POLICY
respondent BF Lifeman Insurance Corporation. The
Perez vs CA
Facts: Primitivo B. Perez had been insured with the BF
Lifeman Insurance Corporation for P20,000.00. Sometime
later, she was induced to enter into another insurance
contract. Unfortunately, the agent lost the application
form accomplished by Perez and he asked the latter to fill
up another application form. The agent sent the
application for additional insurance of Perez to the
Quezon office. Such was supposed to forwarded to the
Manila office.
When Perez died due to drowning, his application papers
for the additional insurance were still with the Quezon. It
was only after some time that the papers were brought to
Manila. Without knowing that Perez died, BF Lifeman
Insurance Corporation approved the application and
issued the corresponding policy.
Petitioner Virginia Perez, wife of the insured was paid
under the first insurance policy but the insurance
company refused to pay the claim under the additional
policy coverage maintaining that the additional
insurance had not been perfected at the time of the
death of Primitivo Perez. Consequently, the insurance
company refunded the amount paid.
BF Lifeman Insurance Corporation filed a complaint
against Virginia Perez seeking the rescission and
declaration of nullity of the insurance contract in
question.
Petitioner Virginia A. Perez, on the other hand, averred
that the deceased had fulfilled all his prestations under
the contract and all the elements of a valid contract are
present.
RTC= in favor of Perez. CA reversed
Issue: Whether the widow can collect from the 2nd policy
Ruling: No. The contract was not perfected.
Insurance is a contract whereby, for a stipulated
consideration, one party undertakes to compensate the
other for loss on a specified subject by specified perils. A
contract, on the other hand, is a meeting of the minds
between two persons whereby one binds himself, with
respect to the other to give something or to render some
service.
Consent must be manifested by the meeting of the offer
and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be
certain and the acceptance absolute. When Primitivo
filed an application for insurance, paid P2,075.00 and
submitted the results of his medical examination, his
application was subject to the acceptance of private
perfection of the contract of insurance between the
deceased and respondent corporation was further
conditioned upon compliance with the following
requisites stated in the application form:
"there shall be no contract of insurance unless and until a
policy is issued on this application and that the said
policy shall not take effect until the premium has been
paid and the policy delivered to and accepted by
me/us in person while I/We, am/are in good health."
The assent of private respondent BF Lifeman Insurance
Corporation therefore was not given when it merely
received the application form and all the requisite
supporting papers of the applicant. Its assent was given
when it issues a corresponding policy to the applicant.
Under the abovementioned provision, it is only when the
applicant pays the premium and receives and accepts
the policy while he is in good health that the contract of
insurance is deemed to have been perfected.
It is not disputed, however, that when Primitivo died on
November 25, 1987, his application papers for additional
insurance coverage were still with the branch office of
respondent corporation in Gumaca and it was only two
days later, or on November 27, 1987, when Lalog
personally delivered the application papers to the head
office in Manila. Consequently, there was absolutely no
way the acceptance of the application could have
been communicated to the applicant for the latter to
accept inasmuch as the applicant at the time was
already dead.
ENRIQUEZ VS. SUN LIFE INSURANCE OF CANADA
Facts: Joaquin Herrer made an application with Sun Life
for a life annuity. He paid the amount of P6,000.00 to the
Manila manager who gave him a "provisional" receipt
"subject to medical examination and approval of the
Company's Central Office."
The application was forwarded to the head office in
Canada and the policy was issued on December 4, 1917
in Canada. Meanwhile, on December 18, 1917, Herrer's
attorney wrote to the Manila Office stating that Herrer
wanted to withdraw his application to which the office
wrote a letter dated November 26, 1917 stating that the
policy had already been issued. The letter was received
by the attorney on December 21, 1917. Herrer had died a
day earlier on December 20, 1920.
The trial court ruled that the contract had been
perfected, hence this appeal.
ISSUES: Whether or not the contract of life annuity was
perfected
Ruling: NO. The contract was not perfected. Art. 1262
provides that acceptance by letter does not bind the
person making the offer except from the time it came to
his knowledge. The pertinent fact is that according to the
provisional receipt, the insurance company had to: 1)
conduct a medical examination; 2) had to obtain the
head office's approval; and 3) somehow communicate
such approval. It is true that the letter notifying
acceptance was deposited in the post office, but the
fact of notification is a rebuttable presumption and the
facts clearly show that Herrer never received the notice
of the acceptance before his death.
Tang vs CA
Facts: Lee Su Guat, widow, 61 years old and illiterate who
spoke only Chinese, applied for life insurance for 60K with
Philamlife. The application was in two parts, both in
English. The second part dealt with her state of health.
Her answers having shown that she was healthy,
Philamlife issued her a policy.
After some time, Lee again applied for additional
insurance of her life for 40T. Since it was only recent from
the time she first applied, no further medical exam was
made but she accomplished Part 1 (which certified the
truthfulness of statements made in Part. 2)
The policy was again approved. On Apri 20 1966, Lee Su
Guat died of Lung cancer.
Tang claimed the amount o 100T but Philamlife refused to
pay on the ground that the insured was guilty of
concealment and misrepresentation.
Tang’s position, however, is that because Lee was
illiterate and spoke only Chinese, she could not be held
guilty of concealment of her health history because the
application for insurance was English, and the insurer has
not proven that the terms thereof had been fully
explained to her as provided by Art. 1332 of CC.
Issue: Whether or not Art. 1332 applies.
Ruling: No.
Art. 1332. When one of the parties is unable to read, or if
the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the
contract must show that the terms thereof have been
fully explained to the former.
The obligation to show that the terms of the contract had
been fully explained to the party who is unable to read or
understand the language of the contract, when fraud or
mistake is alleged, devolves on the party seeking to
enforce it. Here the insurance company is not seeking to
enforce the contracts; on the contrary, it is seeking to
avoid their performance
Accordingly, respondent company was under no
obligation to prove that the terms of the insurance
contracts were fully explained to the other party. In sum,
Art. 1332 is inapplicable to the case at bar.
