Philippine Phoenix vs Woodworks

G.R. No. L-25317 August 6, 1979 Lessons Applicable: Estoppel and credit extension (Insurance) Laws Applicable: Section 77 of the Insurance Code FACTS: July 21, 1960: Woodworks, Inc. was issued a fire policy for its building machinery and equipment by Philippine Phoenix Surety & Insurance Co. for P500K covering July 21, 1960 to July 21, 1961. Woodworks did not pay the premium totalling to P10,593.36. April 19, 1961: It was alleged that Woodworks notified Philippine Phoenix the cancellation of the Policy so Philippine Phoenix credited P3,110.25 for the unexpired period of 94 days and demanded in writing the payment of P7,483.11 Woodworks refused stating that it need not pay premium "because the Insurer did not stand liable for any indemnity during the period the premiums were not paid." Philippine Phoenix filed with the CFI to recover its earned premium of P7,483.11 o Woodworks: to pay the premium after the issuance of the policy put an end to the insurance contract and rendered the policy unenforceable CFI: favored Philippine Phoenix

ISSUE: W/N there was a valid insurance contract despite no premium payment was paid HELD: NO. Reversed

Policy provides for pre-payment of premium. To constitute an extension of credit there must be a clear and express agreement therefor and there nust be acceptance of the extension - none here Since the premium had not been paid, the policy must be deemed to have lapsed. failure to make a payment of a premium or assessment at the time provided for, the policy shall become void or forfeited, or the obligation of the insurer shall cease, or words to like effect, because the contract so prescribes and because such a stipulation is a material and essential part of the contract. This is true, for instance, in the case of life, health and accident, fire and hail insurance policies Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by fire only "after payment of premium" Compliance by the insured with the terms of the contract is a condition precedent to the right of recovery. The burden is on an insured to keep a policy in force by the payment of premiums, rather than on the insurer to exert every effort to prevent the insured from allowing a policy to elapse through a failure to make premium payments.

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37 Vda. de Gabriel vs. Court of Appeals [GR 103883, 14 November 1996] First Division, Vitug (J): 4 concur Facts: Marcelino Gabriel, the insured, was employed by Emerald Construction & Development Corporation (ECDC) at its construction project in Iraq. He was covered by a personal accident insurance in the amount of P100,000.00 under a group policy procured from Fortune Insurance & Surety Company Inc. by ECDC for its overseas workers. The insured risk was for "bodily injury caused by violent accidental external and visible means which injury would solely and independently of any other cause" result in death or disability. On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year later, or on 12 July 1983, ECDC reported Gabriel's death to Fortune by telephone. Among the documents thereafter submitted to Fortune were a copy of the death certificate 5 issued by the Ministry of Health of the Republic of Iraq which stated "REASON OF DEATH: UNDER EXAMINATION NOW NOT YET KNOWN " and an autopsy report of the National Bureau of Investigation (NBI) to the effect that "due to advanced state of postmortem decomposition, cause of Commercial Law Insurance Law, 2006 ( 48 ) Narratives (Berne Guerrero) death could not be determined." Fortune referred the insurance claim to Mission Adjustment Service, Inc. Following a series of communications between Jacqueline Jimenez vda. de Gabriel and Fortune, the latter, on 22 September 1983, ultimately denied the claim of ECDC on the ground of prescription. Vda. De Gabriel went to the Regional Trial Court of Manila. In her complaint against ECDC and Fortune, she averred that her husband died of electrocution while in the performance of his work and prayed for the recovery of P100,000.00 for insurance indemnification and of various other sums by way of actual, moral, and exemplary damages, plus attorney's fees and costs of suit. Fortune filed its answer, which was not verified, admitting the genuineness and due execution of the insurance policy; it alleged, however, that since both the death certificate issued by the Iraqi Ministry of Health and the autopsy report of the NBI failed to disclose the cause of Gabriel's death, it denied liability under the policy. In addition, Fortune raised the defense of "prescription," invoking Section 384 10 of the Insurance Code. Later, Fortune filed an amended answer, still unverified, reiterating its original defenses but, this time, additionally putting up a counterclaim and a crossclaim. The trial court dismissed the case against ECDC for the failure of Vda. de Gabriel to take steps to cause the service of the fourth alias summons on ECDC. The dismissal was without prejudice. The case proceeded against Fortune alone. On 28 May 1987, the trial court rendered its decision in favor (partly) of Vda. de Gabriel's claim. In arriving at its conclusion, the trial court held that Fortune was deemed to have waived the defense, i.e., that the cause of Gabriel's death was not covered by the policy, when the latter failed to impugn by evidence Vda. de Gabriel's averment on the matter. With regard to the defense of prescription, the court considered the complaint to have been timely filed or within 1 year from Fortune's denial of the claim. Vda. de Gabriel and Fortune both appealed to the Court of Appeals. The Court of Appeals, on 18 September 1991, reversed the decision of the lower court. The appellate court held that Vda. de Gabriel had failed to substantiate her allegation that her husband's death was caused by a risk insured against. The motion for reconsideration was denied. Vda. de Gabriel filed the petition for review on certiorari. Issue [1]: Whether prescription was properly invoked by Fortune in this case. Held [1]: YES. On the issue of "prescription," Fortune correctly invoked Section 384 of the Insurance Code which provides that "Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of action shall prescribe." The notice of death was given to Fortune, concededly, more than a year after the death of Vda. de Gabriel's husband. Fortune, in invoking prescription, was not referring to the one-year period from the denial of the claim within which to file an action against an insurer but obviously to the written notice of claim that had to be submitted within six months from the time of the accident. On the other hand, there is absolutely no basis in fact and in law to hold that the insurance company was deemed to have waived -- by failing to have its answers (to the Request for Admission) duly verified -- the defense, that the death of Vda. de Gabriel's husband was not caused by violent accidental external and visible means' as contemplated in the insurance policy. The Death Certificate and the Autopsy Report, more than controverted the allegation of Vda. de Gabriel as to the cause of death of her husband. Issue [2]: Whether Vda. De Gabriel is required to present proof that the insureds demise was from an accidental death, unlike in ordinary life insurance where the insured's death, regardless of the cause thereof,

