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Insurance Cases

1) The document discusses several cases related to insurable interest in property and conditions of insurance policies. 2) In one case, the Court ruled that a lessor did not have an insurable interest in merchandise insured by tenants, and therefore was not entitled to the insurance proceeds from a fire. 3) In another case, the Court found that an insured was not prohibited from recovering insurance proceeds, even though he had other policies, because the total insurance did not exceed the limit stated in the policy's conditions. 4) The last case discussed involved insurance policies taken out on mortgaged properties, and whether the bank holding the mortgage had an insurable interest and right to the proceeds.

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0% found this document useful (0 votes)
65 views10 pages

Insurance Cases

1) The document discusses several cases related to insurable interest in property and conditions of insurance policies. 2) In one case, the Court ruled that a lessor did not have an insurable interest in merchandise insured by tenants, and therefore was not entitled to the insurance proceeds from a fire. 3) In another case, the Court found that an insured was not prohibited from recovering insurance proceeds, even though he had other policies, because the total insurance did not exceed the limit stated in the policy's conditions. 4) The last case discussed involved insurance policies taken out on mortgaged properties, and whether the bank holding the mortgage had an insurable interest and right to the proceeds.

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Ana Robin
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© © All Rights Reserved
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Insurable interest: of loss of the property.

In such a case, the contract of


insurance is a mere wager which is void under Section 25
Sps. Cha v. CA of the Insurance Code.
August 18, 1997 SECTION 25. Every stipulation in a policy of Insurance
for the payment of loss, whether the person insured has
FACTS: or has not any interest in the property insured, or that
the policy shall be received as proof of such interest, and
Spouses Nilo Cha and Stella Uy-Cha and CKS every policy executed by way of gaming or wagering, is
Development Corporation entered a 1 year lease contract void
with a stipulation not to insure against fire the chattels, Section 17. The measure of an insurable interest in
merchandise, textiles, goods and effects placed at any property is the extent to which the insured might be
stall or store or space in the leased premises without first damnified by loss of injury thereof
obtaining the written consent and approval of the lessor. The automatic assignment of the policy to CKS under the
But it insured against loss by fire their merchandise provision of the lease contract previously quoted is void
inside the leased premises for P500,000 with the United for being contrary to law and/or public policy. The
Insurance Co., Inc. without the written consent of CKS proceeds of the fire insurance policy thus rightfully
On the day the lease contract was to expire, fire broke belong to the spouses. The liability of the Cha spouses
out inside the leased premises and CKS learning that the to CKS for violating their lease contract in that Cha
spouses procured an insurance wrote to United to have spouses obtained a fire insurance policy over their own
the proceeds be paid directly to them. But United refused merchandise, without the consent of CKS, is a separate
so CKS filed against Spouses Cha and United. and distinct issue which we do not resolve in this case.
RTC: United to pay CKS the amount of P335,063.11 and
Spouses Cha to pay P50,000 as exemplary damages, Geagonia v. CA
P20,000 as attorney’s fees and costs of suit Feb 6, 1995
CA: deleted exemplary damages and attorney’s fees
ISSUE: W/N the CKS has insurable interest because the Facts:
spouses Cha violated the stipulation Geagonia, owner of a store, obtained from Country
Bankers fire insurance policy for P100,000.00. The 1 year
HELD: NO. CA set aside. Awarding the proceeds to policy and covered thestock trading of dry goods.
spouses Cha. The policy noted the requirement that
"3. The insured shall give notice to the Company of any
Sec. 18. No contract or policy of insurance on property insurance or insurances already effected, or which may
shall be enforceable except for the benefit of some person subsequently be effected, covering any of the property or
having an insurable interest in the property insured properties consisting of stocks in trade, goods in process
A non-life insurance policy such as the fire insurance and/or inventories only hereby insured, and unless
policy taken by petitioner-spouses over their notice be given and the particulars of such insurance or
merchandise is primarily a contract of indemnity. insurances be stated therein or endorsed in this policy
Insurable interest in the property insured must exist a t pursuant to Section 50 of the Insurance Code, by or on
the time the insurance takes effect and at the time the behalf of the Company before the occurrence of any loss
loss occurs. The basis of such requirement of insurable or damage, all benefits under this policy shall be deemed
interest in property insured is based on sound public forfeited, provided however, that this condition shall not
policy: to prevent a person from taking out an insurance apply when the total insurance or insurances in force at
policy on property upon which he has no insurable the time of the loss or damage is not more than
interest and collecting the proceeds of said policy in case P200,000.00."
