CLAIM SETTLEMENTS
COURT OF APPEALS and
Wallem vs Prudential
FINMAN GENERAL ASSURANCE CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JULIA SURPOSA, respondents.
FACTS:
[P]etitioner 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.
RATIO:
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.
G.R. No. 127897. November 15, 2001
DELSAN TRANSPORT LINES, INC., vs. THE HON.
AMERICAN HOME ASSURANCE CORPORATION,
FACTS: The facts show that Caltex Philippines (Caltex for brevity) entered into a
contract of affreightment with the petitioner, Delsan Transport Lines, Inc., for a
period of one year whereby the said common carrier agreed to transport Caltex’s
industrial fuel oil from the Batangas-Bataan Refinery to different parts of the
country. Under the contract, petitioner took on board its vessel, MT Maysun
2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil
Terminal in Zamboanga City. The shipment was insured with the private
respondent, American Home Assurance Corporation. During the voyage, the vessel
sank. The insurer paid Caltex and now seeks recovery under the right of
subrogation. The trial court found the vessel seaworthy and the incident was
caused by force majeure hence, exempt from liability. CA reversed the trial court’s
decision, explaining that petitioner was liable as a common carrier due to lack of
manpower and absent any explanation why the vessel sank.
ISSUE: Whether or not there was an implied admission of seaworthiness thus
precluding the right of recovery by private respondent as insurer.
Whether or not the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action.
RULING: No. The payment made by the private respondent for the insured’s value
of the lost cargo operates as waiver of its (private respondent) right to enforce the
term of the implied warranty against Caltex under the marine insurance
policy. However, the same cannot be validly interpreted as an automatic admission
of the vessel’s seaworthiness by the private respondent as to foreclose recourse
against the petitioner for any liability under its contractual obligation as a common
carrier. The fact of payment grants the private respondent subrogatory right which
enables it to exercise legal remedies that would otherwise be available to Caltex as
owner of the lost cargo against the petitioner common carrier.
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence in the vigilance over the goods and for
the safety of passengers transported by them, according to all the circumstance of
each case.In the event of loss, destruction or deterioration of the insured goods,
common carriers shall be responsible unless the same is brought about, among
others, by flood, storm, earthquake, lightning or other natural disaster or calamity.
In all other cases, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence. The said presumption was not
overturned by petitioner in this case. Hence, private respondent as insurer can
exercise its right of subrogation against petitioner.
Thus, as the appellate court correctly ruled, petitioner’s vessel, MT Maysun, sank
with its entire cargo for the reason that it was not seaworthy. There was no squall
or bad weather or extremely poor sea condition in the vicinity when the said vessel
sank.
Anent the second issue, it is our view and so hold that the presentation in evidence
of the marine insurance policy is not indispensable in this case before the insurer
may recover from the common carrier the insured value of the lost cargo in the
exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to
establish not only the relationship of herein private respondent as insurer and
Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the
amount paid to settle the insurance claim. The right of subrogation accrues simply
upon payment by the insurance company of the insurance claim.
Sherman Shafer vs RTC
FACTS:
1. Petitioner Sherman Shafer obtained a private car policy over his Ford Laser
car from Makati Insurance Company, Inc., for third party liability (TPL).
During the effectivity of the policy, an information for reckless imprudence
resulting in damage to property and serious physical injuries was filed
against petitioner.
2. The owner of the damaged Volkswagen car filed a separate civil action
against petitioner for damages.
3. The court a quo issued an order dismissing the third party complaint on
the ground that it was premature, based on the premise that unless the
accused (herein petitioner) is found guilty and sentenced to pay the
offended party indemnity or damages, the third party complaint is without
cause of action. The court further stated that the better procedure is for
the accused (petitioner) to wait for the outcome of the criminal aspect of
the case to determine whether or not the accused, also the third party
plaintiff, has a cause of action against the third party defendant for the
enforcement of its third party liability (TPL) under the insurance contract.
ISSUE: W/N the accused in a criminal action for reckless imprudence, where the civil
action is jointly prosecuted, can legally implead the insurance company as third
party defendant under its private car insurance policy. – YES.
