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G.R. No. L-22375 July 18, 1975
THE CAPITAL INSURANCE & SURETY CO., INC., petitioner, vs. PLASTIC ERA CO., INC., AND COURT OF
APPEALS, respondents.
FACTS:
On December 17, 1960, Capital Insurance (insurer) delivered to the Plastic Era (insured) its open Fire
Policy No. 22760 wherein the former undertook to insure the latter's building, equipment, raw materials,
products and accessories located at Sheridan Street, Mandaluyong, Rizal. The term of the policy (face
value = 100,000) is December 15, 1960 to December 15, 1961 1 oclock in the afternoon.

When the policy was delivered, Plastic Era failed to pay the corresponding insurance premium. However,
through its duly authorized representative, it executed the an acknowledgment receipt.
On January 8, 1961, in partial payment of the insurance premium, Plastic Era delivered to Capital

Insurance, a check for the amount of P1,000.00 postdated January 16, 1961 payable to the order of the
latter and drawn against the Bank of America. However, Capital Insurance tried to deposit the check only
on February 20, 1961 and the same was dishonored by the bank for lack of funds. The records show that
as of January 19, 1961 Plastic Era had a balance of P1,193.41 with the Bank of America.
On January 18, 1961 or two days after the insurance premium became due, at about 4:00 to 5:00 o'clock
in the morning, the property insured by Plastic Era was destroyed by fire.
The loss and/or damage suffered by Plastic Era was estimated by the Manila Adjustment Company to be
P283,875. However, according to the records the same property has been insured by Plastic Era with the
Philamgen Insurance Company for P200,000.00.
In less than a month Plastic Era demanded from Capital Insurance the payment of the sum of P100,000.00
as indemnity for the loss of the insured property under Policy No. 22760 but the latter refused for the
reason that, among others, Plastic Era failed to pay the insurance premium.

Thus, Plastic Era filed a complaint against Capital Insurance for the recovery of the sum.

DECISION OF LOWER COURTS:
(1) Court of First Instance Manila: pay Plastic Era 88,325.63.
(2) Court of Appeals: affirmed CFI.

ISSUE:
Whether or not a contract of insurance has been duly perfected between the petitioner, Capital Insurance,
and respondent Plastic Era

RULING:
Yes, the contract has been perfected.

Capital Insurance accepted the promise of Plastic Era to pay the insurance premium within thirty (30)
days from the effective date of policy. By so doing, it has implicitly agreed to modify the tenor of the
insurance policy and in effect, waived the provision therein that it would only pay for the loss or damage
in case the same occurs after the payment of the premium. Considering that the insurance policy is silent
as to the mode of payment, Capital Insurance is deemed to have accepted the promissory note in payment
of the premium. This rendered the policy immediately operative on the date it was delivered.
The acknowledgment is deemed to be a promissory note. In other words, a requirement for the payment
of the first or initial premium in advance or actual cash may be waived by acceptance of a promissory
note

The fact that the check issued by Plastic Era in partial payment of the promissory note was later on
dishonored did not in any way operate as a forfeiture of its rights under the policy, there being no express
VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

stipulation therein to that effect.

If the check is accepted as payment of the premium even though it turns out to be worthless, there is
payment that will prevent forfeiture.
The payment of the premium on the insurance policy therefore became an independent obligation the
non-fulfillment of which would entitle Capital Insurance to recover. It could just deduct the premium due
and unpaid upon the satisfaction of the loss under the policy.

- 2
[G.R. No. 150751. September 20, 2004]
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA,
respondent.

