White Gold vs.
Pioneer Insurance (GR 154514, 7/28/05) They argued that Steamship Mutual’s primary purpose is to solicit and
White Gold procured a protection and indemnity coverage for its vessels
from The Steamship Mutual through Pioneer Insurance and Surety
Corporation. White Gold was issued a Certificate of Entry and Acceptance.
Pioneer also issued receipts. When White Gold failed to fully pay its
accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold
for collection of sum of money to recover the unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission
claiming that Steamship Mutual and Pioneer violated provisions of
the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was
no need for Steamship Mutual to secure a license because it was not
engaged in the insurance business and that it was a P & I club. Pioneer was
not required to obtain another license as insurance agent because
Steamship Mutual was not engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished between P
& I Clubs vis-à-vis conventional insurance. The appellate court also held
that Pioneer merely acted as a collection agent of Steamship Mutual.
Hence this petition by White Gold.
Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in
the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship
Mutual?
Held: Yes. Petition granted.
Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the
insurance business. To buttress its assertion, it cites the definition as “an
association composed of shipowners in general who band together for the
specific purpose of providing insurance cover on a mutual basis against
liabilities incidental to shipowning that the members incur in favor of third
parties.”
provide protection and indemnity coverage and for this purpose, it has
engaged the services of Pioneer to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it
is not engaged in the insurance business in the Philippines. It is merely an
association of vessel owners who have come together to provide mutual
protection against liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is “a form of insurance against third party liability, where the
third party is anyone other than the P & I Club and the members.” By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country
albeit without the requisite certificate of authority mandated by Section
187 of the Insurance Code. It maintains a resident agent in the Philippines
to solicit insurance and to collect payments in its behalf. Steamship
Mutual even renewed its P & I Club cover until it was cancelled due to non-
payment of the calls. Thus, to continue doing business here, Steamship
Mutual or through its agent Pioneer, must secure a license from the
Insurance Commission.
Since a contract of insurance involves public interest, regulation by the
State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
authority from the Insurance Commission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the
certificate of registration issued by the Insurance Commission. It has been
licensed to do or transact insurance business by virtue of the certificate of
authority issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate license to be an
agent/broker of Steamship Mutual.
Although Pioneer is already licensed as an insurance company, it needs a
separate license to act as insurance agent for Steamship Mutual. Section
299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance
broker in the solicitation or procurement of applications for insurance, or
receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
1
Philippines or any agent thereof, without first procuring a license so to act
from the Commissioner…
Philippine Healthcare Providers vs. Commissioner of Internal Revenue (GR
167330, 9/18/09)
Petitioner is a domestic corporation whose primary purpose is to establish,
maintain, conduct and operate a prepaid group practice health care
delivery system or a health maintenance organization to take care of the
sick and disabled persons enrolled in the health care plan and to provide
for the administrative, legal, and financial responsibilities of the
organization. On January 27, 2000, respondent CIR sent petitioner a formal
deman letter and the corresponding assessment notices demanding the
payment of deficiency taxes, including surcharges and interest, for the
taxable years 1996 and 1997 in the total amount of P224,702,641.18. The
deficiency assessment was imposed on petitioner’s health care agreement
with the members of its health care program pursuant to Section 185 of
the 1997 Tax Code. Petitioner protested the assessment in a letter dated
February 23, 2000. As respondent did not act on the protest, petitioner
filed a petition for review in the Court of Tax Appeals (CTA) seeking the
cancellation of the deficiency VAT and DST assessments. On April 5, 2002,
the CTA rendered a decision, ordering the petitioner to PAY the deficiency
VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20%
interest from January 20, 1997 until fully paid for the 1996 VAT deficiency
and P31,094,163.87 inclusive of 25% surcharge plus 20% interest from
January 20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly,
VAT Ruling No. [231]-88 is declared void and without force and effect. The
1996 and 1997 deficiency DST assessment against petitioner is hereby
CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from
collecting the said DST deficiency tax. Respondent appealed the CTA
decision to the (CA) insofar as it cancelled the DST assessment. He claimed
that petitioner’s health care agreement was a contract of insurance subject
to DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that
petitioner’s health care agreement was in the nature of a non-life
insurance contract subject to DST. Respondent is ordered to pay the
deficiency Documentary Stamp Tax. Petitioner moved for reconsideration
but the CA denied it.
ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in
insurance business.
(2) Whether or not the agreements between petitioner and its members
possess all elements necessary in the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance
business. The SC said in June 12, 2008 decision that it is irrelevant that
petitioner is an HMO and not an insurer because its agreements are
treated as insurance contracts and the DST is not a tax on the business but
an excise on the privilege, opportunity or facility used in the transaction of
the business. Petitioner, however, submits that it is of critical importance
to characterize the business it is engaged in, that is, to determine whether
it is an HMO or an insurance company, as this distinction is indispensable
in turn to the issue of whether or not it is liable for DST on its health care
agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is
“an entity that provides, offers or arranges for coverage of designated
health services needed by plan members for a fixed prepaid premium. The
payments do not vary with the extent, frequency or type of services
provided. Section 2 (2) of PD 1460 enumerates what constitutes “doing an
insurance business” or “transacting an insurance business”which are
making or proposing to make, as insurer, any insurance contract; making
or proposing to make, as surety, any contract of suretyship as a vocation
and not as merely incidental to any other legitimate business or activity of
the surety; doing any kind of business, including a reinsurance business,
specifically recognized as constituting the doing of an insurance business
2
within the meaning of this Code; doing or proposing to do any business in
substance equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code.
Overall, petitioner appears to provide insurance-type benefits to its
members (with respect to its curative medical services), but these are
incidental to the principal activity of providing them medical care. The
“insurance-like” aspect of petitioner’s business is miniscule compared to its
noninsurance activities. Therefore, since it substantially provides health
care services rather than insurance services, it cannot be considered as
being in the insurance business.
Calanoc vs. Court of Appeals (GR L-8151, 12/16/55
Doctrine: In case of ambiguity in an insurance contract covering accidental death, the
Supreme Courtheld that such terms shall be construed strictly against the
insurer and liberally in favor of the insured inorder to effect the purpose of
indemnity.
Facts:Melencio Basilio, a watchman of the Manila Auto Supply, secured a life insurance
policy fromthe Philippine American Insurance Company in the amount of P2,000 to which
was attached asupplemental contract covering death by accident. He later
died from a gunshot wound on the occasionof a robbery committed;
subsequently, his widow was paid P2,000 representing the face value of
thepolicy. The widow demanded the payment of the additional sum of P2,000
representing the value of thesupplemental policy which the company refused
because the deceased died by murder during therobbery and while making
an arrest as an officer of the law which were expressly excluded in the
contract. The company’s contention which was upheld by the Court of
Appeals provides that
the circumstances surrounding Basilio’s death was caused by one of the
risks excluded by the
supplementary contract which exempts the company from liability
.Issue:Is the Philippine American Life Insurance Co. liable to the petitioner
for the amount covered by thesupplemental contract?
Held:Yes.
The circumstances of Basilio’s death cannot be taken as purely intentional
on the part of
Basilio to expose himself to the danger. There is no proof that his death was the result of
intentionalkilling because there is the possibility that the malefactor had
fired the shot merely to scare away the
people around. In this case, the company’s defense points out that
Basilio’s
is included among the risksexcluded in the supplementary contract; however, the terms
and phraseology of the exception clauseshould be clearly expressed within the
understanding of the insured. Art. 1377 of the New Civil Codeprovides that in case
ambiguity, uncertainty or obscurity in the interpretation of the terms of
thecontract, it shall be construed against the party who caused such
obscurity. Applying this to thesituation, the ambiguous or obscure terms in
the insurance policy are to be construed strictly against theinsurer and
liberally in favor of the insured party. The reason is to ensure the
protection of the insuredsince these insurance contracts are usually
arranged and employed by experts and legal advisers actingexclusively in
the interest of the insurance company. As long as insurance companies
insist upon the useof ambiguous, intricate and technical provisions, which
conceal their own intentions, the courts must, infairness to those who purchase
insurance, construe every ambiguity in favor of the insured.
