UCPB General vs Asgard Corrugated

GR 244407 Jan. 26, 2021

DOCTRINE:
An insurable interest in property is not limited to property ownership in the
subject matter of the insurance. Anyone who derives a benefit from its existence or
would suffer loss from its destruction has an insurable interest in property .
FACTS:
Asgard and Milestone entered into a Toll Manufacturing Agreement (TMA)
whereby Asgard undertook to perform toll-manufacturing of paper products for
Milestone.  Under the TMA, Asgard undertook to perform for Milestone toll
manufacturing of paper products in accordance with the volume and specifications as
Milestone may define from time to time. Milestone shall advise Asgard of its
requirements for the products to be toll-manufactured at least fifteen (15) days in
advance of Milestone's desired delivery.
Asgard needed additional capital for the purchase of new equipment for its
manufacturing plant. So, it invited Milestone to invest in the company. Instead of
immediately investing, Milestone proposed to take over the management and
operations of Asgard. 
Asgard and Milestone further agreed that the latter would convert the paper products
into corrugated carton boxes using the corrugating machines owned by Asgard. The
agreement likewise included the modification of the corrugating machines by replacing
the parts with the ones owned by Milestone. As a result thereof, all vital parts of the
corrugating machines of Asgard were detached and replaced with parts owned by
Milestone.
Asgard and Milestone took out an insurance policy from UCPB Insurance. Upon
payment of premium, UCPB Insurance issued Industrial All Risk Policy to Milestone
and/or Market Link and/or Nova Baile and/or Asgard to insure Asgard's machinery and
equipment of every kind covering the period August 1, 2009 to August 1, 2010.
In July 15, 2010, Milestone pulled out its stocks, machinery, and equipment from
Asgard's plant in Novaliches, Quezon City for relocation to Milestone's own premises in
Laguna. It caused damage to Asgard's corrugating machine and accessories.
Asgard notified UCPB Insurance about the loss and filed an insurance claim. UCPB
Insurance denied the claim explaining that malicious damage was committed by
Milestone, one of the name insured, and not committed by a third party. As such, UCPB
Insurance is not liable for a loss caused by the willful act of the insured.
For this, Asgard filed a complaint for sum of money. Asgard alleged that it solely owns
the damaged corrugating machine and Milestone has no insurable interest therein.
UCPB Insurance countered that even if Asgard was in fact the sole owner of the
machine, Milestone still has an insurable interest therein because it would suffer a loss
upon its destruction as it cannot produce the corrugated boxes.
UCPB Insurance filed a Motion for Summary Judgment which was granted by the RTC.
The RTC ruled that Milestone had insurable interest over the property. The issue on the
insurable interest of Milestone over the property is a legal issue which does not
necessitate a presentation of the parties' respective pieces of evidence. The CA agreed
with with the RTC that Milestone lacked insurable interest and could not properly be
considered an insured under the Policy.
ISSUE:
1. Whether Milestone had insurable interest over Asgard's corrugating machines at
the time of the loss or damage. YES
2. Whether UCPB Insurance may be held liable under the Policy.
RULING:
1. YES. Section 13 of the Insurance Code defines insurable interest as "every
interest in property, whether real or personal, or any relation thereto, or liability in
respect thereof, of such nature that a contemplated peril might directly damnify the
insured." Under Section 14 of the same Code, an insurable interest in property may
consist in: (a) an existing interest, like that of an owner or lienholder; (b) an inchoate
interest founded on existing interest, like that of a stockholder in corporate property; or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy
arises, like that of a shipper of goods in the profits he expects to make from the sale
thereof. For this, an insurable interest in property is not limited to property ownership in
the subject matter of the insurance. Anyone has an insurable interest in property who
derives a benefit from its existence or would suffer loss from its destruction.  
Asgard cannot take an inconsistent position that Milestone had no more
insurable interest under the Policy when it admitted that both Asgard and Milestone took
out the insurance policy on August 1, 2009 effective until August 1, 2010. It is very clear
that Milestone has insurable interest on the property at the time of the loss and damage
on July 15, 2010.
Lastly, when Milestone removed its parts and machines, Milestone still had an
actual and real interest in the preservation of the corrugating machines while the TMA is
not effectively terminated.
2. NO. Section 89 of the Insurance Code (Republic Act No. 10607) is clear - an
insurer is not liable for a loss caused by the willful act of the insured. The insurer is not
liable for a loss caused by the intentional act of the insured or through his connivance.
However, the insurer is not relieved from liability by the mere fact that the loss was
caused by the negligence of the insured, or of his agents or others. However, when the
insured's negligence is so gross that it is tantamount to misconduct, or willful or wrongful
act, the insurer is not liable. Since the damage or loss caused by Milestone to Asgard's
corrugating machines was willful or intentional, UCPB Insurance is not liable under the
Policy.
DECISION:
The petition is granted. The Complaint for Sum of Money with Application for Writ of
Preliminary Attachment in Civil Case No. 11-531 is DISMISSED.