1 of 10
The petitioners’ stocks were destroyed by fire. He then ante litem motam. It was, indeed, incredible that he did
filed a claim which was subsequently denied because the not know about the prior policies since these policies
petitioner’s stocks were covered by two other fire were not new or original.
insurance policies for Php 200,000 issued by PFIC. The 2. Stated differently, provisions, conditions or exceptions
basis of the private respondent's denial was the in policies which tend to work a forfeiture of insurance
petitioner's alleged violation of Condition 3 of the policy. policies should be construed most strictly against those
Geagonia then filed a complaint against the private for whose benefits they are inserted, and most favorably
respondent in the Insurance Commission for the toward those against whom they are intended to operate.
recovery of P100,000.00 under fire insurance policy and With these principles in mind, Condition 3 of the subject
damages. He claimed that he knew the existence of the policy is not totally free from ambiguity and must be
other two policies. But, he said that he had no knowledge meticulously analyzed. Such analysis leads us to conclude
of the provision in the private respondent's policy that (a) the prohibition applies only to double insurance,
requiring him to inform it of the prior policies and this and (b) the nullity of the policy shall only be to the
requirement was not mentioned to him by the private extent exceeding P200,000.00 of the total policies
respondent's agent. obtained.
The Insurance Commission found that the petitioner did Furthermore, by stating within Condition 3 itself that
not violate Condition 3 as he had no knowledge of the such condition shall not apply if the total insurance in
existence of the two fire insurance policies obtained from force at the time of loss does not exceed P200,000.00,
the PFIC; that it was Cebu Tesing Textiles w/c procured the private respondent was amenable to assume a co-
the PFIC policies w/o informing him or securing his insurer's liability up to a loss not exceeding P200,000.00.
consent; and that Cebu Tesing Textile, as his creditor, had What it had in mind was to discourage over-insurance.
insurable interest on the stocks. Indeed, the rationale behind the incorporation of "other
The Insurance Commission then ordered the respondent insurance" clause in fire policies is to prevent over-
company to pay complainant the sum of P100,000.00 insurance and thus avert the perpetration of fraud. When
with interest and attorney’s fees. a property owner obtains insurance policies from two or
CA reversed the decision of the Insurance Commission more insurers in a total amount that exceeds the
because it found that the petitioner knew of the existence property's value, the insured may have an inducement to
of the two other policies issued by the PFIC. destroy the property for the purpose of collecting the
insurance. The public as well as the insurer is interested
Issues: in preventing a situation in which a fire would be
1. WON the petitioner had not disclosed the two profitable to the insured.
insurance policies when he obtained the fire insurance
and thereby violated Condition 3 of the policy. RCBC v. CA
2. WON he is prohibited from recovering 289 SCRA 292

Held: Yes. No. Petition Granted FACTS:

Ratio: RCBC Binondo Branch initially granted a credit facility of


1. The court agreed with the CA that the petitioner knew P30M to Goyu & Sons, Inc. GOYU’s applied again and
of the prior policies issued by the PFIC. His letter of 18 through Binondo Branch key officer's Uy’s and Lao’s
January 1991 to the private respondent conclusively recommendation, RCBC’s executive committee increased
proves this knowledge. His testimony to the contrary its credit facility to P50M to P90M and finally to P117M.
before the Insurance Commissioner and which the latter As security, GOYU executed 2 real estate mortgages and
relied upon cannot prevail over a written admission made 2 chattel mortgages in favor of RCBC.
2 of 10
GOYU obtained in its name 10 insurance policy on the although it appears that GOYU obtained the subject
mortgaged properties from Malayan Insurance Company, insurance policies naming itself as the sole payee, the
Inc. (MICO). In February 1992, he was issued 8 intentions of the parties as shown by their
insurance policies in favor of RCBC. contemporaneous acts, must be given due consideration
April 27, 1992: One of GOYU’s factory buildings was in order to better serve the interest of justice and equity
burned so he claimed against MICO for the loss who 8 endorsement documents were prepared by Alchester in
denied contending that the insurance policies were either favor of RCBC
attached pursuant to writs of attachments/garnishments MICO, a sister company of RCBC
or that creditors are claiming to have a better right GOYU continued to enjoy the benefits of the credit
GOYU filed a complaint for specific performance and facilities extended to it by RCBC.
