Republic (CIR) vs Sun Life Assurance of Canada

Facts
On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life Assurance Co. Ltd. v. [CIR], which held that mutual life
insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST. This pronouncement was later
affirmed by this court in [CIR] v. Insular Life Assurance Company, Ltd. Sun Life surmised that[,] being a mutual life insurance company, it was
likewise exempt from the payment of premium tax and DST. Hence, on August 20, 1999, Sun Life filed with the CIR an administrative claim for tax
credit of its alleged erroneously paid premium tax and DST for the aforestated tax periods.
For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to file a claim for tax credit or refund dwindling
away and about to expire, Sun Life filed with the CTA a petition for review. The CTA found in favor of Sun Life.
Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to have registered, foremost, with the Cooperative
Development Authority before it could enjoy the exemptions from premium tax and DST extended to purely cooperative companies or associations
under [S]ections 121 and 199 of the Tax Code. For its failure to register, it could not avail of the exemptions prayed for. The CTA denied the CIRs
motion for reconsideration.
Issue:
WON respondent is exempted from payment of tax on life insurance premiums and documentary stamp tax
Ruling:
YES. The Tax Code defines a cooperative as an association conducted by the members thereof with the money collected from among themselves
and solely for their own protection and not for profit. Without a doubt, respondent is a cooperative engaged in a mutual life insurance business.
First, it is managed by its members. Both the CA and the CTA found that the management and affairs of respondent were conducted by its
member-policyholders. SUNLIFE has been mutualized or converted from a stock life insurance company to a nonstock mutual life insurance
corporation pursuant to Section 266 of the Insurance Code of 1978. On the basis of its bylaws, its ownership has been vested in its member-
policyholders who are each entitled to one vote; and who, in turn, elect from among themselves the members of its board of trustees.
Second, it is operated with money collected from its members. Since respondent is composed entirely of members who are also its policyholders,
all premiums collected obviously come only from them. The member-policyholders constitute both insurer and insured who contribute, by a
system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid.
Third, it is licensed for the mutual protection of its members, not for the profit of anyone. A mutual life insurance company is conducted for the
benefit of its member-policyholders, who pay into its capital by way of premiums.
A mutual life insurance company is conducted for the benefit of its member-policyholders, 23 who pay into its capital by way of
premiums. To that extent, they are responsible for the payment of all its losses. 24 "The cash paid in for premiums and the premium
notes constitute their assets . . . . " 25 In the event that the company itself fails before the terms of the policies expire, the member-
policyholders do not acquire the status of creditors. 26 Rather, they simply become debtors for whatever premiums that they have
originally agreed to pay the company, if they have not yet paid those amounts in full, for "[m]utual companies . . . depend solely upon . .
. premiums." 27 Only when the premiums will have accumulated to a sum larger than that required to pay for company losses will the
member-policyholders be entitled to a "pro rata division thereof as profits." 28Members contributing to capital are also he owners.
Entitled proportionately to losses and profits.
Insurance premium cannot be increased but may be lessened.
The so-called "dividend" that is received by member-policyholders is not a portion of profits set aside for distribution to the stockholders
in proportion to their subscription to the capital stock of a corporation. 37 One, a mutual company has no capital stock to which
subscription is necessary; there are no stockholders to speak of, but only members. And, two, the amount they receive does not
partake of the nature of a profit or income. The quasi-appearance of profit will not change its character. It remains anoverpayment, a
benefit to which the member-policyholder is equitably entitled. 38||| (Republic v. Sunlife Assurance Co. of Canada, G.R. No. 158085,
October 14, 2005)
It does not follow that because respondent is registered as a nonstock corporation and thus exists for a purpose other than profit, the
company can no longer make any profits. 41 Earning profits is merely its secondary, not primary, purpose. In fact, it may not lawfully
engage in any business activity for profit, for to do so would change or contradict its nature 42 as a non-profit entity. 43 It may, however,
invest its corporate funds in order to earn additional income for paying its operating expenses and meeting benefit claims. Any excess
profit it obtains as an incident to its operations can only be used, whenever necessary or proper, for the furtherance of the purpose for
which it was organized.||| (Republic v. Sunlife Assurance Co. of Canada, G.R. No. 158085, October 14, 2005)
Under the Tax Code although respondent is a cooperative, registration with the Cooperative Development Authority (CDA) is not necessary in order
for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on
policies of insurance or annuities it grants, under Section 199. Not formed under Cooperative Code. Already existing before the law was passed.
Different objectives. Insurance Code does not require registration with CDA.
Gratia argumenti that registration is mandatory, it cannot deprive respondent of its tax exemption privilege merely because it failed to
register. The nature of its operations is clear; its purpose well-defined. Exemption when granted cannot prevail over administrative
convenience.