Biagtan vs. Insular Life (GR L-25579, 3/29/72)
Juan S. Biagtan was insured with defendant Insular Life for the sum of
P5,000.00 and, under a supplementary contract denominated "Accidental
Death Benefit Clause”, for an additional sum of P5,000.00 if the death of
the Insured resulted directly from bodily injury effected solely through
external and violent means sustained in an accident ... and independently
of all other causes. The clause, however, expressly provided that it would
not apply where death resulted from an injury intentionally inflicted by
another party.
3

On May 20, 1964, the house of the insuredwas robbed by a band of
robbers who were charged in and convicted for robbery with homicide;
that in committing the robbery, the robbers, on reaching the staircase
landing on the second floor, rushed towards the door of the second floor
room, where they suddenly met the insured near the door of one of the
rooms who received thrusts from their sharp-pointed instruments
resulting in his death. The insurance company paid the basic amount of
P5,000.00 but refused to pay the additional sum under the accidental
death benefit clause, on the ground that the insured's death resulted from
injuries intentionally inflicted by third parties and therefore was not
covered.
ISSUE:
Whether wounds received by the insured at the hands of the robbers were
inflicted intentionally thereby exempting the insurer from liability under
the supplementary contract
RULING:
Yes, the wounds received by the insured at the hands of the robbers were
inflicted intentionally thereby exempting the insurer from liability under
the supplementary contract
Nine wounds were inflicted upon the deceased. This is a physical fact as to
which there is no dispute. So is the fact that five of those wounds caused
the death of the insured. Whether the robbers had the intent to kill or
merely to scare the victim or to ward off any defense he might offer, it
cannot be denied that the act itself of inflicting the injuries was intentional.
The exception in the accidental benefit clause invoked by the appellant
does not speak of the purpose — whether homicidal or not — of a third
party in causing the injuries, but only of the fact that such injuries have
been "intentionally". Intentional as used in an accident policy excepting
intentional injuries inflicted by the insured or any other person, etc.,
implies the exercise of the reasoning faculties, consciousness and volition.
Where a provision of the policy excludes intentional injury, it is the
intention of the person inflicting the injury that is controlling. If the injuries
suffered by the insured clearly resulted from the intentional act of a third
person the insurer is relieved from liability as stipulated.
Sun Insurance vs. Court of Appeals (GR 92383, 7/17/92)
Facts:
Lim accidentally killed himself with his gun after removing the magazine,
showing off, pointing the gun at his secretary, and pointing the gun at his
temple. The widow, the beneficiary, sued the petitioner and won 200,000
as indemnity with additional amounts for other damages and attorney’s
fees. This was sustained in the Court of Appeals then sent to the Supreme
court by the insurance company.
Issue:
1. Was Lim’s widow eligible to receive the benefits?
2. Were the other damages valid?
Held:
1. Yes 2. No
Ratio: 1. There was an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a
deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings
about their injury or death." This was true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury
caused by attempted suicide or by one needlessly exposing himself to
danger except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the
witness testimony that he took steps to ensure that the gun wasn’t loaded.
He even assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility
to pay the indemnity agreed upon if the insuredis shown to have
contributed to his own accident.
2. “In order that a person may be made liable to the payment of moral
damages, the law requires that his act be wrongful. The adverse result of
an action does not per se make the act wrongful and subject the act or to
the payment of moral damages. The law could not have meant to impose a
4
penalty on the right to litigate; such right is so precious that moral
damages may not be charged on those who may exercise it erroneously.
For these the law taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees
and litigation expenses, since it is not the fact of winning alone that
entitles him to recover such damages of the exceptional circumstances
enumerated in Art. 2208. Otherwise, every time a defendant wins,
automatically the plaintiff must pay attorney's fees thereby putting a
premium on the right to litigate which should not be so. For those
expenses, the law deems the award of costs as sufficient.”