FACTS:
On July 25, 1990 at Puerto Princesa, Palawan, Central Shipping Company received on board its vessel, the
M/V Central Bohol, 376 pieces [of] Philippine Apitong Round Logs and undertook to transport said
shipment to Manila for delivery to Alaska Lumber Co., Inc.
The cargo was insured for P3,000,000.00 against total loss under Insurance Company of North Americas
Marine Cargo Policy No. MCPB- 00170. The vessel completely sank. Due to the sinking of the vessel, the
cargo was totally lost. The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the
shipment to Central Shipping but the latter failed and refused to settle the claim, hence Insurance
company, being the insurer, paid said claim and now seeks to be subrogated to all the rights and actions
of the consignee as against Central Shipping. Central Shipping raised as its main defense that the
proximate and only cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a
tropical storm which neither Central Shipping nor the captain of its vessel could have foreseen.

DECISION OF LOWER COURTS:
(1) RTC: Central Shipping Liable. RTC was unconvinced that the sinking of M/V Central Bohol had been
caused by the weather or any other caso fortuito. It noted that monsoons, which were common
occurrences during the months of July to December, could have been foreseen and provided for by an
ocean-going vessel.
(2) CA: affirmed RTC. Given the season of rains and monsoons, the ship captain and his crew should have
anticipated the perils of the sea. The CA found no merit in petitioners assertion of the vessels
seaworthiness. It held that the Certificates of Inspection and Drydocking were not conclusive proofs
thereof. In order to consider a vessel to be seaworthy, it must be fit to meet the perils of the sea.
ISSUES & RULING:
(1) Whether the carrier is liable for the loss of the cargo; and

Yes.
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss, destruction or
deterioration of its cargo, unless it can prove that the sole and proximate cause of such event is one of the
causes enumerated in Article 1734 of the Civil Code, or that it exercised extraordinary diligence to
prevent or minimize the loss. In the present case, the weather condition encountered by petitioners
vessel was not a storm or a natural disaster comprehended in the law. Given the known weather
condition prevailing during the voyage, the manner of stowage employed by the carrier was insufficient
to secure the cargo from the rolling action of the sea. The carrier took a calculated risk in improperly
securing the cargo. Having lost that risk, it cannot now disclaim any liability for the loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V
Central Bohol encountered a southwestern monsoon in the course of its voyage. Having made such factual
representation in its Note of Marine Protest, petitioner cannot now be allowed to retreat and claim that
the southwestern monsoon was a storm. Normally expected on sea voyages, however, were such
monsoons, during which strong winds were not unusual.
VILLO, Viktoria Mary Antonette P.
Insurance Case Digests



According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55 to 63 miles per hour or
10 to 11 in the Beaufort Scale. The
second mate of the vessel stated that the wind was blowing around
force 7 to 8 on the Beaufort Scale. Consequently, the strong winds accompanying the southwestern
monsoon could not be classified as a storm. Such winds are the ordinary vicissitudes of a sea voyage.

Also, even if it were a storm, it was not the proximate and only cause of the loss. The loss of the vessel was
caused not only by the southwestern monsoon, but also by the shifting of the logs in the hold. Such
shifting could been due only to improper stowage.

(2) Whether the doctrine of limited liability is applicable


No. The doctrine of limited liability under Article 587 of the Code of Commerce is not applicable to the
present case. This rule does not apply to situations in which the loss or the injury is due to the concurrent
negligence of the shipowner and the captain.
- 3 -
[G.R. No. 137775. March 31, 2005]
FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL
CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all surnamed
ANG, and CO TO, respondents.

FACTS:
Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the
shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge that were operated as
common carriers. Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to
be towed by a tugboat for it to move from one place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the
D/B Lucio, for towage by M/T ANCO, when the barge and tugboat arrived at San Jose, Antique, in the
afternoon of 30 September 1979, the clouds over the area were dark and the waves were already big. The
arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to complain about their
difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested
ANCOs representative to transfer the barge to a safer place because the vessel might not be able to
withstand the big waves.
ANCOs representative did not heed the request because he was confident that the barge could withstand
the waves. At around midnight, the barge run aground and was broken and the cargoes of beer in the
barge were swept away.
As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages
against ANCO. ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the
complaint were indeed loaded on the vessel belonging to ANCO. It claimed however that it had an
agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by
reason of fortuitous event. Third-party defendant FGU admitted the existence of the Insurance Policy
under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the
said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the
said insurance policy.

