South Sea v CA G.R. No. 102253 June 2, 1995 J.

Vitug Facts: Valenzuela Hardwood entered into an agreement with the defendant Seven Brothers whereby the latter undertook to load the former's 940 lauan logs for shipment to Manila. South Sea insured the logs for P2,000,000.00 in its marine policy. Valenzuela then gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua. Seven Brothers ship sank resulting in the loss of the logs. A check for P5,625.00 to cover payment of the premium tendered to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. Valenzuela demanded from South Sea the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim. Valenzuela filed a complaint a complaint for the recovery of the value of lost logs and freight charges from Seven Brothers Shipping Corporation or from South Sea Surety and Insurance Company, the insurer. The trial court rendered judgment in favor of plaintiff Valenzuela. The Court of Appeals affirmed the judgment only against the insurance corporation and absolved the shipping entity from liability. The court held that there was a stipulation in the charter party exempted the ship owner from liability in case of loss. In the SC petition, petitioner argues that it should have been freed from any liability to Hardwood. It faults the appellate court (a) for having disregarded Section 77 of the insurance Code and (b) for holding Victorio Chua to have been an authorized representative of the insurer. Issue: WON Mr. Chua acted as an agent of the surety company or of the insured when he received the check for insurance premiums. Held: Agent of the surety. Petition denied. Ratio: To determine if there was a valid contract of insurance, it must be determine if the premium was validly paid to the company or its agents at the time of the loss. The appellate and trial courts have found that Chua acted as an agent. South Sea insisted that Chua has been an agent for less than ten years of the ColumbiaInsurance Brokers, a different company. Appellant argued that Mr. Chua, having received the premiums, acted as an agent under Section 301 of the Insurance Code which provides: Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance brokerwithin the intent of this Code, and shall thereby become liable to all the duties requirements, liabilities and penalties to which an insurance broker is subject. Valenzuela claimed that the second paragraph of Section 306 of the Insurance Code provided: Sec. 306 Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have authorized such agent or broker to receive on its

behalf payment of any premium which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due thereon. Mr. Chua testified that the marine cargo insurance policy logs was by South Sea to be given to the wood company. When South Sea delivered to Mr. Chua the marine cargo insurance policy for Valenzuelas logs, he is deemed to have been authorized by former to receive the premium which is due on its behalf. When the logs were lost, the insured had already paid the premium to an agent of the South SeaSurety and Insurance Co., Inc., which is consequently liable to pay the insurance proceeds under the policy it issued to the insured. The court followed the factual evidence of the lower courts and held that they didnt try questions of fact. TANG V. CA- INSURANCE FRAUD OR MISTAKE 90 SCRA 236 Facts: On Sept. 25, 2965, Lee Su Guat, widow, 61 years old and illiterate who spoke only Chinese, applied for life insurance for 60T 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 health, Philamlife issued her a policy effective Oct. 23, 1965 with her nephew Vicente Tang as beneficiary. On Nov. 15, 1965, 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. Both trial court and CA ruled that Lee was guilty of concealment. Tangs 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. Held: NO. Art. 1332 is NOT applicable. Under said article, 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 contract; on the contrary, it is seeking to avoid its performance. It is petitioner who is seeking to enforce it, even as fraud or mistake is NOT alleged. Accordingly, Philamlife was under no obligation to prove that the terms of the insurance contract were fully explained to the other party. Even if we were to say that the insurer is the one

seeking the performance of the cont contracts by avoiding paying the claim, it has to be noted as above stated that there has been NO imputation of mistake of fraud by the illiterate insured whose personality is represented by her beneficiary. In sum, Art. 1332 is inapplicable, and considering the findings of both the trial court and the CA as to the Concealment of Lee, the SC affirms their decisions.

prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part.

VDA. DE CANILANG V. CA - CONCEALMENT 223 SCRA 443 (1993) Facts: > Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." > On the next day, 4 August 1982, Canilang applied for a "nonmedical" insurance policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of P19,700. > On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. > Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder. > Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application. CA reversed. Issue: Whether or not Grepalife is liable. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the relevant provisions of the Insurance Code, the information concealed must be information which the concealing party knew and "ought to [have] communicate[d]," that is to say, information which was "material to the contract. The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Grepalife would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge ultimately.