would normally be compensable. Held [2]: YES. The insurance policy expressly provided that to be compensable, the injury or death should be caused by "violent accidental external and visible means." In attempting to prove the cause of her husband's death, all that Vda. de Gabriel could submit were a letter sent to her by her husband's co-worker, stating that Gabriel died when he tried to haul water out of a tank while its submerged motor was still functioning, and Commercial Law Insurance Law, 2006 ( 49 ) Narratives (Berne Guerrero) Vda. de Gabriel's sinumpaang salaysay which merely confirmed the receipt and stated contents of the letter. Said the appellate court in this regard: "It must be noted that the only evidence presented by her to prove the circumstances surrounding her husband's death were her purported affidavit and the letter allegedly written by the deceased co-worker in Iraq. The said affidavit however suffers from procedural infirmity as it was not even testified to or identified by the affiant (Vda. De Gabriel) herself. This self-serving affidavit therefore is a mere hearsay under the rules. In like manner, the letter allegedly written by the deceased's co-worker which was never identified to in court by the supposed author, suffers from the same defect as the affidavit of the plaintiff-appellant." Not one of the other documents submitted, to wit, the POEA decision, dated 06 June 1984, the death certificate issued by the Ministry of Health of Iraq and the NBI autopsy report, could give any probative value to Vda. de Gabriel's claim. The POEA decision did not make any categorical holding on the specific cause of Gabriel's death. Neither did the death certificate issued by the health authorities in Iraq nor the NBI autopsy report provide any clue on the cause of death. All that appeared to be clear was the fact of Gabriel's demise on 22 May 1982 in Iraq. Evidence, in fine, is utterly wanting to establish that the insured suffered from an accidental death, the risk covered by the policy. In an accident insurance, the insured "s beneficiary has the burden of proof in demonstrating that the cause of death is due to the covered peril. Once the fact is established, the burden then shifts to the insurer to show any excepted peril that may have been stipulated by the parties. An "accident insurance" is not thus to be likened to an ordinary life insurance where the insured's death, regardless of the cause thereof, would normally be compensable. The latter is akin in property insurance to an "all risk" coverage where the insured, on the aspect of burden of proof, has merely to show the condition of the property insured when the policy attaches and the fact of loss or damage during the period of the policy and where, thereafter, the burden would be on the insurer to show any "excluded peril." When, however, the insured risk is specified, it lies with the claimant of the insurance proceeds to initially prove that the loss is caused by the covered peril.