damages at the RTC GOYU is at the very least estopped from assailing their
RCBC, one of GOYU’s creditors, also filed with MICO its operative effects.
formal claim over the proceeds of the insurance policies, The two courts below erred in failing to see that the
but said claims were also denied for the same reasons promissory notes which they ruled should be excluded
that MICO denied GOYU’s claims for bearing dates which are after that of the fire, are
RTC: Confirmed GOYU’s other creditors (Urban Bank, mere renewals of previous ones
Alfredo Sebastian, and Philippine Trust Company) RCBC has the right to claim the insurance proceeds, in
obtained their writs of attachment covering an aggregate substitution of the property lost in the fire. Having
amount of P14,938,080.23 and ordered that 10 insurance assigned its rights, GOYU lost its standing as the
policies be deposited with the court minus the said beneficiary of the said insurance policies
amount so MICO deposited P50,505,594.60. insurance company to be held liable for unreasonably
Another Garnishment of P8,696,838.75 was handed delaying and withholding payment of insurance proceeds,
down the delay must be wanton, oppressive, or malevolent -
RTC: favored GOYU against MICO for the claim, RCBC not shown
for damages and to pay RCBC its loan Sebastian’s right as attaching creditor must yield to the
CA: Modified by increasing the damages in favor of preferential rights of RCBC over the Malayan insurance
GOYU policies as first mortgagee.
In G.R. No. 128834, RCBC seeks right to intervene in
the action between Alfredo C. Sebastian (the creditor) Gaisano Cagayan v. Insurance Co. of North America
and GOYU (the debtor), where the subject insurance GR 147839 June 8, 2006
policies were attached in favor of Sebastian
RTC and CA: endorsements do not bear the signature of FACTS:
any officer of GOYU concluded that the endorsements
favoring RCBC as defective. Intercapitol Marketing Corporation (IMC) is the maker of
Wrangler Blue Jeans. while Levi Strauss (Phils.) Inc.
ISSUE: W/N RCBC as mortgagee, has any right over the (LSPI) is the local distributor of products bearing
insurance policies taken by GOYU, the mortgagor, in case trademarks owned by Levi Strauss & Co
of the occurrence of loss IMC and LSPI separately obtained from Insurance
Company of North America fire insurance policies for
HELD: YES. their book debt endorsements related to their ready-
mortgagor and a mortgagee have separate and distinct made clothing materials which have been sold or
insurable interests in the same mortgaged property, such delivered to various customers and dealers of the Insured
that each one of them may insure the same property for anywhere in the Philippines which are unpaid 45 days
his own sole benefit after the time of the loss
3 of 10
February 25, 1991: Gaisano Superstore Complex in property insurance, one's interest is not determined by
Cagayan de Oro City, owned by Gaisano Cagayan, Inc., concept of title, but whether insured has substantial
containing the ready-made clothing materials sold and economic interest in the property
delivered by IMC and LSPI was consumed by fire. Section 13 of our Insurance Code defines insurable
February 4, 1992: Insurance Company of North America interest as "every interest in property, whether real or
filed a complaint for damages against Gaisano Cagayan, personal, or any relation thereto, or liability in respect
Inc. alleges that IMC and LSPI filed their claims under thereof, of such nature that a contemplated peril might
their respective fire insurance policies which it paid thus directly damnify the insured." Parenthetically, under
it was subrogated to their rights Section 14 of the same Code, an insurable interest in
Gaisano Cagayan, Inc: not be held liable because it was property may consist in: (a) an existing interest; (b) an
destroyed due to fortuities event or force majeure inchoate interest founded on existing interest; or (c) an
RTC: IMC and LSPI retained ownership of the delivered expectancy, coupled with an existing interest in that out
goods until fully paid, it must bear the loss (res perit of which the expectancy arises.
domino) Anyone has an insurable interest in property who derives
CA: Reversed - sales invoices is an exception under a benefit from its existence or would suffer loss from its
Article 1504 (1) of the Civil Code to res perit domino destruction.