SUN LIFE V. CA - CONCEALMENT IN INSURANCE 245 SCRA 268 (1995) Facts: > On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life. He was issued a life insurance policy with double indemnity in case of accidental death. The designated beneficiary was his mother, Bernarda. > On June 26, 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with Sun Life, seeking the benefits of the insurance. Sun Life conducted an investigation and its findings prompted it to reject the claim. > Sun Life discovered that 2 weeks prior to his application, Bacani was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests. He did not reveal such fact in his application. > In its letter, Sun Life informed Berarda, that the insured did not disclosed material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. > Bernarda and her husband, filed an action for specific performance against Sun Life. RTC ruled for Bernarda holding that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. Moreover, it held that the health history of the insured was immaterial since the insurance policy was "non-medical." CA affirmed. Issue: Whether or not the beneficiary can claim despite the concealment. Held: NOPE. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec 31) The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks

SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the Insurance Code of 1978.

This couldnt be accepted because the insured signed the form. He affirmed the correctness of all the entries. The company records show that the deceased was examined by Dr. Victoriano Lim and was found to be diabetic and hypertensive. He was also found to have suffered from hepatoma. Because of the concealment made by the deceased, the company was thus misled into accepting the risk and approving his application as medically fit.

Geagonia v CA G.R. No. 114427 February 6, 1995 Tan v CA G.R. No. 48049 June 29, 1989 J. Gutierrez Jr. Facts: Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P 80,000.00 with Philamlife. It was approved. Tan Lee Siong died of hepatoma. Petitioners then filed a claim for the proceeds. The company denied petitioners' claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts. The premiums paid on the policy were refunded. The petitioners filed a complaint in the Insurance Commission. The latter dismissed the complaint. The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for lack of merit. Hence, this petition. Issue: WON Philam didnt have the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. Held: No. Petition dismissed. Ratio: The Insurance Code states in Section 48: Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. The so-called "incontestability clause" in the second paragraph prevents the insurer from raising the defenses of false representations insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The policy was in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. The "incontestability clause" added by the second paragraph of Section 48 is in force for two years. After this, the defenses of concealment or misrepresentation no longer lie. The petitioners argue that no evidence was presented to show that the medical terms were explained in a layman's language to the insured. They also argue that no evidence was presented by respondent company to show that the questions appearing in Part II of the application for insurance were asked, explained to and understood by the deceased so as to prove concealment on his part. Facts: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year policy and covered thestock trading of dry goods. The policy noted the requirement that "3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance orinsurances in force at the time of the loss or damage is not more than P200,000.00." The petitioners stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioners stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against the private respondent in the Insurance Commission for the recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence of the other two policies. But, he said that he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies and this requirement was not mentioned to him by the private respondent's agent. The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. The Insurance Commission then ordered the respondent company to pay complainant the sum ofP100,000.00 with interest and attorneys fees. CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC. Issues: 1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby violated Condition 3 of the policy. 2. WON he is prohibited from recovering Held: Yes. No. Petition Granted Ratio: 1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His

testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original. 2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom they are intended to operate. With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibitionapplies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent wasamenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

The defense of fraud, in the form of non-declaration of coinsurances which was not pleaded in the answer, was also not pleaded in the Motion to Dismiss. The trial court denied the respondents motion. Oriental filed another motion to include additional evidence of the co-insurance which could amount to fraud. The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision. Pacific Banking filed a motion for reconsideration of the said decision of the respondent Court of Appeals, but this was denied for lack of merit. Issues: 1. WON unrevealed co-insurances Violated policy conditions No. 3 2. WON the insured failed to file the required proof of loss prior to court action. Held: Yes. Petition dismissed. Ratio: 1. Policy Condition No. 3 explicitly provides: 3. The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this policy shall be forfeited. The insured failed to reveal before the loss three other insurances. Had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud. Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of coinsurances taken over the subject property. As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy. Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the endorsement or assignment was made was to protect the mortgagee/assignee against any untoward act or omission of the insured. It would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured. It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglectexcept fraud or misrepresentation, or arsonof the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same. The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. Concealment of the aforecited co-insurances can easily be fraud, or in the very least,misrepresentation.