PRUDENTIAL GUARANTEE and ASSURANCE INC., vs. TRANS-ASIA SHIPPING LINES, INCG.R. No. 151890 June 20, 2006P r i n c i p l e f o u n d i n t h e c a s e : a warranty is a statement or promise set forth i n t h e p o l i c y , o r b y r e f e r e n c e incorporated therein, the untruth or non-fulfillment of which in any respect, and without reference to whetherthe insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer.However it must be first duly proven by the one who alleges that there was a breach of warranty. Facts: TRANS-ASIA is the owner of the vessel M/V Asia Korea. In consideration of payment of premiums, PRUDENTIAL insuredM/V Asia Korea for loss/damage of the hull and machinery arising from perils, inter alia, of fire and explosion for thesum of P40 Million, beginning from the period of July 1, 1993 up to July 1, 1994.On October 25, 1993, while the policy was in force, a fire broke out while [M/V Asia Korea was] undergoing repairs atthe port of Cebu. On October 26, 1993 TRANS-ASIA filed its notice of claim for damage sustained by the vesselevidenced by a letter/formal claim. TRANS-ASIA reserved its right to subsequently notify PRUDENTIAL as to the fullamount of the claim upon final survey and determination by average adjuster Richard Hogg International (Phil.) of thedamage sustained by reason of fire. TRANS-ASIA executed a document denominated "Loan and Trust receipt", a portion of which states that Receivedfrom Prudential Guarantee and Assurance, Inc., the sum of PESOS THREE MILLION ONLY (P3,000,000.00) as a loanwithout interest under Policy No. MH 93/1353 [sic], repayable only in the event and to the extent that any net recoveryis made by Trans-Asia Shipping Corporation, from any person or persons, corporation or corporations,

or other parties,on account of loss by any casualty for which they may be liable occasioned by the 25 October 1993: Fire on Board."PRUDENTIAL later on denied Trans-Asias claim in stated in a letter that "After a careful review and evaluation of yourclaim arising from the above-captioned incident, it has been ascertained that you are in breach of policy conditions,among them "WARRANTED VESSEL CLASSED AND CLASS MAINTAINED". Accordingly, we regret to advise that yourclaim is not compensable and hereby DENIED." and asked for the return of the 3,000,000. TRANS-ASIA filed a Complaint for Sum of Money against PRUDENTIAL with the RTC of Cebu City, wherein TRANS-ASIAsought the amount of P8,395,072.26 from PRUDENTIAL, alleging that the same represents the balance of theindemnity due upon the insurance policy in the total amount of P11,395,072.26. TRANS-ASIA similarly sought interestat 42% per annum citing Section 243 of Presidential Decreee No. 1460, otherwise known as the "Insurance Code," asamended.PRUDENTIAL denied the material allegations of the Complaint and interposed the defense that TRANS-ASIA breachedinsurance policy conditions, in particular: PRUDENTIAL posits that TRANS-ASIA violated an express and materialwarranty in the subject insurance contract, i.e., Marine Insurance Policy No. MH93/1363, specifically Warranty ClauseNo. 5 thereof, which stipulates that the insured vessel, "M/V ASIA KOREA" is required to be CLASSED AND CLASSMAINTAINED. According to PRUDENTIAL, on 25 October 1993, or at the time of the occurrence of the fire, "M/V ASIAKOREA" was in violation of the warranty as it was not CLASSED AND CLASS MAINTAINED. PRUDENTIAL submits thatWarranty Clause No. 5 was a condition precedent to the recovery of TRANS-ASIA under the policy, the violation of which entitled PRUDENTIAL to rescind the contract under Sec. 74 of the Insurance Code. By way of a counterclaim,PRUDENTIAL sought a refund of P3,000,000.00, which it allegedly advanced to TRANS-ASIA by way of a loan withoutinterest and without prejudice to the final evaluation of the claim, including the amounts of P500,000.00, for surveyfees and P200,000.00, representing attorneys fees. Trial court ruled in favor of Prudential. It ruled that a determination of the parties liabilities hinged on whether TRANSASIA violated and breached the policy conditions on WARRANTED VESSEL CLASSED AND CLASS MAINTAINED. Itinterpreted the provision to mean that TRANS-ASIA is required to maintain the vessel at a certain class at all timespertinent during the life of the policy. According to the court a quo, TRANS-ASIA failed to prove compliance of theterms of the warranty, the violation thereof entitled PRUDENTIAL to rescind the contract. The court of appeals reversed the decision. It ruled that PRUDENTIAL, as the party asserting the non-compensability of the loss had the burden of proof to show that TRANS-ASIA breached the warranty, which burden it failed to discharge.P R U D E N T I A L c a n n o t r e l y o n t h e l a c k o f c e r t i f i c a t i o n t o t h e e f f e c t t h a t T R A N S - A S I A w a s C L A S S E D A N D C L A S S MAINTAINED as its sole basis for reaching the conclusion that the warranty was breached. It opined that the lack of acertification does not necessarily mean that the warranty was breached by TRANS-ASIA. Instead, it consideredPRUDENTIALs admission that at the time the insurance contract was entered into between the parties, the vessel wasproperly classed by Bureau Veritas, a classification society recognized by the industry. It similarly gave weight to thef a c t t h a t i t w a s t h e r e s p o n s i b i l i t y o f R i c h a r d s H o g g I n t e r n a t i o n a l ( P h i l s . ) I n c . , t h e a v e r a g e a d j u s t e r h i r e d b y PRUDENTIAL, to secure a copy of such certification to support its conclusion that mere absence of a certification doesnot warrant denial of TRANS-ASIAs claim under the insurance policy.Issue: WON Trans-Asia breached the warranty stated in the insurance policy, thus absolving Prudential from paying Trans-Asia. Ruling: No.Rationale:A s f o u n d b y t h e C o u r t o f A p p e a l s a n d a s s u p p o r t e d b y t h e r e c o r d s , Bureau Veritas is a classification societyrecognized in the marine industry. As it is undisputed that TRANS-ASIA was properly classed at the time the contract of insurance was entered into, thus , it becomes incumbent upon PRUDENTIAL to show evidence that the statusof TRANS-ASIA as being properly CLASSED by Bureau Veritas had shifted in violation of the warranty. Unfortunately, PRUDENTIAL failed to support the allegation. The lack of a certification in PRUDENTIALs records to the effect that TRANS-ASIAs "M/V Asia Korea" was CLASSED ANDCLASS MAINTAINED at the time of the occurrence of the fire cannot be tantamount to the conclusion that TRANS-ASIAin fact breached the warranty contained in the policy.It was likewise the responsibility of the average adjuster, Richards Hogg International (Phils.), Inc., to secure a copy of such certification, and

