Insurance Law -Week 1

Insurance Contract
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. 2)
A contract of suretyship shall be deemed to be an insurance contract, within the
meaning of this Code, only if made by a surety who or which, as such, is doing an
insurance business as hereinafter provided. (Sec. 2)
Elements of Insurance Contract
1. Subject Matter the thing insured.
2. Consideration premium paid.
3. Object/Purpose transfer and distribution of risk of loss, damage, or liability
arising from an unknown or contingent event.
FACTS: In 1988, Ernani Trinos applied for a health care insurance under the
Philamcare Health Systems, Inc. He was asked if he was ever treated for high blood,
heart trouble, diabetes, cancer, liver disease, asthmaa, or peptic ulcer; he answered
no. His application was approved and it was effective for one year. His coverage was
subsequently renewed twice for one year each. While the coverage was still in force in
1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the
hospitalization amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim
before Philamcare for the latter to pay the hospitalization cost. Philamcare refused to
pay as it alleged that Ernani failed to disclose the fact that he was diabetic,
hypertensive, and asthmatic. Julita ended up paying the hospital expenses. Ernani
eventually died. In July 1990, Julita sued Philamcare for damages. Philamcare alleged
that the health coverage is not an insurance contract; that the concealment made by
Ernani voided the agreement.
ISSUE: Whether or not Philamcare can avoid the health coverage agreement.

Nature & Characteristic of an insurance contract. HELD: No. The health coverage agreement (health care agreement) entered upon by
1. Consensual perfected thru mutual consent. Ernani with Philamcare is a non-life insurance contract and is covered by the
2. Voluntary not compulsory Insurance Law. It is primarily a contract of indemnity. Once the member incurs
3. Aleatory dependent on happening of a contingent event. hospital, medical or any other expense arising from sickness, injury or other stipulated
4. Unilateral legal duties is only imposed on the insurer who promises contingent, the health care provider must pay for the same to the extent agreed upon
indemnification. under the contract. There is no concealment on the part of Ernani. He answered the
5. Conditional subject to the condition of the happening of the event insured question with good faith. He was not a medical doctor hence his statement in
against. answering the question asked of him when he was applying is an opinion rather than a
6. Personal Contract fact. Answers made in good faith will not void the policy.

Further, Philamcare, in believing there was concealment, should have taken the
Philamcare Health Systems, Inc. vs Court of Appeals necessary steps to void the health coverage agreement prior to the filing of the suit by
379 SCRA 356 Rescission of an Insurance Contract Health Care Agreement is an Julita. Philamcare never gave notice to Julita of the fact that they are voiding the
Insurance Contract agreement. Therefore, Philamcare should pay the expenses paid by Julita.

Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
Insurance Law -Week 1
Philippine Health Care Providers v CIR
G.R. No. 167330 June 12, 2008
Facts: The petitioner, a prepaid health-care organization offering benefits to its
members. The CIR found that the organization had a deficiency in the payment of the
DST under Section 185 of the 1997 Tax Code which stipulated its implementation:
On all policies of insurance or bonds or obligations of the nature of indemnity for
loss, damage, or liability made or renewed by any person, association or company or
corporation transacting the business of accident, fidelity, employer's liability, plate,
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life, marine, inland, and fire insurance)
The CIR sent a demand for the payment of deficiency taxes, including surcharges and
interest, for 1996-1997 in the total amount of P224,702,641.18.
The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the
company had to go to the CTA. The latter declared judgment against them and
reduced the taxes. It ordered them to pay 22 million pesos for deficiency VAT for 1997
and 31 million deficiency VAT for 1996.
CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to
1997.
Issues: WON a health care agreement in the nature of an insurance contract and
therefore subject to the documentary stamp tax (DST) imposed under Section 185 of
Republic Act 8424 (Tax Code of 1997)
Held: Yes. Petition dismissed.
The DST is levied on the exercise by persons of certain privileges conferred by law for
the creation, revision, or termination of specific legal relationships through the
execution of specific instruments.
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
The DST is an excise upon the privilege, opportunity, or facility offered at exchanges
for the transaction of the business. In particular, the DST under Section 185 of the
1997 Tax Code is imposed on the privilege of making or renewing any policy of
insurance (except life, marine, inland and fire insurance), bond or obligation in the
nature of indemnity for loss, damage, or liability.
Petitioner's health care agreement is primarily a contract of indemnity. And in the
recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health
care agreement is in the nature of a non-life insurance policy.
Its health care agreement is not a contract for the provision of medical services.
Petitioner does not actually provide medical or hospital services but merely arranges
for the same
It is also incorrect to say that the health care agreement is not based on loss or
damage because, under the said agreement, petitioner assumes the liability and
indemnifies its member for hospital, medical and related expenses (such as
professional fees of physicians). The term "loss or damage" is broad enough to cover
the monetary expense or liability a member will incur in case of illness or injury.
Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature
of non-life insurance, which is primarily a contract of indemnity.
Similarly, the insurable interest of every member of petitioner's health care program
in obtaining the health care agreement is his own health. Under the agreement,
petitioner is bound to indemnify any member who incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated contingency to the
extent agreed upon under the contract.
Malayan Insurance Corp vs CA G.R. 119599 March 20, 1997
J. Romero
Facts: TKC Marketing imported 3,000 metric tons of soya from Brazil to Manila. It was
insured by Malayan at the value of almost 20 million pesos. The vessel, however, was
stranded on South Africa because of a lawsuit regarding the possession of the soya.
Insurance Law -Week 1
TKC consulted Malayan on recovery of the amount, but the latter claimed that it
wasnt covered by the policy. The soya was sold in Africa for Php 10 million, but TKC
wanted Malayan to shoulder the remaining value of 10 million as well.
Petitioner filed suit due to Malayans reticence to pay. Malayan claimed that arrest by
civil authorities wasnt covered by the policy. The trial court ruled in TKCs favor with
damages to boot. The appellate court affirmed the decision under the reason that
clause 12 of the policy regarding an excepted risk due to arrest by civil authorities was
deleted by Section 1.1 of the Institute War Clauses which covered ordinary arrests by
civil authorities. Failure of the cargo to arrive was also covered by the Theft, Pilferage,
and Non-delivery Clause of the contract. Hence this petition.
Issues:
1. WON the arrest of the vessel was a risk covered under the subject insurance
policies.
2. WON the insurance policies must strictly construed against the insurer.
Held: Yes. Yes. Petition dismissed.
1. Section 12 or the "Free from Capture & Seizure Clause" states: "Warranted free of
capture, seizure, arrest, restraint or detainment, and the consequences thereof or of
any attempt thereat Should Clause 12 be deleted, the relevant current institute war
clauses shall be deemed to form part of this insurance.
This was really replaced by the subsection 1.1 of section 1 of Institute War Clauses
(Cargo) which included the risks excluded from the standard form of English Marine
Policy by the clause warranted free of capture, seizure, arrest, restraint or
detainment, and the consequences thereof of hostilities or warlike operations,
whether there be a declaration of war or not.
The petitioners claim that the Institute War Clauses can be operative in case of
hostilities or warlike operations on account of its heading "Institute War Clauses" is
not tenable. It reiterated the CAs stand that its interpretation in recent years to
include seizure or detention by civil authorities seems consistent with the general
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
purposes of the clause. This interpretation was regardless of the fact whether the
arrest was in war or by civil authorities.