Concurring: J., Antonio
In a contract of insurance, each party must
communicate to the other, in good faith, all facts within
his knowledge which are material to the contract, and
which the other has no means of ascertaining. As a
general rule, the failure by the insured to disclose
conditions affecting the risk of which he is aware makes
the contract voidable at the option of the insurer.
The reason for this rule is that insurance policies are
traditionally contracts uberrimae fidei, which means
“most abundant good faith”, “absolute and perfect
candor or openness and honesty,” “absence of any
concealment or deception however slight.” Here the CA
found that the insured deliberately concealed material
facts about her physical condition and history and/or
concealed with whoever assisted her in relaying false
information to the medical examiner. Certainly, the
petitioner cannot assume inconsistent positions by
attempting to enforce the contract of insurance for the
purpose of collecting the proceeds of the policy and at
the same time nullify the contract by claiming that it was
executed through fraud or mistake.
RCBC vs CA
Facts: RCBC Binondo Branch initially granted a credit
facility of P30M to Goyu & Sons, Inc.
GOYU’s applied again and through Binondo Branch key
officer's Uy’s and Lao’s recommendation, RCBC’s
executive committee increased its credit facility to P50M
to P90M and finally to P117M. As security, GOYU
executed 2 real estate mortgages and 2 chattel
mortgages in favor of RCBC.
GOYU obtained in its name 10 insurance policy on the
mortgaged properties from Malayan Insurance
Company, Inc. (MICO). In February 1992, he was issued 8
insurance policies in favor of RCBC.
Sometime later, one of GOYU’s factory buildings was
burned so he claimed against MICO for the loss who
denied contending that the insurance policies were
either attached pursuant to writs of
attachments/garnishments or that creditors are claiming
to have a better right
GOYU filed a complaint for specific performance and
damages at the RTC
RCBC, one of GOYU’s creditors, also filed with MICO its
formal claim over the proceeds of the insurance policies,
but said claims were also denied for the same reason
RTC: favored GOYU against MICO for the claim, RCBC for
damages and to pay RCBC its loan
CA: Modified by increasing the damages in favor of
GOYU
ISSUE: W/N RCBC as mortgagee, has any right over the
insurance policies taken by GOYU, the mortgagor, in
case of the occurrence of loss
Ruling: Yes. mortgagor and a mortgagee have separate
and distinct insurable interests in the same mortgaged
property, such that each one of them may insure the
same property for his own sole benefit
although it appears that GOYU obtained the subject
insurance policies naming itself as the sole payee, the
intentions of the parties as shown by their
contemporaneous acts, must be given due consideration
in order to better serve the interest of justice and equity
GOYU continued to enjoy the benefits of the credit
facilities extended to it by RCBC. GOYU is at the very least
estopped from assailing their operative effects.
RCBC has the right to claim the insurance proceeds, in
substitution of the property lost in the fire. Having assigned
its rights, GOYU lost its standing as the beneficiary of the
of said insurance policies
Grepalife vs CA
Facts: On March 14 1957, Ngo Hing, a duly authorized
agent of the Great Pacific life Assurance Company filed
an application with the company for the for a 20 year
endowment policy in the amount of P 50,000.00 on the
life of his one-year old daughter, Helen Go. He supplied
the necessary information to which Mondragon, the
Branch Manager of Pacific Life in Cebu, typewrote it in
the application form and was signed by Ngo Hing. A
binding deposit receipt was issued to Ngo Hing upon his
payment of the assurance premium. Mondragon
received a letter of disapproval from the insurance
company. It stated that the 20 year endowment plan is
not applicable for minors below 7 years old but would
consider the application for a different kind of policy
which is Juvenile Triple Action plan. The disapproval of
the application was not communicated to Ngo Hing.
When Helen Go died of influenza with the complication
of Bronchopneumonia on May 28, 1957, Ngo Hing sought
for the payment of proceeds from the insurance
company. He was denied from getting any proceeds. He
then filed an action against the insurance company for
the recovery of the same. The trial court ruled for Ngo
Hing and was affirmed in the Court of Appeals stating
further the return of the premium paid.
Issue: Whether the binding deposit receipt constituted a
temporary contract of life insurance in question
Ruling: The provisions printed on the deposit receipt
provide that the binding deposit receipt to be merely a
provisional or temporary insurance contract and only
upon compliance of the ffg conditions:
1. that the company shall be satisfied that the applicant
was insurable on standard rates
2. that if the company does not accept the application
and offers to issue a different plan, the insurance
contract shall not be binding until the applicant accepts
the policy offered
3. that if the applicant is not able according to the
standard rates, and the company disapproves the
application, the insurance shall not be in force
Since petitioner Pacific Life disapproved the insurance
application of respondent Ngo Hing, the binding deposit
receipt in question had never become in force at any
time. As held by this Court, where an agreement is made
between the applicant and the agent, no liability shall
attach until the principal approves the risk and receipt is
given by the agent. The acceptance is merely
conditional, and is subordinated to the act of the
company is approving or rejecting the application. Thus,
in life insurance, a binding slip or binding receipt does not
insure by itself.
De Lim vs Sunlife
Facts: Luis Lim Y Garcia of Zamboanga applied for a
policy of life insurance with Sunlife in the amount of 5K.
He designated his wife Pilar Lim as the beneficiary. The
first premium of P433 was paid by Lim and company
issued a “provisional policy”.
Such policy contained the following provisions “xx the
abovementioned life is to be assured in accordance with
the terms and conditions contained or inserted by the
Company in the policy which may be granted by it in this
particular case for 4 months only from the date of the
application, PROVIDED that the company shall confirm
this agreement by issuing a policy on said application xxx.
Should the company NOT issue such a policy, then this
agreement shall be null and void ab initio and the
Company shall be held not to have been on the risk at
all, but in such case, the amount herein shall be returned
Lim died on Aug. 23, 1917 after the issuance of the
provisional policy but before the approval of the
application by the home office of the insurance
company.