HELD: In the instant case, the court a quo erred in dismissing petitioner's third party
complaint on the ground that petitioner had no cause of action yet against the
insurance company (third party defendant). There is no need on the part of the
insured to wait for the decision of the trial court finding him guilty of reckless
imprudence. The occurrence of the injury to the third party immediately gave rise to
the liability of the insurer under its policy.
A third party complaint is a device allowed by the rules of procedure by which the
defendant can bring into the original suit a party against whom he will have a claim
for indemnity or remuneration as a result of a liability established against him in the
original suit. Third party complaints are allowed to minimize the number of lawsuits
and avoid the necessity of bringing two (2) or more actions involving the same
subject matter. They are predicated on the need for expediency and the avoidance
of unnecessary lawsuits. If it appears probable that a second action will result if the
plaintiff prevails, and that this result can be avoided by allowing the third party
complaint to remain, then the motion to dismiss the third party complaint should
be denied.
SUBROGATION
Malayan Insurance Co., Inc. vs. CA [G.R. No. L-36413, 26 September 1988]
Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a Private Car Comprehensive
Policy covering a Willys jeep. The insurance coverage was for "own damage" not to
exceed P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of the insurance policy, , the insured jeep, while being driven
by one Juan P. Campollo an employee of the respondent San Leon Rice Mill, Inc., (SAN
LEON) collided with a passenger bus belonging to the respondent Pangasinan
Transportation Co., Inc. (PANTRANCO) at the national highway in Barrio San Pedro,
Rosales, Pangasinan, causing damage to the insured vehicle and injuries to the driver,
Juan P. Campollo, and the respondent Martin C. Vallejos, who was riding in the ill-
fated jeep.
Martin C. Vallejos filed an action for damages against Sio Choy, Malayan Insurance
Co., Inc. and the PANTRANCO before the Court of First Instance of Pangasinan. The
trial court rendered judgment holding Sio Choy, SAN LEON, and MALAYAN jointly and
severally liable. However, MALAYAN’s liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court. However, it ruled that SAN
LEON has no obligation to indemnify or reimburse the petitioner insurance company
for whatever amount it has been ordered to pay on its policy, since the San Leon Rice
Mill, Inc. is not a privy to the contract of insurance between Sio Choy and the
insurance company.
MALAYAN appealed to the SC by way of review on certiorari.
Issues:
(1) Whether or not MALAYAN is solidarily liable to Vallejos, along with Sio Choy and
SAN LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by SAN LEON for whatever
amount petitioner has been adjudged to pay respondent Vallejos on its insurance
policy.
Held:
(1) Only Sio Choy and SAN LEON are solidarily liable to Vallejos for the award of
damages. Sio Choy is liable as owner of the jeep pursuant to Article 2184, while SAN
LEON is liable as the employer of the driver of the jeep at the time of the accident
pursuant to Art 2180.
MALAYAN’s liability, however, arose only out of the insurance policy with Sio Choy.
Petitioner as insurer of Sio Choy, is liable to respondent Vallejos, but it cannot, as
incorrectly held by the trial court, be made "solidarily" liable with the two principal
tortfeasors namely respondents Sio Choy and SAN LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of the loss, the insurer is
entitled to be subrogated pro tanto to any right of action which the insured may have
against the third person whose negligence or wrongful act caused the loss. When the
insurance company pays for the loss, such payment operates as an equitable
assignment to the insurer of the property and all remedies which the insured may
have for the recovery thereof. That right is not dependent upon , nor does it grow
out of any privity of contract or upon written assignment of claim, and payment to
the insured makes the insurer assignee in equity.
MANILA MAHOGANY MANUFACTURING CORPORATION vs. COURT OF APPEALS
ANDZENITH INSURANCE CORPORATION (G.R. No. L-52756 (October 12,
1987)FACTS:
Petitioner Manila Mahogany Manufacturing Corporation insured its Mercedes
Benz 4-door sedan withrespondent Zenith Insurance Corporation. The insured
vehicle was bumped and damaged by a truck owned bySan Miguel Corporation.
For the damage caused, respondent company paid petitioner five
thousand pesos(P5,000.00) in amicable settlement. Petitioner's general manager
executed a Release of Claim, subrogatingrespondent company to all its right to
action against San Miguel Corporation.
