QUA CHEE GAN, plaintiff-appellee, vs. LAW UNION AND ROCK INSURANCE CO., LTD.

,
represented by its agent, WARNER, BARNES AND CO., LTD., defendant-appellant.
G.R. No. L-4611
December 17, 1955

DOCTRINE:
FACTS:
ISSUE:
HELD:

DIOSDADO C. TY, plaintiff-appellant,

vs.
FILIPINAS COMPAIA DE SEGUROS, et al., defendants-appellees.
G.R. No. L-21821-22 and L-21824-27
May 31, 1966

DOCTRINE:
We might add that the agreement contained in the insurance policies is the law between the parties.
As the terms of the policies are clear, express and specific that only amputation of the left hand
should be considered as a loss thereof, an interpretation that would include the mere fracture or
other temporary disability not covered by the policies would certainly be unwarranted

FACTS:
Plaintiff-appellant was an employee of Broadway Cotton Factory at Grace Park, Caloocan City,
working as mechanic operator, with monthly salary of P185.00. In the latter part of 1953, he took
Personal Accident Policies from several insurance companies, among which are herein defendantsappellees, on different dates,1 effective for 12 months. During the effectivity of these policies, or on
December 24, 1953, a fire broke out in the factory where plaintiff was working. As he was trying to
put out said fire with the help of a fire extinguisher, a heavy object fell upon his left hand. Plaintiff
received treatment at the National Orthopedic Hospital from December 26, 1953 to February 8,
1954, for the following injuries, to wit:
(1) Fracture, simple, oraximal phalanx, index finger, left;
(2) Fracture, compound, communite proximal phalanx, middle finger, left and 2nd phalanx
simple;
(3) Fracture, compound, communite phalanx, 4th finger, left;
(4) Fracture, simple, middle phalanx, middle finger, left;
(5) Lacerated wound, sutured, volar aspect, small finger, left;
(6) Fracture, simple, chip, head, 1st phalanx 5th digit, left.
which injuries, the attending surgeon certified, would cause temporary total disability of appellant's
left hand.
As the insurance companies refused to pay his claim for compensation under the policies by reason
of the said disability of his left hand, Ty filed motions in the Municipal Court of Manila, which
rendered favorable decision. On appeal to the Court of First Instance by the insurance companies,
the cases were dismissed on the ground that under the uniform terms of the insurance policies,
partial disability of the insured caused by loss of either hand to be compensable, the loss must result
in the amputation of that hand. Hence, these appeals by the insured.
1wph1.t

ISSUE:
Whether or not plaintiff is entitled to indemnification under the foregoing
provision.
HELD:

This is not the first time that the proper construction of this provision, which is uniformly carried in
personal accident policies, has been questioned. Herein appellant himself has already brought this
matter to the attention of this Court in connection with the other accident policies which he took and
under which he had tried to collect indemnity, for the identical injury that is the basis of the claims in
these cases. And, we had already ruled:
While we sympathize with the plaintiff or his employer, for whose benefit the policies were
issued, we can not go beyond the clear and express conditions of the insurance policies, all
of which definite partial disability as loss of either hand by amputation through the bones of
the wrist. There was no such amputation in the case at bar. All that was found by the trial
court, which is not disputed on appeal, was that the physical injuries "caused temporary total
disability of plaintiff's left hand." Note that the disability of plaintiff's hand was merely
temporary, having been caused by fractures of the index, the middle and the fourth fingers of
the left hand.
We might add that the agreement contained in the insurance policies is the law between the parties.
As the terms of the policies are clear, express and specific that only amputation of the left hand
should be considered as a loss thereof, an interpretation that would include the mere fracture or
other temporary disability not covered by the policies would certainly be unwarranted. 2
We find no reason to depart from the foregoing ruling on the matter.
Plaintiff-appellant cannot come to the courts and claim that he was misled by the terms of the
contract. The provision is clear enough to inform the party entering into that contract that the loss to
be considered a disability entitled to indemnity, must be severance or amputation of that affected
member from the body of the insured.