ISSUE: W/N Insurance Company of North America can it is sufficient that the insured is so situated with
claim against Gaisano Cagayan for the debt that was reference to the property that he would be liable to loss
isnured should it be injured or destroyed by the peril against
which it is insured
HELD: YES. petition is partly GRANTED. order to pay an insurable interest in property does not necessarily
P535,613 is DELETED imply a property interest in, or a lien upon, or possession
of, the subject
insurance policy is clear that the subject of the insurance matter of the insurance, and neither the title nor a
is the book debts and NOT goods sold and delivered to beneficial interest is requisite to the existence of such an
the customers and dealers of the insured interest
ART. 1504. Unless otherwise agreed, the goods remain at insurance in this case is not for loss of goods by fire but
the seller's risk until the ownership therein is transferred for petitioner's accounts with IMC and LSPI that
to the buyer, but when the ownership therein is remained unpaid 45 days after the fire - obligation is
transferred to the buyer the goods are at the buyer's risk pecuniary in nature
whether actual delivery has been made or not, except obligor should be held exempt from liability when the
that: loss occurs thru a fortuitous event only holds true when
the obligation consists in the delivery of a determinate
(1) Where delivery of the goods has been made to the thing and there is no stipulation holding him liable even
buyer or to a bailee for the buyer, in pursuance of the in case of fortuitous event
contract and the ownership in the goods has been Article 1263 of the Civil Code in an obligation to deliver
retained by the seller merely to secure performance by a generic thing, the loss or destruction of anything of the
the buyer of his obligations under the contract, the goods same kind does not extinguish the obligation (Genus
are at the buyer's risk from the time of such delivery; nunquan perit)
IMC and LSPI did not lose complete interest over the The subrogation receipt, by itself, is sufficient to
goods. They have an insurable interest until full payment establish not only the relationship of respondent as
of the value of the delivered goods. Unlike the civil law insurer and IMC as the insured, but also the amount paid
concept of res perit domino, where ownership is the to settle the insurance claim
basis for consideration of who bears the risk of loss, in
4 of 10
Art. 2207. If the plaintiff's property has been insured, and ISSUE:
he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach Whether the CA erred in holding Grepalife liable to DBP
of contract complained of, the insurance company shall as beneficiary in a group life insurance contract from a
be subrogated to the rights of the insured against the complaint filed by the widow of the decedent/mortgagor
wrongdoer or the person who has violated the contract.
As to LSPI, no subrogation receipt was offered in HELD:
evidence.
Failure to substantiate the claim of subrogation is fatal to The rationale of a group of insurance policy of
petitioner's case for recovery of the amount of P535,613 mortgagors, otherwise known as the “mortgage
redemption insurance,” is a device for the protection of
Devices for risk: both the mortgagee and the mortgagor. On the part of
the mortgagee, it has to enter into such form of contract
Great Pacific life assurance v. CA so that in the event of the unexpected demise of the
316 SCRA 678 mortgagor during the subsistence of the mortgage
contract, the proceeds from such insurance will be
FACTS: applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the
Great Pacific Life Assurance Corporation (Grepalife) obligation. In a similar vein, ample protection is given to
executed a contract of group life insurance with the mortgagor under such a concept so that in the event
Development Bank of the Philippines (DBP) wherein of death, the mortgage obligation will be extinguished by
Grepalife agreed to insure the lives of eligible housing the application of the insurance proceeds to the mortgage
loan mortgagors of DBP. indebtedness. In this type of policy insurance, the
mortgagee is simply an appointee of the insurance fund.
One such loan mortgagor is Dr. Wilfredo Leuterio. In an Such loss-payable clause does not make the mortgagee a
application form, Dr. Leuterio answered questions party to the contract.
concerning his test, attesting among others that he does
not have any heart conditions and that he is in good The insured, being the person with whom the contract
health to the best of his knowledge. was made, is primarily the proper person to bring suit
thereon. Subject to some exceptions, insured may thus
However, after about a year, Dr. Leuterio died due to sue, although the policy is taken wholly or in part for the
“massive cerebral hemorrhage.” When DBP submitted a benefit of another person, such as a mortgagee.
death claim to Grepalife, the latter denied the claim,
alleging that Dr. Leuterio did not disclose he had been And since a policy of insurance upon life or health may
suffering from hypertension, which caused his death. pass by transfer, will or succession to any person,
Allegedly, such non-disclosure constituted concealment whether he has an insurable interest or not, and such
that justified the denial of the claim. person may recover it whatever the insured might have
recovered, the widow of the decedent Dr. Leuterio may
Hence, the widow of the late Dr. Leuterio filed a file the suit against the insurer, Grepalife.
complaint against Grepalife for “Specific Performance
with Damages.” Both the trial court and the Court of Sun Life Assurance Canada v. CA
Appeals found in favor of the widow and ordered GR 105135 June 22, 1995
Grepalife to pay DBP.
