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Insurance | Risk and Coverage KAMM | 2018

RISKS AND COVERAGE S


o A promise to pay for loss caused by a fortuitous or extraneous
1. C O N C E P T O F I N SU R A B L E R I S K A N D event happening, but it is not a promise to pay for loss or
CAUSATION (SEC. 3, ICP) damage which is almost certain to happen because of the
nature and inherent qualities of the property insured
o Policies of this kind are very rare and can only be found in
Element of Risk – the very foundation of insurance; the
marine insurance as marine insurance developed as an all risk
speculative aspect of insurance
coverage, using the phrase “perils of the sea” to encompass the
Why speculative aspect?
wide and varied range of risks that were covered [Malayan
- Human activity or endeavor is invariably Insurance vs CA, 336 Phil 977, citing Keeton & Widiss,
susceptible to risks or failure, losses or liability. Insurance Law, 467 (1988)]
Since only a portion of the relevant facts
affecting such activity or endeavor can ever be B. EXCEPTIONS AND EXCLUSIONS
known, predictions about the occurrence of a
Exceptions or exclusions in a policy work to limit or restrict the
potential loss are based on estimates or
operation of the general provisions in the contract.
guesswork.
o An exclusion in a policy is a means employed by the IR to
Causation – from the very concept and definition of insurance,
protect itself from an additional risk or hazard against which it
the loss, damage or liability which may befall the insured must
does not wish to insure without the payment of an additional
be caused by risk insured against.
premium (it can be negotiated by the parties, usually in RIDERS).
EXCEPTIONS, as limitations in the policy, work to constitute as
Short of causation, there can never be an insurance situation. a defense which the IR may urge to defeat a claim since it has
not assumed that risk against such perils and hazards (claim
Sec. 3, ICP: while you can)
- “any contingent or unknown event, whether past -Country Bankers Insurance Corp. vs Lianga Bay & Community
or future, which may damnify a person having an Multi-Purpose Cooperative, Inc., 425 Phil 511
insurable interest, or create a liability against o The IR who seeks to defeat a claim because of an exception or
him may be insured against . . . “ limitation in the policy has the burden of establishing that the
o Provided that they are not contrary loss comes within the purview of the exception or limitation –
to law, public order, public policy, -United Merchants Corp. vs Country Bankers Insurance Corp., GR
morals, good customs (not No. 198588, July 11, 2012].
prejudicial to other persons) o In the case of DBP Pool of Accredited Insurance vs Radio
o Reference to past event which may Mindanao Network Inc., 430 SCR 314 (2006), the SC on the risks
be insured reflects the early days of covered by an insurance policy which did not specifically
marine insurance ONLY covering exclude the event which led to its loss. . . . The theory of the IRs
vessels or cargo whether “lost or not was that the cause of loss, which consisted of certain acts of
lost”; in these situations, the parties approximately 20 armed men who were allegedly members of
are not aware of the loss or the CPP/NPA was an excepted risk under certain conditions of
destruction of the thing insured the fire insurance policy (war, invasion, act of foreign enemy,
Article 1174, CC: Even a fortuitous event, definitely unknown, hostilities or warlike operations (whether war be declared or
may be the peril insured against not), civil war. . . mutiny, riot, military or popular uprising,
insurrection, rebellion, revolution, military or usurped power”…
Both the insurer (IR) and the insured (ID) may stipulate in a The SC rejected the IR’s argument that it is incumbent upon the
contract between the two of them the risk insured against, that ID to prove that the cause of loss was covered by the insurance
they may limit the scope of such a policy either by enumerating policy. It ratiocinated in this wise:
certain risks or events which are expressly covered or by “Particularly, in an insurance case, where a risk is excepted
excluding certain events or perils from the coverage. by the terms of a policy which insures against other perils or
hazards, loss from such a risk constitutes a defense which
A. SPECIFIED RISKS VS “ALL RISK” POLICIES (DISTINGUISH) the insurer may urge, since it has not assumed that risk, and
General Rule: An insurance company has the unqualified right to select from this it follows that an IR seeking to defeat a claim
the risks it considers profitable to insure. because of an exception or limitation in the policy has the
burden of proving that the loss comes within the purview of
Specified Risks Policies (more common)– an IR may offer to cover the exception or limitation set up. If a proof is made of a loss
only certain risks to which a person may be exposed; the policy will apparently within a contract of insurance, the burden is
specify the risks the IR has agreed to grant coverage for, and beyond upon the IR to prove that the loss arose from a cause of loss
this it may not held liable which is excepted or for which it is not liable, or from a cause
which limits its liability.”
“All Risk” Policies (usually in marine insurance) - an IR may offer to
cover all Jurisprudential definition of “all-risk” policy C. PRINCIPLES IN CAUSATION (Secs. 86-89, ICP)
o (Jurisprudential Definition) That policy which insures against (Cause-Event-Result Trichotomy)
all causes of conceivable loss or damage, EXCEPT as otherwise The rules of causation are applied for the purpose of fixing culpability.
excluded in the policy or due to fraud or intentional misconduct (Can we hold the IR liable?) The rules consider both the injury and the
on the part of the insured principal cause to fix the blame. (Hence, Identify the Risk and the Injury)
-Gloren Inc. vs Filipinas Cia. De Seguros, 65 O.G. 339 The concern is with the nature of the injury and how it happened. If the

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peril insured against is the proximate cause, the court will look no Sec. 89: An IR is not liable for a loss caused by the willful act or through
further. (Principle of Proximate Cause) the connivance of the ID; but he is not exonerated by the negligence of the
NOTE EXAM: Is The IR Liable? ID, or of the insurance agents or others.
- One of the purposes for taking out insurance is to protect the ID
Secs 86-89, ICP are the statutory provisions on causations in relation to against the consequences of his (simple) negligence and that of
loss, damage or liability suffered by the ID in an insurance transaction. his agents.