the alleged breach of TRANS-ASIA cannot be gleaned from the average adjusterssurvey report , or adjustment of particular average per "M/V Asia Korea" of the 25 October 1993 fire on board. The Supreme Court is not unmindful of the clear language of Sec. 74 of the Insurance Code which provides that ,"the violation of a material warranty, or other material provision of a policy on the part of either partythereto, entitles the other to rescind." It is generally accepted that "a warranty is a statement or promiseset forth in the policy, or by reference incorporated therein, the untruth or non-fulfillment of which inany respect, and without reference to whether the insurer was in fact prejudiced by such untruth or non-fulfillment, renders the policy voidable by the insurer." However, it is similarly indubitable that for the breach of a warranty to avoid a policy, the same must be dulys h o w n b y t h e p a r t y a l l e g i n g t h e s a m e . We cannot sustain an allegation that is unfounded. Consequently, PRUDENTIAL, not having shown that TRANS-ASIA breached the warranty condition, CLASSED AND CLASSMAINTAINED, it remains that TRANS-ASIA must be allowed to recover its rightful claims on the policy. Assuming arguendo that TRANS-ASIA violated the policy condition on WARRANTED VESSEL CLASSED AND CLASSMAINTAINED, PRUDENTIAL made a valid waiver of the same.PRUDENTIAL can be deemed to have made a valid waiver of TRANS-ASIAs breach of warranty as alleged. Becauseafter the loss, Prudential renewed the insurance policy of Trans-Asia for two (2) consecutive years, from noon of 01 July1994 to noon of 01 July 1995, and then again until noon of 01 July 1996. This renewal is deemed a waiver of anybreach of warranty.PRUDENTIAL, in renewing TRANS-ASIAs insurance policy for two consecutive years after the loss covered by Policy No.MH93/1363, was considered to have waived TRANS-ASIAs breach of the subject warranty, if any. Breach of a warrantyor of a condition renders the contract defeasible at the option of the insurer; but if he so elects, he may waive hisprivilege and power to rescind by the mere expression of an intention so to do. In that event his liability under thepolicy continues as before. There can be no clearer intention of the waiver of the alleged breach than the renewal of the policy insurance granted by PRUDENTIAL to TRANS-ASIA in MH94/1595 and MH95/1788, issued in the years 1994and 1995, respectively.