I. GENERAL PROVISIONS (Section 1) A. Origin of Insurance
B. Laws Governing Insurance in the Philippines
i. Insurance Code of 1978
ii. Civil Code (Articles 739, 2012, 2011, 2207)
iii. Special Laws
C. Insurance Contract (Section 2) i. Definition
ii. Elements iii. Characteristics
iv. Interpretation of Insurance Contracts Simeon del Rosario vs. The Equitable Insurance
and Casualty Co Inc. (1963) Facts:
On February 7, 1957, Equitable Insurance and Casualty Co., Inc., issued Personal Accident Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of Simeon, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of the insured.
The provisions of the insurance policy pertinent to the case are as follows:
Part I. Indemnity For Death
If the insured sustains any bodily injury which is effected solely through violent, external, visible and accidental means, and which shall result, independently of all other causes and within sixty (60) days from the occurrence thereof, in the Death of the Insured, the Company shall pay the amount set opposite such injury:
Section 1. Injury sustained other than those specified below unless excepted hereinafter. . . . P1,000.00
Section 2. Injury sustained by the wrecking or disablement of a railroad passenger car or street railway car in or on which the Insured is travelling as a farepaying passenger. . . P1,500.00
Part VI. Exceptions
This policy shall not cover disappearance of the Insured nor shall it cover Death, Disability, Hospital fees, or Loss of Time, caused to the insured:
. . . (h) By drowning except as a consequence of the wrecking or disablement in the Philippine waters of a passenger steam or motor vessel in which the Insured is travelling as a farepaying passenger; . . . .
A rider to the Policy contained the following: IV. DROWNING
It is hereby declared and agreed that exemption clause Letter (h) embodied in PART VI of the policy is hereby waived by the company, and to form a part of the provision covered by the policy.
A fire broke out in the motor launch ISLAMA. As a consequence of which, Francisco del Rosario and 33 others were forced to jump off the launch. This resulted in the death of Francisco and his beneficiary Remedios Jayme.
Equitable insurance paid Simeon del Rosario, father of Francisco Php1000 pursuant to Sec.1 of Part 1 of the policy. On the day of receipt, Atty. Francisco wrote Equitable acknowledging the receipt of Simeon of the amount of Php1000 but informed the company that the amount is incorrect as Simeon was entitled to Php1,500, under Sec.2 Part 1 of the policy.
Equitable referred the matter to the Insurance Commissioner who opined that the liability of the company is only Php1000. Thus, Equitable refused to pay. Subsequently, Atty. Francisco asked for Php3000 from Equitable. The company refused to pay. Hence a complaint for the recovery of the balance was instituted.
Issue:
How much should the indemnity be? Ruling:
The CFI ruled that:
On the face of the policy Exhibit "A" itself, death by drowning is a ground for recovery apart from the bodily injury because death by bodily injury is covered by Part I of the policy while death by drowning is covered by Part VI thereof. But while the policy mentions specific amounts that may be recovered for death for bodily injury, yet, there is not specific amount mentioned in the policy for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery thereunder. Since the defendant has bound itself to pay P1000.00 to P3,000.00 as indemnity for the death of the insured but the policy does not positively state any definite amount that may be recovered in case of death by drowning, there is an ambiguity in this respect in the policy, which ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to allow greater indemnity. Thus, del Rosario is entitled to Php3000. Since Equitable has already paid Php1000, a balance of Php2000 remains to be paid.
SC upheld the ruling of the CFI for it is supported by the generally accepted principles of insurance, which enunciate that where there is an ambiguity with respect to the terms and conditions of the policy, the same will be resolved against the one responsible thereof.
It should be recalled in this connection, that generally, the insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms and Conditions. The interpretation of obscure stipulations in a contract should not favor the party
who cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance company.
. . . . And so it has been generally held that the "terms in an insurance policy, which are ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and the reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by expert and legal advisers employed by, and acting exclusively in the interest of, the insurance company" (44 C.J.S. 1174). Calanoc v. Court of Appeals, et al., G.R. No. L-8151, Dec. 16, 1955.
. . . . Where two interpretations, equally fair, of languages used in an insurance policy may be made, that which allows the greater indemnity will prevail. (L'Engel v. Scotish Union & Nat. F. Ins. Co., 48 Fla. 82, 37 So. 462, 67 LRA 581 111 Am. St. Rep. 70, 5 Ann. Cas. 749).
At any event, the policy under consideration, covers death or disability by accidental means, and the appellant insurance company agreed to pay P1,000.00 to P3,000.00. is indemnity for death of the insured.
FIELDMEN’S INSURANCE CO. vs. VDA. DE SONGCO
FACTS:
Federico Songco owned a private jeepney. On September 15, 1960, he was induced by Fieldmen's insurance agent Benjamin Sambat to apply for a Common Carrier's Liability Insurance Policy covering his motor vehicle. He was issued a Common Carriers Accident Insurance Policy. On the next year, he renewed the policy by paying the annual premium. During the effectivity of the renewed policy, the insured vehicle collided with another car while being driven by Rodolfo Songco, a duly licensed driver and son of Federico (the vehicle owner). As a result, Federico Songco (father) and Rodolfo Songco (son) died, along with other passengers.
A claim was filed but was denied by the insurance company on the pretext that what was insured was a private vehicle and not a common carrier. During the trial, it was declared by a witness that when insurance agent Benjamin Sambat was inducing Songco to insure his vehicle, the latter butted in saying, “Our vehicle is a private vehicle and not for passengers.” But the agent replied: “Regardless of whether your vehicle was an owner-type or for passengers, it could still be insured because our company is not owned by the Government. And the Government has nothing to do with our company.”