DECISION OF LOWER COURTS:
(1) RTC-Cebu: The estate of Ang Gui and Co To is liable to SMC for the amount of the lost shipment. With
respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%)
of the amount of the lost cargoes. While the cargoes were indeed lost due to fortuitous event, there was
failure on ANCOs part, through their representatives, to observe the degree of diligence required that
would exonerate them from liability.

VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

(2) CA: affirmed RTC in toto.

ISSUES:
(1) Whether ANCOs representatives was able to exercise the extraordinary degree of diligence required
by the law to exculpate them from liability for the loss of the cargoes.
(2) Whether or not FGU can be held liable under the insurance policy to reimburse ANCO for the loss of
the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant
negligence of the latters employees.
RULING:
(1) No.
In this case, the calamity that caused the loss of the cargoes was not unforeseen nor was it unavoidable. In
fact, the other vessels in the port of San Jose, Antique, managed to transfer to another place, a
circumstance which prompted SMCs District Sales Supervisor to request that the D/B Lucio be likewise
transferred, but to no avail. The D/B Lucio had no engine and could not maneuver by itself. Even if
ANCOs representatives wanted to transfer it, they no longer had any means to do so as the tugboat M/T
ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have
had the foresight not to leave the barge alone considering the pending storm.
(2) No, FGU is not liable.

The ordinary negligence of the insured and his agents has long been held as a part of the risk which the
insurer takes upon himself, and the existence of which, where it is the proximate cause of the loss, does
not absolve the insurer from liability. But willful exposure, gross negligence, negligence amounting to
misconduct, etc., have often been held to release the insurer from such liability.
In the case at bar, both the trial court and the appellate court had concluded from the evidence that the
crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit: There was
blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of
the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather.
The negligence of the defendants- appellants is proved by the fact that on 01 October 1979, the only simple
vessel left at the wharf in San Jose was the D/B Lucio.
This Court, taking into account the circumstances present in the instant case, concludes that the blatant
negligence of ANCOs employees is of such gross character that it amounts to a wrongful act that must
exonerate FGU from liability under the insurance contract.
- 4 -
G.R. No. 95546 November 6, 1992
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS,
AMERICAN HOME ASSURANCE CO., represented by American International Underwriters (Phils.),
Inc., respondent.
FACTS:
Sometime in early 1982, private respondent American Home Assurance Co. (AHAC), represented by
American International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany
Condominium Corporation (TUSCANY) Insurance Policy No. AH-CPP-9210452 on the latter's building and
premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of
P466,103.05. The premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982 and
16 November 1982, all of which were accepted by private respondent.
Successive renewals of the policies were made in the same manner. On 1984, the policy was again
renewed and petitioner made two installment payments, both accepted by private respondent, the first
on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter,
petitioner refused to pay the balance of the premium.
VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

Private respondent filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy.
Petitioner explained that it discontinued the payment of premiums because the policy did not contain a
credit clause in its favor. Petitioner further claimed that the policy was never binding and valid, and no
risk attached to the policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid
for 1984-85, and in its answer with amended counterclaim, sought the refund of P924,206.10
representing the premium payments for 1982-85.
DECISION OF LOWER COURTS:
(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due