The petitioner was said to have confused the Institute War clauses and the F.C.S. in
English law.
It stated that "the F.C. & S. Clause was "originally incorporated in insurance policies
to eliminate the risks of warlike operations". It also averred that the F.C. & S. Clause
applies even if there be no war or warlike operations. In the same vein, it contended
that subsection 1.1 of Section 1 of the Institute War Clauses (Cargo) "pertained
exclusively to warlike operations" and yet it also stated that "the deletion of the F.C. &
S. Clause and the consequent incorporation of subsection 1.1 of Section 1 of the
Institute War Clauses (Cargo) was to include "arrest, etc. even if it were not a result of
hostilities or warlike operations."
The court found that the insurance agency tried to interpret executive and political
acts as those not including ordinary arrests in the exceptions of the FCS clause , and
claims that the War Clauses now included executive and political acts without
including ordinary arrests in the new stipulation.
A strained interpretation which is unnatural and forced, as to lead to an absurd
conclusion or to render the policy nonsensical, should, by all means, be avoided.
2. Indemnity and liability insurance policies are construed in accordance with the
general rule of resolving any ambiguity therein in favor of the insured, where the
contract or policy is prepared by the insurer. A contract of insurance, being a contract
of adhesion, means that any ambiguity should be resolved against the insurer.
Western Guaranty v CA
G.R. No. 91666 July 20, 1990
Facts: Priscilla Rodriguez was struck by a bus owned by De Dios. She was hospitalized
and her face was permanently disfigured. Western Guaranty, the insurance company
of the bus line, was obliged to pay due to the bodily injury caused by the bus.
Rodriguez was able to earn a money judgment from the court to the tune of 3000 for
actual damages, 1500 for loss of earning capacity, and 20000 for moral damages and
Insurance Law -Week 1
attorneys fees. De Dios filed a complaint against Western to indemnify the amount.
Western lost the case in the appellate court, hence this petition.
Issue: Is Western liable for paying loss of earnings, moral damages and attorney's fees
even if these items are not among those included in the Schedule of Indemnities set
forth in the insurance policy.
Held: Yes. Petition dismissed.
The policy states:
Section 1. Liability to the Public Company will, subject to the Limits of Liability, pay
all sums necessary to discharge liability of the insured in respect of
(a) death of or bodily injury to or damage to property of any passenger as
defined herein.
There was also a schedule of indemnities that specified a certain amount for a certain
type of injury as well as hospital service payments.
In this case, the limits on the amount payable for certain kinds of expenses were not
considered by the court as excluding liability for any other type of expense or
damage or loss even though actually sustained or incurred by the third party victim.
The court noted that the limits of the liability was at 50,000 per person per accident.
Construing this with section 1 means that all kinds of damages allowable by law were
also to be covered by the policy once it was shown that liability has arisen.
The schedule of indemnities was not a closed enumeration of the kinds of damages
Western can award.
Western should have used far more specific language, not the pay all sums necessary
to discharge liability clause.
Insurance contracts must be read by the courts with a jaundiced eye to prevent the
insurer from escaping from its obligation. Also, contracts of adhesion such as policies
msut be construed against the party who made them, in this case western.
Qua v Law Union.
G.R. No. L-4611 December 17, 1955
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
J. Reyes
Facts:
Qua owned 4 warehouses used for the storage of copra and hemp. They were insured
with the Law Union.
Fire broke out and completely destroyed 3 bodegas. The plaintiff submitted claims
totalling P398,562.81. The Insurance Company resisted payment on the grounds that
the fire had been deliberately caused by the insured or by other persons in
connivance with him.
Que Chee Gan and his brother were tried for arson, but were acquitted by the trial
court. As regards the insurance claim, the trial court ruled in favor of Qua and entitled
him to recover more than Php 300,000 for indemnities from the insurance company.
Hence, the company appealed to the SC.
In its first assignment of error, the insurance company alleged that the trial Court
should have held that the policies were avoided for breach of warranty. The contract
noted that fire hydrants were required in a particular measurement of space (every
150 feet). Hence, they argued that since the bodegas insured had an external wall
perimeter of 500 meters, the appellee should have 11 fire hydrants in the compound,
and that he actually had only 2, with a further pair.
Issues:
1. WON the insurance company can void the policies it had issued
2. WON the insured violated the "Hemp Warranty" provisions of the policy against the
storage of gasoline
3. WON the insured planned the destruction of the bodega
Held: No. No. No.
1. The insurer, who at the time of issuance, has knowledge of existing facts which
would invalidate the contract from the beginning, such constitutes a waiver of
conditions in the contract inconsistent with the facts, and the insurer is stopped
thereafter from asserting the breach of such conditions. Also, an insurance company
Insurance Law -Week 1
intends to executed a valid contract in return for the premium received; and when the
policy contains a condition which renders it voidable at its inception, and this result is
known to the insurer, it will be presumed to have intended to waive the conditions
and to execute a binding contract, rather than to have deceived the insured into
thinking he is insured when in fact he is not.