Sec. 86: Unless otherwise provided by the policy, an IR is liable for a loss of FGU Insurance Corp. vs CA, 454 SCRA 337:
which a peril insured against was the proximate cause, although a peril (judicial inclination favored coverage either by construing ambiguous
not contemplated by the contract may have been a remote cause of the policy provisions against an IR or by protecting the reasonable
loss; but he is not liable for a loss of which the peril insured against was expectations of the ID)
only a remote cause. RULING: While basic is the rule that the carelessness and negligence of
the ID or his agents constitute no defense on the part of the IR, this rule
Example: Fire insurance policy excludes explosion which, however, is not without exception since it presupposes that the loss has occurred
damaged the property and where the explosion was caused by a fire due to causes which could not have been prevented by the ID despite
which is considered the proximate cause. the exercise of due diligence. Therefore, when the ID’s negligence is so
gross as to constitute willful act, the IR will be exonerated.
Vda de Bataclan v. Medina, 102 Phil 181:
Defines Proximate Cause 2 . P R E L I M I N A R Y S T A T E ME N T S O N C L A S SE S O F
FACTS: At around 2am, a passenger bus’ front tires burst, causing the I N SU R A N C E A N D MU L T I P L I C A T I O N O F … F R I SK S
bus to zigzag until it fell into a ditch on the right side of the road and
turned turtle. Three passengers were trapped inside the bus, shouting …the number or types of risks that can be insured against, as well as the
for help to the houses in the neighborhood. Ten men then came to their interests to be protected, have grown considerably to encompass
aid, one of them carrying a lighted torch. Upon approaching the practically every conceivable form or kind of work that may be
overturned bus, a fierce fire started burning and consuming the bus, encountered in modern life. The present-day complexity of insurance
including the trapped passengers. The families of the deceased law may be attributed to, among others, the sheer number of risks that
passengers sued the carrier. may be covered; growth of corporate business forms; and the
RULING: The carrier is liable, and that the overturning of the bus and incredible ease of transportation and communication in the modern
not the fire, was the proximate cause. It is interesting how the Supreme world. Fields of Insurance:
Court connected all the circumstances – from the overturning of the 1) Life
bus, the leaking of the gas from its tank, and the coming of persons 2) Fire
responding to the cries for help of the trapped passengers and the use 3) Casualty
of torches in the dark (2:30am) – to come to the conclusion that all these 4) Suretyship
were a natural sequence of events. Citing American Jurisprudence, the 5) Marine
Court defined proximate cause as “that cause, which, in natural and
continuous sequence, unbroken by new independent cause, produces the 3 . L I F E I N SU R A N C E ( T I T L E 5 , I C P )
event, and without which that event would not have occurred”. Specified Risks and Extent of Coverage in Life Insurance
Essentially, it is the contract where a beneficiary shall be paid upon the
What particular situation will the IR be held liable? death of the ID.
Sec 87: An IR is liable (1) where the thing insured is rescued from a peril The proceeds are payable either upon (a) death of the person; (b) his
insured against that would otherwise have caused a loss, if, in the course surviving a specified period; or (c) on the continuance or cessation of
of such rescue, the thing is exposed to a peril not insured against, which life. (Sec. 182)
permanently deprives the ID of its possession, in whole or in part; or (2)
swhere a loss is caused by the efforts to rescue the thing insured from a A. SEC. 181, ICP
peril insured against. GREAT PACIFIC LIFE v. CA, G.R. NO. 113899, OCT. 13, 1999
B. SEC. 184, ICP
Example 1: A house and its contents were covered by a policy of C. TYPES OF LIFE INSURANCE CONTRACTS
insurance against fire only, not theft. When the house is about to be
i. Individual (Sec. 234, ICP)
consumed by fire, some appliances and furnishings were brought out
and placed in an empty lot across the house where thieves took ii. Group
advantage of the confusion and stole the appliances and furnishings.
The IR should still be liable. Pineda v. CA
G.R. No. 105562, Sept. 27, 1993:
Example 2: The IR would still be liable if damage is caused by the The employer got the insurance proceeds of the beneficiaries
strong pressure of water used to extinguish the fire because the of his employees through SPAs executed by such
damage was caused by efforts to rescue the thing insured from a peril beneficiaries. The IR refused to pay the beneficiaries because
insured against. they already paid the employer.
RULING: Group insurance is essentially a single insurance
Sec. 88. Where a peril is especially excepted in a contract of insurance, a contract that provides coverage for many individuals. It is
loss, which would not have occurred but for such peril, is thereby excepted usually provided by an employer, being the policy holder, in
although the immediate cause of the loss was a peril which was not favor of its employees, as the insured. The employer-policy
excepted. holder is the agent of the IR in collecting the premium, thus
any omission of duty to the employee in the administration
should be attributable to the IR.

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Although the policy is in the name of the employer, the real b. Limited Payment Life Insurance – premiums are paid only
policy holders are the employees. After all, the premiums paid during a specified number of years or until a specified
came from their labor. event occurs
c. Single Premium Life Insurance – the coverage is acquired
Grepalife v. CA by the payment of a single premium
316 SCRA 677 (1999): d. Joint Life Insurance – coverage is payable upon the first
Grepalife executed a contract of group life insurance with the death among two or more insured. This type is usually
DBP wherein Grepalife agreed to insure the lives of eligible purchased by business partners or spouses. Upon the
housing loan mortgagors of DBP. One such loan mortgagor death of one of the insureds, the insurance is paid to the
was Dr. Leuterio. In an application form, Dr. L answered survivor(s)
questions concerning his health and attesting among others, e. Universal Life Insurance – coverage emphasizes the
that he did not have any heart condition, and that he was in separation of the portion of the premium that is used to
good health to the best of his knowledge. However, after cover the insurance protection from the portion of the
about a year, Dr. L died due to “massive cerebral premium allocated to an investment
hemorrhage”. Grepalife denied the claim, alleging f. Variable Life Insurance – some amount of death benefit
concealment. Hence, the widow of the late Dr. L filed a provided by a VLI policy is guaranteed by the IR, but the
complaint against Grepalife for Specific Performance with total death benefit and the cash value of the insurance
Damages. The trial court, CA and the SC were all in before death depend on the investment performance of
agreement that there was no concealment. that portion of the premium which is allocated to a
RULING: The SC, in refuting the claim of Grepalife that Mrs. L separate fund
was not the real party in interest, explained that the rationale g. Endowment Life Insurance – provides for the payment of
of a group insurance policy of mortgagors, otherwise known a specified amount in the event of death before the end of
as the “mortgage redemption insurance” was that it was a the endowment period, commonly twenty years. In
device for the protection of both the mortgagee and the addition, this coverage also provides that if the insured
mortgagor. On the part of the mortgagee, it had to enter into survives to a specified maturity date, the insured will be
such form of contract so that in the event of the unexpected paid a specified endowment
demise of the mortgagor during the subsistence of the
mortgage contract, the proceeds from such insurance would 2. Term Life Insurance – provides for the payment of a specified
be applied to the payment of the mortgage debt, thereby amount if death occurs within the time period designated in the
relieving the heirs of the mortgagor from paying the policy, usually for periods of one to five years
obligation. In a similar vein, ample protection is given to the 3. Modified Life Insurance – combines terms and whole life
mortgagor under such a concept so that in the event of death, insurance in a single insurance policy; objective is to provide a
the mortgage obligation will be extinguished by the coverage in which the premiums paid by the insured during the
application of the insurance proceeds to the mortgage first few years are substantially less that the cost of a whole life
indebtedness. (Who are the Real Party in Interest, Who may policy. During the remaining policy term, the premiums
claim?) increase.
4. Group Life Insurance – a single contract covers an entire group
iii. Industrial Life Insurance (Sec. 235, ICP) of people; typically, the policy owner is an employer or an entity
- Refers to an insurance which provides insurance such as a labor organization, and the policy covers the
coverage to industrial workers or people who are unable employees or members of the group; provided as part of a
to afford insurance for bigger amounts. It is tailored to complete employee benefit package, the actual insurance
meet the needs of majority of its purchasers – the urban policy, known as the master contract, being kept by the
industrial class or blue-collar workers – thus, the employer. Where the employee is required to pay a portion of
premiums are typically small and the proceeds are the premium, the arrangement is known as “contributory
generally small too. plan”. The share of the employee is deducted from his wages.
- Unlike an ordinary life insurance, this kind of insurance
shall not lapse after non-payment of premiums in 3 E. LIABILITY OF INSURER IN CASE OF SUICIDE (SEC. 183)
months after the expiration of the grace period, if such Most insurance policies contain a suicide provision depending on the
non-payment is due to the failure of the company to send date of its commission compared to the policy issue date.
its representatives to the insured to collect premium.
Sec. 183: The IR in a life insurance contract shall be liable in case of
D. TYPES OF LIFE INSURANCE COVERAGE suicide only when it is committed after the policy has been in force for
a period of two years from the date of its issue or of its last
i. Term (Sec. 216, ICP)
reinstatement, unless the policy provides a shorter period. Provided,
ii. Endowment (Sec. 233, ICP)
however, that suicide committed in the state of insanity shall be
compensated regardless of the date of commission. (Take note of this
DIFFERENT PLANS or TYPES OF LIFE INSURANCE Proviso)
1. Whole Life Insurance – refers to one wherein the benefits are
payable upon the death of the person whose life is insured. Suicide Clause – not Mandatory
a. Ordinary Life Insurance – premiums are paid (either Incontestability Clause - Mandatory
quarterly, semi-annually or annually) throughout the
lifetime of the person insured or until the person reaches Normally, suicide is willful and intentional act. As such, the Code
a predetermined specified age (such as 50, 60, 65 or 70 provides that the IR is liable only if the same is committed after two
years) at which point the coverage continues without the years from the effectivity of the insurance contract, unless a shorter
payment of additional premiums