Thereafter, respondent company wrote Insurance Adjusters, Inc. to demand
reimbursement from SanMiguel Corporation of the amount it had paid petitioner.
Insurance Adjusters, Inc. refused reimbursement,alleging that San Miguel
Corporation had already paid petitioner P4,500.00 for the damages to
petitioner'smotor vehicle, as evidenced by a cash voucher and a Release of Claim
executed by the General Manager of petitioner discharging San Miguel Corporation
from "all actions, claims, demands the rights of action that nowexist or hereafter
develop arising out of or as a consequence of the accident.
"R e s p o n d e n t i n s u r a n c e c o m p a n y t h u s d e m a n d e d f r o m p e t i t i o n
e r r e i m b u r s e m e n t o f t h e s u m o f P4,500.00 paid by San Miguel
Corporation. Petitioner refused; hence, the instant case.
ISSUE:
Whether or not the respondent insurance company is subrogated to the rights of
the petitioner againstSan Miguel Corporation.
HELD:
YES
RULING:
The Supreme Court held that if a property is insured and the owner receives the
indemnity from theinsurer, it is provided in [Article 2207 of the New Civil
Code] that the insurer is deemed subrogated to therights of the insured
against the wrongdoer and if the amount paid by the insurer does not fully cover
the loss,then the aggrieved party is the one entitled to recover the deficiency.
Under this legal provision, the real partyin interest with regard to the portion of the
indemnity paid is the insurer and not the insured.
Hence, petitioner is entitled to keep the sum of P4,500.00 paid by San Miguel
Corporation under itsclear right to file a deficiency claim for damages
incurred, against the wrongdoer, should the insurancecompany not
fully pay for the injury caused (Article 2207, New Civil Code).
However, when petitioner released San Miguel Corporation from any liability,
petitioner's right to retain the sum of P5,000.00 no longer existed, thereby entitling
private respondent to recover the same.
The right of subrogation can only exist after the insurer has paid the insured
otherwise the insured will be deprived of his right to full indemnity. If the insurance
proceeds are not sufficient to cover the damagessuffered by the insured, then he
may sue the party responsible for the damage for the remainder. To the extentof
the amount he has already received from, the insurer enjoys the right of
subrogation.
Since the insurer can be subrogated to only such rights as the insured may
have, should the insured,after receiving payment from the insurer, release
the wrongdoer who caused the loss, the insurer loses hisrights against the
latter. But in such a case, the insurer will be entitled to recover from the insured
whatever it has paid to the latter, unless the release was made with the consent of
the insurer.
ABOITIZ SHIPPING CORPORATION, vs. INSURANCE COMPANY OF
NORTH AMERICA,
G.R. No. 168402 August 6, 2008
Facts:
1. MSAS Cargo International Limited and/or Associated and/or Subsidiary
Companies (MSAS) procured a marine insurance policy from respondent
ICNA UK Limited of London and the insurance was for a transshipment of
 certain wooden work tools and workbenches purchased for the consignee
Science Teaching Improvement Project (STIP), Ecotech Center, Sudlon
Lahug, Cebu City, Philippines.
2. When the cargo reached Manila, it was received by petitioner Aboitiz
Shipping Corporation (Aboitiz) through its duly authorized booking
representative, Aboitiz Transport System and the bill of lading issued by
Aboitiz contained the notation grounded outside warehouse.
3. The shipment arrived in Cebu City and discharged onto a receiving apron of
the Cebu International Port and it was then brought to the Cebu Bonded
Warehousing Corporation pending clearance from the Customs authorities
where petitioner’s checker noted that the crates were slightly broken or
cracked at the bottom.
4. Subsequently, then Claims Head of petitioner, received a telephone call
from Bernhard Willig, the representative of consignee who received the
shipment, informing him that the cargo sustained water damage.
5. ICNA paid the amount of P280,176.92 to consignee and ICNA formally
advised Aboitiz of the claim and subrogation receipt executed in its favor
but despite follow-ups, no reply was received from Aboitiz.