Pacific v CA G.R. No. L-41014 November 28, 1988 J. Paras Facts: An open fire insurance policy, was issued to Paramount Shirt Manufacturing by Oriental Assurance Corporation to indemnify P61,000.00, caused by fire to the factorys stocks, materials and supplies. The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods described in the policy were held in trust by the insured for Pacific Banking under trust receipts. The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation". A fire broke out on the premises destroying the goods contained in the building. The bank sent a letter of demand to Oriental for indemnity. The company wasnt ready to give since it was awaiting the adjusters report. The company then made an excuse that the insured had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, as a result, determination of the liability of private respondent could not be made. Pacific Banking filed in the trial court an action for a sum of money for P61,000.00 against Oriental Assurance. At the trial, petitioner presented communications of the insurance adjuster to Asian Surety revealing undeclared coinsurances with the following: P30,000 with Wellington Insurance; P25,000 with Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount on the same property covered by its policy with Oriental whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with Victory.

Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right. Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence. 2. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve as a notice of loss. It didnt even furnish other documents. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore there was no cause of action. It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the herein petitioner.

Held: The award of damages in case of unreasonable delay in thepayment of insurance claims is governed by the Philippine Insurance Code, which provides: Sec. 244. In case of any litigation for the enforcement of any policy or contract of insurance, it shall be the duty of the Commissioner or the Court, as the case may be, to make a finding as to whether the payment of the claim of the insured has been unreasonably denied or withheld; and in the affirmative case, the insurance company shall be adjudged to pay damages which shall consist of attorney's fees and other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment plus interest of twice the ceiling prescribed by the Monetary Board of the amount ofthe claim due the insured, from the date following the time prescribed in section two hundred forty-two or in section two hundred forty-three, as the case may be, until the claim is fully satisfied; Provided, That the failure to pay any such claim within the time prescribed in said sections shall be considered prima facie evidence of unreasonable delay in payment. It is clear that under the Insurance Code, in case of unreasonable delay in the payment of the proceeds of an insurance policy, the damages that may be awarded are: 1) attorney's fees; 2) other expenses incurred by the insured person by reason of such unreasonable denial or withholding of payment; 3) interest at twice the ceiling prescribed by the Monetary Board of the amount of the claim due the injured; and 4) the amount of the claim.

Zenith Insurance Corporation vs. CA [G.R. No. 85296 May 14, 1990] Post under case digests, Commercial Law at Saturday, February 25, 2012 Posted by Schizophrenic Mind Facts: On January 25, 1983, private respondent Lawrence Fernandez insured his car for "own damage" with petitioner Zenith Insurance Corporation. On July 6, 1983, the car figured in an accident and suffered actual damages in the amount of P3,640.00. After allegedly being given a run around by Zenith for two (2) months, Fernandez filed a complaint with the Regional Trial Court of Cebu for sum of money and damages resulting from the refusal of Zenith to pay the amount claimed. Aside from actual damages and interests, Fernandez also prayed for moral damages in the amount of P10,000.00, exemplary damages of P5,000.00, attorney's fees of P3,000.00 and litigation expenses of P3,000.00. On September 28, 1983, Zenith filed an answer alleging that it offered to pay the claim of Fernandez pursuant to the terms and conditions of the contract which, the private respondent rejected. On June 4, 1986, a decision was rendered by the trial court in favor of private respondent Fernandez. On August 17, 1988, the Court of Appeals rendered its decision affirming in toto the decision of the trial court. Issue: The propriety of the award of moral damages, exemplary damages and attorney's fees is the main issue raised herein by petitioner.