The instant action is brought by the beneficiary to recover
from Sun Life the sum of 5K
Issue: Whether or not the beneficiary can collect.
Ruling: NO.
The contract of insurance was not consummated by the
parties. The above quoted agreement clearly stated
that the agreement should NOT go into effect until the
home office of the Company shall confirm it by issuing a
policy. It was nothing but an acknowledgment by the
Company that it has received a sum of money agreed
upon as the first year’s premium upon a policy to be
issued upon the application if it is accepted by the
Company.
When an agreement is made between the applicant
and the agent whether by signing an application
containing such condition or otherwise, that no liability
shall attach until the principal approves the risk and a
receipt is given by the agent, such acceptance is merely
conditional and is subordinated to the company’s act in
approving or rejecting; so in life insurance a “binding slip
or receipt” does not insure itself.
Bonifacio Brothers vs Mora
Facts: Enrique Mora mortgaged his Odlsmobile sedan car
to HS Reyes Inc. with the condition that Mora would insure
the car with HS Reyes as beneficiary.
The car was then insured with State Insurance Company
and the policy delivered to Mora.
During the effectivity of the insurance contract, the car
figured in an accident. The company then assigned the
accident to an insurance appraiser for investigation and
appraisal of the damage.
Mora without the knowledge and consent of HS Reyes,
authorized Bonifacio Bros to fix the car, using materials
supplied by the Ayala Auto Parts Company
For the cost of Labor and materials, Mora was billed
P2,102.73. The bill was sent to the insurer’s appraiser. The
insurance company drew a check in the amount of the
insurance proceeds and entrusted the check to its
appraiser for delivery to the proper party.
The car was delivered to Mora without the consent of HS
Reyes, and without payment to Bonifacio Bros and
Ayala.
Upon the theory that the insurance proceeds should be
directly paid to them, Bonifacio and Ayala filed a
complaint against Mora and the insurer with the
municipal court for the collection of P2,102.73.
The insurance company filed its answer with a
counterclaim for interpleader, requiring Bonifacio and HS
Reyes to interplead in order to determine who has a
better right to the proceeds.
Issue: Whether or not there is privity of contract between
Bonficacio and Ayala on one hand and State Insurance
on the other.
Ruling: None. It is fundamental that contracts take effect
only between the parties thereto, except in some specific
instance provided by law where the contract contains
some stipulation in favor of a third person. Such stipulation
is known as a stipulation pour autrui; or a provision in favor
of a third person not a party to the contract.
Under this doctrine, a third person is ed to avail himself of
a benefit granted to him by the terms of the contract,
provided that the contracting parties have clearly and
deliberately conferred a favor upon such person.
Consequently, a third person NOT a party to the contract
has NO action against the aprties thereto, and cannot
generally demand the enforcement of the same.
The question of whether a third person has an
enforceable interest in a contract must be settled by
determining whether the contracting parties intended to
tender him such an interest by deliberately inserting terms
in their agreement with the avowed purpose of
conferring favor upon such third person. IN this
connection, thiscourt has laid down the rule that the
fairest test to determine whether the interest of a 3rd
person in a contract is a stipulation pour autrui or merely
an incidental interest, is to rely upon the intention of the
parties as disclosed by their contract.
In the instant case the insurance contract does not
contain any words or clauses to disclose an intent to give
any benefit to any repairmen or material men in case of
repair of the car in question. The parties to the insurance
contract omitted such stipulation, which is a
circumstance that supports the said conclusion. On the
other hand, the "loss payable" clause of the insurance
policy stipulates that "Loss, if any, is payable to H.S.
Reyes, Inc." indicating that it was only the H.S. Reyes, Inc.
which they intended to benefit.
A policy of insurance is a distinct and independent
contract between the insured and insurer, and third
persons have no right either in a court of equity, or in a
court of law, to the proceeds of it, unless there be some
contract of trust, expressed or implied, by the insured and
third person. In this case, no contract of trust, express
 or implied. In this case, no contract of trust, expressed or
implied exists. We, therefore, agree with the trial court
that no cause of action exists in favor of the appellants in
so far as the proceeds of insurance are concerned. The
appellant's claim, if at all, is merely equitable in nature
and must be made effective through Enrique Mora who
entered into a contract with the Bonifacio Bros Inc. This
conclusion is deducible not only from the principle
governing the operation and effect of insurance
contracts in general, but is clearly covered by the express
provisions of section 50 of the Insurance Act (now Sec.
53).
Heirs of Maramag vs Maramag
Facts: Petitioners in this case are the legitimate heirs of
deceased Loreto
the petitioners were not named as beneficiaries in the
insurance policies issued by Insular and Grepalife.
Petitioners claim that Eva, the concubine of Loreto and a
suspect in his murder, is disqualified from being
designated of the insurance policies. They further add
that Eva’s children with Loreto, being illegitimate children,
are entitled to a lesser share of the proceeds of the
policies
Thus, they prayed that the share of Eva and portions of
the share of Loreto’s illegitimate children should be
awarded to them, being the legitimate heirs of Loreto
entitled to their respective legitimes.
Issue: Whether or not the proceeds should be awarded to
the petitioners
Ruling: No. The insurance contracts are governed by
specials laws Petitioners are third parties to the insurance
contracts with Insular and Grepalife and thus, they are
not entitled to the proceeds thereof The Insular and
Grepalife have no legal obligation to turn over the
insurance proceeds to the petitioner.
It is only in cases where the insured has not designated
any beneficiary, or when the designated beneficiary is
disqualified by law to receive the proceeds, that the
insurance policy proceeds shall redound to the benefit of
the estate of the insured
Coquia v. Fieldmen’s Insurance
Facts: On Dec. 1, 1961, Fieldmen’s Insurance co. Issued in
favor of the Manila Yellow Taxicab a common carrier
insurance policy with a stipulation that the company shall
indemnify the insured of the sums which the latter may be
held liable for with respect to “death or bodily injury to
any fair-paying passenger including the driver and
conductor”.