Finman General Insurance vs. Court of Appeals (GR 100970, 9/2/72)
FACTS:
[P]etitioner filed this petition alleging grove abuse of discretion on the part
of the appellate court in applying the principle of “expresso unius exclusio
alterius” in a personal accident insurance policy since death resulting from
murder and/or assault are impliedly excluded in said insurance policy
considering that the cause of death of the insured was not accidental but
rather a deliberate and intentional act of the assailant in killing the former
as indicated by the location of the lone stab wound on the insured.
Therefore, said death was committed with deliberate intent which, by the
very nature of a personal accident insurance policy, cannot be indemnified.
ISSUE:
Whether or not death petitioner is correct that results from assault or
murder deemed are not included in the terms “accident” and “accidental”.
HELD:
NO. Petition for certiorari with restraining order and preliminary injunction
was denied for lack of merit.
RATIO:
The terms “accident” and “accidental” as used in insurance contracts have
not acquired any technical meaning, and are construed by the courts in
their ordinary and common acceptation. Thus, the terms have been taken
to mean that which happen by chance or fortuitously, without intention
and design, and which is unexpected, unusual, and unforeseen. An
accident is an event that takes place without one’s foresight or expectation
— an event that proceeds from an unknown cause, or is an unusual effect
of a known cause and, therefore, not expected.
[I]t is well settled that contracts of insurance are to be construed liberally
in favor of the insured and strictly against the insurer. Thus ambiguity in
the words of an insurance contract should be interpreted in favor of its
beneficiary.
Bonifacio Bros. vs. Mora (GR L-20853, 5/29/67)
Lessons Applicable: stipulation pour autrui (Insurance)
FACTS:
 Enrique Mora, owner of Oldsmobile sedan model 1956, mortgaged it
to H.S. Reyes, Inc., with the condition that they would be the
beneficiary of its insurance
 June 23, 1959: The sedan was insured with State Bonding & Insurance
Co., Inc
 During the period of effectivity, the sedan met an accident and it
was appraised by Bayne Adjustment Co. and repaired it with Bonifacio
Bros. and the parts were supplied by Ayala Auto Parts Co. This was all
done without the knowledge of H.S. Reyes. Enrique was billed
P2,102.73 through Bayne. The insurance company drew a check
deducting P100 for franchise and entrusted it to Bayne payable to
Enrique or H.S. Reyes.
 Still unpaid, the sedan was delivered to Enrique without the
Knowledge of H.S. Reyes
 Bonifacio Bros and Ayala Auto filed in the MTC on the theory that the
insurance proceeds should be paid directly to them
 CFI affirmed MTC: H.S. Reyes, Inc. as having a better right
5
ISSUE: W/N there is privity between Bonifacio Bro and Ayala Auto against
the insurance company
HELD: NO. Judgment affirmed
 GR: contracts take effect only between the parties thereto
 EX: some specific instances provided by law where the contract
contains some stipulation in favor of a third person - stipulation pour
autrui
 provision in favor of a third person not a party to the contract
 third person is allowed to avail himself of a benefit granted to him by
the terms of the contract, provided that the contracting parties have
clearly and deliberately conferred a favor upon such person
 stipulation pour autrui must be clearly expressed - none here
 "loss payable" clause of the insurance policy stipulates that "Loss, if
any, is payable to H.S. Reyes, Inc." indicating that it was only the H.S.
Reyes, Inc. which they intended to benefit.
 stipulation merely establishes the procedure that the insured has to
follow in order to be entitled to indemnity for repair
 a policy of insurance is a distinct and independent contract between
the insured and insurer, and third persons have no right either in a
court of equity, or in a court of law, to the proceeds of it, unless there
be some contract of trust, expressed or implied between the insured
and third person
 "loss" in insurance law embraces injury or damage
 The injury or damage sustained by the insured in consequence of the
happening of one or more of the accidents or misfortune against
which the insurer, in consideration of the premium, has undertaken to
indemnify the insured
 parties.
Artex Development vs. Wellington Insurance (GR L-29508, 6/27/73)
Topic: Reinsurance
FACTS:
- issued byWellington to Artex.