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period is provided in the policy. A two-year period is designed to party in causing the injuries, but only of the fact that such injuries
decrease the moral hazard. have been intentionally inflicted. 9 wounds inflicted with bladed
weapons at close range cannot be considered innocent insofar as
However, a suicide committed while the ID is insane or incapable of intent is concerned. The Court ruled that the manner of execution of
comprehending the consequences of his acts, is compensable, the crime permits no other conclusion.
regardless of the date of the suicide.
Dissenting Opinion of Justice Teehankee – the IR patently failed to
A policy may expressly exclude suicide from its coverage but it may discharge its burden of proving that the fatal injuries were inflicted
not exclude suicide while insane. upon the deceased intentionally or deliberately.
(Begging the question)
F. ACCIDENTAL DEATH AND DEATH BY ACCIDENTAL MEANS
G. MEASURE OF INDEMNITY (SEC. 186, RA 10607)
Finman v. CA The measure of recovery is the face value of the policy, and not the value
213 SCRA (1992) of the loss.
The terms “accident” and “accidental means”, as used in insurance
contracts have not acquired any technical meaning, and are H. OTHER CASES:
construed by the courts in their ordinary and common acceptation. o Manufacturing Life Insurance vs Meer, 89 PHIL 351
Thus, the terms have been taken to mean that they happen by chance o James McGuire vs The Manufacturers Life Insurance Co., GR#. L-
or fortuitously, without intention and design and are unexpected, 3581 (September 21,
unusual, and unforeseen. Where the death or injury is not the o 1950)
natural or probable result of the ID’s voluntary act, or if something o Andres vs Crown Life Ins. Co., GR# L-10875 (January 28,
unforeseen occurs in the doing of the act which produces the injury, 1958)
the resulting death is within the protection of the policies insuring o De la Cruz vs Capital Insurance, 17 SCRA 559 (1966)
against death or injury from accident. o Insular Life vs Ebrado, 80 SCRA 181 (1977)
o Sun Insurance vs CA, 211 SCRA 554 (1992)
Calanoc vs CA, o The Insular Life Assurance Company, LTD. vs. Paz Khu,
98 Phil 79 (1955) Felipe Khu Jr., and Frederick Y. Khu GR#195176 (April 18,
A watchman died of a gunshot wound in a robbery incident near his 2016)
post. His widow successfully claimed the face value of the life
insurance policy but when she demanded the payment of the 4 . F I R E I N SU R A N C E ( T I T L E 2 , I C P )
additional sum representing the value of the supplemental policy,
the company refused due to a dispute as to whether the watchman’s a. Definition and scope (Sec. 169, ICP)
death was due to an accident or not. This was determinative of  Includes insurance against loss by fire, lightning, windstorm,
whether the widow would get the additional benefit in the policy, tornado, or earthquake and other allied risks when such risks are
since the IR, as its defense, alleged that the deceased died because he covered by extension to fire insurance policies or under separate
was murdered by a person who took part in the commission of the policies
robbery and while making an arrest as an officer of the law. These
 General Rule: the risk assumed by the insurer is loss and
contingencies were expressly excluded in the contract and had the
damage caused by hostile fire and not those caused by friendly fire
effect of exempting the company from liability.
b. Risks or losses covered
On the issue of whether or not the death of the watchman came
i. Hostile Fire vs Friendly Fire
within the purview of the exception clause of the supplemental
policy, and hence, exempted the IR from liability, the SC ruled in the HOSTILE FIRE FRIENDLY FIRE
negative. An event is not an accident if it is due to a voluntary and Fire which burns at a place Fire that burns in a place
intentional act on the part of anyone, including third parties. The where it is not intended to where it is intended to burn
Court noted that there was no proof that the incident was intentional, burn or ought not to be and ought to be
that the robber had aimed for the watchman, because there was
nothing on record that showed how the fatal shot was fired. The Friendly fire may become
house being robbed was not even the one he was guarding. Thus, the hostile fire by escaping from
IR was ordered to pay the widow the value of the supplemental the place where it ought to
policy. be to some place in which it
ought not to be
Biagtan vs Insular Principle beyond the distinction:
44 SCRA 58 (1972) The policy shall not be construed to protect the insured from
Similar issue as in Calanoc but the Court arrived at a different injury consequent upon his negligent use or management or
conclusion. fire, so long as it burns in the place where it ought to be
IR refused to pay under the Accidental Death Benefit Clause saying
that the stabs were intentionally inflicted by third parties and c. Effect of alteration in the thing insured (Secs. 170-172)
therefore not covered. SC reversed the trial court and ruled in favor i. Increase of Risks and Moral Hazard clauses
of the IR. Sec. 170: An alteration in the use or condition of a thing insured
Unlike in Calanoc, SC held that the ID was killed intentionally. The from that to which it is limited by the policy made without the
term “intentional” implies the exercise of the reasoning faculties, consent of the IR, by means within the control of the ID, and
consciousness and volition. The SC pointed out that there were 9 increasing the risks, entitles an IR to rescind a contract of fire
wounds in all. The provision in the accidental death benefit clause insurance.
does not speak of the purpose – whether homicidal or not – of a third

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Sec. 172: provides that an act of the ID in a fire insurance Under Sec. 174, the parties may provide for an option-to-rebuild
policy which does not violate its provisions, clause or similar stipulations concerning the repairing, rebuilding or
“even though it increases the risk and is the cause of the loss,” replacing of buildings or structures wholly or partially damaged or
does not affect the fire insurance contract destroyed.