FACTS:
5 of 10
right to rescind the contract of insurance by reason of the
Robert John Bacani procured a life insurance contract for concealment employed by the insured. It must be
himself from petitioner-company, designating his mother emphasized that rescission was exercised within the two-
Bernarda Bacani, herein private respondent, as the year contestability period as recognized in Section 48 of
beneficiary. He was issued a policy valued at P100,000.00 The Insurance Code. WHEREFORE, the petition is
with double indemnity in case of accidental death. GRANTED and the Decision of the Court of Appeals is
Sometime after, the insured died in a plane crash. REVERSED and SET ASIDE.
Bernarda filed a claim with petitioner, seeking the
benefits of the insurance policy taken by her son. Philamcare case repeat (from last batch)
However, said insurance company rejected the claim on
the ground that the insured did not disclose material Vda de Canilang v. CA
facts relevant to the issuance of the policy, thus rendering GR No. 924922 June 17, 1993
the contract of insurance voidable. Petitioner discovered
that two weeks prior to his application for insurance, the Facts:
insured was examined and confined at the Lung Center Canilang was found to have suffered from sinus
of the Philippines, where he was diagnosed for renal tachycardia then bronchitis after a check-up from his
failure. The RTC, as affirmed by the CA, this fact was doctor. The next day, he applied for a "non-medical"
concealed, as alleged by the petitioner. But the fact that insurance policy with respondent Grepalife naming his
was concealed was not the cause of death of the insured wife, Thelma Canilang, as his beneficiary. This was to the
and that matters relating to the medical history of the value of P19,700.
insured is deemed to be irrelevant since petitioner He died of "congestive heart failure," "anemia," and
waived the medical examination prior to the approval "chronic anemia." The widow filed a claim with Great
and issuance of the insurance policy. Pacific which the insurer denied on the ground that the
insured had concealed material information from it.
ISSUE: Whether or not the concealment of such material Petitioner then filed a complaint against Great Pacific for
fact, despite it not being the cause of death of the recovery of the insurance proceeds. Petitioner testified
insured, is sufficient to render the insurance contract that she was not aware of any serious illness suffered by
voidable her late husband and her husband had died because of a
kidney disorder. The doctor who gave the check up stated
HELD: that he treated the deceased for “sinus tachycardia” and
"acute bronchitis."
YES. Section 26 of the Insurance Code is explicit in Great Pacific presented a physician who testified that the
requiring a party to a contract of insurance to deceased's insurance application had been approved on
communicate to the other, in good faith, all facts within the basis of his medical declaration. She explained that as
his knowledge which are material to the contract and as a rule, medical examinations are required only in cases
to which he makes no warranty, and which the other has where the applicant has indicated in his application for
no means of ascertaining. Anent the finding that the facts insurance coverage that he has previously undergone
concealed had no bearing to the cause of death of the medical consultation and hospitalization.
insured, it is well settled that the insured need not die of The Insurance Commissioner ordered Great Pacific to
the disease he had failed to disclose to the insurer. It is pay P19,700 plus legal interest and P2,000.00 as
sufficient that his non-disclosure misled the insurer in attorney's fees. On appeal by Great Pacific, the Court of
forming his estimates of the risks of the proposed Appeals reversed. It found that the failure of Jaime
insurance policy or in making inquiries. The SC, Canilang to disclose previous medical consultation and
therefore, ruled that petitioner properly exercised its treatment constituted material information which should
6 of 10
have been communicated to Great Pacific to enable the Materiality relates rather to the "probable and reasonable
latter to make proper inquiries. influence of the facts" upon the party to whom the
Hence this petition by the widow. communication should have been made, in assessing the
risk involved in making or omitting to make further
Issue: Won Canilang was guilty of misrepresentation inquiries and in accepting the application for insurance;
that "probable and reasonable influence of the facts"
Held: Yes. Petition denied. concealed must, of course, be determined objectively, by
the judge ultimately.