Wellington insurance insured for P24,346,509 the building stocks
andmachinery of plaintiff Artex against loss or damage by fire or lightning
uponaugust 2, 1963 with an additional sum of P833,034.
-
Another insurance against business interruption (use and
occupancy)forP5,200,000.
-
On September 22, 1963 the building, and machineries were burned and
anotice of loss and damage was given to Wellington.
-
Insurance adjusters computed the loss for the fire as P10,106,544.40
andWellington paid only 6,481,870.07, leaving a balance of 3,624,683.43
-
The computed business interruption loss was P3M but Wellington paid
onlyP1,864,134.08 leaving a balance of P1,748,460 (computation based
on case)
-
Artex through counsel Norberto Quisumbing made a manifestation that
onlyabout P397,ooo is the remaining balance and liability which was the
subjectof reinsurance with Alexander and Alexander Inc, of New York,
Artexacknowledging here the receipt of P3,600,000 as FINAL and
FULLSETTLEMENT of all claims against Welllington
-
Artex further prays to the court to affirm the lower court’s decision
of liquidation and prayed for modification of the amount of liability to be
fixed toP397,813.00 plus 12% interest per annum thereof for the
late payment untilapril 10, 1969 and attorney’s fees of 15% of
the recovery, expenses of litigation, no writ of execution however to be
made within 3years from july10, 1969 per collateral agreement of the
-
Wellington in its brief raises the issue that Artex deemed to have agreed
tolook SOLELY to the reinsurers for indemnity in case of loss since their
paid upcapital stock is only P500,000 and that they have to secure such
reinsurancecoverage the over P24M fire insurance coverage of the policy
6
Issue:WON reinsurance contract of the parties makes the insured to look
SOLELY tothe reinsurers for indemnity in case of loss
Ruling:NO, the insured who is not directly a party or privy to the
reinsurance contractbetween Wellington and Alexander and Alexander
Inc., cannot demand enforcementof such insurance contracts.The
Contracts take effect only between the parties, their assigns and heirs
asprovide by Art 1311 of our civil code. Further it provides that a
contract withstipulations pour autrui or in favor of a third person not a
party to the contract, theparties must have CLEARLY and DELIBERATELY
conferred favor upon a thirdperson.
- attributable to the negligence of the petitioner. Also, it said that IMC and
The SC also stated that assuming that Artex directly sue the reinsurers
forpayment this does not in any way affect or cancel out Wellington’s
directcontractual liability to Artex.The SC dispose the case by affirming the
prayer of Artex
Gaisano Cagayan vs. Insurance Co. of North America (GR 147839, 6/8/06)
Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from
respondent fire insurance policies with book debt endorsements. The
insurance policies provide for coverage on "book debts in connection with
ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in
the Book of Account of the Insured 45 days after the time of the loss
covered under this Policy." The policies also provide for the following
conditions:
1. Warranted that the Company shall not be liable for any unpaid account
in respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months
from the date of the covering invoice or actual delivery of the merchandise
whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve
(12) days after the close of every calendar monthall amount shown in their
books of accounts as unpaid and thus become receivable item from their
customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On
February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro
City, owned by petitioner, was consumed by fire. Included in the items lost
or destroyed in the fire were stocks of ready-made clothing materials sold
and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It
alleges that IMC and LSPI were paid for their claims and that the unpaid
accounts of petitioner on the sale and delivery of ready-made clothing
materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that
the fire was purely accidental; that the cause of the fire was not
LSPI retained ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It
ordered Gaisano to pay Insurance the P 2 million and the P 500,000 the
latter paid to IMC and Levi Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as
one covering the unpaid accounts of IMC and LSPI since such insurance
applies to loss of the ready-made clothing materials sold and delivered to
petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership
of the goods by stipulating in the sales invoices that "[i]t is further agreed
that merely for purpose of securing the payment of the purchase price the
above described merchandise remains the property of the vendor until the
purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts
with IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition
partly granted.