The appellant is barred estoppel to claim violation of the so-called fire hydrants
warranty, because it knew the number of hydrants demanded therein never existed
from the very beginning and issued the policies.
To allow a company to accept one's money for a policy of insurance which it then
knows to be void and of no effect, though it knows as it must, that the assured
believes it to be valid and binding, is so contrary to the dictates of honesty and fair
dealing, and so closely related to positive fraud, as to the abhorrent to fair-minded
men.
The appellant company so worded the policies that while exacting the greater number
of fire hydrants and appliances, it kept the premium discount at the minimum of 2
1/2%, thereby giving the insurance company a double benefit. Such abnormal
treatment of the insured strongly points at an abuse of the insurance company's
selection of the words and terms of the contract, over which it had absolute control.
Receipt of Premiums or Assessments after Cause for Forfeiture Other than
Nonpayment. It is a well settled rule of law that an insurer which with knowledge
of facts entitling it to treat a policy as no longer in force, receives and accepts a
premium on the policy, estopped to take advantage of the forfeiture. It cannot treat
the policy as void for the purpose of defense to an action to recover for a loss
thereafter occurring and at the same time treat it as valid for the purpose of earning
and collecting further premiums.
Moreover, taking into account the well known rule that ambiguities or obscurities
must be strictly interpreted against the party that caused them, the "memo of
warranty" invoked by appellant bars the latter from questioning the existence of the
appliances called for in the insured premises
2. The ambiguity must be held strictly against the insurer and liberally in favor of the
insured, specially to avoid a forfeiture. So long as insurance companies insist upon the
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
use of ambiguous, intricate and technical provisions, which conceal rather than
frankly disclose, their own intentions, the courts must, in fairness to those who
purchase insurance, construe every ambiguity in favor of the insured.
Appellee admitted that there were 36 cans of gasoline in the building designed. It
However, gasoline is not specifically mentioned among the prohibited articles listed in
the so-called "hemp warranty." The cause relied upon by the insurer speaks of "oils",
and is uncertain because, "Oils" usually mean "lubricants" and not gasoline or
kerosene.
If the company intended to rely upon a condition of that character, it ought to have
been plainly expressed in the policy.
The contract of insurance is one of perfect good faith not for the insured alone, but
equally so for the insurer; in fact, it is mere so for the latter, since its dominant
bargaining position carries with it stricter responsibility.
Also, the gasoline kept in Bodega No. 2 was only incidental to his business, being no
more than a customary 2 day's supply for the five or six motor vehicles used for
transporting of the stored merchandise. "It is well settled that the keeping of
inflammable oils on the premises though prohibited by the policy does not void it if
such keeping is incidental to the business."
3. It was unlikely that Qua burned the warehouse to defraud the company because he
had the resources to pay off the National Bank in a short time. Also, no motive
appears for attempt to defraud the insurer. While the acquittal of the insured in the
arson case is not res judicata on the present civil action, the insurer's evidence, to
judge from the decision in the criminal case, is practically identical in both cases and
must lead to the same result, since the proof to establish the defense of connivance at
the fire in order to defraud the insurer "cannot be materially less convincing than that
required in order to convict the insured of the crime of arson."
As to the defense that the burned bodegas could not possibly have contained the
quantities of copra and hemp stated in the fire claims, the insurer relied on its
adjuster investigator who examined the premises during and after the fire. His
testimony, however, was based on inferences from the photographs and traces found
after the fire, and must yield to the contradictory testimony of those who actually saw
Insurance Law -Week 1
the contents of the bodegas shortly before the fire, while inspecting them for the
mortgagee Bank.
Cebu Shipyard v William G.R. No. 132607. May 5, 1999
J. Purisima
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.
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
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.
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.
Insurance Law -Week 1
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.
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
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
Insurance Law -Week 1
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.
Fortune v CA
G.R. No. 115278 May 23, 1995
J. Davide Jr.
Facts:
Producers Banks money was stolen while it was being transported from Pasay to
Makati. The people guarding the money were charged with the theft. The bank filed a
claim for the amount of Php 725,000, and such was refused by the insurance
corporation due to the stipulation:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the
Insured whether acting alone or in conjunction with others. . . .
In the trial court, the bank claimed that the suspects were not any of the above
mentioned. They won the case. The appellate court affirmed on the basis that the
bank had no power to hire or dismiss the guard and could only ask for replacements
from the security agency.
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
Issue: Did the guards fall under the general exceptions clause of the insurance policy