PHILAM CARE HEALTH SYSTEMS, INC. V CA
FACTS:
Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with Philamcare Health Systems, Inc.
He answered the standard application form: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble,
diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details). - NO
the application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was issued Health Care Agreement No.
P010194
Under the agreement, respondents husband was entitled to avail of hospitalization benefits, whether ordinary or emergency, listed therein. He was also
entitled to avail of "out-patient benefits" such as annual physical examinations, preventive health care and other out-patient services.
Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1,
1990. The amount of coverage was increased to a maximum sum of P75,000.00 per disability.
During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for 1 month beginning March 9,
1990.
While her husband was in the hospital, Julina Trinos tried to claim the benefits under the health care agreement.
Philamcare denied her claim saying that the Health Care Agreement was void for concealing Ernanis medical history so she paid the hospitalization
expenses of P76,000.00 herself.
Doctors at the MMC allegedly discovered at the time of Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in
the application form.
After being discharged from the MMC, he was attended by a physical therapist at home.
Later, he was admitted at the Chinese General Hospital.
Due to financial difficulties, however, he was brought home again.
April 13, 1990 morning: Ernani had fever and was feeling very weak
He was brought to Chinese General Hospital where he died
July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its president, Dr. Benito Reverente
RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral damages, exemplary damages, attorney's fees and cost of suit
CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare
Philamcare brought an instant petition for review arguing that:
health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance Code does not apply.
grants "living benefits," such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the
agreement until its expiration one-year thereafter
only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is
indemnified for his loss
since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last longer; incontestability clause does not
apply, as the same requires an effectivity period of at least two years
insurance company is governed by the Insurance Commission, but a Health Maintenance Organization under the authority of the Department of Health
ISSUE:
W/N the health care agreement is a contract of insurance. - YES
W/N the spouse being "not" legal wife can claim - YES

HELD: Petition is DENIED. CA AFFIRMED.
1. YES.
P.D. 612 Insurance Code
Sec. 2 (1)
(1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from
an unknown or contingent event.
Sec. 3
Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him,
may be insured against, subject to the provisions of this chapter.
The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children.
Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance
company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's
estate or the minor's father, mother, husband, wife, child, brother or sister.
The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy.
All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor
upon the death of the original owner, unless otherwise provided for in the policy.
In the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement was his own health.
in the nature of non-life insurance, which is primarily a contract of indemnity
Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must
pay for the same to the extent agreed upon under the contract.
The answer in response to the question relating to the medical history of the applicant largely depends on opinion rather than fact, especially coming from
respondent's husband who was not a medical doctor.
Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are
untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the provider or insurer.
P.D. 612 Insurance Code
Sec. 27
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.
cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: - none of these was made
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is
based.
When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-
compliance with his obligation.
Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract - the insurer.
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the
Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the
agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.
2. YES.
CONTENTION: not the legal wife (deceased was previously married to another woman who was still alive)
health care agreement is in the nature of a contract of indemnity.
payment should be made to the party who incurred the expenses
It is not controverted that respondent paid all the hospital and medical expenses. She is therefore entitled to reimbursement. The
records adequately prove the expenses incurred by respondent for the deceased's hospitalization, medication and the professional fees
of the attending physicians. |||