Ratio:
7
1. Nowhere is it provided in the questioned insurance policies that the
subject of the insurance is the goods sold and delivered to the customers
and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with
petitioner which remained unpaid 45 days after the loss through fire, and
not the loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the
Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk
until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the buyer's
risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to
a bailee for the buyer, in pursuance of the contract and the ownership in
the goods has been retained by the seller merely to secure performance by
the buyer of his obligations under the contract, the goods are at the
buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will
pay its debt, the risk of loss is borne by the buyer. Petitioner bears the risk
of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of
the delivered goods. Unlike the civil law concept of res perit domino,
where ownership is the basis for consideration of who bears the risk of
loss, in property insurance, one's interest is not determined by concept of
title, but whether insured has substantial economic interest in the
property.
Section 13 of our Insurance Code defines insurable interest as "every
interest in property, whether real or personal, or any relation thereto, or
liability in respect thereof, of such nature that a contemplated peril might
directly damnify the insured." Parenthetically, under Section 14 of the
same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c)
an expectancy, coupled with an existing interest in that out of which
the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or
seller retains an insurable interest in the property sold so long as he has
any interest therein, in other words, so long as he would suffer by its
destruction, as where he has a vendor's lien. In this case, the insurable
interest of IMC and LSPI pertain to the unpaid accounts appearing in their
Books of Account 45 days after the time of the loss covered by the policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous
event under Article 117432 of the Civil Code is misplaced. As held earlier,
petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss
of goods by fire but for petitioner's accounts with IMC and LSPI that
remained unpaid 45 days after the fire. Accordingly, petitioner's obligation
is for the payment of money. As correctly stated by the CA, where the
obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve
him of his liability.
The rationale for this is that the rule that an obligor should be
held exempt from liability when the loss occurs thru a fortuitous event
only holds true when the obligation consists in the delivery of a
determinate thing and there is no stipulation holding him liable even in
case of fortuitous event. It does not apply when the obligation is pecuniary
in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic
thing, the loss or destruction of anything of the same kind does not
extinguish the obligation." This rule is based on the principle that the
genus of a thing can never perish. An obligation to pay money is generic;
therefore, it is not excused by fortuitous loss of any specific property of
the debtor.
4. With respect to IMC, the respondent has adequately established its
claim. The P 3 m claim has been proven. The subrogation receipt, by itself,
is sufficient to establish not only the relationship of respondent as insurer
and IMC as the insured, 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 Respondent's action against
petitioner is squarely sanctioned by Article 2207 of the Civil Code which
provides:
8
 Art. 2207. If the plaintiff's 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.
As to LSPI, respondent failed to present sufficient evidence to prove its
cause of action. There was no evidence that respondent has been
subrogated to any right which LSPI may have against petitioner. Failure to
substantiate the claim of subrogation is fatal to petitioner's case for
recovery of P535,613.00.
Spouses Tibay vs. Court of Appeals (GR 119655, 5/24/96)
Facts:
1. In January 22 1987, the Petitioner Violeta Tibay (and Nicolas Roralso)
obtained a fire insurance policy for their 2-storey from the Private
Respondent Fortune Life Insurance Co. The said policy covers the period
from January 23, 1987 until January 23, 1988 or one year for P600, 000 and
at the agreed premium of P2, 983.50. On January 23 or the next day,
petitioner made a partial payment of the premium with P600.
2. Unfortunately, on March 8 1987, the said building was burned to the
ground. It was only two days after the fire that Petitioner Violeta advanced
the full payment of the policy premium which was accepted by the insurer.
On this same day, petitioner likewise filed the claim that was then referred
to the insurer's adjuster. Investigation of the cause of fire commenced and
the petitioner submitted the required proof of loss.
3. Despite that, the private respondent Fortune refused to pay the
insurance claim saying it as not liable due to the non-payment by
petitioner of the full amount of the premium as stated in the policy.
4. The petitioner then brought the matter to the Insurance Commission but
nothing good came out. Hence this case filed.