The policy also stated that in “the event of the death of
the driver, the Company shall indemnify his personal
representatives and at the Company’s option may make
indemnity payable directly to the claimants or heirs of the
claimants.”
During the policy’s lifetime, a taxicab of the insured
driven by Coquia met an accident and Coquia died.
When the company refused to pay the only heirs of
Coquia, his parents, they instituted this complaint. The
company contends that plaintiffs have no cause of
action since the Coquias have no contractual
relationship with the company.
Issue: Whether or not plaintiffs have the right to collect on
the policy.
Ruling: YES.
Athough, in general, only parties to a contract may bring
an action based thereon, this rule is subject to
exceptions, one of which is found in the second
paragraph of Article 1311 of the Civil Code of the
Philippines, reading: "If a contract should contain some
stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to
the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately
conferred a favor upon a third person." This is but the
restatement of a well-known principle concerning
contracts pour autrui, the enforcement of which may be
demanded by a third party for whose benefit it was
made, although not a party to the contract, before the
stipulation in his favor has been revoked by the
contracting parties
In the case at bar, the policy under consideration is
typical of contracts pour autrui this character being
made more manifest by the fact that the deceased
driver paid fifty percent (50%) of the corresponding
premiums, which were deducted from his weekly
commissions. Under these conditions, it is clear that the
Coquias — who, admittedly, are the sole heirs of the
deceased — have a direct cause of action against the
Company, and, since they could have maintained this
action by themselves, without the assistance of the
insured it goes without saying that they could and did
properly join the latter in filing the complaint herein.
Development Insurance Corp vs IAC
Facts: Phil. Union Realty Development Corp. (PURDC)
insured its building against fire with Development
Insurance Corp. (DIC). The policy contained the following
provision:
"This is an open policy as defined in Section 57 of the
Insurance Act. In the event of loss, whether total or
partial, it is understood that the amount of the loss shall
be subject to appraisal and the liability of the company,
if established, shall be limited to the actual loss, subject to
the applicable terms, conditions, warranties and clauses
of this Policy, and in no case shall exceed the amount of
the policy."
After a fire consumed a part of the building, with PURDC
suffering an appraised value of loss of P508, 867 (later
adopted by the trial court and the appellate court),
PURDC filed its claim with DIC, but the latter refused. DIC
argued that since the building was worth more than the
sum insured, PURDC must be considered its own insurer for
the difference of the amount and the face value of the
policy and should share pro rata on the loss sustained
Issue: WON DIC is liable for the appraised value of actual
loss sustained by PURDC.
Ruling: Yes, it is. As defined in the aforestated provision,
which is now Section 60 of the Insurance Code, "an open
policy is one in which the value of the thing insured is not
agreed upon but is left to be ascertained in case of loss."
This means that the actual loss, as determined, will
represent the total indemnity due the insured from the
insurer except only that the total indemnity shall not
exceed the face value of the policy. The actual loss
having been ascertained in this case, the Court will
respect such factual determination in the absence of
proof that it was arrived at arbitrarily. There is no such
showing. Hence, applying the open policy clause as
expressly agreed upon by the parties in their contract,
PURDC is entitled to the payment of indemnity under the
said contract in the full amount of the appraised value of
actual loss.
ACCFA vs Alpha Insurance
Facts: To guarantee the Asingan Farmers' Cooperative
Marketing Association, Inc. (FACOMA) against loss on
account of personal dishonesty, amounting to
larceny/estafa of its Secretary-Treasurer, Ladines,
appellee Alpha Insurance & Surety Company had issued,
its bond with Ladines as principal and the appellee as
solidary surety. On the same date, the Asingan FACOMA
assigned its rights to the appellant, Agricultural Credit
Cooperative and Financing Administration (ACCFA) with
approval of the principal and the surety.
During the effectivity of the bond, Ladines converted and
misappropriated, to his personal benefit, some of the
FACOMA funds, of which a part belonged to the ACCFA.
Upon discovery of the loss, ACCFA immediately notified in
writing the survey company on 10 October 1958, and
presented the proof of loss within the period fixed in the
bond; but despite repeated demands the surety
company refused and failed to pay. ACCFA filed suit
against appellee on 30 May 1960.
Defendant Alpha Insurance & Surety Co., Inc., (now
appellee) moved to dismiss the complaint as it was filed
more than one year after plaintiff made claim for loss,
contrary to the eighth condition of the bond
At first, the Court of First Instance denied dismissal; but,
upon reconsideration, the court reversed its original
stand, and dismissed the complaint on the ground that
the action was filed beyond the contractual limitation
period. Hence, this appeal.
Issue: WON the provision of a fidelity bond that no action
shall be had or maintained thereon unless commenced
within one year from the making of a claim for the loss
upon which the action is based, is valid, in view of Section
61-A of the Insurance Act invalidating stipulations limiting
the time for commencing an action thereon to less than
one year from the time the cause of action accrues?
Ruling: NO. A fidelity bond is, in the nature of a contract
of insurance against loss from misconduct, and is
governed by the same principles of interpretation.
Consequently, the condition of the bond in question,
limiting the period for bringing action is subject to the
provisions of Section 61-A of the Insurance Act (No. 2427),
as amended by Act 4101 of the pre-Commonwealth
Philippine Legislature, prescribing that:
SEC. 61-A: A condition, stipulation or agreement in any
policy of insurance, limiting the time for commencing an
action thereunder to a period of less than one year from
the time when the cause of action accrues is void.
- Since a "cause of action" requires, as essential elements,
not only a legal right of the plaintiff and a correlative
obligation of the defendant but also "an act or omission
of the defendant in violation of said legal right," the
cause of action does not accrue until the party obligated
refuses, expressly or impliedly, to comply with its duty (in
this case, to pay the amount of the bond).
-The year for instituting action in court must be reckoned
from the time of appellee's refusal to comply with its
bond. It can’t be counted from the creditor's filing of the
claim of loss, for that does not import that the surety
company will refuse to pay.