and thus absolved the insurance company from liability?
Held: Yes to both. Petition granted.
The insurance agency contended that the guards automatically became the
authorized representatives of the bank when they cited International Timber Corp.
vs. NLRC where a contractor is a "labor-only" contractor in the sense that there is an
employer-employee relationship between the owner of the project and the
employees of the "labor-only" contractor.
They cited Art. 106. Of the Labor Code which said:
Contractor or subcontractor. There is "labor-only" contracting where the person
supplying workers to an employer does not have substantial capital or investment in
the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such persons are performing activities which are
directly related to the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were
directly employed by him.
The bank asserted that the guards were not its employees since it had nothing to do
with their selection and engagement, the payment of their wages, their dismissal, and
the control of their conduct.
They cited a case where an employee-employer relationship was governed by (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employee's conduct.
The case was governed by Article 174 of the Insurance Code where it stated that
casualty insurance awarded an amount to loss cause by accident or mishap.
The term "employee," should be read as a person who qualifies as such as generally
and universally understood, or jurisprudentially established in the light of the four
standards in the determination of the employer-employee relationship, or as
statutorily declared even in a limited sense as in the case of Article 106 of the Labor
Insurance Law -Week 1
Code which considers the employees under a "labor-only" contract as employees of
the party employing them and not of the party who supplied them to the employer.
But even if the contracts were not labor-only, the bank entrusted the suspects with
the duty to safely transfer the money to its head office, thus, they were
representatives. According to the court, a representative is defined as one who
represents or stands in the place of another; one who represents others or another in
a special capacity, as an agent, and is interchangeable with agent.
New Life v CA
G.R. No. 94071 March 31, 1992
J. Regalado
Facts: Julian Sy, owner of New Life, insured his building in 3 different insurance
agencies for 350,000, 1,000,000, and 200,000. When his building and the goods inside
burned down, he claimed for insurance indemnities, but these were rejected by the
three companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the
insurance companies. The court of appeals reversed the decision of the trial court.
Issue: Did the petitioner violate conditions 3 and 27 of the three insurance policies,
thereby foreiting collection of indemnities?
Held: Yes. Condition 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 such notice be given and the particulars of
such insurance or insurances be stated therein or endorsed on 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
Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.
insurance or insurances in force at the time of loss or damage not more than
P200,000.00.
Sy never disclosed co-insurance in the contracts he entered into with the three
corporations. The insured is specifically required to disclose the insurance that he had
contracted with other companies. Sy also contended that the insurance agents knew
of the co-insurance. However, the theory of imputed knowledge, that the knowledge
of the agent is presumed to be known by the principal, is not enough.
When the words of the document are readily understandable by an ordinary reader,
there is no need for construction anymore.
The conformity of the insured to the terms of the policy is implied with his failure to
disagree with the terms of the contract.
Since Sy, was a businessman, it was incumbent upon him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap- The obvious purpose of the
aforesaid requirement in the policy is to prevent over-insurance and thus avert the
perpetration of fraud. The public, as well as the insurer, is interested in preventing the
situation in which a fire would be profitable to the insured.
Also, policy condition 15 was used. It stated: 15.. . . if any false declaration be made
or used in support thereof, . . . all benefits under this Policy shall be forfeited . . .
As for condition number 27, the stipulation read:
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 any court of competent
jurisdiction 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.
This is regarding Sys claim for one of the companies. Recovery was filed in court by
petitioners only on January 31, 1984, or after more than one (1) year had elapsed
from petitioners' receipt of the insurers' letter of denial on November 29, 1982. This
made it void.
Insurance Law -Week 1
Ty v First National
G.R. No. L-16138 April 29, 1961
J. Labrador

Facts: Ty, a mechanic foreman in Caloocan, bought 18 insurance policies at 8 pesos

each. A fire broke out, and Ty fought his way out of the factory. His hand was broken
by a heavy object in the process. He wanted to collect an indemnity valuing 650 pesos
for the loss of hand by means of amputation even if he only suffered from broken
fingers. The insurance companies sued him in court and they won. Ty then appealed
to the Supreme Court.

Issue: Can he collect the sums even if there was no amputation?

Held: No. The insurance policies clearly define loss of hand as amputation of the
bones on the wrist. The injury was only a temporary total disability of plaintiff's left
hand." This wasnt covered by the policies.

General Classificationss of an Insurance Contract

A. Life Individual
B. Life Group Insurance
C. Non-Life

Construction/Interpretation
1. Strict
2. Liberal

Pau Jokes!!
P: Knock-Knock; H: Whos there; P: To; H: To who?; P: To whom.