Malayan Insurance Co, Ltd. vs Pap Co., Ltd., e. Co-insurance clause


703 SCRA 314 (2013)
FACTS: Fire insurance covering machinery and equipment located In fire insurance, there is no implied co-insurance between the ID
in the Sanyo building was procured by Pap Co. for RCBC, the and IR as in marine insurance under Sec. 159.
mortgagee of the said equipment. After almost a year but before the The parties may stipulate a co-insurance clause such that the ID is
expiration of the policy, it was renewed on an “as is” basis. During required to proportionately bear the uninsured portion in case of
the subsistence of this renewal policy, the insured machinery was partial loss.
lost by fire not in the Sanyo building but in the Pace Pacific building.
The transfer had been made prior to the renewal of the policy. Pap Example:
filed a claim with Malayan but the latter refused on the ground that The insured property is worth P1,000,000 and the policy with a
the insured machinery had been transferred to a location different co-insurance clause has a face value of only P800,000. A loss of
from that stated in the policy without their consent. In a suit filed by half the property would result in payment of only half the actual
Pap, the RTC ruled in favor of Pap, finding that Malayan failed to valuation of the insurance, or P400,000, while the ID bears the
show that the alteration resulted in an increase of risk. The CA uninsured loss of P100,000.
affirmed the ruling, agreeing that Malayan had failed to show such
increase but furthermore adding that Malayan had also failed to cite f. Prohibitions (Sec. 175) – READ THIS!
specific provisions in the policy prohibiting the transfer of the
machinery or requiring the consent of Malayan before such transfer. Section 175. No policy of fire insurance shall be pledged,
hypothecated, or transferred to any person, firm or company who
RULING: SC ruled in favor of Malayan. Rule on alteration was strictly acts as agent for or otherwise represents the issuing company, and
applied. It found that such transfer of the properties subject of the any such pledge, hypothecation, or transfer hereafter made shall be
policy was in fact prohibited under Condition No. 9c of the policy, to void and of no effect insofar as it may affect other creditors of the
wit: insured.
“9. Under any of the following circumstances, the insurance ceases to
attach as regards the property affected unless the insured, before the RELEVANT CASES
occurrence of any loss or damage, obtains the sanction of the
company signified by endorsement upon the policy, by or on behalf o Tan Chuco vs Yorkshire Fire and Life Insurance, 14 PHIL 346 (1909)
of the Company: xxx o Bachrach vs British American Assurance, 17 PHIL 35 (1910)
(c) if property insured be removed to any building or place other o Development Insurance vs IAC, et.al., GR L-71360 (July 16, 1986)
than in that which is herein stated to be insured.” o New Life Enterprises, et.al. vs CA, et.al. GR#94071 (Mar. 31, 1992)
Furthermore, Pap had been unable to show that it had complied with
the sanction by Malayan for the transfer or removal. Philippine Home Assurance vs CA, 257 SCRA 468
As to increase of risk, the Court found that there was proof of such (1996)
increase as there would have been an increase in the fire rating as a
result of the transfer which should have resulted in payment of FACTS: Cargo on board the SS Eastern Explorer had been salvaged and
higher premiums. The Court concluded that the transfer without the forwarded to the consignees after the ship caught fire due to a small
notice to and consent of Malayan constituted an alteration in the flame in an acetylene container near the engine room. The shipping
condition and location of the thing insured. The Malayan was company charged the consignees additional freight and salvage costs
therefore not liable to Pap for the proceeds of the insurance policy. which were paid on their behalf under protest by Phil. Home
Assurance.
d. Measure of Indemnity (Secs. 173-174) PHA filed a complaint to recover the sums paid alleging that these were
damages caused by the fault, negligence, illegal act and/or breach of
The Code provides in Sec. 173 that if there is no valuation in the contract of the shipping company, ES.
policy of fire insurance, the measure of indemnity is the expense it ES raised the defense that the fire had been caused by an unforeseen
would be to the insured at the time of the commencement of the fire event.
to replace the thing lost or injured in the condition in which it was at Trial Court: The TC agreed with them, finding that the fire had been
the time of the injury. The liability of the IR is in no case to exceed caused by a natural calamity, making the charging of additional costs
what it would cost to repair, or replace the thing with material of like legal according to the Salvage law, the Code of Commerce, and the Bill
kind or quality with proper deduction for depreciation considering of Lading. The CA affirmed their ruling.
the age or condition of the thing before the loss. RULING: The SC disagreed saying that fire may not be considered a
natural calamity as it almost always arises from some act of man or by
The same section provides that if there is a valuation, the effect shall human means. It cannot be an “act of God” unless caused by lightning
be the same as in a policy of marine insurance, namely that the of a natural disaster or casualty not attributable to human agency.
valuation is conclusive between the parties in adjusting total or Having found that ES had been negligent in storing the acetylene
partial loss. Sec. 174 provides that when there is total loss, the whole cylinder near the engine room, the SC ruled that the consignees should
amount stated in the policy shall be paid; in case of partial loss, the not have been made liable and ordered EX to reimburse the amount
full amount of the loss shall be paid. However, in no case shall the IR paid by PHA under protest.
be required to pay more than the amount stated in the policy.

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5 . C A SU A L T Y I N SU R A N C E ( T I T L E 3 , I C P )
RULING: Except with respect to compulsory motor vehicle liability
a. Concept (Sec. 176) insurance, the Insurance Code contains no other provisions applicable to
casualty insurance. These contracts are therefore, governed by the
Sec. 176: “Casualty insurance is insurance covering loss or liability general provisions applicable to all types of insurance. Outside of these,
arising from accident or mishap, excluding certain types of loss which the rights and obligations of the parties must be determined by the terms
by law or custom are considered as falling exclusively within the scope of their contract taking into consideration its purpose and always in
of other types of insurance such as fire or liability insurance, motor accordance with the general principles of insurance law.
vehicle liability insurance, plate glass insurance, burglary and theft
insurance, personal accident and health insurance as written by non- Found the driver of the van and the security guard, both assigned by an
life insurance companies, and other substantially similar kinds of independent contractor, to be “authorized representatives” of the bank
insurance.” having been contracted with the duty to transfer funds of the bank.