The Court of Appeals rendered a decision in favor of the claimants. It held that where inequitable conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured. After Fieldmen's Insurance Co. had led the insured Songco to believe that he could qualify under the common carrier liability insurance policy, it could not, thereafter, be permitted to change its stand to the detriment of the heirs of the insured. The failure to apply the Doctrine of Estoppel in this case would result in a gross travesty of justice. ISSUE:
Whether or not the insurance claim is proper? RULING:
The fact that the insured owned a private vehicle, not a common carrier, was something which the company knew all along. In fact, it exerted the utmost pressure on the insured, a man of scant education, to enter into the contract of insurance. The Court of Appeals also held that since some of the conditions contained in the policy were impossible to comply with under the existing conditions at the time, the insurer is estopped from asserting breach of such conditions.
The Supreme Court, in affirming the decision of the Court of Appeals, took judicial notice of the fact that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared agreements that the weaker party may not change one whit, his participation in the agreement being reduced to the alternative of “take it or leave it” labelled since Raymond Saleilles as contracts by adherence (contrats d'adhesion), in contrast to those entered into by parties bargaining on an equal footing, such contracts (i.e. insurance policies & international bills of lading) obviously call for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses.
Citing the case of Qua Chee Gan vs. Law Union & Rock Insurance, "The contract of insurance is one of perfect good faith (uberima fides) not for the insured alone but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility."
Landicho vs. GSIS
[G.R. No. L-28866 March 17, 1972] FACTS:
On June 1, 1964, the GSIS issued in favor of Flaviano Landicho, a civil engineer of the Bureau of Public Works, stationed at Mamburao, Mindoro Occidental, optional additional life insurance policy No. OG-136107 in the sum of P7,900. xxx
Before the issuance of said policy, Landicho had filed an application, by filing and signing a printed form of the GSIS on the basis of which the policy was issued. Paragraph 7 of said application States:
7. xxx I hereby agree as follows: xxx c. That this application serves as a letter of authority to the Collecting Officer of our Office thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36, beginning the month of May, 1964, and every month thereafter until notice of its discontinuance shall have beenreceived from the System; . d. That the failure to deduct from my salary the month premiums shall not make the policy lapse, however, the premium account shall be considered as indebtedness which, I bind myself to pay the System; .
e. That my policy shall be made effective on the first day of the month next following the month the first premium is paid; provided, that it is not more ninety (90) days before or after the date of the medical examination, was conducted if required."
While still an employee of the Bureau of Public Works, Mr. Landicho died in an airplane crash on June 29, 1966. Mrs. Landicho, in her own behalf and that of her co-plaintiffs and minor children, Rafael J. and Maria Lourdes Eugenia, filed with the GSIS a claim for P15,800, as the double indemnity due under policy No. OG-136107. GSIS denied the claim, upon the ground that the policy had never been in force because, pursuant to subdivision (e) of the above-quoted paragraph 7 of the application, the policy "shall be ... effective on the first day of the month next following the month the first premium is paid," and no premium had ever been paid on said policy. The Lower Court decided in favor of the petitioner. GSIS appealed to the Supreme Court.
ISSUE:
WON the insurance policy in question has ever been in force, not a single premium having been paid thereon. RULING: Lower Court decision is sustained.
(T)he language, of subdivisions (c), (d) and (e) is such as to create an ambiguity that should be resolved against the party responsible therefor — defendant GSIS, as the party who prepared and furnished the application form — and in favor of the party misled thereby, the insured employee.
Indeed, our Civil Code provides:
The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 2
This is particularly true as regards insurance policies, in respect of which it is settled that the " "terms in an insurance policy, which are ambiguous, equivocal, or uncertain ... are to be construed strictly and most
strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where a forfeiture is involved" (29 Am. Jur., 181), and the reason for this rule is the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." (44 C.J.S., p. 1174.) 3.
The equitable and ethical considerations justifying the foregoing view are bolstered up by two (2) factors, namely:
(a) The aforementioned subdivision (c) states "that this application serves as a letter of authority to the Collecting Officer of our Office" — the Bureau of Public Works — "thru the GSIS to deduct from my salary the monthly premium in the amount of P33.36." No such deduction was made — and, consequently, not even the first premium "paid" — because the collecting officer of the Bureau of Public Works was not advised by the GSIS to make it (the deduction) pursuant to said authority. Surely, this omission of the GSIS should not inure to its benefit. .
(b) The GSIS had impliedly induced the insured to
believe that Policy No. OG-136107 was in force, he having been paid by the GSIS the dividends corresponding to said policy. Had the insured had the
slightest inkling that the latter was not, as yet, effective for non-payment of the first premium, he would have, in all probability, caused the same to be forthwith satisfied.
WHEREFORE, the decision appealed from should be, it is hereby affirmed, with costs against the defendant-appellant, Government Service Insurance System. It is so ordered. .
DELA CRUZ V. CAPITAL INS. & SURETY CO., INC. DEATH RESULTING FROM BOXING IS AN ACCIDENT – SINCE DEATH IS NOT A NATURAL OR PROBABLE RESULT OF BOXING.
Facts:
Eduardo de la Cruz, employed as a mucker in the Itogon-Suyoc Mines, Inc. in Baguio, was the holder of an accident insurance policy underwritten by the Capital Insurance & Surety Co., Inc., In connection with the celebration of the New Year, the Itogon-Suyoc Mines, Inc. sponsored a boxing contest for general entertainment wherein the insured Eduardo de la Cruz, a non-professional boxer participated. In the course of his bout with another person, likewise a non-professional, of the same height, weight, and size,
Eduardo slipped and was hit by his opponent on the left part of the back of the head, causing Eduardo to fall, with his head hitting the rope of the ring. He was brought to the Baguio General Hospital where he expired the the following day. The cause of death was reported as hemorrhage, intracranial, left.