Pioneer Insurance & Surety Corporation vs. Carmen G. Tan Also Known as
Carmen S.f. Gatmaytan and/or Unknown Owner/proprietor of Save More Drug
Doing Business Under the Name and Style of Save More Drug
G.R. No. 239989 | July 13, 2020
 
Facts:

Pioneer Insurance engaged in the business of fire insurance, extended Fire Insurance
Policy No. FI-PP-03-0000356-00-D (subject policy) in favor of United Laboratories, Inc.
(Unilab) for the latter’s stocks of various drugs, medicines, and pharmaceutical
products. The policy was in effect for a period of one year from December 29, 2003 to
December 29, 2004.

Among the goods covered by the subject policy were delivered to Carmen G. Tan,
proprietor of Save More Drug (Save More). Said goods were stored at Tan’s warehouse
at 1910 Don Jose Street, Don Antonio Heights Subdivision, Commonwealth Avenue,
Quezon City Notably, the Terms and Conditions of the Delivery Receipts state:
 
x x x Goods remain the property of UNITED LABORATORIES, INC., until fully paid but
risk of loss arising from any cause shall be for buyer’s own account from the moment
the goods are delivered to the buyer or the common carrier.

On August 28, 2004, the entire Save More warehouse, including Unilab’s goods, was
razed by fire. Unilab then filed a claim with Pioneer Insurance pursuant to the subject
policy. Successfully, Unilab obtained the amount of P13,430,528.22 which represented
the value of the goods stored by Unilab in the Save More warehouse lost by fire. In
exchange, Unilab executed in favor of petitioner a Release Claim and a Loss and
Subrogation Receipt.

Pioneer Insurance sought to recover from Tan the amount it paid to Unilab. However,
Tan refused, prompting petitioner to file a complaint for damages.
Pioneer Insurance alleged that pursuant to a contract of sale, Unilab delivered to Tan
various pharmaceutical products which were stored to the latter’s warehouse. However,
said products were lost due to fire. Since the cause of the loss was due to negligence of
respondent, the latter should reimburse the petitioner for whatever was paid to Unilab
by virtue of the former’s right of subrogation.

Tan averred the fire was accidental; hence, Pioneer Insurance could not recover from
her.
The RT maintained that by subrogation, Pioneer Insurance’s payment to the insured,
Unilab, operated as an assignment to the former of all remedies that the latter may have
against the third party whose negligence caused the loss. Moreover, the RTC held that
whether the cause of the loss was due to a fortuitous event was beside the point. What
is axiomatic is that the respondent’s obligation is the payment of money, which is a
generic obligation; and failure to make payment shall not relieve her of liability even by
reason of fortuitous event. 
 
Tan then filed an appeal questioning the propriety of the award of damages in favor of
Pioneer Insurance. Tan raised that it is not liable for damages to base on the nature of
the contract executed between her and Unilab, that is, a contract of consignment.

The CA denied the appeal and affirmed with modification the ruling of the RTC. The CA
found that the contract between respondent and Unilab is one of sale. It further
maintained that Unilab nevertheless retained insurable interest over such goods until full
payment of the purchase price. As such, the insurance contract was not terminated by
virtue of the transfer of ownership to Tan. Unilab can recover from Pioneer Insurnace for
any loss covered by the subject policy, which is payment for unpaid debts and
receivables. The prestation under the subject policy is a generic thing, which is not
extinguishable even by fortuitous event. Corollary, Pioneer Insurance can claim from
Tan whatever it has paid to Unilab under the rule that one who pays for another may
demand from the debtor what he had paid.

Tan then filed a Motion for Reconsideration. She assailed the findings of the CA as to
the nature of the contract between her and Unilab. Tan argued that the contract is one
of consignment, which made her an extension of Unilab as principal. That being said,
Tan averred that she could not have been liable to Pioneer Insurance as she had
identical interest with Unilab insofar as the subject policy is concerned.
 
In an Amended Decision, the CA reversed its earlier ruling, holding that Tan was not
liable to Pioneer Insurance, the CA reviewed the records and found that the contract
was one of consignment. Thus, respondent was considered as an agent of Unilab; and
as such, cannot be deemed liable to petitioner for the loss of goods. Hence, Pioneer
Insurance petitioned.

