax Code has deleted the income tax of 10 percent imposed upon the gross investment income of mutual life insurance companies – domestic and foreign -- the provisions of Section 121 and 199 remain unchanged.

PHILAMCARE HEALTH SYSTEMS vs. CA

FACTS: In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health Systems, Inc. He was asked if he was ever treated for high blood, heart trouble, diabetes, cancer, liver disease, asthma, or peptic ulcer; he answered no. His application was approved and it was effective for one year. His coverage was subsequently renewed twice for one year each. While the coverage was still in force in 1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the hospitalization amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for the latter to pay the hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to disclose the fact that he was diabetic, hypertensive, and asthmatic. Julita ended up paying the hospital expenses. Ernani eventually died. In July 1990, Julita sued

Philamcare for damages. Philamcare alleged that the health coverage is not an insurance contract; that the concealment made by Ernani voided the agreement.

ISSUE: Whether or not Philamcare can avoid the health coverage agreement.

HELD: No. The health coverage agreement (health care agreement) entered upon by Ernani with Philamcare is a non-life insurance contract and is covered by the Insurance Law. It is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract. There is no concealment on the part of Ernani. He answered the question with good faith. He was not a medical doctor hence his statement in answering the question asked of him when he was applying is an opinion rather than a fact. Answers made in good faith will not void the policy.

Further, Philamcare, in believing there was concealment, should have taken the necessary steps to void the health coverage agreement prior to the filing of the suit by Julita. Philamcare never gave notice to Julita of the fact that they are voiding the agreement. Therefore, Philamcare should pay the expenses paid by Julita.

CIR vs. Lincoln Philippine Life Insurance

FACTS: Prior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-CMA Life Insurance Company, Inc.) used to issue policies called “Junior Estate Builder Policy”. A clause therein provides for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by Lincoln Philippine only on the initial sum assured.

When the clause became effective in 1984, the Commissioner of Internal Revenue assessed an additional tax on the increased amount of the coverage of the said policies. Said tax was to cover the deficiency documentary stamps tax for said year. The Court of Appeals ruled that there is only one policy and the automatic increase is not a separate policy; that said increase of coverage is not covered by another documentary stamp tax.

ISSUE: Whether or not there is only one policy.

HELD: Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set forth. Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance.

The subject insurance policy at the time it was issued contained an “automatic increase clause.” Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the “junior estate builder policy” called the “automatic increase clause” already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age.