course of the game not accidental.
In boxing as in other
DE LA CRUZ v. CAPITAL INSURANCE
Facts:
Eduardo de la Cruz was the holder of an accident
insurance policy underwritten by the Capital Insurance &
Surety Co., Inc., for one year. In celebration of New year,
Itogon-Suyoc Mines, Inc. sponsored a boxing contest
where Eduardo, a non-professional boxer participated.
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. The cause of death
was reported as hemorrhage, intracranial, left. Simon de la
Cruz, the father of the insured and beneficiary aunder the
policy, filed a claim with the insurance company. As the
claim was denied, Simon instituted the action in CFI
Pangasinan for specific performance. 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. CFI rendered the
decision in favor of the plaintiff. Hence this appeal.
Issue:
Whether or not the death of Eduardo is covered
by the insurance policy?
Held:
Yes, the death of Eduardo is covered by the
insurance policy
Ratio:
It is not disputed that during the ring fight with
another non-professional boxer, Eduardo slipped, which
was unintentional. At this opportunity, his opponent landed
on Eduardo's head a blow, which sent the latter to the
ropes. That must have caused the cranial injury that led to
his death. Eduardo was insured "against death or disability
caused by accidental means".
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. 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 is argued that to be considered within the
protection of the policy, what is required to be accidental is
the means that caused or brought the death and not the
death itself. But, even if we take appellant's theory, the
death of the insured in the case at bar would still be entitled
to indemnification under the policy. Where the death or
injury is not the natural or probable result of the insured's
voluntary act, or if something unforeseen occurs in the
doing of the act which produces the injury, the resulting
death is within the protection of policies insuring against
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
equally physically rigorous sports, such as basketball or
baseball, death is not ordinarily anticipated to result.
Furthermore, the policy involved herein specifically
excluded from its coverage
(e) Death or disablement
consequent upon the Insured
engaging in football, hunting,
pigsticking, steeplechasing,
polo-playing, racing of any kind,
mountaineering, or
motorcycling.
Death or disablement resulting from engagement
in boxing contests was not declared outside of the
protection of the insurance contract. Failure of the
defendant insurance company to include death resulting
from a boxing match or other sports among the prohibitive
risks leads inevitably to the conclusion that it did not intend
to limit or exempt itself from liability for such death.
Dispositive:
Decision appealed from is affirmed.
SUN INSURANCE OFFICE, LTD. vs. CA (1992)
Doctrine:
It should be noted at the outset that suicide and
willful exposure to needless peril are in pari materia
because they both signify a disregard for one's life. The
only difference is in degree, as suicide imports a positive
act of ending such life whereas the second act indicates a
reckless risking of it that is almost suicidal in intent. To
illustrate, a person who walks a tightrope one thousand
meters above the ground and without any safety device
may not actually be intending to commit
Facts:
The petitioner issued Personal Accident Policy to
Felix Lim, Jr. with a face value of P200,000.00. Two months
later, he was dead with a bullet wound in his head. As
beneficiary, his wife Nerissa Lim sought payment on the
policy but her claim was rejected. The petitioner agreed
that there was no suicide. It argued, however that there was
no accident either. Pilar Nalagon, Lim's secretary, was the
only eyewitness to his death. It happened on October 6,
1982, at about 10 o'clock in the evening, after his mother's
birthday party. According to Nalagon, Lim was in a happy
mood (but not drunk) and was playing with his handgun,
from which he had previously removed the magazine. As
she watched television, he stood in front of her and pointed
the gun at her. She pushed it aside and said it might he
loaded. He assured her it was not and then pointed it to his
temple. The next moment there was an explosion and Lim
slumped to the floor. He was dead before he fell. The widow
sued the petitioner in the Regional Trial Court of
Zamboanga City and was sustained. The RTC found
petioner liable for the policy. CA Affirmed the RTC
Issue:
Whether or not respondent Nerissa, as
beneficiary of Felix,has the right to claim payment of the
policy from the insurance company?
Held:
 Yes, respondent Nerissa, as beneficiary of Felix,
has the right to claim payment of the policy from the
insurance company.
Ratio:
Lim was unquestionably negligent and that
negligence cost him his own life. But it should not prevent
his widow from recovering from the insurance policy he
obtained precisely against accident. There is nothing in the
policy that relieves the insurer of the responsibility to pay
the indemnity agreed upon if the insured is shown to have
contributed to his own accident. Indeed, most accidents are
caused by negligence. There are only four exceptions
expressly made in the contract to relieve the insurer from
liability, and none of these exceptions is applicable in the
case at bar.
It should be noted at the outset that suicide and
willful exposure to needless peril are in pari
materia because they both signify a disregard for one's life.
The only difference is in degree, as suicide imports a
positive act of ending such life whereas the second act
indicates a reckless risking of it that is almost suicidal in
intent. To illustrate, a person who walks a tightrope one
thousand meters above the ground and without any safety
device may not actually be intending to commit suicide, but
his act is nonetheless suicidal. He would thus be
considered as "willfully exposing himself to needless peril"
within the meaning of the exception in question.
The words "accident" and "accidental" have never
acquired any technical signification in law, and when used
in an insurance contract are to be construed and
considered according to the ordinary understanding and
common usage and speech of people generally. In-
substance, the courts are practically agreed that the words
"accident" and "accidental" mean that which happens by
chance or fortuitously, without intention or design, and
which is unexpected, unusual, and unforeseen. The
definition that has usually been adopted by the courts is
that 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 case,
and therefore not expected. In light of these definitions, the
Court is convinced that the incident that resulted in Lim's
death was indeed an accident.
TY vs. FILIPINAS CIA DE SEGUROS (1966)
Doctrine:
As the terms of the policies are clear, express and
specific that only amputation of the left hand should be
considered as a loss thereof, an interpretation that would
include the mere fracture or other temporary disability not
covered by the policies would certainly be unwarranted.
Facts:
Plaintiff-appellant was an employee of Broadway
Cotton Factory, working as mechanic operator. He took
Personal Accident Policies from several insurance
companies, among which are herein defendants-
appellees, on different dates, effective for 12 months.
During the effectivity of these policies, or on December 24,
1953, a fire broke out in the factory where plaintiff was
working. As he was trying to put out said fire with the help
of a fire extinguisher, a heavy object fell upon his left hand.
Plaintiff received treatment at the National Orthopedic
Hospital from December 26, 1953 to February 8, 1954, for
multiple injuries. The attending surgeon certified that the
injuries would cause temporary total disability of appellant's
left hand.
As the insurance companies refused to pay his
claim for compensation under the policies by reason of the
said disability of his left hand, Ty filed motions in the
Municipal Court of Manila, which rendered favorable
decision. On appeal to the Court of First Instance by the
insurance companies, the cases were dismissed on the
ground that under the uniform terms of the insurance
policies, partial disability of the insured caused by loss of
either hand to be compensable, the loss must result in the
amputation of that hand. Hence, these appeals by the
insured.
Issue:
Should the temporary disability of the plaintiff be
compensated by the respondent insurance company?
Held:
No, the temporary disability of the plaintiff cannot
be compensated by the respondent insurance company.
Ratio:
While we sympathize with the plaintiff or his
employer, for whose benefit the policies were issued, we
cannot go beyond the clear and express conditions of the
insurance policies, all of which definite partial disability as
loss of either hand by amputation through the bones of the
wrist. There was no such amputation in the case at bar. All
that was found by the trial court, which is not disputed on
appeal, was that the physical injuries "caused temporary
total disability of plaintiff's left hand." Note that the disability
of plaintiff's hand was merely temporary, having been
caused by fractures of the index, the middle and the fourth
fingers of the left hand.
We might add that the agreement contained in the
insurance policies is the law between the parties. As the
terms of the policies are clear, express and specific that
only amputation of the left hand should be considered as a
loss thereof, an interpretation that would include the mere
fracture or other temporary disability not covered by the
policies would certainly be unwarranted
Dispositive:
Wherefore, finding no error in the decision appealed from,
the same is hereby affirmed, without costs. So ordered.
CALANOC v. COURT OF APPEALS
Doctrine:
And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he went
with the traffic policeman, for certainly he did not go there
for that purpose nor was he asked to do so by the
policeman. Much less can it be pretended that Basilio died
in the course of an assault or murder considering the very
nature of these crimes. In the first place, there is no proof
that the death of Basilio is the result of either crime for the
record is barren of any circumstance showing how the fatal
shot was fired. [Sec.176 Casualty insurance is insurance
covering loss or liability arising from accident or mishap]
Facts:
 Basilio was a watchman of the Manila Auto Supply
in Avenida Rizal & Zurbaran Street. He was insured by the
Philam Life Insurance in the amount of P2, 000 to which
was a supplementary contract was covering death by
accident. He died of a gunshot wound on the occasion of a
robbery committed in the house of Atty. Ojeda. The widow,
Calanoc, was paid the sum of P2, 000, face value of the
policy, but when she demanded the payment of the
additional sum of P2, 000 representation the value of the
supplemental policy, the company refused because they
alleged that the deceased died by reason of murder during
the commission of the robbery. The company further
contends that Basilio was killed which making an arrest as
an officer of the law or as result of an assault or murder
committed in the place and therefore his death was caused
by one of the risks excluded by the supplementary contract
which exempts the company from liability. This argument
was upheld by the CA. Hence, this case.
Issue:
Whether or not the death of Basilio comes with the
purview of the exception clause of the supplementary
policy and hence, exempts Philam from liability?
Held:
No, the death of Basilio comes with the purview of
the exception clause of the supplementary policy and
hence, exempts Philam from liability
Ratio:
The circumstance that he was a mere watchman
and had no duty to heed the call of Atty. Ojeda should not
be taken as a capricious desire on his part to expose his
life to danger considering the fact that the place he was in
duty-bound to guard was only a block away. In volunteering
to extend help under the situation, he might have thought,
rightly or wrongly, that to know the truth was in the interest
of his employer it being a matter that affects the security of
the neighborhood. No doubt there was some risk coming to
him in pursuing that errand, but that risk always existed it
being inherent in the position he was holding. He cannot
therefore be blamed solely for doing what he believed was
in keeping with his duty as a watchman and as a citizen.
And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he went
with the traffic policeman, for certainly he did not go there
for that purpose nor was he asked to do so by the
policeman. Much less can it be pretended that Basilio died
in the course of an assault or murder considering the very
nature of these crimes.
In the first place, there is no proof that the death
of Basilio is the result of either crime for the record is barren
of any circumstance showing how the fatal shot was fired.