5. The trial court rule in favor of the petitioner. Upon appeal, the Court of
Appeals reversed the lower court's decision and held that Fortune is not
liable but ordered it to return the premium paid with interest to the
petitioner. Hence, this petition for review.
Issue: W/N the partial payment of the premium rendered the insurance
policy ineffective?
YES.
1. Insurance is a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an
unknown or contingent event. The consideration is the premium, which
must be paid at the time, way and manner as stated in the policy, and if
not so paid as in this case, the policy is therefore forfeited by its own
terms. In this case, the policy taken out by the petitioner provides for
payment of premium in full. Since the petitioner only made partial
payment with the remaining balance paid only after the fire or peril
insured against has occurred, the insurance contract therefore did not take
effect barring the insured from claiming or collecting from the loss of her
building.
2. Under Section 77 of the Insurance Code (Philippine), it provides therein
that "An insurer is entitled to payment of the premium as soon as the thing
insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium
thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies." Herein case, the controversy
is on the payment of the premium. It cannot be disputed that premium is
the elixir vitae of the insurance business because the insurer is required by
law to maintain a reserve fund to meet its contingent obligations to the
public. Due to this, it is imperative that the premium is paid fully and
promptly. To allow the possibility of paying the premium even after the
peril has ensued will surely undermine the foundation of the insurance
business.
UCPB General Insurance vs. Masagana Telamart (GR 137172, 4/7/01)
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 FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]
CA disagreed with UCPB’s stand that Masagana’s tender of payment of
the premiums on 13 July 1992 did not result in the renewal of the policies,
having been made beyond the effective date of renewal as provided under
Policy Condition No. 26:
Renewal Clause. — Unless the company at least 45 days in advance of the
end of the policy period mails or delivers to the assured at the address
shown in the policy notice of its intention not to renew the policy or to
condition its renewal upon reduction of limits or elimination of coverages,
the assured shall be entitled to renew the policy upon payment of the
premium due on the effective date of renewal.
The following facts have been established:
1. For years, UCPB had been issuing fire policies to th Masagana, and these
policies were annually renewed.
2. UCPB had been granting Masagana a 60-90-day credit term within which to
pay the premiums on the renewed policies.
3. There was no valid notice of non-renewal of the policies, as there is no
proof that the notice sent by ordinary mail was received by Masagana, and
the copy allegedly sent to Zuellig was ever transmitted to Masagana.
4. The premiums for the policies were paid by Masagana within the 60- 90-
day credit term and were duly accepted and received by UCPB’s cashier.
ISSUE & HOLDING
WON IC 77 must be strictly applied to UCPB’s advantage despite its
practice of granting a 60- to 90-day credit term for the payment of
premiums. NO. MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE;
CA DECISION AFFIRMED
RATIO
SEC. 77. An insurer is entitled to payment of the premium as soon as the
thing insured is exposed to the peril insured against. Notwithstanding any
agreement to the contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the premium
thereof has been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
This was formerly Act 2427, Section 72:
SEC. 72. An insurer is entitled to payment of premium as soon as the thing
insured is exposed to the peril insured against, unless there is clear
agreement to grant the insured credit extension of the premium due. No
policy issued by an insurance company is valid and binding unless and until
the premium thereof has been paid. (Underscoring supplied)
IC 77 does not restate the portion of IC 72 expressly permitting
an agreement to extend the period to pay the premium. However, there
are exceptions to IC 77.
1. In case of a life or industrial life policywhenever the grace period
provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premiumis conclusive
evidence of payment [Sec. 78]
3. If the parties have agreed to the payment ininstallments of the
premium and partial payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extensionfor the payment of the
premium [Makati Tuscany Condominium]
5. Estoppel
IC 77 merely precludes the parties from stipulating that the policy is valid
even if premiums are not paid, but does not expressly prohibit an
agreement granting credit extension, and such an agreement is not
contrary to morals, good customs, public order or public policy. [Makati
Tuscany Condominium v. CA]
ON EXCEPTION #4. If the insurer has granted the insured a credit term for
the payment of the premium and loss occurs before the expiration of the
term, recovery on the policy should be allowed even though the premium
is paid after the loss but within the credit term.