Black’s Law Dictionary: The word “casualty” is generally used in iii. Theft and Robbery Insurance
legal contexts to mean either an “accident” or an event that results iv. Personal Accident and Health Insurance
from a “sudden, unexpected, or unusual cause” v. Employers Liability Insurance

In a sense, almost all types of insurance could be regarded as casualty c. Insurable Interest in Liability Insurance
insurance. Indeed, there is a proliferation of different types of
insurance coverage that are neither “fire insurance” nor “life d. Meaning of “Accident” and “Accidental” in Casualty Insurance
insurance”.
e. Basis and extent of Insurer’s Liability
b. Kinds of Casualty Insurance
RELEVANT CASES
i. Liability Insurance
A big portion of these coverages deal with liability insurance o Pan Malayan Insurance Corporation vs CA, G.R. No. 77397, April
procured by professionals, contractors, obligors, debtors, 3, 1990
doctors, property owners, and more. o De la Cruz vs Capital Insurance, 17 SCRA 559 (1966)
For instance, a homeowner’s insurance would cover liability of o Sun Insurance vs CA, 211 SCRA 554 (1992)
the homeowner to third persons who may suffer injuries or o Alpha Insurance and Surety Co. vs Arsenia Sonia Castor,
damages caused by the fault of the homeowner or occupants of GR#198174 (Sept 2, 2013)
the house, or even due to the structure of the house. This will o Phil-Nippon Kyoei, Corp. vs Rosalia T. Gudelosao, GR#181375
distinguish such liability insurance from a “household (July 13, 2016)
insurance” which covers loss or destruction of the house or its
contents. 6 . SU R E T Y SH I P ( T I T L E 4 , I C P )

ii. Credit Protection Insurance a. Sec. 177, ICP


Another type of casualty insurance, also known as “loan Sec. 177: “ A contract of suretyship is an agreement whereby a party
repayment insurance”. called the surety guarantees the performance by another party called the
There is “payment protection insurance” which covers principal or obligor of an obligation or undertaking in favor of a third
borrowers against accident, sickness, unemployment, and party called the obligee. It includes official recognizances, stipulations,
other circumstances which may prevent the borrowers from bonds or undertakings issued by any company by virtue of and under the
servicing currently standing debts. provisions of Act. No. 536, as amended by Act No. 2206.”
Similar to “landlord insurance” which is procured by lessors to
protect their investments, guarding their property from the Under Section 2(a), 2nd paragraph of the Code, a contract of suretyship
lack of care of the lessees. shall be deemed an insurance contract only if made by a surety doing
an insurance business.
Private mortgage insurance – a protection against
absconding mortgagors b. Nature of Liability (Sec. 178, ICP)
Sec. 178 provides that “the liability of the surety shall be joint and several
Almost of the same kind as the foregoing is insurance to protect identity with the obligor, and shall be limited to the amount of the bond.”
against fraud and similar incidents.
Sec. 180 provides that pertinent provisions of the Civil Code of the
Fortune Insurance vs CA, 244 SCRA 308 Philippines shall be applied in suppletory character whenever
(1995) necessary in interpreting the provisions of a contract of suretyship. In
particular, the Civil Code provides that if a person binds himself
FACTS: Producers Bank had taken out a Money, Security and Payroll solidarily with the principal debtor, the contract is called suretyship and
Robbery Policy with Fortune Insurance. The policy provided that the IR the provisions of Sec. 4, Chapter 3, Title I of Book IV of the Code shall be
shall not be liable for any loss caused by any dishonest, fraudulent or observed (Art. 2047, CC). The section referred to contains the
criminal act of the ID or any officer, employee, partner, director, trustee or provisions on Joint and Solidary Obligations.
authorized representative whether acting alone or in conjunction with
others. Fortune raised the defense that the case fell under the general
exceptions clause as the personas named can be considered either
employees or authorized representatives of Producers.

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NATURE OF LIABILITY CASES The Court stated that a separate action to hold the surety on a counter-
bond liable is not necessary. Finding that there was substantial
National Power Corp. vs CA, compliance with the requirements and that the surety had received a
222 SCRA 415 (1993) copy of the motion but failed to oppose the same, the Court affirmed the
amended decision.
FACTS: NPC entered into a contract with Far Eastern Electric Inc. (FEEI)
for the erection of transmission lines to be completed within 120 days. Stronghold Insurance vs CA
PHILAMGEN, an insurance and bonding company, issued a bond for the 208 SCRA 336
faithful performance of the undertaking. In correlation with the bond, (1992)
the contract between NPC and FEEEI contained the following
provision: Another case of a surety bond issued in relation with judicial process
“b. . . It is expressly agreed that in the event the corporation takes
over the work from the Contractor, the latter and his bondsmen FACTS: The Leisure Club filed a case against Northern Motors to
shall continue to be liable under this contract for any expense in recover office furniture and equipment. An order to deliver the said
the completion of the work. . . “ equipment was granted subject to the posting of a replevin bond, which
FEEI would later withdraw from the project due to financial difficulties, was duly issued by Stronghold Insurance. Northern Motors filed a
informing NPC of this withdrawal in a joint letter along with counter-bond to release the seized equipment but Leisure Club could
PHILAMGEN. On the same day, NPC wrote PHILAMGEN a letter not be contacted and indeed was never heard of again.
formally informing them of the withdrawal and that they would be
holding both FEEI and PHILAMGEN liable for the cost of the completion RULING: The trial court rendered judgment in favor of NM for the value
of the work. NPC later wrote PHILAMGEN informing the letter that of the equipment as well as exemplary damages. The case reached the
FEEI had an outstanding obligation of P75,019 and demanding SC which found that all the conditions had been met. LC, in bad faith,
remittance of the proceeds of the bond. PHILAMGEN refused to pay failed to prosecute and disappeared after retrieving the property. The
contending that the bond had expired and that NPC had failed to notify property was not returned though it was adjudged in favor of the
them within 30 days of the expiration as required by bond. defendants. The defendants were adjudged the value of the equipment
as well as exemplary damages. The Court thus upheld the decision of
RULING: SC ruled in favor of NPC, finding that the 30-day limitation the lower court holding Stronghold Insurance liable.
pertained to the situation wherein FEEI completed the project and not
to the situation wherein NPC takes over the work from the contractor. Eastern Assurance & Surety Co. vs IAC
The breach of the contract in the abandonment of unfinished work was GR No. L-69450
within the effective date of the contract and surety bond. Nov. 22, 1988
FACTS: The Dept. of Agrarian Reform put up for public bidding a job for
Zaragoza vs Fidelino the repair of seven jeeps. The winning bidder was Motor City, the bid
163 SCRA 443 (1988) accompanied by a Proposal Bond issued by Eastern Assurance. Under
the contract between DAR and MC, the latter was to put up a
FACTS:Z brought a suit of replevin against F to recover a car he had sold Performance Bond. When MC was only able to repair six of the seven
to the latter after F was unable to pay according to their agreement. The jeeps, DAR filed a complaint against MC and Eastern. The latter argued
car was taken from F on the strength of a writ of delivery but had been that they did not incur liability under their Proposal Bond which did not
returned upon posting of a counter-bond issued by Mabini Insurance & bind them as the subject was merely a proposal and not an actual
Surety Co. When judgment was finally rendered against F, Z moved for undertaking.
the amendment of the decision to include the surety as a party
solidarily bound for the amounts adjudged. Despite having been RULING: The SC stated that the reliance of Eastern on the difference
furnished with copies of the motion, neither F nor the surety appeared between a Proposal Bond and a Performance Bond was not helpful as
to oppose the motion. The trial court made the amendment sought by it is not the abstract nature, title or caption which determines liability
Z. The surety appealed to the SC, raising the argument that the court but the terms of the bond. It found that Eastern would have incurred
did not acquire jurisdiction over the defendant F and the surety as they liability under the terms of the bond upon failure of MC:
were not served summons. “(1) to guarantee the true and faithful performance of the contract
RULING: SC disagreed stating that the terms of the counter-bond leave in case of an award; (2) to accept the award; and (3) to answer for
no doubt of the surety’s assent to be bound by the judgment. any delay and/or default in the execution of the contract as provided
Furthermore, the bond implicitly prayed for affirmative relief in the in the proposal.”
release of the seized car, which constituted an act of voluntary The failure of MC to post a Performance Bond unquestionably resulted
submission before the Court and gave the latter jurisdiction over its in a breach of the first condition. On the third condition, Eastern argued
person. that the term “execution” referred to the signing of the contract and not
In deciding the case, the Court stated the requisites for holding liable the the performance thereof. The Court disagreed stating that the ordinary
surety in a counter-bond, to wit: meaning of execution includes the performance and implementation of
“(1) the filing of an application therefore with the Court having terms. Furthermore, if “execution” only refers to signing then the
jurisdiction of the action; (2) the presentation thereof before the second and third conditions would refer to the same circumstance.
judgment becomes executory (or before the trial or before appeal is Moreover, the Court held that the bond was a contract of adhesion.
perfected); (3) the statement in said application of the facts showing Accordingly, any ambiguity must be construed against Eastern, the
the applicant’s right to damages and the amount thereof; (4) the party who prepared the contract.
giving of due notice of the application to the attaching creditor and
his surety or sureties; and (5) the holding of a proper hearing at
which the attaching creditor and the sureties may be heard on the
application.”