Perhaps this may be clarified in the criminal case now
pending in court as regards the incident but before that is
done anything that might be said on the point would be a
mere conjecture. Nor can it be said that the killing was
intentional for there is the possibility that the malefactor had
fired the shot merely to scare away the people around for
his own protection and not necessarily to kill or hit the
victim. In any event, while the act may not exempt the
triggerman from liability for the damage done, the fact
remains that the happening was a pure accident on the part
of the victim. The victim could have been either the
policeman or Atty. Ojeda for it cannot be pretended that the
malefactor aimed at the deceased precisely because he
wanted to take his life.
Disposition:
Wherefore, reversing the decision appealed from,
we hereby order the company to pay petitioner-appellant
the amount of P2,000, with legal interest from January 26,
1951 until fully paid, with costs.
BIAGTAN V INSULAR LIFE
Doctrine:
Court decisions in the American jurisdiction,
where similar provisions in accidental death benefit clauses
in insurance policies have been construed, may shed light
on the issue before Us. Thus, it has been held that
"intentional" as used in an accident policy excepting
intentional injuries inflicted by the insured or any other
person, etc., implies the exercise of the reasoning faculties,
consciousness and volition. Where a provision of the policy
excludes intentional injury, it is the intention of the person
inflicting the injury that is controlling. If the injuries suffered
by the insured clearly resulted from the intentional act of a
third person the insurer is relieved from liability as
stipulated.
Facts:
Juan S. Biagtan was insured with defendant
Insular Life Assurance Company under Policy No. 398075
for the sum of P5,000.00 and under a supplementary
contract denominated "Accidental Death Benefit Clause,
for an additional sum of P5,000.00 if "the death of the
Insured resulted directly from bodily injury effected solely
through external and violent means sustained in an
accident ... and independently of all other causes." The
clause, however,expressly provided that it would not apply
where death resulted from an injury"intentionally inflicted
by another party."
Sometime in the night of May 1964 or the first
hours of May 21, 1964, while the said life policy and
supplementary contract were in full force and effect, the
house of insured Juan S. Biagtan was robbed by a band of
robbers who were charged in and convicted by the Court of
First Instance of Pangasinan for robbery with homicide; that
in committing the robbery, the robbers, on reaching the
staircase landing on the second floor, rushed towards the
door of the second floor room, where they suddenly met a
person near the door of oneof the rooms who turned out to
be the insured Juan S. Biagtan who received thrusts from
their sharp-pointed instruments, causing wounds on the
body of said Juan S. Biagtan resulting in his death at about
7 a.m. on the same day, May 21, 1964;
Plaintiffs, as beneficiaries of the insured, filed a
claim under the policy. The insurance company paid the
basic amount of P5,000.00 but refused to pay the additional
sum of P5,000.00 under the accidental death benefit
clause, on the ground that the insured's death resulted from
injuries intentionally inflicted by third parties and therefore
was not covered.
Plaintiffs filed suit to recover, and after due hearing the
court a quo rendered judgment in their favor. Hence, this
present appeal by the insurer.
Issue: Whether or not under the facts are stipulated and
found by the trial court the wounds received by the insured
at the hands of the robbers nine in all, five of them mortal
and four non-mortal were inflicted intentionally by third
person wherein excepted from payment in the said policy?
Held:
Yes, under the facts are stipulated and found by
the trial court the wounds received by the insured at the
hands of the robbers nine in all, five of them mortal and
four non-mortal were inflicted intentionally by third
person wherein excepted from payment in the said policy.
Ratio:
The trial court committed a plain error in drawing
the conclusion it did from the admitted facts. Nine wounds
were inflicted upon the deceased, all by means of thrusts
with sharp-pointed instruments wielded by the robbers.
This is a physical fact as to which there is no dispute. So is
the fact that five of those wounds caused the death of the
insured. Whether the robbers had the intent to kill or merely
to scare the victim or to ward off any defense he might offer,
it cannot be denied that the act itself of inflicting the injuries
was intentional.
It should be noted that the exception in the
accidental benefit clause invoked by the appellant does not
speak of the purpose whether homicidal or not of a
third party in causing the injuries, but only of the fact that
such injuries have been "intentionally" inflicted this
obviously to distinguish them from injuries which, although
received at the hands of a third party, are purely accidental.
This construction is the basic idea expressed in the
coverage of the clause itself, namely, that "the death of the
insured resulted directly from bodily injury effected solely
through external and violent means sustained in
an accident ... and independently of all other causes." A
gun which discharges while being cleaned and kills a
bystander; a hunter who shoots at his prey and hits a
person instead; an athlete in a competitive game involving
physical effort who collides with an opponent and fatally
injures him as a result: these are instances where the
infliction of the injury is unintentional and therefore would
be within the coverage of an accidental death benefit
clause such as thatin question in this case. But where a
gang of robbers enter a house and coming face to face with
the owner, even if unexpectedly, stab him repeatedly, it is
contrary to all reason and logic to say that his injuries are
not intentionally inflicted, regardless of whether they prove
fatal or not. As it was, in the present case they did prove
fatal, and the robbers have been accused and convicted of
the crime of robbery with homicide.
Unlike the ruling in the case of Calanoc vs. Court
of Appeals, where the killing of the victim was held as
accidental and thus covered by the insurance policy, the
Supreme Court held that in the instant case, the insured
was killed intentionally. The term intentional implies the
exercise of the reasoning faculties, consciousness and
volition. A similar possibility is clearly ruled out by the facts
in the case now before Us. For while a single shot fired from
a distance, and by a person who was not even seen aiming
at the victim, could indeed have been fired without intent to
kill or injure, nine wounds inflicted with bladed weapons at
close range cannot conceivably be considered as innocent
insofar as such intent is concerned. The manner of
execution of the crime permits no other conclusion.
Dispositive:
Decision appealed from is hereby reversed.
Appellant Insurance company won!
FINMAN GENERAL ASSURANCE v CA
Doctrine:
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. 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. In other words, where the death or injury is not
the natural or probable result of the insured's voluntary act,
or if something unforeseen occurs in the doing of the act
which produces the injury, the resulting death is within the
protection of the policies insuring against death or injury
from accident.
Facts:
It appears on record that on October 22, 1986,
deceased, Carlie Surposa was insured with petitioner
Finman General Assurance Corporation under Finman
General Teachers Protection Plan Master Policy No. 2005
and Individual Policy No. 08924 with his parents, spouses
Julia and Carlos Surposa, and brothers Christopher,
Charles, Chester and Clifton, all surnamed, Surposa, as
beneficiaries.
While said insurance policy was in full force and
effect, the insured, Carlie Surposa, died on October 18,
1988 as a result of a stab wound inflicted by one of the
three (3) unidentified men without provocation and warning
on the part of the former as he and his cousin, Winston
Surposa, were waiting for a ride on their way home along
Rizal-Locsin Streets, Bacolod City after attending the
celebration of the "Maskarra Annual Festival."
Thereafter, private respondent and the other
beneficiaries of said insurance policy filed a written notice
of claim with the petitioner insurance company which
denied said claim contending that murder and assault are
not within the scope of the coverage of the insurance
policy.
On February 24, 1989, private respondent filed a
complaint with the Insurance Commission which held the
insurance company liable to pay the beneficiaries, P15,000
as insurance proceeds. The CA affirmed said decision.
Hence, petitioner filed this petition alleging grave abuse of
discretion on the part of the appellate court in applying the
principle of "expresso unius exclusio alterius" in a personal
accident insurance policy since death resulting from
murder and/or assault are impliedly excluded in said
insurance policy considering that the cause of death of the
insured was not accidental but rather a deliberate and
intentional act of the assailant in killing the former as
indicated by the location of the lone stab wound on the
insured. Therefore, said death was committed with
deliberate intent which, by the very nature of a personal
accident insurance policy, cannot be indemnified.
Issue:
Whether or not the cause of death of the insured
was not accidental, thus, excluded in the insurance policy?
Held:
No, the cause of death of the insured was not
accidental, thus, excluded in the insurance policy
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.
. . . 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. 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. In other
words, where the death or
injury is not the natural or
probable result of the insured's
voluntary act, or if something
unforeseen occurs in the doing
of the act which produces the
injury, the resulting death is
within the protection of the
policies insuring against death
or injury from accident.
As correctly pointed out by the respondent appellate court
in its decision:
In the case at bar, it cannot be pretended that
Carlie Surposa died in the course of an assault or murder
as a result of his voluntary act considering the very nature
of these crimes. In the first place, the insured and his
companion were on their way home from attending a
festival. They were confronted by unidentified persons. The
record is barren of any circumstance showing how the stab
wound was inflicted. Nor can it be pretended that the
malefactor aimed at the insured precisely because the killer
wanted to take his life. In any event, while the act may not
exempt the unknown perpetrator from criminal liability, the
fact remains that the happening was a pure accident on the
part of the victim. The insured died from an event that took
place without his foresight or expectation, an event that
proceeded from an unusual effect of a known cause and,
therefore, not expected. Neither can it be said that where
was a capricious desire on the part of the accused to
expose his life to danger considering that he was just going
home after attending a festival.
Furthermore, the personal accident insurance
policy involved herein specifically enumerated only ten (10)
circumstances wherein no liability attaches to petitioner
insurance company for any injury, disability or loss suffered
by the insured as a result of any of the stimulated causes.
The principle of " expresso unius exclusio alterius" the
mention of one thing implies the exclusion of another thing
is therefore applicable in the instant case since murder
and assault, not having been expressly included in the
enumeration of the circumstances that would negate
liability in said insurance policy cannot be considered by
implication to discharge the petitioner insurance company
from liability for, any injury, disability or loss suffered by the
insured. Thus, the failure of the petitioner insurance
company to include death resulting from murder or assault
among the prohibited risks leads inevitably to the
conclusion that it did not intend to limit or exempt itself from
liability for such death.
Dispositive:
WHEREFORE, finding no irreversible error in the
decision of the respondent Court of Appeals, the petition
for certiorari with restraining order and preliminary
injunction is hereby DENIED for lack of merit. SO
ORDERED.
FORTUNE INSURANCE v CA and PRODUCERS BANK
Doctrine:
Sec. 174. Casualty insurance is insurance
covering loss or liability arising from accident or mishap,
excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of
insurance such as fire or marine. It includes, but is not
limited to, employer's liability insurance, public liability
insurance, motor vehicle liability insurance, plate glass
insurance, burglary and theft insurance, personal accident
and health insurance as written by non-life insurance
companies, and other substantially similar kinds of
insurance.