 Issue:

Whether or not Pioneer Insurance can recover from Tan based on the former’s right to
subrogation? YES
 
Held:

Yes. Unilab retained insurable interest over the goods by virtue of the agreement
between it and Tan that the ownership thereof shall remain with Unilab until full
payment. Corollary, the liability of respondent stems from the same agreement, stating
that the buyer bears the risk of loss arising from any cause upon delivery of the goods
to Tan.

The destroyed goods which were situated at Tan’s warehouse were still unpaid, hence,
it is right to direct Tan to pay Pioneer Insurance the amount which was paid to Unilab as
insurance proceeds. By right of subrogation, Pioneer Insurance as the insurer may
collect payment from Tan after the satisfaction of the insurance claim of Unilab.

Th petition was GRANTED. 

Great Pacific Life Assurance Corp. vs. Court of Appeals

G.R. No. 113899 October 13, 1999

Facts:
A contract of group life insurance was executed between petitioner Great Pacific Life
Assurance Corporation and Development Bank of the Philippines. Grepalife agreed to
insure the lives of eligible housing loan mortgagors of DBP. Dr. Wilfredo Leuterio
applied for membership in the group life insurance plan. In his application form, Dr.
Leuterio stated that he neither had, nor consulted, a physician for a heart condition, high
blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other
physical impairment and answered that he is in good health. Grepalife issued an
insurance coverage to Dr. Leuterio, to the extent of his DBP mortgage indebtedness
amounting P86,200.00. Dr. Leuterio died due to "massive cerebral hemorrhage." DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr.
Leuterio was not physically healthy when he applied for insurance coverage. Grepalife
insisted that Dr. Leuterio did not disclose he had been suffering from hypertension,
which caused his death. The widow of the late Dr. Leuterio, respondent Medarda V.
Leuterio, filed a complaint with the Regional Trial Court for "Specific Performance with
Damages. Petitioner alleges that the complaint was instituted by the widow of Dr.
Leuterio, not the real party in interest, hence the trial court acquired no jurisdiction over
the case. Grepalife was held liable to pay the proceeds of the insurance contract in
favor of DBP, the indispensable party who was not joined in the suit.

Issue:
Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in
a group life insurance contract from a complaint filed by the widow of the
decedent/mortgagor?

*Our topic for this case is the separate insurable interest of the mortgagor and
mortgagee

Ruling:
*The rationale of a group insurance policy of mortgagors, otherwise known as the
"mortgage redemption insurance," is a device for the protection of both the mortgagee
and the mortgagor. On the part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the mortgagor during the
subsistence of the mortgage contract, the proceeds from such insurance will be applied
to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from
paying the obligation. In a similar vein, ample protection is given to the mortgagor under
such a concept so that in the event of death; the mortgage obligation will be
extinguished by the application of the insurance proceeds to the mortgage
indebtedness. Consequently, where the mortgagor pays the insurance premium under
the group insurance policy, making the loss payable to the mortgagee, the insurance is
on the mortgagor's interest, and the mortgagor continues to be a party to the contract.
In this type of policy insurance, the mortgagee is simply an appointee of the insurance
fund, such loss-payable clause does not make the mortgagee a party to the contract. 

Petition Denied. The insured private respondent did not cede to the mortgagee all his
rights or interests in the insurance, the policy stating that: "In the event of the debtor's
death before his indebtedness with the Creditor [DBP] shall have been fully paid, an
amount to pay the outstanding indebtedness shall first be paid to the creditor and the
balance of sum assured, if there is any, shall then be paid to the beneficiary/ies
designated by the debtor." When DBP submitted the insurance claim against petitioner,
the latter denied payment thereof, interposing the defense of concealment committed by
the insured. Thereafter, DBP collected the debt from the mortgagor and took the
necessary action of foreclosure on the residential lot of private respondent. In Gonzales
La O vs. Yek Tong Lin Fire & Marine Ins. Co. we held: Insured, being the person with
whom the contract was made, is primarily the proper person to bring suit thereon. * * *
Subject to some exceptions, insured may thus sue, although the policy is taken wholly
or in part for the benefit of another person named or unnamed, and although it is
expressly made payable to another as his interest may appear or otherwise. * * *
Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee
and is made payable to him, yet the mortgagor may sue thereon in his own name,
especially where the mortgagee's interest is less than the full amount recoverable under
the policy, * * *.

Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any judgment
he may obtain.

And since a policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such person
may recover it whatever the insured might have recovered, the widow of the decedent
Dr. Leuterio may file the suit against the insurer, Grepalife.