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Prudential Guarantee and Assurance, Inc. (P) vs Equinox Land Corp. also noted that by the terms of the bond, the surety “hereon agrees to
(EL) accept all responsibility jointly and severally for the acts of the principal
533 SCRA 257 (2007) done in accordance with the terms of this bond.”

FACTS: J’Marc entered into an agreement with EL for the construction c. Distinctions between suretyship and property insurance (Sec.
of five additional floors to its existing building. J’Marc submitted 2 179, ICP)
bonds issued by P. EL eventually terminated the contract and took over
the construction project. After measuring the amount of work actually Sec. 179: “The surety is entitled to payment of the premium as soon as the
accomplished and comparing the same with the cash advances given to contract of suretyship or bond is perfected and delivered to the obligor.
J’Marc, it was found that there was an overpayment. EL had also paid No contract of suretyship or bonding shall be valid and binding unless and
the laborers, suppliers, and subcontractors an amount totaling x. until the premium therefor has been paid, except where the obligee has
accepted the bond, in which case the bond becomes valid and enforceable
EL filed a complaint with the RTC to recover these amounts, as well as irrespective of whether or not the premium has been paid by the obligor
damages. P filed a motion to dismiss arguing that jurisdiction over the to the surety. X x x In the case of a continuing bond, the obligor shall pay
case was vested with the CIAC. The court thus dismissed the case and the subsequent annual premium as it falls due until the contract of
it was re-filed before the CIAC. suretyship is cancelled by the obligee or by the Commissioner or by a court
of competent jurisdiction, as the case may be.”
Before the CIAC, the surety argued that the tribunal had no jurisdiction
over them as they were not privy to the construction contract and its The provision treats of two separate but connected matters:
surety and performance bonds were not construction agreements. The entitlement of the surety to premium payment and validity of the
CIAC rendered its decision holding P liable to EL on its two bonds. This surety bond.
decision was affirmed on appeal by the CA.
As to entitlement to premium, the surety is entitled to premium
Before the SC, P reiterated its argument that the CIAC had no payment as soon as the contract or bond is perfected and delivered to
jurisdiction over the claim against them and they should not have been the obligor. For continuing bonds, the obligor must pay annual
liable solidarily with J’Marc. premium as it falls due until the suretyship is cancelled by the obligee,
by the the IC or by a court of competent jurisdiction.
RULING:The SC disagreed with both contentions.
First issue: P was estopped from denying the jurisdiction of the CIAC, As to validity and binding effect of the bond, the general rule is that no
since they had moved for the dismissal of the case before the RTC contract of suretyship or bond shall be binding unless and until
precisely on the ground that jurisdiction lay with the CIAC. Second premium has been paid. However, when the obligee has accepted the
issue: “While a contract of surety is secondary only to a valid principal bond, the payment of premium is no longer required and the bond is
obligation, the surety’s liability to the creditor is said to be direct, primary, given binding effect.
and absolute. In other words, the surety is directly and equally bound with
the principal.” This rule is distinct to suretyship as compared with other types of
insurance. In the case of suretyship, conduct of a third person, in this
Intra-Strata Assurance Co. vs Republic case the obligee, may render the contract valid and effective
557 SCRA 363 (2008) irrespective of whether or not the premium has been paid.