CIR VS LINCOLN PHILIPPINE LIFE INSURANCE COMPANY
In the years prior to 1984, private respondent issued a special kind of life insurance policy known as the "Junior Estate Builder Policy," the
distinguishing feature of which is a clause providing for an automatic increase in the amount of life insurance coverage upon attainment of a
certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due
on the policy were paid by petitioner only on the initial sum assured.
Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984 in the amount of P464,898.75 corresponding to
the amount of automatic increase of the sum assured on the policy issued by respondent.
Private respondent questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of Tax Appeals.
The Court of Tax Appeals found no valid basis for the deficiency tax assessment on the insurance policy. The Court of Appeals affirmed the decision
of the Court of Tax Appeals decision insofar as it nullified the deficiency assessment on the insurance policy.
The Commissioner of Internal Revenue filed the present petition questioning that portion of the Court of Appeals decision which invalidated the
deficiency assessment on the insurance policy.
Petitioner claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the main agreement and involves
another transaction; and that, while no new policy was issued, the original policy was essentially re-issued when the additional obligation was
assumed upon the effectivity of this "automatic increase clause" in 1984; hence, a deficiency assessment based on the additional insurance not
covered in the main policy is in order.
ISSUE: Whether or not there is only one policy.
HELD: Yes. Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set
forth. Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark,
sign, symbol, signature, number, or word necessary to complete the contract of insurance. It is thus clear that any rider, clause, warranty or
endorsement pasted or attached to the policy is considered part of such policy or contract of insurance.
The subject insurance policy at the time it was issued contained an automatic increase clause. Although the clause was to take effect only in
1984, it was written into the policy at the time of its issuance. The distinctive feature of the junior estate builder policy called the automatic
increase clause already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for
the increase in the coverage that took effect in 1984 when the assured reached a certain age.
The said increase however is imposable with documentary stamp taxes. The original documentary stamps tax paid by Lincoln Philippine covers the
original amount of the policies without the projected increase. The said increase was already definite at the time of the issuance of the policy. Thus,
the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause
because it was already determinable at the time the transaction was entered into and formed part of the policy.
While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade the payment of just taxes.
In the case at bar, to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the
time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law
requiring that the tax be computed on the basis of the amount insured by the policy.


















GULF RESORTS INC VS PHIL CHARTER INSURANCE -perfection
Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the
American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioners
two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by the AHAC policy provided that the policy wording
and rates in said policy be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period
of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts
paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock endorsement provided that In
consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what
is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property
insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit
"7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and
plaintiffs properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.
Fomal claim then assigned an independent adjuster, Bayne Adjusters and Surveyors, Inc.
Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied
petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. The
trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of
earthquake shock, the same premium it had paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged therein
Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock
coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured
against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no
premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium
payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioners insurance policies with
AHAC.
ANSWER
First, none of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against earthquake shock to petitioner's
insured properties other than on the two swimming pools.
Second, petitioner's payment of additional premium in the amount of P393.00 shows that the policy only covered earthquake shock damage on the
two swimming pools. Same rate throughout the years.
Third, the deletion of the phrase pertaining to the limitation of the earthquake shock endorsement to the two swimming pools in the policy
schedule did not expand the earthquake shock coverage to all of petitioner's properties. This inadvertence did not make the policy incomplete, nor
did it broaden the scope of the endorsement whose descriptive title was merely enumerated.
in order for the earthquake shock endorsement to be effective, premiums must be paid for all the properties covered. In all of its seven insurance
policies, petitioner only paid P393.00 as premium for coverage of the swimming pools against earthquake shock. No other premium was paid for
earthquake shock coverage on the other properties
Annual payment and Earthquake endorsement rider Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of
the earthquake shock coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.
SC:
5.In consideration of the insurer's promise, the insured pays a premium
In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two swimming pools. There is no
mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioner's
previous insurance policies from AHAC-AIU.
-No increase in the premium.
-Fire insurance does not cover swimming pools
-Deletion of Item #5 EQ shock 2 swimming pools only. inadvertence
Adjuster testimony clearly understood that the coverage for EQ shock was for the 2 pools only. Thus, there is no ambiguity.
AHA insurance was copied by PCIC.