-In so far, therefore, as condition eight of the bond
requires action to be filed within one year from the filing
of the claim for loss, such stipulation contradicts the
public policy expressed in Section 61-A of the Philippine
Insurance Act.
- Condition eight of the bond, therefore, is null and void,
and the appellant is not bound to comply with its
provisions. The discouraging of unnecessary litigation must
be deemed a rule of public policy, considering the
unrelieved congestion in the courts.
-As a consequence, the action may be brought within
the statutory period of limitation for written contracts
(New Civil Code, Article 1144).
Paulo Ang and Sally Ang vs Fulton Fire Insurance Co.
Facts: P&S Dept Store was insured with Fulton Fire
Insurance co. over stocks of general merchandise
consisting principally of dried goods. It contained a
stipulation stating "if the claim is made and rejected but
no action commenced within 12 months after such
rejection, all benefits under the policy would be forfeited
Fire consumed the store and Ang filed claims which was
denied by Fulton
Paulo Ang and 10 others were charged of arson. CFI
acquitted him.
Ang filed case against Fulton's agent. CFI ruled in favor of
Ang, holding that the 12-month prescription period was
suspended by the case against the agent
Issue: Whether the filing of previous suit against the agent
suspended the running of the prescriptive period
Ruling: No. The period was not suspended and the action
had already prescribed
The condition contained that the claims must be
presented within 12 months or one year after rejection is
not merely a procedural requirement, but is essential to a
prompt settlement of claims against the insurance
companies
It demands that insurance suits be brought by the insured
while the evidence as to the origins and causes of
destruction have not yet disappeared
Contractual limitations in insurance policies prevail over
the statutory limitations, as well as over the exceptions to
the latter, because the rights of the parties flow from the
contract of insurance. Their contract is the law between
the parties, and their agreement that an action on a
claim denied by the insurer must be brought within one
year from the denial, governs, not the rules on the
prescription of actions
Sun insurance vs CA and Emilio Tan
Facts: Emilio Tan took from Sun Insurance Office a
P300,000.00 property insurance policy to cover his interest
in the electrical supply store of his brother. Four days after
the issuance of the policy, the building was burned
including the insured store. On August 20, 1983, Tan filed
his claim for fire loss with Sun Insurance Office, but on
February 29, 1984, Sun Insurance Office wrote Tan
denying the latter’s claim. On April 3, 1984, Tan wrote Sun
Insurance Office, seeking reconsideration of the denial of
his claim. Sun Insurance Office answered the letter,
advising Tan’s counsel that the Insurer’s denial of Tan’s
claim remained unchanged.
ISSUES:
(1)WON the filing of a motion for reconsideration
interrupts the 12 months prescriptive period to contest the
denial of the insurance claim; and
(2)WON the rejection of the claim shall be deemed final
only of it contains words to the effect that the denial is
final
HELD:
(1) No. In this case, Condition 27 of the Insurance Policy of
the parties reads:
27. Action or suit clause - If a claim be made and
rejected and an action or suit be not commenced either
in the Insurance Commission or in any court of
competent jurisdiction within twelve (12) months from
receipt of notice of such rejection, or in case of
arbitration taking place as provided herein, within twelve
(12) months after due notice of the award made by the
arbitrator or arbitrators or umpire, then the claim shall for
all purposes be deemed to have been abandoned and
shall not thereafter be recoverable hereunder.As the
terms are very clear and free from any doubt or
ambiguity whatsoever, it must be taken and understood
in its plain, ordinary and popular sense.
Respondent Tan admitted that he received a copy of
the letter of rejection on April 2, 1984. Thus, the 12-month
prescriptive period started to run from the said date of
April 2, 1984, under section 27.
2. It was clear in the letter.
Ang v. Fulton Fire Insurance Co.- The condition contained
in an insurance policy that claims must be presented
within one year after rejection is not merely a procedural
requirement but an important matter essential to a
prompt settlement of claims against insurance
companies as it demands that insurance suits be brought
by the insured while the evidence as to the origin and
cause of destruction have not yet disappeared.
Therefore, there was a necessity of bringing suits against
the Insurer within one year from the rejection of the claim.
(1984) The contention of the respondents that the one-
year prescriptive period does not start to run until the
petition for reconsideration had been resolved by the
insurer (1985), runs counter to the doctrine.
The provision in the contract was pursuant to Sec. 63.
A condition, stipulation or agreement in any policy of
insurance, limiting the time for commencing an action
thereunder to a period of less than one year from the
time when the cause of action accrues, is void
Lopez vs. Filipinas Compañia de Seguros
Facts: Plaintiff applied with the defendant company for
the insurance of his properties: Biederman truck tractor
and a Winter Weils trailer from lessor damage in the
amount of P20,000.00 and P10,000.00, respectively.
During the application, the defendant company inquired
of the plaintiff the ff:
Has any company in respect of the insurance of any car
or vehicle (A) declined, cancelled or refused to renew
your insurance? (B) increased your premium renewal
Plaintiff answered in negative but the truth was that the
American International Underwriters of the Philippines
(AIU) had already declined similar application for
insurance by the plaintiff with respect of theabove-
mentioned vehicles.
The defendant issued to the plaintiff two Commercial
Vehicle Comprehensive Policies covering the said
properties
The vehicles mentioned figured in an accident resulting in
the total loss of the tractor and partial damage to the
trailer. Plaintiff demand upon the defendant for the
payment to him the total amt. of damages resulting from
the accident.
On April 28, 1960, defendant rejected the claim on the
ground of concealment of a material fact: that the
insured property previously been declined insurance by
another company.
May 27, 1960, the plaintiff filed with the Office of the
Insurance Commissioner a complaint against the said
company
As suggested, the plaintiff was willing to submit his claim
to arbitration but was contested by the defendant since
"the claim of the plaintiff cannot be resolved by
arbitration, as recourse to arbitration referred toin the
policy contract, envisioned only differences or disputes,
'with respect to the amount of the company's liability,'
and not to cases where the company does not admit its
liability to the insured.