Simon de la Cruz, the father of the insured and who was named beneficiary under the policy, thereupon filed a claim with the insurance company for payment of the indemnity under the insurance policy
Defendant insurer set up the defense that the death of the insured, caused by his participation in a boxing contest, was not accidental and, therefore, not covered by insurance.
Issue:
Whether the death of Eduardo was accidental since he entered in the boxing contest voluntarily.
Ruling:
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.
It may be mentioned in this connection, that the tendency of court decisions in the United States in the recent years is to eliminate the fine distinction between the terms "accidental" and "accidental means" and to consider them as legally synonymous.
The generally accepted rule is that, death or injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except the death or injury. 3 There is no accident when a deliberate act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. 4 In other words, where the death or injury is not the natural or probable result of the insured's voluntary act which produces the injury, the resulting death is within the protection of policies insuring against the death or injury from accident. In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. Without this unfortunate incident, that is, the unintentional slipping of the deceased, perhaps he could not have received that
blow in the head and would not have died. The fact that boxing is attended with some risks of external injuries does not make any injuries received in the course of the game not accidental.
-Ty
New Life Enterprises vs Court of Appeals By: Yin Oliveros
FACTS:
Julian Sy and Jose Sy formed a partnership under the business name of New Life Enterprises. They were holding their business in a two-storey building in Lucena City.
Julian Sy insured the stocks in trade of New Life Enterprises under three insurance companies. INSURANCE COMPANY TYPE OF INSURANCE AMOUNT Western Guaranty Corporation Fire Insurance Policy - This policy was renewed 350, 000. 00 Reliance Surety and Insurance Co., Inc. Fire Insurance Policy This policy was also renewed. 300, 000. 00-
There was an additional insurance issued in the amount of 700, 000. 00 Equitable Insurance Corporation Fire Insurance Policy 200, 000. 00 TOTAL: 1, 550, 000. 00 The building occupied by New Life Enterpriseswas gutted by fire caused by a faulty electrical wiring. According to the plaintiffs, the stocks in trade were inside said building and were thus burned.
Julian Sy, together with an agent of Reliance Insurance, filed his claim. To support his claim, he submitted a fire clearance, the insurance policies and the inventory of stocks. He further testified that the three insurance companies are sister companies, and as a matter of fact when he was following-up his claim with Equitable Insurance, the Claims Manager told him to go first to Reliance Insurance and if said company agrees to pay, they would also pay. Ultimately, the three insurance companies denied plaintiffs' claim for payment due to BREACH OF POLICY CONDITIONS.
Reliance Surety and Insurance Company claimed that plaintiff violated Policy Condition No. "3" which requires the insured to give notice of any insurance or insurances already effected covering the stocks in trade.
The Trial Court ruled in favor of the plaintiff that was reversed by the Court of Appeals. ISSUE: Whether or not the plaintiff incurred a breach in the policy conditions?
RULING:
The Supreme Court ruled in favor of the insurance companies.
The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other insurance and its particulars that he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents is not the "notice" that would estop the insurers from denying the claim.
Thus, it points out that while petitioner Julian Sy claimed that he had informed insurance agent Alvarez regarding the co-insurance on the property, he contradicted himself by inexplicably claiming that he had not read the terms of the policies.
Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. Courts are not allowed to make contracts for the parties; rather, they will intervene only when the terms of the policy are ambiguous, equivocal, or uncertain. The parties must abide by the terms of the contract because such terms constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the insured's right of recovery from the insurer.
While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer company, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. Moreover, obligations arisingfrom contracts have the force of law between the contracting parties and should be complied with in good faith.
It was incumbent upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of him considering that he has been a businessperson since 1965. Furthermore, the contract concerns indemnity in case of loss in his moneymaking trade of which he should have been aware as it was precisely the reason for his procuring the insurance.
v. What constitutes doing an insurance business
D. Perfection of the Contract of Insurance
a. Offer and
Acceptance/Consensuality (1) Delay in Acceptance
(2) Delivery of Policy II. CONTRACT OF INSURANCE
A. What may be insured (Sections 3, 4 and 5)
B. Parties to the Contract (Sections 6, 7, 8 and 9)
i. Who may be an insurer ii. Who may be insured
iii. Rules on insurance by mortgagor or mortgagee
iv. Transfer of insurance from mortgagor to mortgagee -Filipinas -Geagonio -PNB PALILEO v. COSIO [G.R. No. L-7667 November 28, 1955] FACTS:
On Dec. 18, 1951, Palileo obtained from Cosio a loan in the sum of 12,000. Pursuant to their agreement, Palileo paid to Cosio as interest on the loan a total of P2,250 corresponding to 9 mos from Dec 18, 1951, on the basis of P250 a month, which is more than the maximum interest allowed by law. To secure the payment of the aforesaid loan, defendant required plaintiff to sign a a document known as “Conditional Sale of Residential Bldg” purporting to convey to defendant, with right to repurchase, a two-story building of strong materials belonging to plaintiff. This document did not express the true intention of the parties, which was merely to place said property as security for the payment of the loan. After the execution of the document, defendant insured the building against fire with the Associated Insurance & Surety Co., Inc. for the sum of P15000, the insurance policy having been issued in the name of defendant.
The building was partly destroyed by fire and, after proper demand, defendant collected from the insurance company an indemnity of P13,107. Plaintiff demanded from defendant that she be credited with the necessary amount to pay her obligation out of the insurance proceeds but defendant refused to do so. Upon these facts, the trial court held that the defendant should credit the sum of P13,107 received by him from the Associated Insurance & Surety Co., Inc. to the payment of plaintiff’s obligation in the sum of P12000, thus considering the agreement fully paid and leaving a balance of P1107 from the insurance collected by the defendant; and since plaintiff had paid to defendant P2250 for 9 mos for interest which exceeds the 12 percent per annum legal interest (P1440 for one year), plaintiff overpaid P810, defendant should refund plaintiff the total of P1107 plus P810 and to pay the costs.