MALAYAN INSURANCE CO., INC. vs. THE HON. COURT OF APPEALS
FACTS:
On 29 March 1967, herein petitioner, Malayan Insurance Co., Inc., issued in favor of private respondent Sio Choy Private Car Comprehensive Policy
No. MRO/PV-15753, effective from 18 April 1967 to 18 April 1968, covering a Willys jeep with Motor No. ET-03023, Serial No. 351672, and Plate
No. J-21536, Quezon City, 1967. The insurance coverage was for "own damage" not to exceed P600.00 and "third-party liability" in the amount of
P20,000.00.
Sio Choy insured his jeep with Malayan Insurance against 3rd party liability. One day the jeep, driven by an employee of San Leon Rice Mill, figured
in an accident with Pantranco Bus.
The passenger of the jeep, Vallejo, who was injured due to the accident, claimed damages from Sio Choy, Malayan and Pantranco. Pantranco was
held not liable.
Malayan insurance paid Vallejo and asked for reimbursement from San Leon as the latter driver caused the alleged accident. The latter, however
denied liability.
RTC ruled that Sio Choy, Malayan and San Leon are solidary liable, thus, the former is entitled to reimbursement.
CA said although jointly and severally liable, Malayan is not entitled to reimbursement.
ISSUES:
1. WON Sio Choy, Malayan and San Leon Rice Mill are solidary liable.
2. WON Malayan can seek reimbursement.
RULING:
1. Only respondents Sio Choy and San Leon Rice Mill, Inc, (to the exclusion of the petitioner) that are solidarily liable to respondent Vallejos
for the damages awarded to Vallejos.
Sio Choy and San Leon Rice Mill, Inc. are the principal tortfeasors who are primarily liable to respondent Vallejos. The law states that the
responsibility of two or more persons who are liable for a quasi-delict is solidarily. On the other hand, the basis of petitioner's liability is its
insurance contract with respondent Sio Choy.
While it is true that where the insurance contract provides for indemnity against liability to third persons, such third persons can directly sue the
insurer, 6 however, the direct liability of the insurer under indemnity contracts against third party liability does not mean that the insurer can be
held solidarily liable with the insured and/or the other parties found at fault. The liability of the insurer is based on contract; that of the insured is
based on tort.
In the case at bar, 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 Rice Mill, Inc. For if petitioner-insurer were
solidarily liable with said two (2) respondents by reason of the indemnity contract against third party liability-under which an insurer can be directly
sued by a third party this will result in a violation of the principles underlying solidary obligation and insurance contracts.
In the case at bar, the trial court held petitioner together with respondents Sio Choy and San Leon Rice Mills Inc. solidarily liable to respondent
Vallejos for a total amount of P29,103.00, with the qualification that petitioner's liability is only up to P20,000.00. In the context of a solidary
obligation, petitioner may be compelled by respondent Vallejos to pay the entire obligation of P29,013.00, notwithstanding the qualification made
by the trial court. But, how can petitioner be obliged to pay the entire obligation when the amount stated in its insurance policy with respondent
Sio Choy for indemnity against third party liability is only P20,000.00? Moreover, the qualification made in the decision of the trial court to the
effect that petitioner is sentenced to pay up to P20,000.00 only when the obligation to pay P29,103.00 is made solidary, is an evident breach of the
concept of a solidary obligation. Thus, We hold that the trial court, as upheld by the Court of Appeals, erred in holding petitioner, solidarily liable
with respondents Sio Choy and San Leon Rice Mill, Inc. to respondent Vallejos.||| (Malayan Insurance Co., Inc. v. Court of Appeals, G.R. No. L-
36413, September 26, 1988)
2. Malayan is entitled to re-imbursement from San Leon by virtue of SUBROGATION. Article 1217 says,
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already
made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.
In accordance with Article 1217, MALAYAN, upon payment to Vallejos and thereby becoming the subrogee of solidary debtor Sio Choy, is entitled
to reimbursement from respondent San Leon Rice Mill, Inc.
To recapitulate then: We hold that only respondents Sio Choy and San Leon Rice Mill, Inc. are solidarily liable to the respondent Martin C. Vallejos
for the amount of P29,103.00. Vallejos may enforce the entire obligation on only one of said solidary debtors. If Sio Choy as solidary debtor is made
to pay for the entire obligation (P29,103.00) and petitioner, as insurer of Sio Choy, is compelled to pay P20,000.00 of said entire obligation,
petitioner would be entitled, as subrogee of Sio Choy as against San Leon Rice Mills, Inc., to be reimbursed by the latter in the amount of
P14,551.50 (which is 1/2 of P29,103.00).