ISSUE:
Whether payment by installment of the premiums due on an insurance policy invalidates the contract of
insurance, in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which
provides:
Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued
by an insurance company is valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision applies.
RULING:
No, the contract remains valid even if the premiums were paid on installments. Certainly, basic principles
of equity and fairness would not allow the insurer to continue collecting and accepting the premiums,
although paid on installments, and later deny liability on the lame excuse that the premiums were not
prepared in full.
At the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.
Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is
indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the
risk insured for any period, however brief or momentary. The obligation to pay premiums when due is
ordinarily as indivisible obligation to pay the entire premium.
- 5
G.R. No. L-67835 October 12, 1987
MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA CRUZ ARNALDO, in her capacity as
the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.
FACTS:
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private respondent, Coronacion
Pinca, Fire Insurance Policy No. F-001-17212 on her property for the amount of P14,000.00 effective July
22, 1981, until July 22, 1982.
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the
corresponding notice to Pinca.
On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of
MICO. On January 15, 1982, Adora remitted this payment to MICO, together with other payments. On
January 18, 1982, Pinca's property was completely burned.


DECISION OF LOWER COURTS:
(1) Insurance Commission: granted claim for compensation for burned property.

VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

ISSUE:
Whether there was a valid insurance contract at the time of the loss.
RULING:
Yes.
A valid cancellation must, therefore, require concurrence of the following conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of the
grounds mentioned;
(3) The notice must be
(a) in writing,
(b) mailed, or delivered to the named insured,
(c) at the address shown in the policy;
(4) It must state
(a) which of the grounds mentioned in Section 64 is relied upon and
(b) that upon written request of the insured, the insurer will furnish the facts on which the cancellation is
based.
MICO's claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To
support this assertion, it presented one of its employees, who testified that "the original of the
endorsement and credit memo" presumably meaning the alleged cancellation "were sent the

assured by mail through our mailing section" However, there is no proof that the notice, assuming it
complied with the other requisites mentioned above, was actually mailed to and received by Pinca.
We also look askance at the alleged cancellation, of which the insured and MICO's agent himself had no
knowledge, and the curious fact that although Pinca's payment was remitted to MICO's by its agent on
January 15, 1982, MICO sought to return it to Adora only on February 5, 1982, after it presumably had
learned of the occurrence of the loss insured against on January 18, 1982. These circumstances make the
motives of the petitioner highly suspect, to say the least, and cast serious doubts upon its candor and
bona fides.
- 6 -
G.R. No. 81026 April 3, 1990
PAN MALAYAN INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, ERLINDA FABIE AND
HER UNKNOWN DRIVER, respondents.

FACTS:

On December 10, 1985, PANMALAY filed a complaint for damages with the RTC of Makati against private
respondents Erlinda Fabie and her driver. PANMALAY averred the following: that it insured a Mitsubishi
Colt Lancer car with plate No. DDZ-431 and registered in the name of Canlubang Automotive Resources
Corporation [CANLUBANG]; that on May 26, 1985, due to the "carelessness, recklessness, and
imprudence" of the unknown driver of a pick-up with plate no. PCR-220, the insured car was hit and
suffered damages in the amount of P42,052.00; that PANMALAY defrayed the cost of repair of the insured
car and, therefore, was subrogated to the rights of CANLUBANG against the driver of the pick-up and his
employer, Erlinda Fabie; and that, despite repeated demands, defendants, failed and refused to pay the
claim of PANMALAY. private respondents filed a Motion to Dismiss alleging that PANMALAY had no cause
of action against them. They argued that payment under the "own damage" clause of the insurance policy
precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made
on the assumption that there was no wrongdoer or no third party at fault.

DECISION OF LOWER COURTS:
(1) Trial Court: dismissed for no cause of action PANMALAY's complaint for damages against private
respondents Erlinda Fabie and her driver
(2) CA: affirmed trial court.

VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

ISSUE:
Whether or not the insurer PANMALAY may institute an action to recover the amount it had paid its
assured in settlement of an insurance claim against private respondents as the parties allegedly
responsible for the damage caused to the insured vehicle.
RULING:

PANMALAY is correct.
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured
property is destroyed or damaged through the fault or negligence of a party other than the assured, then
the insurer, upon payment to the assured, will be subrogated to the rights of the assured to recover from
the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operates as an equitable that the insurer has been obligated to pay. Payment by the insurer to the
assured operates as an equitable or negligence of a third party. CANLUBANG is apparently of the same
understanding. Based on a police report assignment to the former of all remedies that the latter may have
against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim by the insurer.