Ratio: The Insurance Commissioner had also ruled that the
There was a right of the insurance company to rescind failure of Great Pacific to convey certain information to
the contract if it was proven that the insured committed the insurer was not "intentional" in nature, for the reason
fraud in not affirming that he was treated for heart that Canilang believed that he was suffering from minor
condition and other ailments stipulated. ailment like a common cold. Section 27 stated that:
Apart from certifying that he didn’t suffer from such a Sec. 27. A concealment whether intentional or
condition, Canilang also failed to disclose in the that he unintentional entitles the injured party to rescind a
had twice consulted a doctor who had found him to be contract of insurance.
suffering from "sinus tachycardia" and "acute bronchitis." The failure to communicate must have been intentional
Under the Insurance Code: rather than inadvertent. Canilang could not have been
Sec. 26. A neglect to communicate that which a party unaware that his heart beat would at times rise to high
knows and ought to communicate, is called a and alarming levels and that he had consulted a doctor
concealment. twice in the two (2) months before applying for non-
Sec. 28. Each party to a contract of insurance must medical insurance. Indeed, the last medical consultation
communicate to the other, in good faith, all factors took place just the day before the insurance application
within his knowledge which are material to the contract was filed. In all probability, Jaime Canilang went to visit
and as to which he makes no warranty, and which the his doctor precisely because of the ailment.
other has not the means of ascertaining. Canilang's failure to set out answers to some of the
The information concealed must be information which questions in the insurance application constituted
the concealing party knew and should have concealment.
communicated. The test of materiality of such
information is contained in Section 31: Prudential v. Trans Asia Shipping lines
Sec. 31. Materiality is to be determined not by the event, GR 151890 June 20, 2006
but solely by the probable and reasonable influence of
the facts upon the party to whom the communication is Principle found in the case: Section 343 and 344 applies
due, in forming his estimate of the disadvantages of the when there is unreasonable delay or refusal in the
proposed contract, or in making his inquiries. payment of the insurance claims which could force the
The information which Jaime Canilang failed to disclose insured to file a case thus entitling him of attorney’s fees.
was material to the ability of Great Pacific to estimate the
probable risk he presented as a subject of life insurance. Facts:
Had he disclosed his visits to his doctor, the diagnosis
made and medicines prescribed by such doctor, in the TRANS-ASIA is the owner of the vessel M/V Asia Korea.
insurance application, it may be reasonably assumed that In consideration of payment of premiums, PRUDENTIAL
Great Pacific would have made further inquiries and insured M/V Asia Korea for loss/damage of the hull and
would have probably refused to issue a non-medical machinery arising from perils, inter alia, of fire and
insurance policy. explosion for the sum of P40 Million, beginning from the
7 of 10
period of July 1, 1993 up to July 1, 1994.On October 25, 5 thereof, which stipulates that the insured vessel, “M/V
1993, while the policy was in force, a fire broke out while ASIA KOREA” is required to be CLASSED AND CLASS
[M/V Asia Korea was] undergoing repairs at the port of MAINTAINED. According to PRUDENTIAL, on 25
Cebu. On October 26, 1993 TRANS-ASIA filed its notice October 1993, or at the time of the occurrence of the fire,
of claim for damage sustained by the vessel evidenced by “M/V ASIA KOREA” was in violation of the warranty as
a letter/formal claim. TRANS-ASIA reserved its right to it was not CLASSED AND CLASS MAINTAINED.
subsequently notify PRUDENTIAL as to the full amount PRUDENTIAL submits that Warranty Clause No. 5 was a
of the claim upon final survey and determination by condition precedent to the recovery of TRANS-ASIA
average adjuster Richard Hogg International (Phil.) of under the policy, the violation of which entitled
the damage sustained by reason of fire. TRANS-ASIA PRUDENTIAL to rescind the contract under Sec. 74 of
executed a document denominated “Loan and Trust the Insurance Code. By way of a counterclaim,
receipt”, a portion of which states that “Received from PRUDENTIAL sought a refund of P3,000,000.00, which
Prudential Guarantee and Assurance, Inc., the sum of it allegedly advanced to TRANS-ASIA by way of a loan
PESOS THREE MILLION ONLY (P3,000,000.00) as a without interest and without prejudice to the final
loan without interest under Policy No. MH 93/1353 evaluation of the claim, including the amounts of
[sic], repayable only in the event and to the extent that P500,000.00, for survey fees and P200,000.00,
any net recovery is made by Trans-Asia Shipping representing attorney’s fees. Trial court ruled in favor of