Facts:
This case began with the filing with RTC by
Producers Bank against petitioner Fortune Insurance and
Surety Co., Inc. a complaint for recovery of the sum of
P725,000.00 under the policy issued by Fortune.
The sum was allegedly lost during a robbery of
Producer's armored vehicle while it was in transit to transfer
the money from its Pasay City Branch to its head office in
Makati. The parties agreed to the following facts:
1. The plaintiff was insured by the defendants and
an insurance policy was issued.
2. An armored car of the plaintiff, while in the
process of transferring cash in the sum of P725,000.00
under the custody of its teller, Maribeth Alampay, from its
Pasay Branch to its Head Office was robbed of the said
cash.;
. 7. Demands were made by
the plaintiff upon the defendant
to pay the amount of the loss of
P725,000.00, but the latter
refused to pay as the loss is
excluded from the coverage of
the insurance policy,
specifically under page 1
thereof, "General Exceptions"
Section (b), which is marked as
Exhibit "A-1," and which reads
as follows:
GENERAL EXCEPTIONS
The company shall not be liable
under this policy in report of
xxx xxx xxx
(b) any loss caused by any
dishonest, fraudulent or
criminal act of the insured or
any officer, employee, partner,
 director, trustee or authorized
representative of the Insured
whether acting alone or in
conjunction with others. . . .
The trial court rendered its decision in favor of
Producers. It ruled that Magalong(driver of armored car)
and Atiga(Security) were not employees or representatives
of Producers. It Said:
They were merely an assigned
armored car driver and security
guard, respectively, for the
June 29, 1987 money transfer
from plaintiff's Pasay Branch to
its Makati Head Office. Quite
plainly it was teller Maribeth
Alampay who had "custody" of
the P725,000.00 cash being
transferred along a specified
money route, and hence
plaintiff's then designated
"messenger" adverted to in the
policy.
CA affirmed TC. It agreed with the conclusion of the trial
court that Magalong and Atiga were neither employees nor
authorized representatives of Producers and ratiocinated
as follows:
A policy or contract of
insurance is to be construed
liberally in favor of the insured
and strictly against the
insurance company (New Life
Enterprises vs. Court of
Appeals, 207 SCRA 669; Sun
Insurance Office, Ltd. vs. Court
of Appeals, 211 SCRA 554).
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 (New Life Enterprises
Case, supra, p. 676; Sun
Insurance Office, Ltd. vs. Court
of Appeals, 195 SCRA 193).
The language used by
defendant-appellant in the
above quoted stipulation is
plain, ordinary and simple. No
other interpretation is
necessary. The word
"employee" must be taken to
mean in the ordinary sense.
The Labor Code is a
special law specifically dealing
with/and specifically designed
to protect labor and therefore
its definition as to employer-
employee relationships insofar
as the application/enforcement
of said Code is concerned must
necessarily be inapplicable to
an insurance contract which
defendant-appellant itself had
formulated. Had it intended to
apply the Labor Code in
defining what the word
"employee" refers to, it
must/should have so stated
expressly in the insurance
policy.
Said driver and security
guard cannot be considered as
employees of plaintiff-appellee
bank because it has no power
to hire or to dismiss said driver
and security guard under the
contracts (Exhs. 8 and C)
except only to ask for their
replacements from the
contractors. 5
Fortune alleges that TC and CA erred in holding it
liable under the insurance policy because the loss falls
within the general exceptions clause considering that driver
Magalong and security guard Atiga were Producers'
authorized representatives or employees in the transfer of
the money and payroll from its branch office in Pasay City
to its head office in Makati.
According to Fortune, when Producers commissioned a
guard and a driver to transfer its funds from one branch to
another, they effectively and necessarily became its
authorized representatives in the care and
On the other hand, Producers contends that
Magalong and Atiga were not its employees since it had
nothing to do with their selection and engagement, the
payment of their wages, their dismissal, and the control of
their conduct.
Issue:
Whether or not the petitioner is liable under the
Money, Security, and Payroll Robbery policy it issued to the
private respondent or whether recovery thereunder is
precluded under the general exceptions clause thereof?
Held:
No, the petitioner is not liable under the Money,
Security, and Payroll Robbery policy it issued to the private
respondent or whether recovery thereunder is precluded
under the general exceptions clause thereof.
Ratio:
Fortune is exempt from liability under the general
exceptions clause of the insurance policy. It should be
noted that the insurance policy entered into by the parties
is a theft or robbery insurance policy which is a form of
casualty insurance. Section 174 of the Insurance Code
provides:
Sec. 174. Casualty insurance is
insurance covering loss or
liability arising from accident or
mishap, excluding certain types
of loss which by law or custom
are considered as falling
exclusively within the scope of
insurance such as fire or
marine. It includes, but is not
limited to, employer's liability
insurance, public liability
insurance, motor vehicle
liability insurance, plate glass
 insurance, burglary and theft
insurance, personal accident
and health insurance as written
by non-life insurance
companies, and other
substantially similar kinds of
insurance. (emphases
supplied)
Except with respect to compulsory motor vehicle liability
insurance, the Insurance Code contains no other
provisions applicable to casualty insurance or to robbery
insurance in particular. These contracts are, therefore,
governed by the general provisions applicable to all types
of insurance. Outside of these, the rights and obligations of
the parties must be determined by the terms of their
contract, taking into consideration its purpose and always
in accordance with the general principles of insurance law.
It has been aptly observed that in burglary, robbery, and
theft insurance, "the opportunity to defraud the insurer
the moral hazard is so great that insurers have found it
necessary to fill up their policies with countless restrictions,
many designed to reduce this hazard. Seldom does the
insurer assume the risk of all losses due to the hazards
insured against."
Persons frequently excluded under such provisions are
those in the insured's service and employment. The
purpose of the exception is to guard against liability should
the theft be committed by one having unrestricted access
to the property. In such cases, the terms specifying the
excluded classes are to be given their meaning as
understood in common speech. The terms "service" and
"employment" are generally associated with the idea of
selection, control, and compensation.
APPLICATION: Under the policy (quoted above)
There is marked disagreement between the parties on the
correct meaning of the terms "employee" and "authorized
representatives."
It is clear to us that insofar as Fortune is
concerned, it was its intention to exclude and exempt from
protection and coverage losses arising from dishonest,
fraudulent, or criminal acts of persons granted or having
unrestricted access to Producers' money or payroll.
When it used then the term "employee," it must have had
in mind any person who qualifies as such as generally and
universally understood, or jurisprudentially established in
the light of the four standards in the determination of the
employer-employee relationship, or as statutorily declared
even in a limited sense as in the case of Article 106 of the
Labor Code which considers the employees under a "labor-
only" contract as employees of the party employing them
and not of the party who supplied them to the employer.
Fortune claims that Producers' contracts with
PRC Management Systems and Unicorn Security Services
are "labor-only" contracts. But even granting these
contracts were not "labor-only" contracts, and PRC
Management Systems and Unicorn Security Services were
truly independent contractors, we are satisfied that
Magalong and Atiga were, in respect of the transfer of
Producer's money from its Pasay City branch to its head
office in Makati, its "authorized representatives" who
served as such with its teller Maribeth Alampay.
Howsoever viewed, Producers entrusted the
three with the specific duty to safely transfer the money to
its head office, with Alampay to be responsible for its
custody in transit; Magalong to drive the armored vehicle
which would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two
other companions. In short, for these particular tasks, the
three acted as agents of Producers. A "representative" is
defined as one who represents or stands in the place of
another; one who represents others or another in a special
capacity, as an agent, and is interchangeable with "agent."
Dispositive:
TC and CA are reversed. Fortune won. Foretune
is exempt from liability under the general exceptions clause
of the insurance policy.
MISAMIS LUMBER V. CAPITAL INSURANCE
Doctrine:
The insurance contract may be rather onerous
("one-sided", as the lower court put it), but that in itself does
not justify the abrogation of its express terms, terms which
the insured accepted or adhered to and which is the law
between the contracting parties.
Facts:
Plaintiff-appellee Misamis Lumber Corporation,
under its former name, Lanao Timber Mills, Inc., insured its
Ford Falcon motor car for the amount of P14,000 with the
defendant-appellant, Capital Insurance & Surety Company,
Inc. The pertinent provision of the policy provides:
4. The Insured may authorize the repair of the
Motor Vehicle necessitated by damage for which the
Company may be liable under this policy provided that:
(a) the estimated cost of such
repair does not exceed the
authorized Repair Limit.
(b) a detailed estimate of the
cost is forwarded to the
Company without delay.
and providing also that the
authorized repair limit is
P150.00.
Then, the insured car, while traveling along in
Aurora Boulevard in front of the Pepsi-Cola plant in Quezon
City, passed over a water hole which the driver did not see
because an oncoming car did not dim its light. The
crankcase and flywheel housing of the car broke when it hit
a hollow block lying alongside the water hole. At the
instance of the plaintiff-appellee, the car was towed and
repaired by Morosi Motors at its shop at 1906 Taft Avenue
Extension at a total cost of P302.27.
On 29 November 1961, when the repairs on the
car had already been made, the plaintiff-appellee made a
report of the accident to the defendant-appellant Capital
Insurance & Surety Company. Since the defendant-
appellant refused to pay for the total cost of to wage and
repairs, suit was filed in the municipal court originally.
The defendant-appellant admits liability in the
amount of P150, but not for any excess thereof.
The lower court ruled against the insurance
corporation because the company did not show that the
cost was excessive. Also, the court ruled that absolving the
company of the excess amount would make the contract
one sided.
Issue:
Whether or not the insurance company is liable for
more than the amount in the repair limit?
Held:
 No, the insurance company is liable for more than
the amount in the repair limit
Ratio:
The lower court's recourse to legal hermeneutics
is not called for because paragraph 4 of the policy is clear
and specific and leaves no room for interpretation. The
interpretation given is even unjustified because it opposes
what was specifically stipulated. Thus, it will be observed
that the policy drew out not only the limits of the insurer's
liability but also the mechanics that the insured had to
follow to be entitled to full indemnity of repairs. The option
to undertake the repairs is accorded to the insurance
company per paragraph 2. The said company was deprived
of the option because the insured took it upon itself to have
the repairs made, and only notified the insurer when the
repairs were done. As a consequence, paragraph 4, which
limits the company's liability to P150.00, applies.