MANILA MAHOGANY MFG CORP V CA & ZENITH INSURANCE
FACTS:
Manila Mahogany insured its Mercedes Benz with respondent insurance company. One day, the vehicle was bumped and damaged by a truck
owned by San Miguel Corp (SMC).
Zenith paid P5K to petitioner in amicable settlement. Petitioners general manager executed a Release Claim, subrogating respondent company to
all its right to action against SMC.
Later respondent wrote Insurance Adjusters Inc. to demand reimbursement from SMC. Insurance Adjusters refused saying that SMC had already
paid petitioner P4,500 for the damages to petitioners vehicle, as evidenced by a cash voucher and Release of Claim executed by the GM of
petitioner discharging SMC from all actions, claims, demands the rights of action that now exist or hereafter develop arising out of or as a
consequence of the accident.
Respondent demanded the P4.5K amount from petitioner. Petitioner refused. Suit filed for recovery.
City Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with modification that petitioner was to pay respondent the total
amount of 5K it had received from respondent.
Petitioners argument: Since the total damages were valued at P9,486.43 and only 5K was received by petitioner from respondent, petitioner
argues that it was entitled to go after SMC to claim the additional which was eventually paid to it.
Respondents argument: No qualification to its right of subrogation.
ISSUE:
1.WON petitioner should pay respondent despite the subrogation in the Release of Claim was conditioned on recovery of the total amount of
damages petitioner has sustained.
RULING:
1. NO. SC said no other evidence to support its allegation that a gentlemans agreement existed between the parties, not embodied in the Release
of Claim, such Release of Claim must be taken as the best evidence of the intent and purpose of the parties.
CA correct in holding petitioner should reimburse respondent 5K.
When Manila Mahogany executed another release claim discharging SMC from all rights of action after the insurer had paid the proceeds of the
policy the compromise agreement of 5K- the insurer is entitled to recover from the insured the amount of insurance money paid.
Petitioner by its own acts released SMC, thereby defeating respondents right of subrogation, the right of action against the insurer was also
nullified.
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 losses his rights 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 w/ the consent of the insurer.
---"The right of subrogation can only exist after the insurer has paid the insured, otherwise the insured will be deprived of hi s right to full
indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may sue the party responsible for the
damage for the [sic] remainder. To the extent of the amount he has already received from the insurer, the insurer enjoy's [sic] 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 his rights 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." 4 (Emphasis supplied)
And even if the specific amount asked for in the complaint is P4,500.00 only and not P5,000.00, still, the respondent Court acted well within its
discretion in awarding P5,000.00, the total amount paid by the insurer. The Court of Appeals rightly reasoned as follows:
"It is to be noted that private respondent, in its complaint, prays for the recovery, not of P5,000.00 it had paid under the insurance policy but
P4,500.00 San Miguel Corporation had paid to petitioner. On this score, We believe the City Court and Court of First Instance erred in not awarding
the proper relief. Although private respondent prays for the reimbursement of P4,500.00 paid by San Miguel Corporation, instead of P5,000.00
paid under the insurance policy, the trial court should have awarded the latter, although not prayed for, under the general prayer in the complaint
"for such further or other relief as may be deemed just or equitable" (Rule 6, Sec. 3, Revised Rules of Court; Rosales v. Reyes Ordoveza, 25 Phil.
495; Cabigao v. Lim, 50 Phil. 844; Baguioro v. Barrios and Tupas, 77 Phil. 120)."