FACTS: Grand Textile (GT) imported various articles such as dyestuff, Philippine Pryce Assurance vs CA
spare parts for machinery, yarn, chemicals and the like. These articles 230 SCRA 164 (1994)
were transferred to a Customs Bonded Warehouse where the charges
due were computed at x. To secure the payment of these obligations FACTS: A collection suit was filed against the surety on its bond issued
pursuant to the Tariff and Customs Code, Intra-Strata and Phil. Home for Sagum General Merchandise. The surety claimed that there was no
Assurance issued general warehousing bonds in favor of GT. contract of surety because the checks issued to pay for the premiums
were dishonored. Before the SC, they also raised as a defense the fact
Without payment of the charges due, GT withdrew the imported goods that when they issued the bonds, they were not authorized to do so by
from storage. Thus, the BoC demanded payment of the amounts due the IC.
from GT as well as the two sureties. When all three failed to pay, a
collection suit was filed against them. Judgment was rendered against RULING: The case was decided on procedural grounds, but the Court
all three in the RTC and the CA. also stated that Philippine Pryce had no meritorious defense. They had
submitted in their answer that they had issued the bonds subject
On appeal to the SC, the sureties argued that the withdrawal of GT of the matter of the action. Furthermore, it appeared from the testimony that
goods without notice to them released them from liability. The sureties the obligee had accepted the surety bonds, meaning they had become
argued that they should have been entitled to participate in the valid and enforceable, irrespective of whether or not the premium had
handling of the imported articles and were entitled to notice of any act been paid. Finally, their contention that they had not been authorized
of the obligee and obligor affecting the risks secured. Otherwise, there to issue the bond would be an admission of fraud and was not
might be fraudulent conspiracy between the two to defraud the surety. considered by the Court. No person can claim benefit from the wrong
he himself committed.
RULING: The SC reiterated the nature of suretyship wherein there is a
principal relationship between the obligor and the obligee and an d. Other Cases
accessory surety relationship whereby the surety binds itself to be o Arranz vs Manila Fidelity, 101 PHIL 272 (1957)
liable to the creditor on the debtor’s default. The surety does not by o Reparations Com. vs Universal Deep Sea Fishing 83 SCRA 764
reason of the agreement earn the right to intervene in the principal (1978)
relationship. Its role only comes alive upon the debtor’s default. It was o Capital Insurance vs Ronquillo Trading 123 SCRA 526 (1983)
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o AFP General Insurance vs Molina 556 SCRA 630 (2008) contemplation or anticipation of accident in the legal sense in
o First Lepanto-Taisho Insurance Corporation (now known as FLT which it should be understood, and not in contemplating or
Prime Insurance Corporation) v. Chevron Philippines, Inc. (formerly anticipation of an event such as theft.”
known as Caltex Philippines, Inc.), GR#177839 (Jan. 18, 2012) Thus, where a car is admittedly unlawfully and wrongfully taken
without the owner’s consent or knowledge, such constitutes theft,
7. COMPREHENSIVE MOTOR VEHICLE LIABILITY and therefor it is the “Theft” Clause, and not the “Authorized
I N SU R A N C E Driver” Clause that applies. There is no causal connection
between the possession of a valid driver’s license and the loss of
a. Third Party Liability Insurance Requirement (Sec. 387 and 389) the vehicle.
The Code requires this coverage for the registration of motor vehicles.
The purpose of this requirement is to limit situations in which an b. Third Party Defined (Sec. 386c)
individual is injured in a vehicular accident and does not have
insurance to assist in compensating for the injuries. Every motor Section 386(c) Third party is any person other than a passenger as defined in
vehicle owner must obtain an insurance to indemnity the death, bodily this section and shall also exclude a member of the household, or a member of the
family within the second degree of consanguinity or affinity, of a motor vehicle
injury, and/or damage arising from motor vehicle use, to third party
owner or land transportation operator, as likewise defined herein, or his
passengers. (Sec. 387, ICP) employee in respect of death, bodily injury, or damage to property arising out of
and in the course of employment.
Shafer vs Judge
167 SCRA 386 (1988) c. Amount of Indemnity (Sec. 390)

Explains the rationale behind the compulsory nature of this kind of “Section 390. Every land transportation operator and every owner of a motor
insurance vehicle shall, before applying for the registration or renewal of registration of any
motor vehicle, at his option, either secure an insurance policy or surety bond
FACTS: Shafer got involved in a vehicle collision. He filed a third-party issued by any insurance company authorized by the Commissioner or make a
complaint against Makati Insurance where he obtained a third-party cash deposit in such amount as herein required as limit of liability for purposes
specified in Section 387.
liability insurance. The lower court dismissed his 3rd-party complaint
saying that he cannot claim until his liability in the criminal case filed by "(a) In the case of a land transportation operator, the insurance guaranty
the owner of the vehicle collided with is determined. in cash or surety bond shall cover liability for death or bodily injuries of
third-parties and/or passengers arising out of the use of such vehicle in the
RULING: The SC held that there is no need on the part of the insured to amount not less than Twelve thousand pesos (P12,000.00) per passenger
wait for the decision of the trial court finding him guilty of reckless or third-party and an amount, for each of such categories, in any one
imprudence. The court ruled that the occurrence of the injury to the accident of not less than that set forth in the following scale:
third party immediately gave rise to the liability of the insurer under its
"(1) Motor vehicles with an authorized capacity of twenty-six (26) or
policy.
more passengers: Fifty thousand pesos (P50,000.00);
CMVLI (third party liability or TPL) is primarily intended to provide "(2) Motor vehicles with an authorized capacity of from twelve (12)
compensation for the death or bodily injuries suffered by innocent to twenty-five (25) passengers: Forty thousand pesos (P40,000.00);
third parties or passengers as a result of a negligent operation and use "(3) Motor vehicles with an authorized capacity of from six (6) to
of motor vehicles. The victims and/or their dependents are assured of eleven (11) passengers: Thirty thousand pesos (P30,000.00);
immediate financial assistance, regardless of the financial capacity of "(4) Motor vehicles with an authorized capacity of five (5) or less
motor vehicle owners. passengers: Five thousand pesos (P5,000.00) multiplied by the
authorized capacity.
The Court declared that in the liability of the insurance company under
"Provided, however, That such cash deposit made to, or surety bond posted
the CMVLI, the insurer’s liability accrues immediately upon the with, the Commissioner shall be resorted to by him in cases of accidents the
occurrence of the injury or event upon which the liability depends, and indemnities for which to third-parties and/or passengers are not settled
does not depend on the recovery or judgment by the injured party accordingly by the land transportation operator and, in that event, the said
against the insured. cash deposit shall be replenished or such surety bond shall be restored
The Court stated further, that the general purpose of statutes enabling within sixty (60) days after impairment or expiry, as the case may be, by
an injured person to proceed directly against the insurer is to protect such land transportation operator, otherwise, he shall secure the insurance
injured persons against the insolvency of the insured who causes such policy required by this chapter. The aforesaid cash deposit may be invested
by the Commissioner in readily marketable government bonds, and/or
injury, and to give such injured person a certain beneficial interest in
securities.
the proceeds of the policy.
"(b) In the case of an owner of a motor vehicle, the insurance or guaranty
NOT CMVTPL insurance but Property Insurance over motor vehicles in cash or surety bond shall cover liability for death or injury to third-
parties in an amount not less than that set forth in the following scale in
Perla Compania de Seguros vs CA & Lim any one accident:
208 SCRA 487 (1992) "(1) Private Cars
"(i) Bantam: Twenty thousand pesos (P20,000.00);
Spouses Lim purchased a car from Supercars Inc. (Super). Thereafter, "(ii) Light: Twenty thousand pesos (P20,000.00); and
"(iii) Heavy: Thirty thousand pesos (P30,000.00).
the spouses had the car insured under a comprehensive car insurance
"(2) Other Private Vehicles
policy by Perla. The insurance contract had an “Authorized Driver” "(i) Tricycles, motorcycles and scooters: Twelve thousand
clause which precluded recovery under the policy if the ID, or any pesos (P12,000.00);
person driving under the ID’s order, were violating any licensing or "(ii) Vehicles with an unladen weight of 2,600 kilos or less:
other related driving laws or regulations. Twenty thousand pesos (P20,000.00);
“The risk against accident is distinct from the risk against theft. "(iii) Vehicles with an unladen weight of between 2,601 kilos
The authorized driver clause in a typical insurance policy is in and 3,930 kilos: Thirty thousand pesos (P30,000.00); and