The insurance contract may be rather onerous
("one-sided", as the lower court put it), but that in itself does
not justify the abrogation of its express terms, terms which
the insured accepted or adhered to and which is the law
between the contracting parties.
Finally, to require the insurer to prove that the cost
of the repairs ordered by the insured is unreasonable, as
the appealed decision does, when the insurer was not
given an opportunity to inspect and assess the damage
before the repairs were made, strikes Us as contrary to
elementary justice and equity.
Dispositive:
Petitioner won.
VI. SURETYSHIP
Section 177 of Insurance Code
A contract of suretyship is an agreement whereby a party
called the surety guarantees the performance by another
party called the principal or obligor of an obligation or
undertaking in favor of a third party called the obligee. It
includes official recognizances, stipulations, bonds or
undertakings issued by any company by virtue of and
under the provisions of Act No. 536, as amended by Act
No. 2206.
Section 178 of Insurance Code
The liability of the surety or sureties shall be joint and
several with the obligor and shall be limited to the amount
of the bond. It is determined strictly by the terms of the
contract of suretyship in relation to the principal contract
between the obligor and the obligee. (As amended by
Presidential Decree No. 1455).
Section 179 of Insurance Code
The surety is entitled to payment of the premium
as soon as the contract of suretyship or bond is perfected
and delivered to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and until the
premium therefor has been paid, except where
the obligee has accepted the bond, in which case the
bond becomes valid and enforceable irrespective of
whether or not the premium has been paid by the obligor
to the surety: Provided, That if the contract
of suretyship or bond is not accepted by, or filed with
the obligee, the surety shall collect only reasonable
amount, not exceeding fifty per centum of the premium
due thereon as service fee plus the cost of stamps or
other taxes imposed for the issuance of the contract or
bond: Provided, however, That if the non-acceptance of
the bond be due to the fault or negligence of the surety,
no such service fee, stamps or taxes shall be collected.
In the case of a continuing bond, the obligor
shall pay the subsequent annual premium as it falls due
until the contract of suretyship is cancelled by
the obligee or by the Commissioner or by a court of
competent jurisdiction, as the case may be.
Section 180 of Insurance Code
Pertinent provisions of the Civil Code of
the Philippines shall be applied in a suppletory character
whenever necessary in interpreting the provisions of a
contract of suretyship.
NAPOCOR v. CA (1986)
Doctrine:
The surety bond must be read in its entirety and
together with the contract between NPC and the
contractors. The provisions must be construed together to
arrive at their true meaning. Certain stipulations cannot be
segregated and then made to control.
Facts:
The National Power Corporation (NPC) entered
into a contract with the Far Eastern Electric, Inc. (FFEI) on
December 26, 1962 for the erection of transmission lines
for the Angat Hydroelectric Project. FFEI agreed to
complete the work within 120 days from the signing of the
contract otherwise FFEI will pay NPC P200 per day as
damages. Philippine American General Insurance Co., Inc.
(Philamgen) issued a surety bond in the amount of
P30,672.00 for the faithful performance of the undertaking
by FEEI, as required.
The condition of the bond reads: The liability of the
PHILIPPINE AMERICAN GENERAL INSURANCE
COMPANY, INC. under this bond will expire One (1) year
from final Completion and Acceptance and said bond will
be cancelled 30 days after its expiration, unless surety is
notified of any existing obligation thereunder.
The following stipulations are also incorporated in
the construction contract between NPC and FFEI:
(a) Should the Contractor fail to
complete the construction of
the work as herein specified
and agreed upon, or if the work
is abandoned, the Corporation
shall have the power to take
over the work by giving notice
in writing to the Contractor and
his sureties of its intention to
 take over the construction
work.
(b) It is expressly agreed that in
the event the corporation takes
over the work from the
Contractor, the latter and his
bondsmen shall continue to be
liable under this contract for
any expense in the completion
of the work in excess of the
contract price.
The work was abandoned on June 26, 1963,
leaving the construction unfinished. On July 19, 1963, NPC
wrote Philamgen informing it of the withdrawal of FEEI from
the work and formally holding both FEEI and Philamgen
liable for the cost of the work to be completed plus
damages.
The work was completed by NPC on September
30, 1963. On January 30, 1967 NPC notified Philamgen
that FEEI had an outstanding obligation in the amount of
P75,019.85. Philamgen did not pay as demanded but
contended instead that its liability under the bond has
expired on September 20, 1964 and claimed that no notice
of any obligation of the surety was made within 30 days
after its expiration.
NPC filed case against Philamgen. TC: ruled in
favor of NPC; held FFEI and Philamgen jointly and
severally liable to NPC. CA: Reversed and dismissed the
complaint.
Issue:
Whether or not Philamgen is liable to pay NPC?
Held:
Yes, Philamgen is liable to pay NPC
Ratio:
Philamgen was informed as early as July 19, 1963
that its principal FFEI had abandoned its work and that
NPC was to continue said work. NPC also informed them
of their continuing liability. The 30-day notice adverted to in
the surety bond applies to the completion of the work by the
contractor. This completion by the contractor never
materialized. There was sufficient notice made by the NPC.
The surety bond must be read in its entirety and
together with the contract between NPC and the
contractors. The provisions must be construed together to
arrive at their true meaning. Certain stipulations cannot be
segregated and then made to control.
Furthermore, it is well settled that contracts of
insurance are to be construed liberally in favor of the
insured and strictly against the insurer. Thus ambiguity in
the words of an insurance contract should be interpreted in
favor of its beneficiary.
In the case at bar, it cannot be denied that the
breach of contract in this case, that is, the abandonment of
the unfinished work of the transmission line of the petitioner
by the contractor Far Eastern Electric, Inc. was within the
effective date of the contract and the surety bond. Such
abandonment gave rise to the continuing liability of the
bond as provided for in the contract which is deemed
incorporated in the surety bond executed for its completion.
To rule therefore that private respondent was not properly
notified would be gross error.
Dispositive:.
Petitioner won!
LEYSON vs. RIZAL
Doctrine:
The law has authorized the formation of
corporations for the purpose of conducting surety business,
and the corporate surety differs significantly from the
individual private surety. First, unlike the private surety, the
corporate surety signs for cash and not for friendship.
The private surety is regarded as someone doing
a rather foolish act for praiseworthy motives; the corporate
surety, to the contrary, is in business to be a profit and
charges a premium depending upon the amount of
guaranty and the risk involved. Second, the corporate
surety, like an insurance company, prepares the
instrument, which is a type of contract of adhesion,
whereas the private surety usually does not prepare the
note or bond which he signs. Third, the obligation of the
private surety often is assumed simply on the basis of the
debtor's representations and without legal advice, while the
corporate surety does not bind itself until a full investigation
has been made.
Facts:
The Rizal Surety & Insurance Co. brings this
appeal from an order of the Court of First Instance of Manila
which declared it liable for P6,051.57 on its bond it had
given in behalf of Victorio L. Rodriguez. Rodriguez was the
administrator of the estate of Honofre Leyson. On
December 27, 1951, theCFI of Manila, in which the estate
was at the time pending settlement, ordered Rodriguez
relieved of his trust after finding him guilty of
misadministration. As Rodriguez appealed the order of
relief, the court, as a measure of "protection of this estate,"
required him to file an increased bond of P10,000 (which
then was P500 only) to answer for "the faithful execution of
his trust as of the date of his appointment."
Rodriguez filed a bond, given by the appellant, but
instead of a bond for the purpose specified by the court in
its order, he filed a bond which reads: THEREFORE, if the
said Victorio L. Rodriguez faithfully prepares and present
to the Court, within three months from the date of his
appointment, a correct inventory of all the property of the
deceased which may have come into his possession or into
the possession of any other person representing him
according to law,
RTC approved the bond of 10,000 pesos. Said
bond shall answer for the faithful execution of his trust as
of the date of his appointment. Let the Rizal Surety &
Insurance Company be notified of this order.
Required to account for the period June 27, 1951
to August 30, 1954, Rodriguez was found short of
P6,248.22. (The amount of shortage was later found by
final judgment of the Court of Appeals to be P6,051.57.)
Despite several deadlines given to him,
Rodriguez failed to pay the money in court, for which
reason he was ordered arrested and declared in contempt.
On November 8, 1962, the Court, acting on
motion of the new administratrix, ordered the confiscation
of Rodriguez' bond for the satisfaction of the amount of
P6,051.57. It is from this order that the surety company
appeals.
It is first of all contended that appellant cannot
beheld liable on its bond because the defalcations, for
which the bond was ordered forfeited, were committed by
the principal before the bond was filed. The rule is invoked
that a contract of suretyship must be strictly construed and administratrix to make the surety liable to the extent of
since the contract in this case contains no provision malting P6,051.57, which amount was found due from the said
it expressly retroactive, the point is made that the bond former administrator.
cannot cover violations of trust by the administrator before
the filing of that bond. Dispositive:
Wherefore, the order appealed from is affirmed,
Issue: without pronouncement as to costs.
Whether or not Rizal Surety & insurance Co. is
liable to pay P.6,051.75?
PHILIPPINE PRYCE ASSURANCE V. CA
Ratio:
Yes, Rizal Surety & insurance Co. is liable to pay. Doctrine:
No person can claim benefit from the wrong he
Held: himself committed. A representation made is rendered
While it is indeed true that the bond does not conclusive upon the person making it and cannot be denied
specify the date when it took effect, the fact is that both in or disproved as against the person relying thereon.
its order requiring the administrator to file an increased
bond and in its subsequent order approving the bond, the Facts:
court made plain that the bond would answer "for the Gegroco, Inc filed for a collection of the issued
faithful execution of his (administrator's) trust as of the date surety bond for P500K and P1M by Interworld Assurance
of his appointment." Rodriguez' appointment as Corporation (now Philippine Pryce Assurance Corporation)
administrator was made on December 8, 1947 and it was in behalf of its principal Sagum General Merchandise.
on this date that the bond must be understood to have RTC favored Gegroco, Inc. CA affirmed RTC.
taken effect. Interworld checks issued by its principal which were
That the court should require this condition is supposed to pay for the premiums bounced and it was not
understandable, considering that it had earlier found the yet authorized by the Insurance Commission to issue
former administrator guilty of maladministration and, as a surety bonds.
consequence, ordered his removal. To repeat, the bond in
question was required by the court "for the protection of Issue:
(the) estate" in view of the fact that Rodriguez had Whether or not Interworld Assurance Corp. should
appealed the order of removal and, therefore, could not be liable for the surety bond that it issued as payment for
immediately be relieved of his position of trust. the premium?