Corporation, from any person or persons, corporation or Prudential. It ruled that a determination of the parties’
corporations, or other parties, on account of loss by any liabilities hinged on whether TRANS-ASIA violated and
casualty for which they may be liable occasioned by the breached the policy conditions on WARRANTED
25 October 1993: Fire on Board. “PRUDENTIAL later on VESSEL CLASSED AND CLASS MAINTAINED. It
denied Trans-Asia’s claim in stated in a letter that “After interpreted the provision to mean that TRANS-ASIA is
a careful review and evaluation of your claim arising from required to maintain the vessel at a certain class at all
the above-captioned incident, it has been ascertained that times pertinent during the life of the policy. According to
you are in breach of policy conditions, among them the court a quo, TRANS-ASIA failed to prove compliance
“WARRANTED VESSEL CLASSED AND CLASS of the terms of the warranty, the violation thereof
MAINTAINED”. Accordingly, we regret to advise that entitled PRUDENTIAL to rescind the contract. The court
your claim is not compensable and hereby DENIED.” and of appeals reversed the decision. It ruled that
asked for the return of the 3,000,000. TRANS-ASIA filed PRUDENTIAL, as the party asserting the non-
a Complaint for Sum of Money against PRUDENTIAL compensability of the loss had the burden of proof to
with the RTC of Cebu City, wherein TRANS-ASIA sought show that TRANS-ASIA breached the warranty, which
the amount of P8,395,072.26 from PRUDENTIAL, burden it failed to discharge.It considered
alleging that the same represents the balance of the PRUDENTIAL’s admission that at the time the insurance
indemnity due upon the insurance policy in the total contract was entered into between the parties, the vessel
amount of P11,395,072.26. TRANS-ASIA similarly was properly classed by Bureau Veritas, a classification
sought interest at 42% per annum citing Section 243 of society recognized by the industry. It similarly gave
Presidential Decree No. 1460, otherwise known as the weight to the fact that it was the responsibility of
“Insurance Code,” as amended. PRUDENTIAL denied Richards Hogg International (Phils.) Inc., the average
the material allegations of the Complaint and interposed adjuster hired by PRUDENTIAL, to secure a copy of such
the defense that TRANS-ASIA breached insurance policy certification to support its conclusion that mere absence
conditions, in particular: PRUDENTIAL posits that of a certification does not warrant denial of TRANS-
TRANS-ASIA violated an express and material warranty ASIA’s claim under the insurance policy.Also the C.A.
in the subject insurance contract, i.e., Marine Insurance ruled that TRANS-ASIA is entitled to the unpaid claims
Policy No. MH93/1363, specifically Warranty Clause No. covered by Marine Policy, or a total amount of
8 of 10
P8,395,072.26 however even if there was unreasonable As established in Section 244, by reason of the delay and
denial or withholding of the payment of the claims due the consequent filing of the suit by the insured, the
Trans-Asia is still not entitled to pay for attorney’s fees insurers shall be adjudged to pay damages which shall
for it can only be awarded in the cases enumerated in consist of attorney’s fees and other expenses incurred by
Article 2208 of the Civil Code. But Trans-Asia is entitled the insured.
to double interest on the policy for the duration of the
delay of payment of the unpaid balance, citing Section Section 244 reads:
244 of the Insurance Code. “In case of any litigation for the enforcement of any
policy or contract of insurance, it shall be the duty of
Issue: theCommissioner or the Court, as the case may be, to
make a finding as to whether the payment of the claim of
WON Prudential should pay Trans-Asia the unpaid theinsured has been unreasonably denied or withheld;
claims covered by the marine policy including attorney’s and in the affirmative case, the insurance company shall
fees. beadjudged to pay damages which shall consist of
attorney’s fees and other expenses incurred by the
Ruling: insured personby reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling
Yes prescribed by theMonetary Board of the amount of the
claim due the insured, from the date following the time
Rationale: prescribed in sectiontwo hundred forty-two or in section
two hundred forty-three, as the case may be, until the
Sec. 244 of the Insurance Code grants damages claim is fully satisfied;Provided, That the failure to pay
consisting of attorney’s fees and other expenses incurred any such claim within the time prescribed in said
by the insured after a finding by the Insurance sections shall be considered primafacie evidence of
Commissioner or the Court, as the case may be,of an unreasonable delay in payment.”
unreasonable denial or withholding of the payment of the Sections 243 and 244 of the Insurance Code apply when
claims due. Moreover, the law imposes an interest of the court finds an unreasonable delay or refusal in the
twice the ceiling prescribed by the Monetary Board on payment of the insurance claims.