SIMEON DEL ROSARIO, plaintiff-appellee,

vs.
THE EQUITABLE INSURANCE AND CASUALTY CO., INC., defendant-appellant.
G.R. No. L-16215
June 29, 1963

DOCTRINE: terms in an insurance policy, which are ambiguous, equivocal or uncertain . . . are to
be construed strictly against, the insurer, and liberally in favor of the insured so as to effect the
dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved,"
and the reason for this rule is that the "insured usually has no voice in the selection or arrangement
of the words employed and that the language of the contract is selected with great care and
deliberation by expert and legal advisers employed by, and acting exclusively in the interest of, the
insurance company.

FACTS:
On February 7, 1957, the defendant Equitable Insurance and Casualty Co., Inc., issued Personal
Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein
plaintiff-appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death
of the insured. The pertinent provisions of the Policy.
On February 24, 1957, the insured Francisco del Rosario, alias Paquito Bolero, while on board the
motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy, Remedios
Jayme, were forced to jump off said launch on account of fire which broke out on said vessel,
resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo.
1wph1.t

On April 13, 1957, Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for
payment with defendant company, and on September 13, 1957, defendant company paid to him
(plaintiff) the sum of P1,000.00, pursuant to Section 1 of Part I of the policy.
On the same date (September 13, 1957), Atty. Vicente J. Francisco, wrote defendant company
acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said company
that said amount was not the correct one. Atty. Francisco claimed
The amount payable under the policy, I believe should be P1,500.00 under the provision of
Section 2, part 1 of the policy, based on the rule of pari materia as the death of the insured
occurred under the circumstances similar to that provided under the aforecited section.
Defendant company, upon receipt of the letter, referred the matter to the Insurance Commissioner,
who rendered an opinion that the liability of the company was only P1,000.00, pursuant to Section 1,
Part I of the Provisions of the policy (Exh. F, or 3). Because of the above opinion, defendant
insurance company refused to pay more than P1,000.00. In the meantime, Atty. Vicente Francisco,
in a subsequent letter to the insurance company, asked for P3,000.00 which the Company refused,
to pay. Hence, a complaint for the recovery of the balance of P2,000.00 more was instituted with the
Court of First Instance of Rizal (Pasay City, Branch VII), praying for it further sum of P10,000.00 as
attorney's fees, expenses of litigation and costs.
Defendant Insurance Company presented a Motion to Dismiss, alleging that the demand or claim is
set forth in the complaint had already been released, plaintiff having received the full amount due as

appearing in policy and as per opinion of the Insurance Commissioner. An opposition to the motion
to dismiss, was presented by plaintiff, and other pleadings were subsequently file by the parties. On
December 28, 1957, the trial court deferred action on the motion to dismiss until termination of the
trial of the case, it appearing that the ground thereof was not indubitable. In the Answer to the
complaint, defendant company practically admitted all the allegations therein, denying only those
which stated that under the policy its liability was P3,000.00.

ISSUE:
Whether or not the insurers liability is P3,000.
HELD:
All the parties agree that indemnity has to be paid. The conflict centers on how much should the
indemnity be. We believe that under the proven facts and circumstances, the findings and
conclusions of the trial court, are well taken, for they are supported by the generally accepted
principles or rulings on insurance, which enunciate that where there is an ambiguity with respect to
the terms and conditions of the policy, the same will be resolved against the one responsible thereof.
It should be recalled in this connection, that generally, the insured, has little, if any, participation in
the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation
of obscure stipulations in a contract should not favor the party who cause the obscurity (Art. 1377,
N.C.C.), which, in the case at bar, is the insurance company.
. . . . And so it has been generally held that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer, and
liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment
to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for
this rule is that the "insured usually has no voice in the selection or arrangement of the words
employed and that the language of the contract is selected with great care and deliberation
by expert and legal advisers employed by, and acting exclusively in the interest of, the
insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151,
Dec. 16, 1955.
. . . . Where two interpretations, equally fair, of languages used in an insurance policy may
be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union &
Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).
At any event, the policy under consideration, covers death or disability by accidental means, and the
appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the
insured.