Issues:
1. Is respondent ICNA the real party-in-interest that possesses the right of
subrogation to claim reimbursement from petitioner Aboitiz?
2. Was there a timely filing of the notice of claim as required under Article
366 of the Code of Commerce?
3. If so, can petitioner be held liable on the claim for damages?
Ruling:
1. Yes, payment by the insurer to the assured operates as an equitable
assignment of all remedies the assured may have against the third party
who caused the damage. Subrogation is not dependent upon, nor does it
grow out of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer. Upon
payment to the consignee of indemnity for damage to the insured goods,
ICNAs entitlement to subrogation equipped it with a cause of action
against petitioner in case of a contractual breach or negligence.
2. Yes, provisions specifying a time to give notice of damage to common
carriers are ordinarily to be given a reasonable and practical, rather than a
strict construction. The call to petitioner was made two days from delivery,
a reasonable period considering that the goods could not have corroded
instantly overnight such that it could only have sustained the damage
during transit. Moreover, petitioner was able to immediately inspect the
damage while the matter was still fresh. In so doing, the main objective of
the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case
3. Yes, The rule as stated in Article 1735 of the Civil Code is that in cases
where the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence required by law.
Petitioner is thus liable for the water damage sustained by the goods due
to its failure to satisfactorily prove that it exercised the extraordinary
diligence required of common carriers.
NOTICE OF LOSS
Pacific Timber Export Corporation vs Court of Appeals
In 1963, Pacific Timber Export Corporation (PTEC) applied for a temporary marine
insurance from Workmen’s Insurance Company (WIC) in order for the latter to insure
1,250,000 board feet of logs to be exported to Japan. In March 1963, WIC issued a
cover note to PTEC for the said logs. On April 2, 1963, WIC issued two policies for the
logs. However, the total board feet covered this time is only 1,195,498. On April 4,
1963, while the logs were in transit to Japan, bad weather prevailed and this caused
the loss of 32 pieces of logs.
WIC then asked an adjuster to investigate the loss. The adjuster submitted that the
logs lost were not covered by the two policies issued on April 2, 1963 but said logs
were included in the cover note earlier issued.
WIC however denied the insurance claim of PTEC as it averred that the cover note
became null and void when the two policies were subsequently issued. The Court of
Appeals ruled that the cover note is void for lack of valuable consideration as it
appeared that no premium payment therefor was made by PTEC.
ISSUE: Whether or not a separate premium is needed for cover notes.
HELD: No. The Cover Note was not without consideration for which the Court of
Appeals held the Cover Note as null and void, and denied recovery therefrom. The
fact that no separate premium was paid on the Cover Note before the loss insured
against occurred, does not militate against the validity of PTEC’s contention, for no
such premium could have been paid, since by the nature of the Cover Note, it did not
contain, as all Cover Notes do not contain particulars of the shipment that would
serve as basis for the computation of the premiums. As a logical consequence, no
separate premiums are intended or required to be paid on a Cover Note.
At any rate, it is not disputed that PTEC paid in full all the premiums as called for by
the statement issued by WIC after the issuance of the two regular marine insurance
policies, thereby leaving no account unpaid by PTEC due on the insurance coverage,
which must be deemed to include the Cover Note. If the Note is to be treated as a
separate policy instead of integrating it to the regular policies subsequently issued,
the purpose and function of the Cover Note would be set at naught or rendered
meaningless, for it is in a real sense a contract, not a mere application for insurance
which is a mere offer.
 FEDEX vs. AHAC and PHILAM INSURANCE COMPANY, INC
G.R. No. 150094
August 18, 2004
FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of
109 cartons of veterinary biologicals for delivery to consignee SMITHKLINE and
French Overseas Company in Makati City. The shipment was covered by Burlington
Airway Bill No. 11263825 with the words, ‘REFRIGERATE WHEN NOT IN TRANSIT’
and ‘PERISHABLE’ stamp marked on its face. That same day, Burlington insured the
cargoes with American Home Assurance Company (AHAC). The following day,
Burlington turned over the custody of said cargoes to FEDEX which transported the
same to Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus Inc.’s]
warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC Cargo
International Corporation, the customs broker hired by the consignee to facilitate
the release of its cargoes from the Bureau of Customs, of the impending arrival of
its client’s cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed custom’s
broker who was assigned by GETC, found out, while he was about to cause the
release of the said cargoes, that the same [were] stored only in a room with 2 air
conditioners running, to cool the place instead of a refrigerator. DIONEDA, upon
instructions from GETC, did not proceed with the withdrawal of the vaccines and
instead, samples of the same were taken and brought to the Bureau of Animal
Industry of the Department of Agriculture in the Philippines by SMITHKLINE for
examination wherein it was discovered that the ‘ELISA reading of vaccinates sera
are below the positive reference serum.’