Lalican vs The Insular Life Assurance Company Limited

G.R. No. 183526  August 25, 2009

Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio). During his
lifetime, Eulogio applied for an insurance policy with Insular Life. On 24 April 1997,
Insular Life, through Josephine Malaluan (Malaluan), its agent in Gapan City, issued in
favor of Eulogio Policy No. 9011992, which contained a 20-Year Endowment Variable
Income Package Flexi Plan worth P500,000.00, with two riders valued at P 500,000.00
each. Thus, the value of the policy amounted to P1,500,000.00. Violeta was named as
the primary beneficiary. P Under the terms of Policy No. 9011992, Eulogio was to pay
the premiums on a quarterly basis in the amount of 8,062.00, payable every 24 April, 24
July, 24 October and 24 January of each year, until the end of the 20-year period of the
policy. According to the Policy Contract, there was a grace period of 31 days for the
payment of each premium subsequent to the first. If any premium was not paid on or
before the due date, the policy would be in default, and if the premium remained unpaid
until the end of the grace period, the policy would automatically lapse and become void.
Eulogio paid the premiums due on 24 July 1997 and 24 October 1997. However, he
failed to pay the premium due on 24 January 1998, even after the lapse of the grace
period of 31 days. Policy No. 9011992, therefore, lapsed and became void. Eulogio
submitted to the Cabanatuan District Office of Insular Life, through Malaluan, on 26 May
1998, an Application for Reinstatement of Policy No. 9011992, together with the amount
of P 8,062.00 to pay for the premium due on 24 January 1998. In a letter dated 17 July
1998, Insular Life notified Eulogio that his Application for Reinstatement could not be
fully processed because, although he already deposited P8,062.00 as payment for the
24 January 1998 premium, he left unpaid the overdue interest thereon amounting to
P322.48. Thus, Insular Life instructed Eulogio to pay the amount of interest and to file
another application for reinstatement. Eulogio was likewise advised by Malaluan to pay
the premiums that subsequently became due on 24 April 1998 and 24 July 1998, plus
interest. On 17 September 1998, Eulogio went to Malaluans house and submitted a
second Application for Reinstatement of Policy No. 9011992, including the amount of
P17,500.00, representing payments for the overdue interest on the premium for 24
January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998.
As Malaluan was away on a business errand, her husband received Eulogios second
Application for Reinstatement and issued a receipt for the amount Eulogio deposited.  A
while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory
arrest secondary to electrocution.

Issue: Whether or not Eulogio had an existing insurable interest in his own life until the
day of his death in order to have the insurance policy validly reinstated.

Held: No. An insurable interest is one of the most basic and essential requirements in
an insurance contract. In general, an insurable interest is that interest which a person is
deemed to have in the subject matter insured, where he has a relation or connection
with or concern in it, such that the person will derive pecuniary benefit or advantage
from the preservation of the subject matter insured and will suffer pecuniary loss or
damage from its destruction, termination, or injury by the happening of the event insured
against. The existence of an insurable interest gives a person the legal right to insure
the subject matter of the policy of insurance. Section 10 of the Insurance Code indeed
provides that every person has an insurable interest in his own life. Section 19 of the
same code also states that an 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.
In the instant case, Eulogios death rendered impossible full compliance with the
conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death,
managed to file his Application for Reinstatement and deposit the amount for payment
of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992
could only be considered reinstated after the Application for Reinstatement had been
processed and approved by Insular Life during Eulogios lifetime and good health.

The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such reinstatement
by the mere filing of an application. The insurer has the right to deny the reinstatement if
it is not satisfied as to the insurability of the insured and if the latter does not pay all
overdue premium and all other indebtedness to the insurer. After the death of the
insured the insurance Company cannot be compelled to entertain an application for
reinstatement of the policy because the conditions precedent to reinstatement can no
longer be determined and satisfied.’

Malaluan did not have the authority to approve Eulogios Application for Reinstatement.
Malaluan still had to turn over to Insular Life Eulogios Application for Reinstatement and
accompanying deposits, for processing and approval by the latter.

Violeta did not adduce any evidence that Eulogio might have failed to fully understand
the import and meaning of the provisions of his Policy Contract and/or Application for
Reinstatement, both of which he voluntarily signed. While it is a cardinal principle of
insurance law that a policy or contract of insurance is to be construed liberally in favor of
the insured and strictly as against the insurer company, yet, contracts of insurance, like
other contracts, are to be construed according to the sense and meaning of the terms,
which the parties themselves have used. If such terms are clear and unambiguous, they
must be taken and understood in their plain, ordinary and popular sense.