The law has authorized the formation of
corporations for the purpose of conducting surety business, Held:
and the corporate surety differs significantly from the Yes, Interworld Assurance Corp. should be liable
individual private surety. First, unlike the private surety, the for the surety bond that it issued as payment for the
corporate surety signs for cash and not for friendship. premium.
The private surety is regarded as someone doing
a rather foolish act for praiseworthy motives; the corporate Ratio:
surety, to the contrary, is in business to be a profit and Interworld did not and never attempted to pay the
charges a premium depending upon the amount of requisite docket fee and was not present during the
guaranty and the risk involved. Second, the corporate scheduled pre-trial so it is as if third-party complaint was
surety, like an insurance company, prepares the never filed
instrument, which is a type of contract of adhesion, Sec. 177. The surety is
whereas the private surety usually does not prepare the entitled to payment of the
note or bond which he signs. Third, the obligation of the premium as soon as the
private surety often is assumed simply on the basis of the contract of suretyship or bond
debtor's representations and without legal advice, while the is perfected and delivered to
corporate surety does not bind itself until a full investigation the obligor. No contract of
has been made. For these reasons, the courts distinguish suretyship or bonding shall be
between the individual gratuitous surety and the vocational valid and binding unless and
corporate surety. In the case of the corporate surety, the until the premium therefor has
rule of strictissimi juris is not applicable, and courts apply been paid, except where the
the rules of interpretation ... appertaining to contracts of obligee has accepted the bond,
insurance. in which case the bond
Nor is there any merit in the claim that the bond in becomes valid and enforceable
this case was confiscated without giving the appellant a irrespective of whether or not
chance to be heard on "the reality and reasonableness of the premium has been paid by
the damages." It has already been held that the nature of a the obligor to the surety
surety's obligation on an administrator's bond, which Interworld's defense that it did not have authority
makes him privy to the proceedings against his principal, is to issue a Surety Bond when it did is an admission of fraud
such that he is bound and concluded, in the absence of committed against Gegroco. No person can claim benefit
fraud or collusion, by a judgment against his principal, even from the wrong he himself committed. A representation
though the surety was not a party to the proceedings. made is rendered conclusive upon the person making it
Furthermore, the record shows that the surety was given and cannot be denied or disproved as against the person
an opportunity to be heard. This motion refers to the relying thereon.
petition filed by the heiress and the temporary
Dispositive:
WHEREFORE, in view of the foregoing, the
decision of the Court of Appeals dismissing the petition
before them and affirming the decision of the trial court and
its order denying petitioner's Motion for Reconsideration
are hereby AFFIRMED. The present petition is
DISMISSED for lack of merit.
AFP GENERAL INSURANCE v. MOLINA
Doctrine:
It provides that a surety bond, once accepted by
the obligee becomes valid and enforceable, irrespective of
whether or not the premium has been paid by the obligor.
Facts:
The private respondents are the complainants in
a case for illegal dismissal filed against Radon Security &
Allied Services Agency and/or Raquel Aquias and Ever
Emporium, Inc. LA ruled that the private respondents were
illegally dismissed and ordered Radon Security to pay them
separation pay, backwages, and other monetary claims.
Radon Security appealed to NLRC and posted
a supersedeas bond. NLRC affirmed with modification. It
found the private respondents were constructively
dismissed and ordered Radon Security to pay them their
separation pay, in lieu of reinstatement with backwages, as
well as their monetary benefits limited to 3 years, plus
attorneys fees equivalent to 10% of the entire amount, with
Radon Security and Ever Emporium, Inc. adjudged jointly
and severally liable.
Radon Security filed a Petition for Certiorari, but it
was dismissed. The decision of NLRC, being final,
submitted a Computation of the Monetary Awards. Radon
Security opposed said computation in its Motion for
Recomputation.
LA issued a Writ of Execution incorporating the
computation of the NLRC Research and Information
Unit. LA dismissed the Motion for Recomputation. By virtue
of the writ of execution, the NLRC Sheriff issued a Notice
of Garnishment against the supersedeas bond. Radon
Security appealed to the NLRC.
AFPGIC entered the fray by filing before the LA
an Omnibus Motion to Quash Notice/Writ of Garnishment
and to Discharge AFPGICs Appeal Bond on the ground
that said bond has been cancelled and thus non-existent in
view of the failure of Radon Security to pay the yearly
premiums. LA denied. It pointed out that the question of
non-payment of premiums is a dispute between the party
who posted the bond and the insurer; to allow the bond to
be cancelled because of the non-payment of premiums
would result in a factual and legal absurdity wherein a
surety will be rendered nugatory by the simple expedient of
non-payment of premiums.
The petitioner then appealed to NLRC. In
dismissing the appeal of AFPGIC, the NLRC pointed out
that AFPGICs theory that the bond cannot anymore be
proceeded against for failure of Radon Security to pay the
premium is untenable, considering that the bond is effective
until the finality of the decision. The NLRC stressed that a
contrary ruling would allow respondents to simply stop
paying the premium to frustrate satisfaction of the money
judgment.
AFPGIC then filed a special civil action for
certiorari on the ground that the NLRC committed a grave
abuse of discretion in affirming the Order of LA. CA
dismissed the petition. Hence, the instant case.
Issue:
Whether or not the subject appeal bond was
already cancelled for non-payment of premium and thus
could not be subject for garnishment.
Held:
Yes. the subject appeal bond was already
cancelled for non-payment of premium and thus could not
be subject for garnishment?
Ratio:
The perfection of an appeal by an employer only
upon the posting of a cash or surety bond clearly and
categorically shows the intent of the lawmakers to make the
posting of a cash or surety bond by the employer to be the
exclusive means by which an employers appeal may be
perfected. Additionally, the filing of a cash or surety bond is
a jurisdictional requirement in an appeal involving a money
judgment to the NLRC. Rule VI, Section 6 categorically
states that the cash or surety bond posted in appeals
involving monetary awards in labor disputes shall be in
effect until final disposition of the case.
The instant case pertains to a surety bond; thus,
the applicable provision of the Insurance Code is Section
177, which specifically governs suretyship. It provides that
a surety bond, once accepted by the obligee becomes valid
and enforceable, irrespective of whether or not the
premium has been paid by the obligor. The private
respondents, the obligees here, accepted the bond posted
by Radon Security and issued by the petitioner. Hence, the
bond is both valid and enforceable. A verbis legis non est
recedendum(from the language of the law there must be no
departure).
When petitioner surety company cancelled the
surety bond because Radon Security failed to pay the
premiums, it gave due notice to the latter but not to the
NLRC. By its failure to give notice to the NLRC, AFPGIC
failed to acknowledge that the NLRC had jurisdiction not
only over the appealed case, but also over the appeal
bond. This oversight amounts to disrespect and contempt
for a quasi-judicial agency tasked by law with resolving
labor disputes. Until the surety is formally discharged, it
remains subject to the jurisdiction of the NLRC.
Our ruling, anchored on concern for the
employee, however, does not in any way seek to derogate
the rights and interests of the petitioner as against Radon
Security. The former is not devoid of remedies against the
latter. Under Section 176 of the Insurance Code, the
liability of petitioner and Radon Security is solidary in
nature. There is solidary liability only when the obligation
expressly so states, or when the law so provides, or when
the nature of the obligation so requires. Since the law
provides that the liability of the surety company and the
obligor or principal is joint and several, then either or both
of them may be proceeded against for the money award.
The Labor Arbiter directed the NLRC Sheriff to
garnish the surety bond issued by the petitioner. The latter,
as surety, is mandated to comply with the writ of
garnishment, for as earlier pointed out, the bond remains
enforceable and under the jurisdiction of the NLRC until it
is discharged. In turn, the petitioner may proceed to collect
the amount it paid on the bond, plus the premiums due and
demandable, plus any interest owing from Radon
Security. This is pursuant to the principle of subrogation
enunciated in Article 2067 of the Civil Code which we apply
to the suretyship agreement between AFPGIC and Radon
Security, in accordance with Section 178 of the Insurance
Code.
Dispositive:
Petition denied.
CAPITAL INSURANCE vs. RONQUILLO TRADING (1983)
Doctrine:
In the surety bond it is stipulated that the "liability
of surety on this bond will expire on May 5, 1963 and said
bond will be cancelled 15 days after its expiration, unless
surety is notified of any existing obligations thereunder."
Under this stipulation the bond expired on the stated date
and the phrase "unless surety is notified of any existing
obligations thereunder" refers to obligations incurred during
the term of the bond.
Facts:
Capital Surety and Insurance Co., Inc., through its
general agent, executed and issued a surety bond in the
amount of $14,800.00 in behalf of Ronquillo Trading and in
favor of S.S. Eurygenes (its master), and/or Delgado
Shipping Agencies. The bond was a guarantee for any
additional freight which may be determined to be due on a
cargo of 258 surplus army vehicles consigned from Pusan,
Korea to the Ronquillo Trading on board the S.S.
Eurygenes and booked on said vessel by the Philippine
Merchants Steamship Company, Inc.
In consideration for the issuance by the appellant
of the aforesaid surety bond, the appellees executed an
indemnity agreement whereby among other things, they
jointly and severally promised to pay the appellant the sum
of P1,827.00 in advance as premium and documentary
stamps for each period of twelve months while the surety
bond was in effect.
About 5 days before the expiration of the liability
on the bond, P.D. Marchessini and Co., Ltd. and Delgado
Shipping Agencies, Inc., filed a civil case in the CFI Manila
against the defendants and the herein appellant Capital
Insurance & Surety Co., Inc. for the sum of $14,800.00, the
loss they allegedly suffered as a direct consequence of the
failure of the defendants to load the stipulated quantity of
406 U.S. surplus army vehicles. The appellant was made
party defendant because of the bond it posted in behalf of
the appellees.
Upon the expiration of the 12 months life of the
bond, the appellant made a formal demand for the payment
of the renewal premiums and cost of documentary stamps
for another year (P1,827.00). The appellees refused to pay,
contending that the liability of the appellant under the surety
bond accrued during the period of twelve months the said
bond was originally in force and before its expiration and
that the defendants-appellees were under no obligation to
renew the surety bond.
The appellant filed a complaint to recover the sum
of P1,827.00 against the appellees in the City Court of
Manila. The city court rendered judgment absolving the
appellees from the complaint. The appellant appealed the
judgment to the CFI Manila. CFI Manila affirmed the
decision of the City Court and the complaint dismissed.