MISAMIS LUMBER CORPORATION, plaintiff and appellee,

vs.
CAPITAL INSURANCE and SURETY CO., INC., defendant and appellant.
G.R. No. L-21380
May 20, 1966

DOCTRINE:
FACTS:
At around eleven o'clock in the evening of 25 November 1961, and while the above-mentioned
insurance policy was in force, the insured car, while traveling along in Aurora Boulevard in front of
the Pepsi-Cola plant in Quezon City, passed over a water hole which the driver did not see because
an oncoming car did not dim its light. The crankcase and flywheel housing of the car broke when it
hit a hollow block lying alongside the water hole. At the instance of the plaintiff-appellee, the car was
towed and repaired by Morosi Motors at its shop at 1906 Taft Avenue Extension at a total cost of
P302.27.
On 29 November 1961, when the repairs on the car had already been made, the plaintiff-appellee
made a report of the accident to the defendant-appellant Capital Insurance & Surety Company.
Since the defendant-appellant refused to pay for the total cost of to wage and repairs, suit was filed
in the municipal court originally.

ISSUE:
HELD:
The lower court did not exonerate the said appellant for the excess because, according to it, the
company's absolution would render the insurance contract one-sided and that the said insurer had
not shown that the cost of repairs in the sum of P302.27 is unreasonable, excessive or padded, nor
had it shown that it could have undertaken the repairs itself at less expense.
The above reasoning is beside the point, because the insurance policy stipulated in paragraph 4 that
if the insured authorizes the repair the liability of the insurer, per its sub-paragraph (a), is limited to
P150.00. The literal meaning of this stipulation must control, it being the actual contract, expressly
and plainly provided for in the policy (Art. 1370, Civil Code; Young vs. Midland Textile Ins. Co., 30
Phil. 617; Ty vs. First Nat. Surety & Assur. Co., Inc., L-16138-45, 29 April 1961).
The lower court's recourse to legal hermeneutics is not called for because paragraph 4 of the policy
is clear and specific and leaves no room for interpretation. The interpretation given is even
unjustified because it opposes what was specifically stipulated. Thus, it will be observed that the
policy drew out not only the limits of the insurer's liability but also the mechanics that the insured had
to follow to be entitled to full indemnity of repairs. The option to undertake the repairs is accorded to
the insurance company per paragraph 2. The said company was deprived of the option because the
insured took it upon itself to have the repairs made, and only notified the insurer when the repairs
were done. As a consequence, paragraph 4, which limits the company's liability to P150.00, applies.

The insurance contract may be rather onerous ("one-sided", as the lower court put it), but that in
itself does not justify the abrogation of its express terms, terms which the insured accepted or
adhered to and which is the law between the contracting parties.
Finally, to require the insurer to prove that the cost of the repairs ordered by the insured is
unreasonable, as the appealed decision does, when the insurer was not given an opportunity to
inspect and assess the damage before the repairs were made, strikes Us as contrary to elementary
justice and equity.
For the foregoing reasons, the appealed decision is hereby modified by ordering the defendantappellant Capital Insurance & Surety Company, Inc. to pay not more than P150.00 to the plaintiffappellee Misamis Lumber Corporation. Each party shall bear its own costs and attorney's fees.