Pan Malayan Insurance Corporation v. Court of Appeals
G.R. No. 81026 | April 3, 1990 | J. Cortes


Facts:
1. Canlubang Automotive Resources Corp. obtained from PanMalay a motor vehicle insurance policy for its Mitsubishi Colt Lancer.
2. While the policy was still in effect, the insured car was allegedly hit by a pick-up owned by Erlinda Fabie but driven by another person.
The car suffered damages in the amount of P42K.
3. PanMalay defrayed the cost of repair of the insured car. It then demanded reimbursement from Fabie and her driver of said amount, but
to no avail.
4. PanMalay filed a complaint for damages with the RTC of Makati against Fabie and the driver. It averred that the damages caused to the
insured car was settled under the own damage coverage of the insurance policy.
5. Private respondents filed a motion to dismiss alleging that PanMalay had no cause of action since the won damage clause of the policy
precluded subrogation under Art. 2207 of the Civil Code. They contended that indemnification under said article is on the assumption
that there was no wrongdoer or no 3
rd
party at fault.
6. The RTC dismissed PanMalays complaint and ruled that payment under the own damage clause was an admission by the insurer that
the damage was caused by the assured and/or its representatives.
7. CA affirmed but on different ground. Applying the ejusdem generis rule, CA held that Section III-I of the policy, which was the basis for
the settlement of the claim against insurance, did not cover damage arising from collision or overturning due to the negligence of 3
rd

parties as one of the insurable risks.

Issue:
Was PanMalay subrogated to the rights of Canlubang against the driver and his employer?

Held:
Yes.

Decision:
The Supreme Court remanded the case back to the trial court.

Ruling:
Right of Subrogation of the Insurer
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged
through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured, will be subrogated
to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay.
Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have
against the third party whose negligence or wrongful act caused the loss.
The right of 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.
There are three exceptions to this rule:
1. where the assured by his own act releases the wrongdoer or third party liable for the loss or damage
2. where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's
claim for loss
3. where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment"

None of these exceptions are present in this case.

As to the trial courts ruling:
When PanMalay utilized the phrase "own damage" a phrase which is not found in the insurance policy to define the basis for its settlement of
Canlubang's claim under the policy, it simply meant that it had assumed to reimburse the costs for repairing the damage to the insured vehicle. It
is in this sense that the so-called "own damage" coverage under Section III of the insurance policy is differentiated from Sections I and IV-1 which
refer to "Third Party Liability" coverage (liabilities arising from the death of, or bodily injuries suffered by, third parties) and from Section IV-2 which
refer to "Property Damage" coverage (liabilities arising from damage caused by the insured vehicle to the properties of third parties).

As to the Court of Appeals ruling:
The Court of Appeals' ruling on the coverage of insured risks stems from an erroneous interpretation of the provisions of the policy. It violates a
fundamental rule on the interpretation of property insurance contracts where interpretation should be liberally in favor of the assured and strictly
against the insurer in cases of disagreement between the parties. The meaning advanced by PanMalay regarding the coverage of the policy is
undeniable more beneficial to Canlubang than that insisted upon by the CA. In any case, the very parties to the policy were not shown to be in
disagreement regarding the meaning and coverage of Section III-I. Hence, it was improper for CA to assert its own interpretation of the contract
that is contrary to the clear understanding and intention of the parties to it.

* Even assuming for the sake of argument that the insurance policy does not cover damage to the insured vehicle caused by negligent acts of third
parties, and that PanMalay's settlement of Canlubang's claim for damages allegedly arising from a collision due to private respondents' negligence
would amount to unwarranted or "voluntary payment", insurer may still recover from the third party responsible for the damage to the insured
property under Article 1236 of the Civil Code.

"own damage" coverage under the policy implies damage to the insured car caused by the assured itself, instead of third parties, proceeds from
an incorrect comprehension of the phrase "own damage" as used by the insurer.