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"(iv) Vehicles with an unladen weight over 3,930 kilos: Fifty


thousand pesos (P50,000.00). h. Authorized Driver Clause - maybe found or stipulated in voluntary
"The Commissioner may, if warranted, set forth schedule of or compulsory motor vehicle insurance
indemnities for the payment of claims for death or bodily injuries
with the coverages set forth herein.
Far Eastern Surety vs Misa
d. No Fault Indemnity Clause (Sec. 391) 25 SCRA 663 (1968)

FACTS: A collision occurred between a truck and a taxicab which bore


"Section 391. Any claim for death or injury to any passenger or third-party
a sticker that stated that its passengers are insured. The passengers of
pursuant to the provisions of this chapter shall be paid without the necessity of
proving fault or negligence of any kind: Provided, That for purposes of this the taxicab suffered injuries and sued the operator of the taxicab for
section: damages. The operator then sued the insurance company for any
"(a) The total indemnity in respect of any person shall not be less than damages that might be recovered by the injured passengers.
Fifteen thousand pesos (P15,000.00); An award was made against the IR of the taxicab operator representing
"(b) The following proofs of loss, when submitted under oath, shall be that the passengers were insured against accidents as shown by the
sufficient evidence to substantiate the claim: “sticker” affixed to the vehicle.
"(1) Police report of accident; and
"(2) Death certificate and evidence sufficient to establish the proper RULING: If the insured carrier company made representations that its
payee; or passengers are insured, it cannot be heard to deny it under the principle
"(3) Medical report and evidence of medical or hospital of estoppel. And if its insurer did not consent to such representations,
disbursement in respect of which refund is claimed; the principle of estoppel does not extend to the insurer.
"(c) Claim may be made against one motor vehicle only. In the case of an The SC considered the decision of the CA not legally tenable. The SC
occupant of a vehicle, claim, shall lie against the insurer of the vehicle in noted that the negligence of the other vehicle (a sand and gravel truck)
which the occupant is riding, mounting or dismounting from. In any other was the causative factor without the taxicab driver nor the operator
case, claim shall lie against the insurer of the directly offending vehicle. In contributing thereto. Thus, the award was set aside being beyond or
all cases, the right of the party paying the claim to recover against the
outside of the contemplation of the parties to the contract of insurance.
owner of the vehicle responsible for the accident shall be maintained.

Peza vs Alikpala
e. Change of Ownership (Sec. 395)
160 SCRA 31 (1988)
"Section 395. In case of change of owner ship of a motor vehicle, or change of the
engine of an insured vehicle, there shall be no need of issuing a new policy until FACTS: Involves an accident where the license of the driver of insured
the next date of registration or renewal of registration of such vehicle, vehicle was confiscated by an LTC agent and the driver issued a
and: Provided, That the insurance company shall agree to continue the policy, temporary permit to drive or TVR which, at the time of the accident had
such change of ownership or such change of the engine shall be indicated in a already expired. The IR refused liability relying on its defense that the
corresponding endorsement by the insurance company concerned, and a signed driver was not an authorized person under the explicit provisions of the
duplicate of such endorsement shall, within a reasonable time, be filed with the policy. The lower court ruled in favor of the insurance company.
Land Transportation Office
RULING: This ruling was sustained by the SC. Both courts ruled that a
f. Notice of Claim / Prescription of Action (Sec. 397) “driver with a temporary operator’s permit that had already expired is
not an authorized person where the policy defines authorized persons
The provisions of the CMVLI states that, any person having a claim as (a) the insured, (b) or any person driving on the ID’S order or with
upon the policy must without unnecessary delay, present to the his permission, provided that the person driving is permitted, in
insurer a written notice of claim which must be filed within six accordance with the licensing or other laws or regulations to drive the
months from the date of accident, otherwise the claim shall be motor vehicle or has been permitted and not disqualified by order of
deemed waived. (Sec. 397, ICP) the Court of Law or by reason of any enactment or regulation from
driving such motor vehicle.
g. Direct Liability of Insurer to Third Party
Other Cases
Vda. de Maglana vs Consolacion o Western Guaranty vs CA 187 SCRA 652 (1990)
212 SCRA 268 (1992) o First Quezon City Insurance vs CA 218 SCRA 525
o First Integrated Bonding & Insurance Company, Inc., vs Harold
FACTS: Destrajo’s PUJ jeep while overtaking another jeep, bumped Hernando, G.R. No. L-51221, July 31, 1991)
Maglana’s motorcycle. As a result, M was thrown from the road and
o Paramount Insurance Co. vs Spouses Remondeulaz, GR No.
died. M’s heirs filed an action for damages against D and AFISCO, D’s
173773, Nov. 28, 2012
jeepney’s insurer.
CFI: The CFI held D liable and AFISCO was ordered to reimburse D the
amounts he would have paid up to the extent of the insurance coverage.
The Maglana heirs were contending that AFISCO should be directly and
solidarily liable with D. The SC held, however, that AFISCO’s liability is
direct but not solidarily with D, citing Malayan Insurance v CA (165 S
536).
“xxx the direct liability of the IR under the indemnity contracts
against third party liability does not mean that the IR can be held
solidarily liable with the ID and/or the other parties found at
fault. The liability of the IR is based on contract; that of the ID is
based on tort xxx”

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READING ASSIGNMENTS!

8 . R E I N SU R A N C E

a. Importance
b. Cases
o Equitable lns. & Casualty Co. vs Rural lns. & Surety Co., 4
SCRA 343 (1962)
o PHILAM vs Auditor General, GR No. L-19255, 22 SCRA 135
(1968) o Gibson vs Revilla, 92 SCRA 219 (1979)
o Pioneer Insurance vs CA, 175 SCRA 668 (1989)

9 . B A N C A S SU R A N C E (Sections 375-377, ICP)

"TITLE 9
"BANCASSURANCE

"Section 375. The term bancassurance shall mean the presentation and
sale to bank customers by an insurance company of its insurance products
within the premises of the head office of such bank duly licensed by the
Bangko Sentral ng Pilipinas or any of its branches under such rules and
regulations which the Commissioner and the Bangko Sentral ng Pilipinas
may promulgate. To engage in bancassurance arrangement, a bank is not
required to have equity ownership of the insurance company. No
insurance company shall enter into a bancassurance arrangement unless
it possesses all the requirements as may be prescribed by the
Commissioner and the Bangko Sentral ng Pilipinas.

"No insurance product under this section, whether life or non-life, shall be
issued or delivered unless in the form previously approved by the
Commissioner.

"Section 376. Personnel tasked to present and sell insurance products


within the bank premises shall be duly licensed by the Commissioner and
shall be subject to the rules and regulations of this Act.

"Section 377. The Commissioner and the Bangko Sentral ng Pilipinas


shall promulgate rules and regulations to effectively supervise the
business of bancassurance.

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