Appellants Motion for Reconsideration was denied. Hence,
the instant appeal.
Issue:
Whether or not the trial court was correct in
holding that once suretys liability under the bond accrued,
appellees are under no obligation to pay the premiums and
costs of documentary stamps for the succeeding period?
Held:
Yes, the trial court was correct in holding that once
suretys liability under the bond accrued, appellees are
under no obligation to pay the premiums and costs of
documentary stamps for the succeeding period.
Ratio:
The appellees countered that the only purpose of
the Civil Case was to enforce a liability which existed even
before the bond was executed. The bond was given to
secure payment by appellees of such additional freight as
would already be due on the cargo when it actually arrived
in Manila. The bond was not executed to secure obligation
or liability which was still to arise after its twelve month life.
While it is true that the lower court held that the bond was
still in effect after its expiry date, the effectivity was not due
to a renewal made by the appellees but because the surety
bond provided that "the liability of the surety will not expire
if, as in this case, it is notified of an existing obligation
thereunder". The meaning of the bond's still being in effect
is that, the suit on the bond instituted by the obligees prior
to the expiration of the "liability" thereunder was only for the
purpose of enforcing that liability and amounted to notice to
appellant of an already existing or accrued liability so as not
to let that liability lapse or expire and thereby bar
enforcement.
We agree with the contention of the appellees. It must be
noted that in the surety bond it is stipulated that the "liability
of surety on this bond will expire on May 5, 1963 and said
bond will be cancelled 15 days after its expiration, unless
surety is notified of any existing obligations thereunder."
Under this stipulation the bond expired on the stated date
and the phrase "unless surety is notified of any existing
obligations thereunder" refers to obligations incurred during
the term of the bond.
Furthermore, under the Indemnity Agreement, the
appellees "agree to pay the COMPANY the sum of P1,800
in advance as premium thereof for every twelve (12)
months or fraction thereof, while this bond or any renewal
or substitution thereof is in effect." Obviously, the duration
of the bond is for "every twelve (12) months or fraction
thereof, while this bond or any renewal or substitution is in
effect." Since the appellees opted not to renew the contract
they cannot be obliged to pay the premiums. More
specifically, where a contract of surety is terminated under
its terms, the liability of the principal for premiums after
such termination ceases notwithstanding the pendency of
a lawsuit to enforce a liability that accrued during its
stipulated lifetime.
Dispositive:
WHEREFORE, the appeal is dismissed for lack of
merit. The decision of the court a quo is affirmed. SO
ORDERED.
VII. LIFE INSURANCE
Section 179 of Insurance Code
Life insurance is insurance on human lives and insurance
appertaining thereto or connected therewith.
Section 180 of Insurance Code
An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period,
or otherwise contingently on the continuance or cessation
of life.
Every contract or pledge for the payment of endowments
or annuities shall be considered a life insurance contract
for purpose of this Code.
In the absence of a judicial guardian, the father, or in the
latter's absence or incapacity, the mother, or any minor,
who is an insured or a beneficiary under a contract of life,
health or accident insurance, may exercise, in behalf of
said minor, any right under the policy, without necessity
of court authority or the giving of a bond, where the
interest of the minor in the particular act involved does
not exceed twenty thousand pesos. Such right may
include, but shall not be limited to, obtaining a policy loan,
surrendering the policy, receiving the proceeds of the
policy, and giving the minor's consent to any transaction
on the policy.
The insurer in a life insurance contract shall be liable in
case of suicides only when it is committed after the policy
has been in force for a period of two years from the date
of its issue or of its last reinstatement, unless the policy
provides a shorter period: Provided, however, That
suicide committed in the state of insanity shall be
compensable regardless of the date of commission.
Section 181 of Insurance Code
A policy of insurance upon life or health may pass by
transfer, will or succession to any person, whether he has
an insurable interest or not, and such person may recover
upon it whatever the insured might have recovered.
Section 179 of Insurance Code
Notice to an insurer of a transfer or bequest thereof is not
necessary to preserve the validity of a policy of insurance
upon life or health, unless thereby expressly required.
Section 179 of Insurance Code
Unless the interest of a person insured is susceptible of
exact pecuniary measurement, the measure of indemnity
under a policy of insurance upon life or health is the sum
fixed in the policy.
VIII. OTHER PROVISIONS
Section 247 of Insurance Code
If the Commissioner is of the opinion upon examination of
other evidence that any domestic or foreign insurance
company is in an unsound condition, or that it has failed to
comply with the provisions of law or regulations obligatory
upon it, or that its condition or method of business is such
as to render its proceedings hazardous to the public or to
its policyholders, or that its paid-up capital stock, in the
case of a domestic stock company, or its available cash
assets, in the case of a domestic mutual company, or its
security deposits, in the case of a foreign company, is
impaired or deficient, or that the margin of solvency
required of such company is deficient, the Commissioner is
authorized to suspend or revoke all certificates of authority
granted to such insurance company, its officers and
agents, and no new business shall thereafter be done by
such company or for such company by its agent in the
Philippines while such suspension, revocation or disability
continues or until its authority to do business is restored by
the Commissioner. Before restoring such authority, the
Commissioner shall require the company concerned to
submit to him a business plan showing the company's
estimated receipts and disbursements, as well as the
basis therefor, for the next succeeding three years.
Section 248 of Insurance Code
If at any time before, or after, the suspension or
revocation of the certificate of authority of an insurance
company as provided in the preceding title, the
Commissioner finds that such company is in a state of
continuing inability or unwillingness to maintain a
condition of solvency or liquidity deemed adequate to
protect the interest of policy holders and creditors, he
may appoint a conservator to take charge the assets,
liabilities, and the management of such company, collect
all moneys and debts due said company and exercise all
powers necessary to preserve the assets of said
company, reorganize the management thereof, and
restore its viability. The said conservator shall have the
power to overrule or revoke the actions of the previous
management and board of directors of the said company,
any provision of law, or of the articles of incorporation or
by-laws of the company, to the contrary notwithstanding,
and such other powers as the Commissioner shall deem
necessary.
The conservator may be another insurance company
doing business in the Philippines, by officer or officers of
such company, or any other competent and qualified
person, firm or corporation. The remuneration of the
conservator and other expenses attendant to the
conservation shall be borne by the insurance company
concerned.
The conservator shall not be subject to any action, claim
or demand by, or liability to, any person in respect of
anything done or omitted to be done in good faith in the
exercise, or in connection with the exercise, of the
powers conferred on the conservator.
The conservator appointed shall report and be
responsible to the Commissioner until such time as the
Commissioner is satisfied that the insurance company
can continue to operate on its own and
the conservatorship shall likewise be terminated should
be Commissioner, on the basis of the report of the
conservator or of his own findings, determine that the
continuance in business of the insurance company would
be hazardous to policy holders and creditors, in which
case the provisions of Title 15 shall apply.
Section 249 of Insurance Code
Whenever, upon examination or other evidence, it shall
be disclosed that the condition of any insurance company
doing business in the Philippines is one of insolvency, or
that its continuance in business would be hazardous to
its policyholders and creditors, the Commissioner shall
forthwith order the company to cease and desist from
transacting business in the Philippines and shall
designate a receiver to immediately take charge of its
assets and liabilities, as expeditiously as possible collect
and gather all the assets and administer the same for the
benefit of its policyholders and creditors, and exercise all
the powers necessary for these purposes including, but
not limited to, bringing suits and foreclosing mortgages in
the name of the insurance company.
The Commissioner shall thereupon determine within
thirty days whether the insurance company may be
reorganized or otherwise placed in such condition so that
it may be permitted to resume business with safety to its
policyholders and creditors and shall prescribe the
conditions under which such resumption of business shall
take place as well as the time for fulfillment of such
conditions. In such case, the expenses and fees in the
collection and administration of the insurance company
shall be determined by the Commissioner and shall be
paid out of the assets of such company.
If the Commissioner shall determine and confirm within
the said period that the insurance company is solvent, as
defined hereunder, or cannot resume business with
safety to its policyholders and creditors, he shall, if the
public interest requires, order its liquidation, indicate the
manner of its liquidation and approve a liquidation plan
and implement it immediately. The Commissioner shall
designate a competent and qualified person as liquidator
who shall take over the functions of the receiver
previously designated and, with all convenient speed,
reinsure all its outstanding policies, convert the assets of
the insurance company to cash, or sell, assign or
otherwise dispose of the same to the policyholders,
creditors and other parties for the purpose of settling the
liabilities or paying the debts of such company and he
may, in the name of the company, institute such actions
as may be necessary in the appropriate Court to collect
and recover accounts and assets of the insurance
company, and to do such other acts as may be necessary
to complete the liquidation as ordered by the
Commissioner.
The provisions of any law to the contrary notwithstanding,
the actions of the Commissioner under this Section shall
be final and executory, and can be set aside by the Court
upon petition by the company and only if there is
convincing proof that the action is plainly arbitrary and
made in bad faith. The Commissioner, through the
Solicitor General, shall then file the corresponding
answer reciting the proceeding taken and praying the
assistance of the Court in the liquidation of the company.
No restraining order or injunction shall be issued by the
Court enjoining the Commissioner from implementing his
actions under this Section, unless there is convincing
proof that the action of the Commissioner is plainly
arbitrary and made in bad faith and the petitioner or
plaintiff files with the Clerk or Judge of the Court in which
the action is pending a bond executed in favor of the
Commissioner in an amount to be fixed by the Court. The
restraining order or injunction shall be refused or, if
granted, shall be dissolved upon filing by the
Commissioner, if he so desires, of a bond in an amount
twice the amount of the bond of the petitioner or plaintiff
conditioned that it will pay the damages which the petition
or plaintiff may suffer by the refusal or the dissolution of
the injunction. The provisions of Rule 58 of the New
Rules of Court insofar as they are applicable shall govern
the issuance and dissolution of the restraining order or
injunction contemplated in this Section.
All proceedings under this Title shall be given preference
in the Courts. The Commissioner shall not be required to
pay any fee to any public officer for filing, recording, or in
any manner authenticating any paper or instrument
relating to the proceedings.
As used in this Title, the term "Insolvency" shall mean the
inability of an insurance company to pay its lawful
obligations as they fall due in the usual and ordinary
course of business as may be shown by its failure to
maintain the margin of solvency required under Section
194 of this Code.
Section 250 of Insurance Code
In case of liquidation of an insurance company, after
payment of the cost of the proceedings, including
reasonable expenses and fees incurred in the liquidation to
be allowed by the Court, the Commissioner shall pay all
allowed claims against such company, under order of the
Court, in accordance with their legal priority.