Cebu Shipyard v William G.R. No. 132607. May 5, 1999
Facts:
Cebu Shipyard and Engineering Works, Inc. repaired marine vessels while the Prudential is in the non-life insurance business. William Lines, Inc., the
owner of M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank. At the time of the incident, subject vessel was insured with
Prudential for P45M for hull and machinery. CSEW was insured for only Php 10 million for the shiprepairers liability policy. They entered into a
contract where negligence was the only factor that could make CSEW liable for damages. Moreover, liability of CSEW was limited to only Php
1million for damages. The Hull Policy included an Additional Perils (INCHMAREE) Clause covering loss of or damage to the vessel through the
negligence of, among others, ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs. The officers and cabin crew stayed at the ship while it was being repaired. After
the vessel was transferred to the docking quay, it caught fire and sank, resulting to its total loss.
William brought suit against CSEW alleging that it was through the latters negligence that the ship caught fire and sank. Prudential was impleaded
as co-plaintiff after it had paid the value of insured items. It was subrogated to 45 million, or the value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for the ship indemnity, 65 million for loss of income, and more than 13 million in other
damages. The CA affirmed the TC decision.
CSEW contended that the cause of the fire was due to Williams hotworks on the said portion of the ship which they didnt ask CSEW permission
for.
Prudential, on the other hand, blamed the negligence of the CSEW workers in the instance when they didnt mind rubber insulation wire coming
out of the air-conditioning unit that was already burning.
Hence this MFR.
Issue:
1. WON CSEW had management and supervisory control of the ship at the time the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the crew
3. WON Prudential has the right of subrogation against its own insured
4. WON the provisions limiting CSEWs liability for negligence to a maximum of Php 1 million are valid
Held: Yes. Yes. Yes. No. Petition denied.
Ratio:
1. The that factual findings by the CA are conclusive on the parties and are not reviewable by this Court. They are entitled to great weight and
respect when the CA affirmed the factual findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused the total loss of subject M/V Manila City was due to the negligence of the
employees and workers of CSEW.
Furthermore, in petitions for review on certiorari, only questions of law may be put into issue. Questions of fact cannot be entertained.
2. For the doctrine of res ipsa loquitur to apply to a given situation, the following conditions must concur: (1) the accident was of a kind which does
not ordinarily occur unless someone is negligent; and (2) that the instrumentality or agency which caused the injury was under the exclusive
control of the person charged with negligence.
The facts and evidence reveal the presence of these conditions. First, the fire would not have happened in the ordinary course of things if
reasonable care and diligence had been exercised.
Second, the agency charged with negligence, as found by the trial court and the CA and as shown by the records, is CSEW, which had control over
subject vessel when it was docked for annual repairs.
What is more, in the present case the trial court found direct evidence to prove that the workers didnt exercise due diligence in the care of subject
vessel. The direct evidence substantiates the conclusion that CSEW was really negligent even without applying such doctrine.
3. Petitioner contends that Prudential is not entitled to be subrogated to the rights of William Lines, Inc., theorizing that (1) the fire which gutted
M/V Manila City was an excluded risk and (2) it is a co-assured under the Marine Hull Insurance Policy. This was wrong. The one who caused the
fire has already been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the former was subrogated to the right of the latter to indemnification from CSEW. As
aptly ruled by the Court of Appeals, the law says:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out
of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party
shall be entitled to recover the deficiency from the person causing the loss or injury.
When Prudential paid the latter the total amount covered by its insurance policy, it was subrogated to the right of the latter to recover the insured
loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is deemed a co-assured under the subject insurance policy with reliance
on Clause 20 of the Work Order which states:
20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the contract is in effect.
Clause 20 of the Work Order in question is clear in the sense that it requires William Lines to maintain insurance on the vessel during the period of
dry-docking or repair. However, the fact that CSEW benefits from the said stipulation does not automatically make it as a co-assured of William
Lines. The intention of the parties to make each other a co-assured under an insurance policy is to be read from the insurance contract or policy
itself and not from any other contract or agreement because the insurance policy denominates the beneficiaries of the insurance. The hull and
machinery insurance procured by William Lines, Inc. from Prudential named only William Lines, Inc. as the assured. There was no manifestation
of any intention of William Lines, Inc. to constitute CSEW as a co-assured under subject policy. The claim of CSEW that it is a co-assured is
unfounded.
Then too, in the Additional Perils Clause of the same Marine Insurance Policy, it is provided that this insurance also covers loss of or damage to
vessel directly caused by the negligence of charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW were deemed a co-assured under the policy, it would nullify any claim of William Lines,
Inc. from Prudential for any loss or damage caused by the negligence of CSEW. Certainly, no shipowner would agree to make a shiprepairer a co-
assured under such insurance policy; otherwise, any claim for loss or damage under the policy would be invalidated.
4. Although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se; as binding as an ordinary contract, the Court
recognizes instances when reliance on such contracts cannot be favored especially where the facts and circumstances warrant that subject
stipulations be disregarded. Thus, in ruling on the validity and applicability of the stipulation limiting the liability of CSEW for negligence to P1M
only, the facts and circumstances vis-a-vis the nature of the provision sought to be enforced should be considered, bearing in mind the principles of
equity and fair play.
It is worthy to note that M/V Manila City was insured with Prudential for P45M. Upon thorough investigation by its hull surveyor, M/V Manila City
was found to be beyond economical salvage and repair. The evaluation of the average adjuster also reported a constructive total loss. The said
claim of William Lines, Inc., was then found to be valid and compensable such that Prudential paid the latter the total value of its insurance claim.
Furthermore, it was ascertained that the replacement cost of the vessel, amounts to P55M.
Considering the circumstances, it would unfair to limit the liability of petitioner to One Million Pesos only. To allow CSEW to limit its liability to P1M
notwithstanding the fact that the total loss suffered by the assured and paid for by Prudential amounted to P45M would sanction the exercise of a
degree of diligence short of what is ordinarily required because, then, it would not be difficult for petitioner to escape liability by the simple
expedient of paying an amount very much lower than the actual damage suffered by William.
