The exceptions are:
(1) if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from
liability, the insurer's right of subrogation is defeated
(2) where the insurer pays the assured the value of the lost goods without notifying the carrier who has in
good faith settled the assured's claim for loss, the settlement is binding on both the assured and the
insurer, and the latter cannot bring an action against the carrier on his right of subrogation
(3) where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby
effecting "voluntary payment", the former has no right of subrogation against the third party liable for the
loss
None of the exceptions are availing in the present case.
Also, even if under the above circumstances PANMALAY could not be deemed subrogated to the rights of
its assured under Article 2207 of the Civil Code, PANMALAY would still have a cause of action against
private respondents. In the pertinent case of Sveriges Angfartygs Assurans Forening v. Qua Chee Gan,
supra., the Court ruled that the insurer who may have no rights of subrogation due to "voluntary"
payment may nevertheless recover from the third party responsible for the damage to the insured
property under Article 1236 of the Civil Code.

WHEREFORE, in view of the foregoing, the present petition is GRANTED. Petitioner's complaint for
damages against private respondents is hereby REINSTATED. Let the case be remanded to the lower
court for trial on the merits.
- 7 -
[G.R. No. 125678. March 18, 2002]
PHILAMCARE HEALTH SYSTEMS, INC., petitioner, vs. COURT OF APPEALS and JULITA TRINOS,
respondents.

FACTS:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with
petitioner. Philamcare Health Systems, Inc. In the standard application form, he answered no to the
following question: Have you or any of your family members ever consulted or been treated for high
blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?

The application was approved for a period of one year from March 1, 1988 to March 1, 1989 and was
renewed. During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila
VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

Medical Center (MMC) for one month beginning March 9, 1990. While her husband was in the hospital,
respondent tried to claim the benefits under the health care agreement. However, petitioner denied her
claim saying that the Health Care Agreement was void. According to petitioner, there was a concealment
regarding Ernanis medical history. Doctors at the MMC allegedly discovered at the time of Ernanis
confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application
form.

In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was
constrained to bring him back to the Chinese General Hospital where he died on the same day. On July 24,
1990, respondent instituted with the Regional Trial Court of Manila, Branch 44, an action for damages
against petitioner and its president, Dr. Benito Reverente, which was docketed as Civil Case No. 90-
53795. She asked for reimbursement of her expenses plus moral damages and attorneys fees.
DECISION OF LOWER COURTS:
(1) RTC Manila: rendered judgment in favor or Trinos.
(2) CA: affirmed RTC but deleted the awards for damages.
ISSUE:
Whether a health care agreement is an insurance contract; and whether hence the incontestability
clause under the Insurance Code applies

RULING:

Yes. The insurer is liable.

In the case at bar, the insurable interest of respondents husband in obtaining the health care agreement
was his own health. The health care agreement was in the nature of non-life insurance, which is primarily

a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from
sickness, injury or other stipulated contingent, the health care provider must pay for the same to the
extent agreed upon under the contract.
It appears that in the application for health coverage, petitioners required respondents husband to sign
an express authorization for any person, organization or entity that has any record or knowledge of his
health to furnish any and all information relative to any hospitalization, consultation, treatment or any
other medical advice or examination.
The answer assailed by petitioner was in response to the question relating to the medical history of the
applicant. This largely depends on opinion rather than fact, especially coming from respondents husband
who was not a medical doctor. Where matters of opinion or judgment are called for, answers made in
good faith and without intent to deceive will not avoid a policy even though they are untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the

insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is
an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence
rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is
liable for claims made under the contract. Having assumed a responsibility under the agreement,
petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health
care provider attaches once the member is hospitalized for the disease or injury covered by the
agreement or whenever he avails of the covered benefits that he has prepaid.
Anent the incontestability of the membership of respondents husband, we quote with approval the
following findings of the trial court:
(U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve
months from the date of issuance of the Agreement within which to contest the membership of the
patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the
patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or
VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

misrepresentation no longer lie.