With this rejection, the plaintiff filed his complaint with the
CFI of Manila on September 19,1961.
Against the above complaint, the defendant-appellee
filed on September 29, 1961 a motion to dismiss on the
ground of prescription. The latter argued that the
plaintiff's claim had already prescribed since it was not
filed within twelve months from its rejection by the
insurance company as stipulated under paragraph 9 of
the General Conditions of Commercial Vehicle
Comprehensive Policy Nos. 5598 and 5599, to wit:
If a claim be made and rejected and an action or suit be
not commenced within twelve months after such
rejection or (in case of an arbitration taking place as
provided herein) within twelve months after the arbitrator,
arbitrators, or umpire shall have made their award then
the claim shall for all purposes be deemed to have been
abandoned and shall not thereafter be recovered
hereunder
ISSUE: Whether the complaint filed by the plaintiff-
appellant with the Office of the Insurance Comm. on
May 27,1960 a commencement of an "action or suit"
within the meaning and intent of general condition?
Ruling: No. Action means an ordinary suit in a Court of
Justice by which one party prosecutes another for the
enforcement or protection of a right, or the prevention or
redress of a wrong. Suit is the prosecution or pursuit of
some claim or demand in a court of justice or any
proceeding in a court of justice in which a plaintiff
pursues his remedy to recover a right or claim.
There is nothing in the Insurance Law, which empowers
the Insurance Commissioner to adjudicate on disputes
relating to an insurance company's liability to an insured
under a policy issued by the former to the latter. The
validity of an insured's claim under a specific policy, its
amount, and all such other matters as might involve the
interpretation and construction of the insurance policy,
are issues which only a regular court of justice may
resolve and settle. Consequently, the complaint filed by
the appellant herein with the Office of the Insurance
Commission could not have been an "action or suit."
Saura Import Export Co. v. Philippine International Surety
Facts: Saura mortgaged to PNB its registered parcel of
land in Davao to secure the payment of a promissory
note of 27K
A building of strong materials which was also owned by
Saura, was erected on the parcel of land and the
building had always been covered by insurance even
before the execution of the mortgage contract
Pursuant to the mortgage agreement which required
Saura to insure the building and its contents, it obtained a
fire insurance for P29T from PISC for a period of 1 year
starting Oct. 2, 1954.
The mortgage also required Saura to endorse the
insurance policy to PNB. The memo stated: Loss if any,
payable to PNG as their interest may appear, subject to
the terms, conditions and warranties of this policy.
The policy was delivered to PNB by Saura.
barely 13 days after the issuance of the fire insurance,
PISC canceled the same, effective as of the date of issue.
Notice of the cancellation was sent to PNB in writing and
was received by the bank on Nov. 8, 1954.
On Apr. 6, 1955, the building and its contents worth P4,685
were burned. On April 11, 1985, Saura filed a claim with
PISC and mortgagee bank.
Upon presentation of notice of loss with PNB, Saura
learned for the first time that the policy had been
previously canceled by PISC, when Saura’s folder in the
bank’s file was opened and the notice of the
cancellation by PISC was found.
Issue: Whether or not there was proper cancellation of
the policy?
Held: NO.
The policy in question does NOT provide for the notice of
cancellation, its form or period. The Insurance Law does
not likewise provide for such notice. This being the case,
it devolves upon the Court to apply the generally
accepted principles of insurance, regarding cancellation
of the insurance policy by the insurer.
Actual notice of cancellation in a clear and unequivocal
manner, preferably in writing should be given by the
insurer to the insured so that the latter might be given an
opportunity to obtain other insurance for his own
protection. The notice should be personal to the insurer
and not to and/or through any unauthorized person by
the policy. Both the PSIC and the PNB failed, wittingly or
unwittingly to notify Saura of the cancellation made.
The insurer contends that it gave notice to PNB as
mortgagee of the property and that was already
substantial compliance with its duty to notify the insured
of the cancellation of the policy. But notice to the bank,
as far as Saura herein is concerned, is not effective
notice. PISC is then ordered to pay Saura P29T, the
amount involved in the policy subject matter of this case.
WARRANTIES
Ang Giok Chip v Springfield G.R. No. L-33637
December 31, 1931
Facts:
Ang insured his warehouse for the total value of Php
60,000. One of these, amounting to 10,000, was with
Springfield Insurance Company. His warehouse
burned down, then he attempted to recover 8,000
from Springfield for the indemnity. The insurance
company interposed its defense on a rider in the
policy in the form of Warranty F, fixing the amount
of hazardous good that can be stored in a building
to be covered by the insurance. They claimed that
Ang violated the 3 percent limit by placing
hazardous goods to as high as 39 percent of all the
goods stored in the building. His suit to recover was
granted by the trial court. Hence, this appeal.
Issue: Whether a warranty referred to in the policy
as forming part of the contract of insurance and in
the form of a rider to the insurance policy, is null
and void because not complying with the
Philippine Insurance Act.
Held: No. The warranty is valid. Petition dismissed.
Ratio:
The Insurance Act, Section 65, taken from California
law, states:
"Every express warranty, made at or before the
execution of a policy, must be contained in the
policy itself, or in another instrument signed by the
insured and referred to in the policy, as making a
part of it."
Warranty F, indemnifying for a value of Php 20,000
and pasted on the left margin of the policy stated:
It is hereby declared and agreed that during the
currency of this policy no hazardous goods be
stored in the Building to which this insurance applies
or in any building communicating therewith,
provided, always, however, that the Insured be
permitted to stored a small quantity of the
hazardous goods specified below, but not
exceeding in all 3 per cent of the total value of the
whole of the goods or merchandise contained in
said warehouse, viz; . . . .
Also, the court stated a book that said, "any
express warranty or condition is always a part of the
policy, but, like any other part of an express
contract, may be written in the margin, or
contained in proposals or documents expressly
referred to in the policy, and so made a part of it."