ISSUE:
WON the “trial court is justified in considering the obligation of plaintiff fully compensated by the insurance amount and in ordering defendant to refund to plaintiff the sum of P1107 representing the difference of the loan of 12K from the sum of P13107 collected by defendant from insurance notwithstanding the fact that it was proven that the insurance was taken for the benefit of the mortgagor?”
HELD:
SC modified the judgment of the lower court as follows: (1) the transaction had between the plaintiff and defendant was merely an equitable mortgage intended to secure the payment of the loan of 12K; (2) that the proceeds of the insurance amounting to P13, 107 was properly collected by defendant who is not required to account for it to the plaintiff; (3) that the collection of said insurance proceeds shall not be deemed to have compensated the obligation of the plaintiff to the defendant, but bars the latter from claiming its payment from the former; and (4) defendant shall pay to the plaintiff the sum of P810 representing the overpayment made by plaintiff by way of interest on the loan.
The rule is that “where a mortgagee, independently of the mortgagor, insures the mortgaged property in his own name and for his own interest, he is entitled to the insurance proceeds in case of loss, but in such
case, he is not allowed to retain his claim against the mortgagor, but is passed by subrogation to the insurer to the extent of the money paid”. Or, stated in another
way, “the mortgagee may insure his interest in the property independently of the mortgagor. In that event, upon the destruction of the property the insurance money paid to the mortgagee will not inure
to the benefit of the mortgagor, and the amount due
under the mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain his claim against the mortgagor, but it passes by subrogation to
the insurer, to the extent of the insurance money paid”.
“The general rule and the weight of authority is, that the insurer is thereupon subrogated to the rights of the mortgagee under the mortgage. This is put upon the analogy of the situation of the insurer to that of a surety.”
The correct solution, contrary to the trial court’s ruling, should be that the proceeds of the insurance should be delivered to the defendant but that her claim against the plaintiff should be considered assigned to the insurance company who is deemed subrogated to the rights of the defendant to the extent of the money paid as indemnity.
C. Insurable Interest
i. Insurable Interest in life and health (Section 10)
El Oriente Fabrica de Tabacos, Inc. vs. Juan Posadas, Collector of Internal Revenue
[G.R. No. 34774, September 21, 1931] Facts:
Insurer: Manufacturers Life Insurance Co., of Toronto, Canada, thru its local agent E.E. Elser
Insured: A. Velhagen (manager of El Oriente) Beneficiary: El Oriente Fabrica de Tabacos, Inc.
El Oriente, in order to protect itself against the loss that it might suffer by reason of the death of its manager, whose death would be a serious loss to El Oriente procured from the Insurer an insurance policy on the life of the said manager for the sum of 50,000 USD with El Oriente as the designated sole beneficiary. The insured has no interest or participation in the proceeds of said life insurance policy.
El Oriente charged as expenses of its business all the said premiums and deducted the same from its gross incomes as reported in its annual income tax returns, which deductions were allowed by Posadas (Collector of Internal Revenue) upon showing by El Oriente that such premiums were legitimate expenses of the business.
Upon the death of the manager, El Oriente received all the proceeds of the life insurance policy together with the interest and the dividends accruing thereon, aggregating P104,957.88. Posadas assessed and levied the sum of P3,148.74 as income tax on the proceeds of the insurance policy, which was paid by El Oriente under protest. El Oriente claiming exemption under Section 4 of the Income Tax Law.
Issue:
Whether or not the proceeds of insurance taken by a corporation on the life of an important official to indemnify it against loss in case of his death, are
taxable as income under the Philippine Income Tax Law?
Ruling:
The Income Tax Law for the Philippines is Act No. 2833, as amended. In chapter I On Individuals, is to be found section 4 which provides that, "The following incomes shall be exempt from the provisions of this law: (a) The proceeds of life insurance policies paid to beneficiaries upon the death of the insured ... ." The Chapter on Corporations does not provide as above. It is certain that the proceeds of life insurance policies are exempt. It is not so certain that the proceeds of life insurance policies paid to corporate beneficiaries upon the death of the insured are likewise exempt.
The situation will be better elucidated by a brief reference to laws on the same subject in the United States. The Income Tax Law of 1916 extended to the Philippine Legislature, when it came to enact Act No. 2833, to copy the American statute. Subsequently, the Congress of the United States enacted its Income Tax Law of 1919, in which certain doubtful subjects were clarified. Thus, as to the point before us, it was made clear, when not only in the part of the law concerning individuals were exemptions provided for beneficiaries, but also in the part concerning corporations, specific reference was made to the exemptions in favor of individuals, thereby making the same applicable to corporations. This was authoritatively pointed out and decided by the United States Supreme Court in the case of United States vs. Supplee-Biddle Hardware Co. ( [1924], 265 U.S., 189), which involved facts quite similar to those before us.
To quote the exact words in the cited case of Chief Justice Taft delivering the opinion of the court:
It is earnestly pressed upon us that proceeds of life insurance paid on the death of the insured are in fact capital, and cannot be taxed as income … that proceeds of a life insurance policy paid on the death of the insured are not usually classed as income.
Considering, therefore, the purport of the stipulated facts, considering the uncertainty of Philippine law, and considering the lack of express legislative intention to tax the proceeds of life insurance policies paid to corporate beneficiaries, particularly when in the exemption in favor of individual beneficiaries in the chapter on this subject, the clause is inserted "exempt from the provisions of this law," we deem it reasonable to hold the proceeds of the life insurance policy in question as representing an indemnity and not taxable income.