Section 251 of Insurance Code
The receiver or the liquidator, as the case may be,
designated under the provisions of this title shall not be
subject to any action, claim or demand by, or liability to, any
person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the
exercise, of the powers conferred on such receiver or
liquidator.
CATHAY INSURANCE vs. CA (1989)
Doctrine:
The amount of any loss or damage for which an
insurer may be liable, under any policy other than the
insurance policy, shall be paid within thirty days after proof
of loss is received by the insurer and ascertainment of the
loss or damage is made either by agreement between the
insured and the insurer or by arbitration; but if such
ascertainment is not had or made within sixty days after
such receipt by the insurer of the proof of loss, then the loss
or damage shall be paid within ninety days after such
receipt x x x (Section 243, Insurance Code)
Facts:
Eight years after Emilia Chan Lugay's Cebu
Filipina Press was destroyed by fire in broad daylight, she
is still waiting to collect the proceeds of 7 fire policies which
the petitioners sold to her. The petitioners are the 6
insurance companies that issued fire insurance policies for
the total sum of P4,000,000 to the Cebu Filipino Press of
Cebu City. The fire policies described the insured property
as "stocks of printing materials, papers and general
merchandise usual to the Assured's trade" stored in a one-
storey building of strong materials housing the Cebu
Filipina Press located in Cebu City. All, except one policy
(Paramount's), were renewals of earlier policies issued for
the same property.
On December 18, 1981, at around 10 o'clock in
the morning, the Cebu Filipina Press was razed by
electrical fire together with all the stocks and merchandise
stored in the premises. On January 15, 1982, Mrs. Lugay,
owner and operator of the printing press, submitted sworn
Statements of Loss Formal Claims to the insurers, through
their adjusters. She claimed a total loss of P4, 595. She
submitted proofs of loss required by the adjusters. After
nearly 10 months of waiting for the insurers to pay his claim,
she sued to collect on December 15, 1982. The insurance
companies denied liability, alleging violation of certain
conditions of the policy, misdeclaration, and even arson
which was not seriously pressed for, come the pre-trial, the
petitioners offered to pay 50% of her claim, but she insisted
in full recovery.
The court rendered judgment in favor of Mrs. Lugay
directing payments by the insurance companies to the
former. On appeal, Court of Appeals affirmed the decision
in toto. Hence, this petition for review
Issue:
Whether or not the private respondent's cause of
action had already accrued when the complaint was filed
on December 15, 1982?
Held:
Yes, the private respondent's cause of action had
already accrued when the complaint was filed on
December 15, 1982.
Ratio:
The finding of the trial court and the Court of Appeals
that the insured's cause of action had already accrued
before she filed her complaint is supported by Section 243
of the Insurance Code which fixes a maximum period of 90
days after receipt of the proofs of loss by the insurer for the
latter to pay the insured s claim.
Sec. 243. The amount of any loss or
damage for which an insurer may be liable,
under any policy other than the insurance
policy, shall be paid within thirty days after
proof of loss is received by the insurer and
ascertainment of the loss or damage is
made either by agreement between the
insured and the insurer or by arbitration;
but if such ascertainment is not had or
made within sixty days after such receipt
by the insurer of the proof of loss, then the
loss or damage shall be paid within ninety
days after such receipt x x x
As the fire which destroyed the Cebu Filipina Press
occurred on December 19, 1981 and the proofs of loss
were submitted from January 15, 1982 through June 21,
1982 in compliance with the adjusters' numerous requests
for various documents, payment should have been made
within 90 days thereafter, or on or before September 21,
1982. Hence, when the assured file her complaint on
December 15, 1982, her cause of action had a ready
accrued.
There is no merit in the petitioners' contention that
the proof of loss were insufficient because respondent
Emilia Chan Luga failed to comply with the adjuster's
request for the submission of her bank statements.
Condition No. 13, as the Court of Appeals observed, does
not require the insured to produce her bank statements.
Therefore, the insured was not obligated to produce them
and the insurers had no right to ask for them. Condition No.
13 was prepared by the insurers themselves, hence, it
"should be taken most strongly."
The Court of Appeals found that the insured "fully
complied with the requirements of Condition No. 13." The
adjuster's demand for the assured's bank statements
(which under the law on the secrecy of bank deposits, she
need not disclose) would add more requirements to
Condition No. 13 of the insurance contract, and, as pointed
out by the Appellate Court, "would amount to giving the
insurers limitless latitude in making unreasonable demands
if only to evade and avoid liability." Nor was the claim
inflated. Both the trial court and the Court of Appeals noted
that the proofs were ample and "more than enough for
defendants (insurers) to do a just assessment supporting
the 1981 fire claim for an amount exceeding four million
pesos."
Dispositive:
WHEREFORE, the decision of the Court of
Appeals in CA-G.R. No. CV-12100 is affirmed, except the
award of attorney's fees to the private respondents which
is hereby reduced to ten (10%) percent of the proceeds of
the insurance policies sued upon. Costs against the
petitioners. SO ORDERED
ZENITH INSURANCE v. COURT OF APPEALS
Doctrine:
Under the Insurance Code, in case of
unreasonable delay in the payment of the proceeds of an
insurance policy, the damages that may be awarded are:
a) attorneys fees; b) other expenses incurred by the
insured person by reason of such unreasonable denial or
withholding of payment; c) interest at twice the ceiling
prescribed by the Monetary Board of the amount of the
claim due the injured; and d) the amount of the claim.
Facts:
Private respondent Lawrence Fernandez insured
his car for "own damage" under private car Policy No.
50459 with petitioner Zenith Insurance Corporation the car
figured in an accident and suffered actual damages in the
amount of P3,640.00. After allegedly being given a run
around by Zenith for two (2) months, Fernandez filed a
complaint with the Regional Trial Court of Cebu for sum of
money and damages resulting from the refusal of Zenith to
pay the amount claimed Aside from actual damages and
interests, Fernandez also prayed for more damages in the
amount of P10,000.00, exemplary damages of P5,000.00,
attorney's fees of P3,000.00 and litigation expenses
ofP3,000.00. A decision was rendered by the trial court in
favor of private respondent Fernandez. The trial court,
ordered the execution of the decision pending appeal. The
order was assailed by petitioner in a petition for certiorari
with the Court of Appeals but which petition was also
dismissed the Court of Appeals rendered its decision
affirming in toto the decision of the trial court. The Motion
for Reconsideration of the decision of the Court of Appeals
was denied. Hence, the instant petition was filed by Zenith
allegation that respondent Court of Appeals'
decision and resolution ran counter to applicable decisions
of this Court and that they were rendered without or in
excess of jurisdiction
Issue:
Whether or not the prayer of the respondent of
P20,000 as damages to his case is without factual or legal
basis and W/N the trial court erred in ruling in favor of the
respondent?
Held:
Yes, prayer of the respondent of P20,000 as
damages to his case is with factual or legal basis and W/N
the trial court erred in ruling in favor of the respondent.

Ratio:
It is clear that under the Insurance Code, in case
of unreasonable delay in the payment of the proceeds of
an insurance policy, the damages that may be awarded
are:
1) attorney's fees;
2) other expenses incurred by
the insured person by reason of such
unreasonable denial or withholding of
payment;
3) interest at twice the ceiling
prescribed by the Monetary Board of the
amount of the claim due the injured; and
4) the amount of the claim. As
regards the award of moral and
exemplary damages, the rules under the
Civil Code of the Philippines shall
govern.
"The purpose of moral damages is essentially
indemnity or reparation, not punishment or correction.
Moral damages are emphatically not intended to enrich a
complainant at the expense of a defendant, they are
awarded only to enable the injured party to obtain means,
diversions or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the
defendant's culpable action." The amount of P5,000.00
awarded as attorney's fees is justified under the
circumstances of this case considering that there were
other petitions filed and defended by private respondent in
connection with this case. As regards the actual damages
incurred by private respondent, the amount of P3,640.00
had been established before the trial court and affirmed by
the appellate court. Respondent appellate court correctly
ruled that the deductions of P250.00 and P274.00 as
deductible franchise and 20% depreciation on parts,
respectively claimed by petitioners as agreed upon in the
contract, had no basis.
Disposition:
The award of moral damages is reduced to
P10,000.00 and the award of exemplary damages is
hereby deleted ACCORDINGLY, the appealed decision is
MODIFIED as above stated.
Section 268 of Insurance Code
Every payment for the acquisition of any shares of the
capital stock of such insurer, the purchase price of which is
not fixed by such plan, shall be subject to the prior approval
of the Commissioner. Neither such plan, nor any such
payment, may be approved by the Commissioner unless
he finds that the rights and interests of the insurer, its
policyholders, and shareholders are protected.
REPUBLIC V SUN LIFE
Facts:
Sun Life is a mutual life insurance company
organized and existing under the laws of Canada. It is
registered and authorized by the Securities and Exchange
Commission and the Insurance Commission to engage in
business in the Philippines as a mutual life insurance
company with principal office at Paseo de Roxas, Legaspi
Village, Makati City.
On October 20, 1997, Sun Life filed with the
[Commissioner of Internal Revenue] (CIR) its insurance
premium tax return for the third quarter of 1997 and paid
the premium tax in the amount of P31,485,834.51. For the
period covering August 21 to December 18, 1997,
petitioner filed with the CIR its [documentary stamp tax
(DST)] declaration returns and paid the total amount
of P30,000,000.00
On December 29, 1997, the [Court of Tax Appeals]
(CTA) rendered its decision in Insular Life Assurance Co.
Ltd. v. [CIR], which held that mutual life insurance
companies are purely cooperative companies and are
exempt from the payment of premium tax and DST. This
pronouncement was later affirmed by this court in [CIR] v.
Insular Life Assurance Company, Ltd. Sun Life surmised
that[,] being a mutual life insurance company, it was
likewise exempt from the payment of premium tax and
DST. Hence, on August 20, 1999, Sun Life filed with the
CIR an administrative claim for tax credit of its alleged
erroneously paid premium tax and DST for the aforestated
tax periods.