Whether or not the placing of said fireworks in the
building insured, under the conditions above
enumerated, they being “hazardous goods,” is a
violation of the terms of the contract of insurance.

“It is well settled that a rider attached to a policy is Ruling:

a part of the contract, to the same extent and with
Yes. The word “stored” has been defined to be a
like effect as it actually embodied therein. In the
deposit in a store or warehouse for preservation or
second place, it is equally well settled that an
safe keeping; to put away for future use. Said
express warranty must appear upon the face of the
definition does not include a deposit in a store, in
policy, or be clearly incorporated therein and
small quantities, for daily use.
made a part thereof by explicit reference, or by
words clearly evidencing such intention.” A violation of the terms of a contract of insurance,
by either party, will constitute the basis for a
The court concluded that Warranty F is contained in
termination of the contractual relations, at the
the policy itself, because by the contract of
election of the other. The right to terminate the
insurance agreed to by the parties it was made to
contractual relations exists even though the
be a part. It wasn’t a separate instrument agreed
violation was not the direct cause of the loss.
to by the parties.
In the present case, the deposit of the “hazardous
The receipt of the policy by the insured without
goods,” in the building insured, was a violation of
objection binds him. It was his duty to read the
the terms of the contract. Although the hazardous
policy and know its terms. He also never chose to
goods did not contribute to the loss, the insurer, at
accept a different policy by considering the earlier
his election, was relieved from liability. Said deposit
one as a mistake. Hence, the rider is valid.
created a new risk, not included in the terms of the
K. S. YOUNG vs. THE MIDLAND TEXTILE INSURANCE contract. The insurer had neither been paid, nor
COMPANY had he entered into a contract, to cover the
increased risk.
Facts:
American Home Assurance v. Tantuco
Plaintiff occupied a building as a residence and
storehouse. Plaintiff entered into a contract of FACTS:
insurance with the defendant with the condition
Tantuco Enterprises, Inc. is a coconut oil milling and
that in case said residence and storehouse and
refining company. It owned two mills (the first oil mill
contents be destroyed by fire, defendant shall pay
and a new one), both located at its factory
3K.
compound at Iyam, Lucena City.
One of the conditions of said contract was that no
The two oil mills are separately covered by fire
hazardous goods be stored or kept in the building.
insurance policies issued by American Home
however the plaintiff placed in said residence and
Assurance Co. The first oil mill was insured for 3M
bodega three boxes which belonged to him and
pesos while the new oil mill was insured for 6M
which were filled with fireworks for the celebration
pesos.
of the Chinese new year. Sometime later, said
residence and bodega and the contents thereof A fire broke out and gutted and consumed the
were partially destroyed. Fireworks were found in a new oil mill. American Home rejected the claim for
part of the building not destroyed by the fire; that the insurance proceeds on the ground that no
they in no way contributed to the fire, or to the loss policy was issued by it covering the burned oil mill. It
occasioned thereby. stated that the new oil mill was under Building No.
14 while the insurance coverage extended only to
Issue:
the oil mill under Building No. 5.

Petitioner contends that respondent violated the
express terms of the Fire Extinguishing Appliances
Warranty when the respondent failed to install
internal fire hydrants inside the burned building as
warranted.
Petitioner further argues that respondent is barred
by the parole evidence rule from presenting
evidence that it intended really to insure the
burned oil mill, just as it is barred by estoppel from
claiming that the description of the insured oil mill in
the policy was wrong, because it retained the
policy without having the same corrected before
the fire by an endorsement
ISSUE:
◦Whether or not the new oil mill is covered by the
fire insurance policy
Whether The Court of Appeals erred in its legal
interpretation of 'Fire Extinguishing Appliances
Warranty' of the policy
HELD:
In construing the words used descriptive of a
building insured, the greatest liberality is shown by
the courts in giving effect to the insurance. In view
of the custom of insurance agents to examine
buildings before writing policies upon them, and
since a mistake as to the identity and character of
the building is extremely unlikely, the courts are
inclined to consider the policy of insurance covers
any building which the parties manifestly intended
to insure, however inaccurate the description may
be.
Notwithstanding, therefore, the misdescription in
the policy, it is beyond dispute, to the mind of the
SC, that what the parties manifestly intended to
insure was the new oil mill.
2. SC held that the aforementioned warranty did
not require respondent to provide for all the fire
extinguishing appliances enumerated therein.
Additionally, it did not require that the appliances
are restricted to those mentioned in the warranty. In
other words, what the warranty mandates is that
respondent should maintain in efficient working
condition within the premises of the insured
property, fire fighting equipments such as, but not
limited to, those identified in the list, which will serve
as the oil mills first line of defense in case any part of
it bursts into flame. To be sure, respondent was able
to comply with the warranty. Within the vicinity of
the new oil mill can be found the following devices:
numerous portable fire extinguishers, two fire hoses,
fire hydrant,and an emergency fire engine. All of
these equipments were in efficient working order
when the fire occurred
It ought to be remembered that not only are
warranties strictly construed against the insurer, but
they should, likewise, by themselves be reasonably
interpreted. That reasonableness is to be
ascertained in light of the factual conditions
prevailing in each case. Here, we find that there is
no more need for an internal hydrant considering
that inside the burned building were: (1) numerous
portable fire extinguishers, (2) an emergency fire
engine, and (3) a fire hose which has a connection
to one of the external hydrants.
Qua Chee Gan v. Law Union Rock
Facts: Qua Chee Gan, a merchant, owned 4 warehouses
in Albay which were used for the storage of copra and
hemp in which the appellee deals with exclusively.
The warehouses together with the contents were insured
with Law Union since 1937 and the loss made payable to
PNB as mortgagee of the hemp and copra.
A fire of undetermined cause broke out in July 21, 1940
and lasted for almost 1 whole week.
Bodegas 1, 3, and 4 including the merchandise stored
were destroyed completely.
Insured then informed insurer of the unfortunate event
and submitted the corresponding fire claims, which were
later reduced to P370T.