RAFAEL (REX) VERENDIA, petitioner,

vs.
COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES,
G.R. No. 75605 January 22, 1993

DOCTRINE:
Basically a contract of indemnity, an insurance contract is the law between the parties. Its
terms and conditions constitute the measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right to recovery from the insurer. As it is
also a contract of adhesion, an insurance contract should be liberally construed in favor of
the insured and strictly against the insurer company which usually prepares it

FACTS: The two consolidated cases involved herein stemmed from the issuance by Fidelity
and Surety Insurance Company of the Philippines (Fidelity for short) of its Fire Insurance
Policy No. F-18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex)
Verendia's residential building located at Tulip Drive, Beverly Hills, Antipolo, Rizal in the
amount of P385,000.00. Designated as beneficiary was the Monte de Piedad & Savings Bank.
Verendia also insured the same building with two other companies, namely, The Country
Bankers Insurance for P56,000.00 under Policy No. PDB-80-1913 expiring on May 12, 1981,
and The Development Insurance for P400,000.00 under Policy No. F-48867 expiring on June
30, 198l.
While the three fire insurance policies were in force, the insured property was completely
destroyed by fire on the early morning of December 28, 1980. Fidelity was accordingly
informed of the loss and despite demands, refused payment under its policy, thus prompting
Verendia to file a complaint with the then Court of First Instance of Quezon City, praying for
payment of P385,000.00, legal interest thereon, plus attorney's fees and litigation expenses.
The complaint was later amended to include Monte de Piedad as an "unwilling defendant" (P.
16, Record).
Answering the complaint, Fidelity, among other things, averred that the policy was avoided
by reason of over-insurance; that Verendia maliciously represented that the building at the
time of the fire was leased under a contract executed on June 25, 1980 to a certain Roberto
Garcia, when actually it was a Marcelo Garcia who was the lessee.
On May 24, 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz, ruling in
favor of Fidelity. In sustaining the defenses set up by Fidelity, the trial court ruled that
Paragraph 3 of the policy was also violated by Verendia in that the insured failed to inform
Fidelity of his other insurance coverages with Country Bankers Insurance and Development
Insurance.

ISSUE:
HELD:

Basically a contract of indemnity, an insurance contract is the law between the parties
(Pacific Banking Corporation vs. Court of Appeals 168 SCRA 1 [1988]). Its terms and
conditions constitute the measure of the insurer's liability and compliance therewith is a
condition precedent to the insured's right to recovery from the insurer (Oriental Assurance
Corporation vs. Court of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Seguros,
Inc. vs. Court of Appeals, 185 SCRA 741 [1991]). As it is also a contract of adhesion, an
insurance contract should be liberally construed in favor of the insured and strictly against
the insurer company which usually prepares it (Western Guaranty Corporation vs. Court of
Appeals, 187 SCRA 652 [1980]).
Considering, however, the foregoing discussion pointing to the fact that Verendia used a
false lease contract to support his claim under Fire Insurance Policy No. F-18876, the terms
of the policy should be strictly construed against the insured. Verendia failed to live by the
terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear
and unambiguous, that all benefits under the policy shall be forfeited "If the claim be in any
respect fraudulent, or if any false declaration be made or used in support thereof, or if any
fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain
any benefit under the policy". Verendia, having presented a false declaration to support his
claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by
virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision
(Pacific Banking Corporation vs. Court of Appeals, supra). Worse yet, by presenting a false
lease contract, Verendia, reprehensibly disregarded the principle that insurance contracts
are uberrimae fidae and demand the most abundant good faith (Velasco vs. Apostol, 173
SCRA 228 [1989]).
There is also no reason to conclude that by submitting the subrogation receipt as evidence in
court, Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in
consideration of the amount of P142,685.77. While the said receipt appears to have been a
filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as
the blank spaces for a witness and his address are not filled up. More significantly, the same
receipt states that Verendia had received the aforesaid amount. However, that Verendia had
not received the amount stated therein, is proven by the fact that Verendia himself filed the
complaint for the full amount of P385,000.00 stated in the policy. It might be that there had
been efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not
prove that a settlement had been arrived at and enforced. Thus, to interpret Fidelity's
presentation of the subrogation receipt in evidence as indicative of its accession to its
"terms" is not only wanting in rational basis but would be substituting the will of the Court for
that of the parties.