The foregoing pronouncement will result in the judgment being reversed and in another judgment being rendered in favor of El Oriente.
ii. Rules on change of beneficiary (Section 11)
Digested by: Anne
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs.
CARPONIA T. EBRADO and PASCUALA VDA. DE EBRADO
[G.R. No. L-44059 October 28, 1977] Facts of the Case:
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same amount Buenaventura C. Ebrado designated Carpponia T. Ebrado as the revocable beneficiary in his policy. He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died when he was hit by a failing branch of a tree. As the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the coverage in the total amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27.
Carponia T. Ebrado filed with the insurer a claim for the proceeds of the Policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29, 1970.
After the issues have been joined, a pre-trial conference was held. In the pre-trial conference the parties submits evidence and make admissions.xxx; 8) that the beneficiary designated by the insured in the policy is Carponia Ebrado and the insured made reservation to change the beneficiary but although the insured made the option to change the beneficiary, same was never changed up to the time of his death and the wife did not have any opportunity to write the company that there was reservation to change the designation of the parties it agreed that a decision be rendered based on and stipulation of facts as to who among the two claimants is entitled to the policy. On September 25, 1972, the trial court rendered judgment declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured
Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. The trial court held that.It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal conviction for adultery or concubinage is not essential in order to establish the disqualification mentioned therein. Neither is it also necessary that a finding of such guilt or commission of those acts be made in a separate independent action brought for the purpose. The guilt of the donee (beneficiary) may be proved by preponderance of evidence in the same proceeding (the action brought to declare the nullity of the donation).
Since it is agreed in their stipulation during the pre-trial that the deceased insured and defendant Carponia T. Ebrado were living together as husband and wife without being legally married and that the marriage of the insured with the other defendant Pascuala Vda. de Ebrado was valid and still existing at the time the insurance in question was purchased there is no question that defendant Carponia T. Ebrado is disqualified from becoming the beneficiary of the policy in question and as such she is not entitled to the proceeds of the insurance upon the death of the insured.
Issue of the Case:
Can a common-law wife named as beneficiary in the life insurance policy of a legally married man claim the proceeds thereof in case of death of the latter?
Ruling:
The SC affirmed the decision of the trial court.
under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the person who cannot make a donation to him. Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides: The following donations shall be void:
1. Those made between persons who were guilty of
adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense, in consideration thereof;
3. Those made to a public officer or his wife, descendants or ascendants by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be
proved by preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On the contrary, the law plainly states that the guilt of the party may be proved "in the same acting for
declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded.
In the caw before Us, the requisite proof of common-law relationship between the insured and the beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. It case agreed upon and stipulated therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children; that during his lifetime, the deceased insured was living with his common-law wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing less than judicial admissions which, as a consequence, no longer require proof and cannot be contradicted. A fortiori, on the basis of these admissions, a judgment may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary. In fact, in that pretrial, the parties even agreed "that a decision be rendered based on this agreement and stipulation of facts as to who among the two claimants is entitled to the policy." ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the estate of the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.
SOUTHERN LUZON EMPLOYEE’S ASSN. V. GOLPEO Digested by Margaret Frances Aparte
Note:
A common law wife of the insured who has a legal wife is disqualified as beneficiary. It is not required that there be a previous conviction for adultery or concubinage for the prohibition to apply. However, in an earlier case (such as the present case), the common-law wife designated prevailed over the legal wife because the case took place while the Old Civil Code was still applicable, under which there was no provision similar to Art.2012.
FACTS:
Southern Luzon Employees' Association is composed of laborers and employees of Laguna tayabas Bus Co., and Batangas Transportation Company, and one of its purposes is mutual aid of its members and their defendants in case of death.
Roman A. Concepcion was a member until his death on December 13, 1950. In the form required by the
association to be accomplished by its members, with reference to the death benefit, Roman A. Concepcion listed as his beneficiaries Aquilina Maloles, Roman M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and Robin M. Concepcion.
After the death of Roman A. Concepcion, the association was able to collect voluntary contributions from its members amounting to P2,505. Three sets of claimants presented themselves, namely, (1) Juanita Golpeo, legal wife of Roman A. Concepcion, and her children; (2) Aquilina Maloles, common law wife of Roman A. Concepcion, and her children, named beneficiaries by the deceased; and (3) Elsie Hicban, another common law wife of Roman A. Concepcion, and her child.
The court rendered a decision, declaring the defendants Aquiliana Malolos and her children the sole beneficiaries of the sum of P2,505.00 and ordering the plaintiff to deliver said amount to them.
ISSUE:
WHETHER OR NOT THE COURT COMMITED ERROR IN DESIGNATING A COMMON LAW WIFE OF AN INSURED AS THE BENEFICIARY INSTEAD OF THE LEGAL WIFE. Remember: This case took place while the Old Civil Code was still applicable.
HELD: Judgment affirmed.
The decision is based mainly on the theory that the contract between the plaintiff and the deceased Roman A. Concepcion partook of the nature of an insurance and that, therefore, the amount in question belonged exclusively to the beneficiaries, invoking the following pronouncements of this Court in the case of Del Val vs.
Del Val, 29 Phil., 534:
With the finding of the trial court that the proceeds of the life-insurance policy belongs exclusively to the defendant as his individual and separate property, we agree. That the proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate of the person whose life was insured, and that such proceeds are the separate and individual property of the beneficiary, and not of the heirs of the person whose life was insured, is the doctrine in America. We believe that the same doctrine obtains in these Islands by virtue of section 428 of the Code of Commerce, which reads:
"The amounts which the underwriter must deliver to the person insured, in fulfillment of the contract, shall be the property creditors of any kind whatsoever of the person who effected the insurance in favor of the formers."