As a consequence of the foregoing result of the veterinary biologics test,
SMITHKLINE abandoned the shipment and, declaring ‘total loss’ for the unusable
shipment, filed a claim with AHAC through its representative in the Philippines, the
Philam Insurance Co., Inc. (PHILAM) which recompensed SMITHKLINE for the whole
insured amount. Thereafter, PHILAM filed an action for damages against the FEDEX
imputing negligence on either or both of them in the handling of the cargo.
Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for
the loss. Aggrieved, petitioner appealed to the CA. The appellate court ruled in
favor of PHILAM and held that the shipping Receipts were a prima facie proof that
the goods had indeed been delivered to the carrier in good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods
HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has
tirelessly pointed out that respondents’ claim and right of action are already
barred. Indeed, this fact has never been denied by respondents and is plainly
evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
“6. No action shall be maintained in the case of damage to or partial loss of the
shipment unless a written notice, sufficiently describing the goods concerned, the
approximate date of the damage or loss, and the details of the claim, is presented
by shipper or consignee to an office of Burlington within (14) days from the date the
goods are placed at the disposal of the person entitled to delivery, or in the case of
total loss (including non-delivery) unless presented within (120) days from the date
of issue of the [Airway Bill]. xxx
Relevantly, petitioner’s airway bill states:
“12./12.1 The person entitled to delivery must make a complaint to the carrier
in writing in the case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage
and at the latest within fourteen (14) days from receipt of the goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2) In case of damage, the person entitled to delivery must complain to the
carrier forthwith after the discovery of the damage, and, at the latest, within 3 days
from the date of receipt in the case of baggage and 7 days from the date of receipt
in the case of goods. xx
(3) Every complaint must be made in writing upon the document of
transportation or by separate notice in writing dispatched within the times
aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the
carrier, save in the case of fraud on his part.” xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation
therefor actually constitutes a condition precedent to the accrual of a right of action
against a carrier for loss of or damage to the goods. The shipper or consignee must
allege and prove the fulfillment of the condition. If it fails to do so, no right of
action against the carrier can accrue in favor of the former. The aforementioned
requirement is a reasonable condition precedent; it does not constitute a limitation
of action.

The requirement of giving notice of loss of or injury to the goods is not an empty
formalism. The fundamental reasons for such a stipulation are (1) to inform the
carrier that the cargo has been damaged, and that it is being charged with liability
therefor; and (2) to give it an opportunity to examine the nature and extent of the
injury. “This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims.

NOTES: as to proper payee:

The Certificate specifies that loss of or damage to the insured cargo is “payable to
order x x x upon surrender of this Certificate.” Such wording conveys the right of
collecting on any such damage or loss, as fully as if the property were covered by a
special policy in the name of the holder itself. At the back of the Certificate appears
the signature of the representative of Burlington. This document has thus been
duly indorsed in blank and is deemed a bearer instrument.

Since the Certificate was in the possession of Smithkline, the latter had the right of
collecting or of being indemnified for loss of or damage to the insured shipment, as
fully as if the property were covered by a special policy in the name of the
holder. Hence, being the holder of the Certificate and having an insurable interest
in the goods, Smithkline was the proper payee of the insurance proceeds.

Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a
subrogation Receipt in favor of respondents. The latter were thus authorized “to
file claims and begin suit against any such carrier, vessel, person, corporation or
government.” Undeniably, the consignee had a legal right to receive the goods in
the same condition it was delivered for transport to petitioner. If that right was
violated, the consignee would have a cause of action against the person responsible
therefor.