Delsan Transport Lines, Inc. vs. Court of Appeals and American Home Assurance Corporation
FACTS:
Caltex Philippines entered into a contract of affreightment with the petitioner, Delsan Transport Lines, Inc., whereby the said common carrier
agreed to transport Caltex's industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country.
The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, petitioner's vessel, the MT
Maysun, set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the
Visayas taking with it the entire cargo of fuel oil.
AHAC paid Caltex the sum of P5,096,635.57 representing the insured value of the lost cargo. Exercising its right of subrogation under Article 2207
of the New Civil Code, AHAC demanded from Delsan the same amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private respondent filed a complaint with the Regional Trial Court of Makati
City, Branch 137, for collection of a sum of money.
The trial court rendered a decision dismissing the complaint against herein petitioner. The trial court found that the vessel, MT Maysun, was
seaworthy to undertake the voyage and that the incident was caused by unexpected inclement weather condition or force majeure, thus
exempting petitioner from liability for the loss of its cargo. The decision of the trial court, however, was reversed, on appeal, by the Court of
Appeals.
ISSUES:
(pertaining to subrogation)
1.Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the
vessel was seaworthy, thus precluding any action for recovery against the petitioner?
2.Whether or not the non-presentation of the marine insurance policy bars AHACs right of subrogation?

RULING:
First Issue:
Before the Court, petitioner theorized that when private respondent paid Caltex the value of its lost cargo, the act of the private respondent is
equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to Caltex due to the
latter's breach of implied warranty under the marine insurance policy that the vessel was seaworthy.
The Supreme Court rejected petitioner's theory. According to the Court, the payment made by the private respondent for the insured value of the
lost cargo operates as a waiver of private respondent's 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.
The Court also stressed that the right of subrogation is designed to promote and to accomplish justice and is the mode which equity adopts to
compel the ultimate payment of a debt by one who in justice and good conscience ought to pay.
It 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 by
the insurance company of the insurance claim. Consequently, the payment made by AHAC (insurer) to Caltex (assured) operates as an equitable
assignment to the former of all the remedies which the latter may have against the petitioner.
Second Issue:
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.

*Invoked the case of Home Insurance Corporation v. CA This does not apply, presentation of the policy was held vital in this case because the
shipment therein (hydraulic engines) passed through several stages with a different party involved in each stage. 6 parties were involved.






Federal Express vs American Home (AHAC)
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 clients cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed customs 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, petitioners 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.
Cargohaus was adjudged by RTC and CA as liable for 39k USD, judgement is already final and executor.