the amount of the claim due the insured from the date
following the time prescribed in Section 242 or in In the case at bar, the facts as found by the Court of
Section 243, as the case may be,until the claim is fully Appeals, and confirmed by the records show that there
satisfied. Finally, Section 244 considers the failure to pay was an unreasonable delay by PRUDENTIAL in the
the claims within the time prescribed in Sections 242 or payment of the unpaid balance of P8,395,072.26 to
243, when applicable, as prima facie evidence of TRANS-ASIA. On 26 October 1993, a day after the
unreasonable delay in payment. occurrence of the fire in “M/V Asia Korea”, TRANS-ASIA
filed its notice of claim. On 13 August 1996, the adjuster,
To the mind of this Court, Section 244 does not require a Richards Hogg International (Phils.), Inc., completed its
showing of bad faith in order that attorney’s fees be survey report recommending the amount of
granted.As earlier stated, under Section 244, a prima P11,395,072.26 as the total indemnity due to TRANS-
facie evidence of unreasonable delay in payment of the ASIA. On 21 April 1997, PRUDENTIAL, in a letter
claim is created by failure of the insurer to pay the claim addressed to TRANS-ASIA denied the latter’s claim for
within the time fixed in both Sections 242 and 243 of the the amount of P8,395,072.26 representing the balance of
Insurance Code. thetotal indemnity. On 21 July 1997, PRUDENTIAL sent
a second letter to TRANS-ASIA seeking a return of the
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amount of P3,000,000.00. On 13 August 1997, TRANS- However, the Court of Appeals then reversed the RTC
ASIA was constrained to file a complaint for sum of decision. Hence this appeal.
money against PRUDENTIAL praying, inter alia, for the
sum of P8,395,072.26 representing the balance of the ISSUE:
proceeds of the insurance claim.As can be gleaned from Whether or not Ma. Lourdes could claim benefits as the
the foregoing, there was an unreasonable delay on the beneficiary of her husband under the insurance plan
part of PRUDENTIAL to pay TRANS-ASIA, as in fact, it despite consideration that her husband Manuel concealed
refuted the latter’s right to the insurance claims, from the true condition of his health.
the time proof of loss was shown and the ascertainment
of the loss was made by the insurance adjuster. Evidently, RULING:
PRUDENTIAL’s unreasonable delay in satisfying TRANS- The Supreme Court answers this to the negative and the
ASIA’s unpaid claims compelled the latter to file a suit AFFIRMED in its entirety the decision of the Court of
for collection.Succinctly, an award equivalent to ten Appeals.The comprehensive pension plan that Philam
percent (10%) of the unpaid proceeds of the policy as Plans issued contains a one-year incontestability period.
attorney’s fees to TRANS-ASIA is reasonable under the It states:
circumstances, or otherwise stated, ten percent (10%) of
P8,395,072.26. In the case of Cathay Insurance, Co., Inc. VIII. INCONTESTABILITY
v. Court of Appeals, where a finding of an unreasonable After this Agreement has remained in force for one (1)
delay under Section 244 of the Insurance Code was made year, we can no longer contest for health reasons any
by this Court, we grant an award of attorney’s fees claim for insurance under this Agreement, except for the
equivalent to ten percent (10%) of the total proceeds. We reason that installment has not been paid (lapsed), or
find no reason to deviate from this judicial precedent in that you are not insurable at the time you bought this
the case at bar. pension program by reason of age. If this Agreement
lapses but is reinstated afterwards, the one (1) year
Lourdes v. Philam plans contestability period shall start again on the date of
GR 18693 Feb 22, 2012 approval of your request for reinstatement.The above
incontestability clause precludes the insurer from
FACTS: disowning liability under the policy it issued on the
Manuel Florendo filed an application for ground of concealment or misrepresentation regarding
comprehensive pension plan with respondent Philam the health of the insured after a year of its issuance.
Plans, Inc. (Philam Plans) Manuel signed the application Since
and left to Perla the task of supplying the information Manuel died on the eleventh month following the
needed in the application. Respondent Ma. Celeste issuance of his plan, the one year incontestability period
Abcede, Perla’s daughter, signed the application as sales has not yet set in. Consequently, Philam Plans was not
counselor. Philam Plans issued Pension Plan Agreement barred from
toManuel, with petitioner Ma. Lourdes S. Florendo, his questioning Lourdes’ entitlement to the benefits of her
wife, as beneficiary. In time, Manuel paid his quarterly husband’s pension plan.
premiums. Eleven months later, Manuel died of blood
poisoning. Subsequently,Lourdes filed a claim with
Philam Plans for the payment of the benefits under her
husband’s plan but Philam Plans declined her claim
prompting her to file the present action against the
pension plan company before the Regional Trial Court
(RTC) of Quezon City and ruled in favor of Ma. Lourdes.
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