Finally, petitioner alleges that respondent was not the legal wife of the deceased member considering that
at the time of their marriage, the deceased was previously married to another woman who was still alive.
The health care agreement is in the nature of a contract of indemnity. Hence, payment should be made to
the party who incurred the expenses. It is not controverted that respondent paid all the hospital and
medical expenses. She is therefore entitled to reimbursement.


- 8 -
G.R. No. L-66935 November 11, 1985
ISABELA ROQUE, doing business under the name and style of Isabela Roque Timber Enterprises
and ONG CHIONG, petitioners, vs. HON. INTERMEDIATE APPELATE COURT and PIONEER INSURANCE
AND SURETY CORPORATION, respondent.
FACTS:

On February 19, 1972, the Manila Bay Lighterage Corporation (Manila Bay), a common carrier, entered
into a contract with the petitioners whereby the former would load and carry on board its barge Mable 10
about 422.18 cubic meters of logs from Malampaya Sound, Palawan to North Harbor, Manila. The
petitioners insured the logs against loss for P100,000.00 with respondent Pioneer Insurance and Surety
Corporation (Pioneer).
On February 29, 1972, the petitioners loaded on the barge, 811 pieces of logs at Malampaya Sound,
Palawan for carriage and delivery to North Harbor, Port of Manila, but the shipment never reached its
destination because Mable 10 sank with the 811 pieces of logs somewhere off Cabuli Point in Palawan on
its way to Manila.
Hence, petitioners commenced Civil Case No. 86599 against Manila Bay and respondent Pioneer.
DECISION OF LOWER COURTS:

(1) Trial Court: found in favor of petitioners.
(2) Intermediate Appellate Court: absolved the respondent insurance company from liability on the
grounds that the vessel carrying the insured cargo was unseaworthy and the loss of said cargo was
caused not by the perils of the sea but by the perils of the ship
ISSUES:
I. THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT IN CASES OF MARINE CARGO
INSURANCE, THERE IS A WARRANTY OF SEAWORTHINESS BY THE CARGO OWNER.
II. THE INTERMEDIATE APPELLATE COURT ERRED IN HOLDING THAT THE LOSS OF THE CARGO IN
THIS CASE WAS CAUSED BY "PERILS OF THE SHIP" AND NOT BY "PERILS OF THE SEA.

RULING:
I. No. The IAC is correct.
The liability of the insurance company is governed by law. Section 113 of the Insurance Code provides:
In every marine insurance upon a ship or freight, or freightage, or upon any thing that is the subject of
marine insurance, a warranty is implied that the ship is seaworthy.
Section 99 of the same Code also provides in part. Marine insurance includes:
(1) Insurance against loss of or damage to:
(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, ...

VILLO, Viktoria Mary Antonette P.

Insurance Case Digests

From the above-quoted provisions, there can be no mistaking the fact that the term "cargo" can be the
subject of marine insurance and that once it is so made, the implied warranty of seaworthiness
immediately attaches to whoever is insuring the cargo whether he be the shipowner or not.

Since the law provides for an implied warranty of seaworthiness in every contract of ordinary marine
insurance, it becomes the obligation of a cargo owner to look for a reliable common carrier which keeps
its vessels in seaworthy condition. The shipper of cargo may have no control over the vessel but he has
full control in the choice of the common carrier that will transport his goods. Or the cargo owner may
enter into a contract of insurance which specifically provides that the insurer answers not only for the
perils of the sea but also provides for coverage of perils of the ship.