AS TO THE CONTENTION OF THE COUNSEL’S PLAINTIFF THAT THE PROCEEDS OF THE INSURANCE POLICY WERE DONATION OR GIFT MADE BY THE FATHER DURING HIS LIFETIME, SUCH THAT UNDER
THE CIVIL CODE ARE NOT BETTERMENTS AND SHALL BE CONSIDERED AS PART OF THE LEGAL PORTION. The court disagrees with this contention. The contract of life insurance is a special contract and the destination of the proceeds thereof is determined by special laws which deal exclusively with that subject. The Civil Code has no provisions which relate directly and specifically to life-insurance contract or to the destination of life-insurance proceeds. That subject is regulate exclusively by the Code of Commerce which provides for the terms of the contract, the relations of the parties and the destination of the proceeds of the policy.
Digested by: Kwin Asunto
SOCIAL SECURITY SYSTEM vs. CANDELARIA D. DAVAC
[G.R. No. L-21642. July 30, 1966.] Facts:
This is an appeal from the resolution of the Social Security Commission declaring respondent Candelaria Davac as the person entitled to receive the death benefits payable for the death of Petronilo Davac. The late Petronilo Davac, a former employee of Lianga Bay Logging Co. Inc. became a member of the Social Security System (SSS for short) on September 1, 1957. He designated respondent Candelaria Davac as his beneficiary and indicated his relationship to her as that of "wife". When he died, each of the respondents (Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the SSS. It appears from their respective claims and the documents submitted in support thereof, that the deceased contracted two marriages, the first, with claimant Lourdes Tuplano on August 29, 1946, who bore him a child, Romeo Davac and the second, with claimant Candelaria Davac on January 18, 1949, with whom he had a minor daughter, Elizabeth Davac. Due to their conflicting claims, the processing thereof was held in abeyance, whereupon the SSS filed this petition praying that respondents be required to interplead and litigate between themselves their conflicting claims over the death benefits in question.
Issue:
Whether or not the Social Security Commission acted correctly in declaring respondent Candelaria Davac as the person entitled to receive the death benefits in question.
Held: yes.
The benefit receivable under the Social Security Act is in the nature of a special privilege or an arrangement secured by the law, pursuant to the policy of the State to provide social security to the workingmen. The amounts that may thus be received cannot be considered as property earned by the member during
his lifetime, and, hence, do not form part of the properties of the conjugal partnership or of the estate of the said member. They are disbursed from a public special fund created by Congress pursuant to the declared policy of the Republic "to develop, establish gradually and perfect a social security system which . . . shall provide protection against the hazards of disability, sickness, old age and death." (Section 1, Republic Act No. 1792.) Consequently, if there is a named beneficiary and the designation is not invalid, it is not the heirs of the employee who are entitled to receive the benefits, unless they are the designated beneficiaries themselves. It is only when there is no designated beneficiary or when the designation is void that the laws of succession become applicable. The Social Security Act is not a law of succession.
Digested by: Rachel R. Aying
RE: CLAIMS FOR BENEFITS OF THE HEIRS OF THE LATE MARIO V. CHANLIONGCO, FIDELA B CHANLIONGCO, MARIO B. CHANLIONGCO II, MA.
ANGELINA C. BUENAVENTURA and MARIO C. CHANLIONGCO, JR.
Facts:
This matter refers to the claims for retirement benefits filed by the heirs of the late ATTY. MARIO V. CHANLIONGCO an attorney of the Court, it is in the records that at the time of his death, Atty. Chanliongco was more than 63 years of age, with more than 38 years of service in the government. He did not have any pending criminal administrative or not case against him, neither did he have any money or property accountability. The highest salary he received was P18,700.00 per annum.
Aside from his widow, Dra. Fidel B. Chanliongco and an only Intimate Mario it appears that there are other deceased to namely, Mrs. Angelina C. , Jr., both born out of wedlock to Angelina R Crespo, and duly recognized by the deceased. Except Mario, Jr., who is only 17 years of age, all the claimants are of legal age. According to law, the benefits accruing to the deceased consist of: (1) retirement benefits; (2) money value of terminal leave; (3) life insurance and (4) refund of retirement premium.
From the records now before US, it appears that the GSIS had already the release the life insurance proceeds; and the refund of rent to the claimants. RULING:
The record also shows that the late Atty. Chanliongco died ab intestato and that he filed or over to state in his application for membership with the GSIS the beneficiary or benefits of his retirement benefits, should he die before retirement. Hence, the retirement benefits shall accrue to his estate and will be distributed among his Legal heirs in with the benefits on intestate s , as in the caw of a fife if no benefit is
named in the policy (Vda. de vs. GSIS, L-28093, Jan. 30, 1971, 37 SCRA 315, 325).
AQUINO, J., concurring:
There may be instances, like the instant case, where in legal succession the estate is distributed according to the rules on legitime without applying the rules on intestate ion. The reason is that sometimes the estate is not even sufficient to satisfy the legitimes. The legitimes of the primary compulsory heirs, like a child or descendant, should first be satisfied.
In this case the decedent's legal heirs are his legitimate child, his widow and two intimate children. His estate is partitioned among those heirs by giving them their respective time.
The legitimate child gets one-half of the estate as his legitime which is regarded as his share as a legal heir Art 888, Civil Code).
The widow's legitime is one-fourth of the estate. That represents also her share as a legal heir. The remaining one-fourth of the estate, which is the free portion, goes to the illegitimate children in equal shares, as their legitime, Pursuant to the provision that 'the legitimate of the illegitimate children shall be taken from the portion of the estate at the free disposal of the testator, provoked that in no case shall the total legitime of such illegitimate children exceed that free portion, and that the legitime of the surviving spouse must first be fully satisfied.