It would be unjust and inequitable if recovery on the policy would
not be permitted against UCPB, which had consistently granted a 60-90-
day credit term for the payment of premiums despite its full awareness of
IC 77. Estoppel bars it from taking refuge under said section, since
Masagana relied in good faith on such practice.
Gaisano vs. Development Insurance (GR 190702, 2/27/17)
FACTS:
 Intercapitol Marketing Corporation (IMC) is the maker of Wrangler
Blue Jeans. while Levi Strauss (Phils.) Inc. (LSPI) is the local distributor
of products bearing trademarks owned by Levi Strauss & Co
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 IMC and LSPI separately obtained from Insurance Company of North
America fire insurance policies for their book debt
endorsements related to their ready-made clothing materials which
have been sold or delivered to various customers and dealers of the
Insured anywhere in the Philippines which are unpaid 45 days after
the time of the loss
 February 25, 1991: Gaisano Superstore Complex in Cagayan de Oro
City, owned by Gaisano Cagayan, Inc., containing the ready-made
clothing materials sold and delivered by IMC and LSPI was consumed
by fire.
 February 4, 1992: Insurance Company of North America filed a
complaint for damages against Gaisano Cagayan, Inc. alleges that IMC
and LSPI filed their claims under their respective fire insurance policies
which it paid thus it was subrogated to their rights
 Gaisano Cagayan, Inc: not be held liable because it was destroyed due
to fortuities event or force majeure
 RTC: IMC and LSPI retained ownership of the delivered goods until
fully paid, it must bear the loss (res perit domino)
 CA: Reversed - sales invoices is an exception under Article 1504 (1) of
the Civil Code to res perit domino
ISSUE: W/N Insurance Company of North America can claim against
Gaisano Cagayan for the debt that was isnured
HELD: YES. petition is partly GRANTED. order to pay P535,613 is DELETED
 insurance policy is clear that the subject of the insurance is the book
debts and NOT goods sold and delivered to the customers and dealers
of the insured
 ART. 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but when
the ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except
that:
(1) Where delivery of the goods has been made to the buyer or to a
bailee for the buyer, in pursuance of the contract and the ownership
in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the
goods are at the buyer's risk from the time of such delivery;
 IMC and LSPI did not lose complete interest over the goods. They have
an insurable interest until full payment of the value of the delivered
goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss,
in property insurance, one's interest is not determined by concept of
title, but whether insured has substantial economic interest in the
property
 Section 13 of our Insurance Code defines insurable interest as "every
interest in property, whether real or personal, or any relation thereto,
or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured." Parenthetically, under Section 14
of the same Code, an insurable interest in property may consist in: (a)
an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.
 Anyone has an insurable interest in property who derives a benefit
from its existence or would suffer loss from its destruction.
 it is sufficient that the insured is so situated with reference to the
property that he would be liable to loss should it be injured or
destroyed by the peril against which it is insured
 an insurable interest in property does not necessarily imply a property
interest in, or a lien upon, or possession of, the subject
 matter of the insurance, and neither the title nor a beneficial interest
is requisite to the existence of such an interest
 insurance in this case is not for loss of goods by fire but for
petitioner's accounts with IMC and LSPI that remained unpaid 45 days
after the fire - obligation is pecuniary in nature
 obligor should be held exempt from liability when the loss occurs thru
a fortuitous event only holds true when the obligation consists in the
delivery of a determinate thing and there is no stipulation holding him
liable even in case of fortuitous event
 Article 1263 of the Civil Code in an obligation to deliver a generic
thing, the loss or destruction of anything of the same kind does not
extinguish the obligation (Genus nunquan perit)
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 The subrogation receipt, by itself, is sufficient to establish not only the
relationship of respondent as insurer and IMC as the insured, but also
the amount paid to settle the insurance claim
 Art. 2207. If the plaintiff's 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.
 As to LSPI, no subrogation receipt was offered in evidence.
 Failure to substantiate the claim of subrogation is fatal to petitioner's
case for recovery of the amount of P535,613

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