II. No, the IAC is correct.
In marine cases, the risks insured against are "perils of the sea"
A policy does not cover a loss or injury that must inevitably take place in the ordinary course of things.
There is no doubt that the term 'perils of the sea' extends only to losses caused by sea damage, or by the
violence of the elements, and does not embrace all losses happening at sea. They insure against losses
from extraordinary occurrences only, such as stress of weather, winds and waves, lightning, tempests,
rocks and the like. These are understood to be the "perils of the sea" referred in the policy, and not those
ordinary perils which every vessel must encounter. "Perils of the sea" has been said to include only such
losses as are of extraordinary nature, encounter. "Perils of the sea" has been said to include only such
losses as are of extraordinary nature, or arise from some overwhelming power, which cannot be guarded
against by the ordinary exertion of human skill and prudence. Damage done to a vessel by perils of the sea
includes every species of damages done to a vessel at sea, as distinguished from the ordinary wear and
tear of the voyage, and distinct from injuries suffered by the vessel in consequence of her not being
seaworthy at the outset of her voyage (as in this case). It is also the general rule that everything which
happens thru the inherent vice of the thing, or by the act of the owners, master or shipper, shall not be
reputed a peril, if not otherwise borne in the policy.
It is quite unmistakable that the loss of the cargo was due to the perils of the ship rather than the perils of
the sea. The facts clearly negate the petitioners' claim under the insurance policy.
In the present case the entrance of the sea water into the ship's hold through the defective pipe already
described was not due to any accident which happened during the voyage, but to the failure of the ship's
owner properly to repair a defect of the existence of which he was apprised. The loss was therefore more
analogous to that which directly results from simple unseaworthiness than to that which result from the
perils of the sea.
- 9 -
[G.R. No. 154514. July 28, 2005]
WHITE GOLD MARINE SERVICES, INC., petitioner, vs. PIONEER INSURANCE AND SURETY
CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD.,
respondents.
FACTS:
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its
vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual)
Corporation (Pioneer). Subsequently, White Gold was issued a
through Pioneer Insurance and Surety
Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage.
When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the
latters unpaid balance.


VILLO, Viktoria Mary Antonette P.
Insurance Case Digests

DECISION OF LOWER COURTS:

(1) Insurance Commissioner: dismissed the complaint. There was no violation of the Insurance Code and
the respondents do not need license as insurer and insurance agent/broker because it was not engaged in
the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I
Club). Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of
Steamship Mutual was already superfluous.
(2) CA: affirmed Insurance Commissioner.

ISSUES:
(1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

RULING:
(1) Yes. To continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no
insurer or insurance company is allowed to engage in the insurance business without a license or a
certificate of authority from the Insurance Commission.
The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not have a
license to do business in the Philippines although Pioneer is its resident agent. This relationship is
reflected in the certifications issued by the Insurance Commission.

It cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals as an association
composed of shipowners in general who band together for the specific purpose of providing insurance
cover on a mutual basis against liabilities incidental to shipowning that the members incur in favor of
third parties.
The test to determine if a contract is an insurance contract or not, depends on the nature of the promise,
the act required to be performed, and the exact nature of the agreement in the light of the occurrence,
contingency, or circumstances under which the performance becomes requisite. It is not by what it is
called.
Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the
insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the
liabilities are paid, and where the profits are divided among
creation of a fund from which all losses and
r clubs, provide
themselves, in proportion to their interest. Additionally, mutual insurance associations, o
three types of coverage, namely, protection and indemnity, war risks, and defense costs. A P & I Club is a
form of insurance against third party liability, where the third party is anyone other than the P & I Club
and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association
engaged in the marine insurance business.
(2) Yes. Although Pioneer is already licensed as an insurance company, it needs a separate license to act
as insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 . . .
No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of
applications for insurance, or receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the Philippines or any agent thereof,
without first procuring a license so to act from the Commissioner, which must be renewed annually on
the first day of January, or within six months thereafter.

VILLO, Viktoria Mary Antonette P.

Insurance Case Digests