The rule in Santillon vs. Miranda, L-19281, June 30, 1965, 14 SCRA 563, that when the surviving spouse concurs with only one legitimate child, the spouse is entitled to one-half of the estate and the gets the other half, t to article 996 of the Civil Code, does not apply to the case because here intimate children concur with the surviving spouse and the intimate child.
In this case, to divide the estate between the surviving spouse and the ligitemate child that deprive the illegitimate children of their legitime. So, the decendent's estate is distributed in the proportion of 1/2 for the legitimate child, 1/4 for the widow and 1/8 each for the two illegitimate children.
Also not of possible application to this case is the rule that the legal of an acknowledge natural child is 1/2 of the legitime of the legitimate child of that the of the spurious child is 2/5 of that of the of the intimate child or 4/5 of that of that of the acknowledged natural child.
The rule be applied because the estate is not sufficient to cover legitimes of all compulsory heirs. That is one of the flaws of the law of succession. A situation as in the instant case may arise where the illegitimate children get less than their legitime. With respect to the decendant's unpaid salary and the money value of
his leave, the same are conjugal properties because of the rule that property "obtained by the or work, or as salary of the spouses, or either of them", is conjugal in character.
iii. Forfeiture of beneficiary’s interest (Section 12)
iv. Insurable Interest in property (Sections 13, 14, 15, 16, 17, 18)
TRADERS INSURANCE & SURETY CO vs. JUAN GOLANGCO Y OTRA
[Sep 21, 1954, En Banc G.R. No. L-6442]
(I really had a hard time deciphering the facts of this case as it was written in Spanish ( facts from the lower court as adopted by SC), but I assure you I have full faith that this digest is as accurate corresponding to the full text).
Facts:
Tomas Lianco and the Archbishop ( no name indicated) entered into a contract of lease on a parcel of land owned by church . As lessee, Lianco erected a building on the leased portion of the church’s land. Lianco later transferred ownership of this building to Kaw Eng Si, who later transferred the same to Golangco. This transfers by Lianco of his right to lease and the building’ownership were without consent of the Archbishop. The Archbishop filed an ejectment case against Lianco, who appears to be occupants of the premises building with others paying rent to Golangco. This right of Golangco to receive rent on the building was judicially recognized in a case decided between Lianco and some others occupying the premises pursuant to a compromise agreement. At the moment, the Archbishop did not exercise his option to question Golangco’s rights as lessee, as the transfer by Lianco was without the Archbishop’s consent. On April 7, 1949,Golangco applied for fire insurance with Trader’s Insurance and Surety Co. of which Golangco was issued fire insurance policy stating “that all insurance covered under said policy, includes the 'rent or other subject matter of insurance in respect of or in connection with any building or any property contained in any building'. On June 5, 1949, fire ravaged the building premises pursuant of which Golangco requested Trader’s Insurance to pay the insurance amount of 10,000 including the amount of rent P1,100 monthly. Trader’s insurance refused to pay the insurance as pertaining to the rent averring that Golangco has no insurable interest therein.
Issue:
WON Golangco has insurable interest ( in the property) on the rent of the building premises which may lawfully/validly be subject of insurance?
Ruling:
Yes, Sec. 13 of the Insurance Code provides that “Every interest in the 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, is an insurable interest.” By virtue of the contract between Tomas B. Lianco and the Archbishop, Lianco erected the building of which the premises in question form part and became owner thereof . He transferred the ownership of the premises in question to kaw Eng Si, who in turn transferred it to plaintiff Juan Golangco .Lianco and the actual occupant of the premises acknowledged plaintiff's right to collect rentals thereon in a compromise agreement which was incorporated in a judicial judgment. Both at the time of the issuance of the policy and at the time of the fire, plaintiff Golangco was in legal possession of the premises, collecting rentals from its occupant. It seems plain that if the premises were destroyed - as they were - by fire, Golangco would be, as he was, directly damnified thereby; and hence he had an insurable interest therein (section 13, Insurance Law).
It is to be noted that the policy so worded indicates that the fire insurance policy includes 'rent or other subject matter of insurance in respect of or in connection with any building or any property contained in any building'. The argument of Trader’s Insurance that a policy of insurance must specify the interest of the insured in the property insured, if he is not the absolute owner thereof, is not meritorious because it was the Trader’s, not Golangco, who prepared that policy, and it cannot take advantage of its own acts to plaintiff's detriment; and, in any case, this provision was substantially complied with by Golangco when he made a full and clear statement of his interests to Trader's manager.
The contract between Lianco and the Archbishop only forbade Lianco from transferring 'his rights as LESSEE but the contracts Lianco made in favor of Kaw Eng Si and plaintiff Golangco did not transfer such rights; and hence no written consent thereto was necessary. At worst, the contract would be voidable, but not a void contract, at the option of the Archbishop; but this would not deprive Golangco of his insurable interest until such option were exercised; and it does not appear that it was ever exercised.
The ejectment case filed by the Archbishop against Lianco did not remove nor destroy plaintiff's insurable interest: first, because plaintiff was not a party thereto and cannot be bound thereby; and second, because the judgment of the Municipal Court, at least as late as February 14, 1950, had not been executed so far as possession of the premises were concerned; so that, as far as plaintiff Golangco was concerned, his right to the premises and to the rentals thereon continued to exist on June 5, 1949 when the fire took place."