Insurer refused to pay claiming violations of the warranties
and conditions, filing of fraudulent claims and that the fire
had been deliberately caused by the insured.
Insured filed an action before CFI which rendered a
decision in favor of the insured.
CFI AFFIRMED; LAW UNION LIABLE
On false and fraudulent claims
CFI found that the discrepancies were a result of QCG’s
erroneous interpretation of the provisions of the insurance
policies and claim forms, caused by his imperfect English,
and that the misstatements were innocently made and
without intent to defraud. The rule is that to avoid a
policy, the false swearing must be willful and with intent to
defraud which was not the cause.
On the storage of gasoline
Ambiguities or obscurities must be strictly interpreted
against the party that caused them. This rigid application
of the rule has become necessary in view of current
business practices. In contrast to contracts entered into
by parties bargaining on an equal footing, a contract of
insurance calls for greater strictness and vigilance on the
part of courts of justice with a view to protect the weaker
party from abuses and imposition, and prevent their
becoming traps for the unwary. The contract of insurance
is one of perfect good faith (uferrimal fidei) not for the
insured alone, but equally so for the insurer; in fact, it is
more so for the latter, since its dominant bargaining
position carries with it stricter responsibility.
QCG admitted that there were 36 cans of
gasoline in Bodega 2. Gasoline is not specifically
mentioned among the prohibited articles listed in the
hemp warranty. The cause relied upon LU speaks of oils.
In ordinary parlance, “oils” means “lubricants” and not
gasoline or kerosene. The prohibition of keeping gasoline
could have been expressed clearly and unmistakably.
On fire hydrants warranty
LU is estopped from claiming that there was a violation of
such warranty, since it knew that from the start, the
number of hydrants it demanded never existed, yet it
issued policies and received premiums.
Fieldman’s Insurance v. Songco
Facts: In 1960, Sambat, an agent of Fieldman’s Insurance,
induced Songco, a man of scant education to enter into
a common carrier insurance contract with Fieldman.
During the inducement, a son of Songco butted in and
said that they could not accept the type of insurance
offered because theirs was an owner-type jeepney and
not a common carrier.
Sambat answered that it did not matter because the
insurance company was not owned by the government
and therefore had nothing to do with rules and
regulations of the latter (Fieldman).
The insurance was executed and approved for a year
from Sept. 1960-1961. It was renewed in 1961 for another
year.
Issue: Whether or not the Songcos’ can claim the
insurance proceeds despite the fact that the vehicle
concerned was an owner and not a common carrier.
Ruling: Yes. The company is estopped from asserting that
the vehicle was not covered. After it had led Federico
Songco to believe that he could qualify under the
common carrier liability insurance policy, and to enter
into a contract of insurance paying the premiums due, it
could not thereafter be permitted to change its stand to
the detriment of the heirs of the insured. It knew all along
that Frederico owned a private vehicle. Its agent
Sambat twice exerted the utmost pressure on the insured,
a man of scant education, and the company did not
object to this.
Prudential Guarantee Assurance Inc. vs. Trans Asia
Shipping Lines
Facts: Trans-Asia is the owner of the vessel M/V Asia
Korea. In consideration of payment of premiums,
defendant Prudential insured M/V Asia Korea for
loss/damage of the hull and machinery arising from perils,
inter alia, of fire and explosion for the sum of P40 Million.
While the policy was in force, a fire broke out while M/V
Asia Korea was undergoing repairs at the port of Cebu.
Trans-Asia then filed its notice of claim for damage
sustained by the vessel. Trans-Asia reserved its right to
subsequently notify Prudential as to the full amount of the
claim upon final survey and determination by average
adjuster Richard Hogg International (Phil.) of the damage
sustained by reason of fire.
Trans-Asia executed a Loan and Trust Receipt a portion of
which states that it received from Prudential P3 Million as
a loan and without interest, repayable only in the event
and to the extent that it recovers from any person or
persons, corporation or corporations, or other parties, on
account of loss by any casualty for which they may be
liable occasioned by the fire on board.
Prudential, in a letter, denied Trans-Asia’s claim from the
fire incident due to the latter’s breach of policy
conditions one of which is “WARRANTED VESSEL CLASSED
AND CLASS MAINTAINED”. This was followed by another
letter, requesting the return or payment of the P3 Million
within a period of ten 10 days from receipt of said letter.
Trans-Asia filed a complaint for sum of money against
Prudential which sought the amount of P8,395,072.26 from
the latter, alleging that the same represents the balance
of the indemnity due upon the insurance policy in the
total amount of P11,395,072.26. It similarly sought interest
at 42% per annum citing Section 243 of the Insurance
Code.
The RTC dismissed the complaint for failure to state a
cause of action. It interpreted the provision to mean that
Trans-Asia is required to maintain the vessel at a certain
class at all times pertinent during the life of the policy.
According to the court a quo, Trans-Asia failed to prove
compliance of the terms of the warranty, the violation
thereof entitled Prudential, the insured party, to rescind
the contract. On appeal, said decision was reversed by
the CA.

ISSUES: Whether or not Trans-Asia breached a material

warranty that the vessel is classed and class maintained.

RULING: In ruling in the negative, the Supreme Court held

that Trans-Asia did not breach a material warranty that
the vessel is classed and class maintained. Prudential
Guaranty was not successful in discharging the burden of
evidence that Trans-Asia breached the subject policy
condition on CLASSED AND CLASS MAINTAINED.
Foremost, Prudential, through the Senior Manager of its
Marine and Aviation Division, Lucio Fernandez, made a
categorical admission that at the time of the
procurement of the insurance, Trans-Asia’s vessel, “M/V
Asia Korea” was properly classed by Bureau Veritas, a
classification society recognized in the marine industry.

As it is undisputed that Trans-Asia was properly classed at

the time the contract of insurance was entered into, thus,
it becomes incumbent upon Prudential to show evidence
that the status of Trans-Asia being properly CLASSED by
Bureau Veritas had shifted in violation of the warranty.
Unfortunately, Prudential failed to support the allegation.