FILIPINO MERCHANTS INSURANCE CO., INC., vs. COURT OF APPEALS and CHOA TIEK SENG
FACTS:
1. CHOA TIEK SENG was the consignee of the shipment of fishmeal loaded on board a vessel and unloaded at the Port of Manila. The goods were described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each. He insured said shipment with FILIPINO MERCHANTS insurance company from Bangkok, Thailand to Manila against all risks .
2. When the fishmeal were unloaded from the ship at Manila unto the arrastre contractor and surveyor, it was ascertained and certified that in such discharge 105 bags were in bad order condition. The extent of shortage or loss totalling 227 bags amounting to 12,148 kilos was noted in the Bad Order Certificate.
3. The consignee made a formal claim against the Insurance Company for P51,568.62. The latter refused to pay the claim so the consignee brought an action against the insurance company.
4. The trial court rendered judgment, which was affirmed by the Court of appeals, in favor of the consignee, ordering the insurance company to pay the former the sum of P51,568.62. 5. The insurance company claimed that under the
"all risks" clause of the marine insurance policy it is not liable to the consignee for the partial loss of the cargo because of the absence of proof of some fortuitous event, casualty, or accidental cause to which the loss is attributable. The insurance company argues that the consignee has the burden to adduce evidence, which it failed to do, that the alleged loss to the cargo was due to a fortuitous event. To put at rest all doubts on the matter, the Court discussed on the issue of lack of insurable interest, despite being raised by the insurance company for the first time on appeal.
ISSUES:
1. Whether or not the consignee had an insurable interest
2. Whether or not there must be some fortuitous event for the claim to be compensable under “all risks” marine insurance policy
RULING:
1. Yes, the consignee had an insurable interest in said goods which may be a valid subject of a contract of insurance.
His interest over the goods is based on the perfected
contract of sale. The perfected contract of sale
between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale.
Section 13 of the Insurance Code defines insurable interest in property 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. “
In principle, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property.
Insurable interest in property may consist in: (a) an existing interest;
(b) an inchoate interest founded on an existing interest; or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance.
2. No. An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. The term "all risks" cannot be given a strained technical meaning, to the effect that it extends to all damages/losses suffered by the insured cargo except: (a) loss or damage or expense proximately caused by delay, and
(b) loss or damage or expense proximately caused by the inherent vice or nature of the subject matter insured.
Purpose of “All Risks” insurance
The very purpose of ”all risks" insurance is to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property.
An "all asks" policy has been evolved to grant greater protection than that afforded by the "perils clause," in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the ship; it is written against all losses, that is, attributable to external causes.
Burden of Proof
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation.
The insured only has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when
unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage.
The burden of the insured, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to prove that the loss was due to excepted perils. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance.
As held in Paris-Manila Perfumery Co. vs. Phoenix
Assurance Co., Ltd. “ the basic rule is that the
insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof, the company is liable.”
Special type of insurance
Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage. The insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated, and covers all losses except such as arise from the fraud of the insured.
In the present case, there being no showing that the loss was caused by any of the excepted perils i.e. delay or the inherent vice or nature of the subject matter insured, the insurer is liable under the policy.
v. When insurable interest must exist (Section 19)
Digested by: Birondo
Tai Tong Chuache & Co. v. Insurance Commission Facts:
Complainants acquired a parcel of land and a building they assumed the mortgage of the latter in favor of SSS, which was insured with respondent SSS Accredited Group of Insurers. On April 19, 1975, Azucena Palomo obtained a loan from petitioner Tai Tong Chuache Inc. securing it with a mortgage was executed over the land and the building in favor of petitioner. On April 25, 1975, Arsenio Chua, petitioner’s representative insured the latter's interest with Travellers Multi-Indemnity Corporation. On June 11, 1975, Pedro Palomo secured fire insurance covering the building with respondent Zenith Insurance Corporation and on July 16, 1975, another fire insurance was procured from respondent Philippine British Assurance Company, covering the same building and the contents thereof. However, on July
31, 1975, the building and the contents were totally razed by fire.
Respondents, Zenith Insurance, Phil. British Assurance and SSS Accredited Group of Insurers, paid their corresponding shares of the loss. Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but the same was refused. Hence, complainants demanded from the other three respondents the balance of each share in the loss but the same was also refused. Petitioner then filed a complaint in intervention claiming the proceeds of the fire insurance policy issued by respondent Travellers Multi-Indemnity but the latter alleged that it is not entitled to indemnity for lack of insurable interest before the loss of the insured premises.
Issue:
Whether or not petitioner has an insurable interest. Ruling:
Respondent insurance company did not assail the validity of the insurance policy taken out by petitioner over the mortgaged property. Neither did it deny that the said property was totally razed by fire within the period covered by the insurance. Respondent advanced an affirmative defense of lack of insurable interest on the part of the petitioner that before the occurrence of the peril insured against the Palomos had already paid their credit due the petitioner. Respondent having admitted the material allegations in the complaint has the burden of proof to show that petitioner has no insurable interest over the insured property at the time the contingency took place. Upon that point, there is a failure of proof. Respondent exerted no effort to present any evidence to substantiate its claim, while petitioner did. For said respondent's failure, the decision must be adverse to it.
However, respondent Insurance Commission absolved respondent insurance company from liability on the basis of the certification issued by the then Court of First Instance of Davao, Branch II, that in a certain civil action against the Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong Chuache. From said evidence respondent commission inferred that the credit extended by herein petitioner to the Palomos secured by the insured property must have been paid. Such is a glaring error which cannot be sanctioned. Respondent Commission's findings are based upon a mere inference.
The record of the case shows that the petitioner to support its claim for the insurance proceeds offered as evidence the contract of mortgage which has not been cancelled nor released. It has been held in a long line of cases that when the creditor is in possession of the document of credit, he need not prove non-payment for it is presumed. The validity of the insurance policy taken by petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not yet been paid was