For failure of the CIR to act upon the administrative
claim for tax credit and with the 2-year period to file a claim
for tax credit or refund dwindling away and about to expire,
Sun Life filed with the CTA a petition for review on August
23, 1999. In its petition, it prayed for the issuance of a tax
credit certificate in the amount of P61,485,834.51
representingP31,485,834.51 of erroneously paid premium
tax for the third quarter of 1997 and P30,000[,000].00 of
DST on policies of insurance from August 21 to December
18, 1997. Sun Life stood firm on its contention that it is a
mutual life insurance company vested with all the
characteristic features and elements of a cooperative
company or association as defined in [S]ection 121 of the
Tax Code. Primarily, the management and affairs of Sun
Life were conducted by its members; secondly, it is
operated with money collected from its members; and,
lastly, it has for its purpose the mutual protection of its
members and not for profit or gain.
Thereafter, CTA found in favor
of Sun Life. Quoting largely from its earlier
findings in Insular Life Assurance
Company, Ltd. v. [CIR], which it found to
be on all fours with the present action, the
CTA ruled:
The [CA] has
already spoken. It
ruled that a mutual life
insurance company is
a purely cooperative
company[;] thus,
exempted from the
payment of premium
and documentary
stamp taxes.
Petitioner Sun Life is
without doubt a
mutual life insurance
company. x x x
Seeking reconsideration of the decision of the CTA, the
CIR argued that Sun Life ought to have registered,
foremost, with the Cooperative Development Authority
before it could enjoy the exemptions from premium tax
and DST extended to purely cooperative companies or
associations under [S]ections 121 and 199 of the Tax
Code. For its failure to register, it could not avail of the
exemptions prayed for. Moreover, the CIR alleged that
Sun Life failed to prove that ownership of the company
was vested in its members who are entitled to vote and
elect the Board of Trustees among [them]. The CIR further
claimed that change in the 1997 Tax Code subjecting
mutual life insurance companies to the regular corporate
income tax rate reflected the legislatures recognition that
these companies must be earning profits.
Notwithstanding these arguments, the
CTA denied the CIRs motion for reconsideration.
CA uphold the CTA decision saying that
respondent was a purely cooperative corporation
duly licensed to engage in mutual life insurance
business in the Philippines. Thus, respondent
was deemed exempt from premium and
documentary stamp taxes, because its affairs are
managed and conducted by its members with
money collected from among themselves, solely
for their own protection, and not for profit. Its
members or policyholders constituted both
insurer and insured who contribute, by a system
of premiums or assessments, to the creation of a
fund from which all losses and liabilities were
paid. Hence, this Petition.
Issues:
1. Whether or not the respondent cooperative.
2. Whether or not respondent should register in
the CDA.
3. Whether or not exempted from DTS and
premium taxes.
Held:
1. Yes, the respondent is a cooperative.
2. No, respondent should not register in the CDA.
3. Yes, exempted from DTS and premium taxes.
Ratio:
1. Yes. The Tax Code defines a cooperative as an
association conducted by the members thereof with the
money collected from among themselves and solely for
their own protection and not for profit.[8] Without a doubt,
respondent is a cooperative engaged in a mutual life
insurance business.
First, it is managed by its members. Both the CA
and the CTA found that the management and affairs of
respondent were conducted by its member-policyholders.[9]
A stock insurance company doing business in the
Philippines may alter its organization and transform itself
into a mutual insurance company.[10] Respondent has been
mutualized or converted from a stock life insurance
company to a nonstock mutual life insurance
corporationpursuant to Section 266 of the Insurance Code
of 1978.[12] On the basis of its bylaws, its ownership has
been vested in its member-policyholders who are each
entitled to one vote and who, in turn, elect from among
themselves the members of its board of trustees. Being the
governing body of a nonstock corporation, the board
exercises corporate powers, lays down all corporate
business policies, and assumes responsibility for the
efficiency of management.
Second, it is operated with money collected from
its members. Since respondent is composed entirely of
members who are also its policyholders, all premiums
collected obviously come only from them.[16]
The member-policyholders constitute both insurer
and insuredwho contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses
and liabilities are paid. The premiums pooled into this fund
are earmarked for the payment of their indemnity and
benefit claims.
Third, it is licensed for the mutual protection of its
members, not for the profit of anyone.
As early as October 30, 1947, the director of
commerce had already issued a license to respondent -- a
corporation organized and existing under the laws of
Canada -- to engage in business in the
Philippines.[20] Pursuant to Section 225 of Canadas
Insurance Companies Act, the Canadian minister of state
(for finance and privatization) also declared in its Amending
Letters Patent that respondent would be a mutual company
effective June 1, 1992.[21] In the Philippines, the insurance
commissioner also granted it annual Certificates of
Authority to transact life insurance business, the most
relevant of which were dated July 1, 1997 and July 1,
1998.[22]
A mutual life insurance company is conducted for
the benefit of its member-policyholders,] who pay into its
capital by way of premiums. To that extent, they are
responsible for the payment of all its losses The cash paid
in for premiums and the premium notes constitute their
assets x x x. In the event that the company itself fails before
the terms of the policies expire, the member-policyholders
do not acquire the status of creditors.[26] Rather, they
simply become debtors for whatever premiums that they
have originally agreed to pay the company, if they have not
yet paid those amounts in full, for [m]utual companies x x x
depend solely upon x x x premiums. Only when the
premiums will have accumulated to a sum larger than that
required to pay for company losses will the member-
policyholders be entitled to apro rata division thereof as
profits. The so-called dividend that is received by member-
policyholders is not a portion of profits set aside for
distribution to the stockholders in proportion to their
subscription to the capital stock of a corporation. One, a
mutual company has no capital stock to which subscription
is necessary; there are no stockholders to speak of, but
only members. And, two, the amount they receive does not
partake of the nature of a profit or income. The quasi-
appearance of profit will not change its character. It
remains an overpayment, a benefit to which the member-
policyholder is equitably entitled.
Verily, a mutual life insurance corporation is a
cooperative that promotes the welfare of its own members.
It does not operate for profit, but for the mutual benefit of
its member-policyholders. They receive their insurance at
cost, while reasonably and properly guarding and
maintaining the stability and solvency of the company. The
economic benefits filter to the cooperative members. Either
equally or proportionally, they are distributed among
members in correlation with the resources of the
association utilized.
It does not follow that because respondent is
registered as a nonstock corporation and thus exists for a
purpose other than profit, the company can no longer make
any profits. Earning profits is merely its secondary, not
primary, purpose. In fact, it may not lawfully engage in any
business activity for profit, for to do so would change or
contradict its natureas a non-profit entity. It may, however,
invest its corporate funds in order to earn additional income
for paying its operating expenses and meeting benefit
claims. Any excess profit it obtains as an incident to its
operations can only be used, whenever necessary or
proper, for the furtherance of the purpose for which it was
organized.

2. No. Under the Tax Code although respondent is a
cooperative, registration with the Cooperative
Development Authority (CDA) is not necessary in order for
it to be exempt from the payment of both percentage taxes
on insurance premiums, under Section 121; and
documentary stamp taxes on policies of insurance or
annuities it grants, under Section 199. True, the provisions
of the Insurance Code relative to the organization and
operation of an insurance company also apply to
cooperative insurance entities organized under the
Cooperative Code. The latter law, however, does not apply
to respondent, which already existed as a cooperative
company engaged in mutual life insurance prior to the laws
passage of that law. The statutes prevailing at the time of
its organization and mutualization were the Insurance Code
and the Corporation Code, which imposed no registration
requirement with the CDA.
3. Yes. Having determined that respondent is a cooperative
that does not have to be registered with the CDA, we hold
that it is entitled to exemption from both premium taxes and
documentary stamp taxes (DST).
The Tax Code is clear. On the one hand, Section
121 of the Code exempts cooperative companies from the
5 percent percentage tax on insurance premiums. On the
other hand, Section 199 also exempts from the DST,
policies of insurance or annuities made or granted by
cooperative companies. Being a cooperative, respondent
is thus exempt from both types of taxes.
Dispositive:
Petition is Denied. Sun Life won!
Section 307 of Insurance Code
Any provision of existing laws to the contrary
notwithstanding, no person shall, within the Philippines, sell
or offer for sale a variable contract or do or perform any act
or thing in the sale, negotiation, making or consummating
of any variable contract other than for himself unless such
person shall have a valid and current license from the
Commissioner authorizing such person to act as a variable
contract agent. No such license shall be issued unless and
until the Commissioner is satisfied, after examination that
such person is by training, knowledge, ability and character
qualified to act as such agent. Any such license may be
withdrawn and cancelled by the Commissioner after notice
and hearing, if he shall find that the holder thereof does not
then have the qualifications required for the issuance of
such license.
Section 308 of Insurance Code
It shall be unlawful for any person, company or corporation
in the Philippines to act as general agent of any insurance
company unless he is empowered by a written power of
attorney duly executed by such insurance company, and
registered with the Commissioner to receive notices,
summons and legal processes for and in behalf of the
insurance company concerned in connection with actions
or other legal proceedings against said insurance
company. It shall be the duty of said general agent to notify
the Commissioner of his post office address in
the Philippines, or any change thereof. Notices, summons,
or processes of any kind sent by registered mail to the last
registered address of such general agent of the company
concerned or to the Commissioner shall be sufficient
service and deemed as if served on the insurance company
itself.
Section 309 of Insurance Code
Except as otherwise provided by law or treaty, it shall be
unlawful for any person, partnership, association or
corporation in the Philippines, for himself or itself, or for
some other person, partnership, association or corporation,
either to procure, receive or forward applications of
insurance in, or to issue or to deliver or accept policies or
contracts of insurance of or for, any insurance company or
companies not authorized to transact business in the
Philippines, covering risks, life or non-life, situated in the
Philippines; and any such person, partnership, association
or corporation violating the provisions of this section shall
be deemed guilty of a penal offense, and upon conviction
thereof, shall for each such offense be punished by a fine
of ten thousand pesos, or imprisonment of six months, or
both at the discretion of the court: Provided, That the
provisions of this section shall not apply to reinsurance.
Section 310 of Insurance Code
Except as provided in the next succeeding title, no person
shall act as reinsurance broker in the Philippines unless
he is authorized as such by the Commissioner.
A reinsurance broker is one who, for compensation, not
being a duly authorized agent, employee or officer of an
insurer in which any reinsurance is effected, act or aids
in any manner in negotiating contracts of reinsurance, or
placing risks of effecting reinsurance, for any insurance
company authorized to do business in the Philippines.
Section 311 of Insurance Code
Upon application and payment of the corresponding fee
hereinafter prescribed, and the filing of two errors and
omissions (professional liability or professional
indemnity) policies hereinafter described, a person may,
if found qualified, be issued a license to act as
reinsurance broker by the Commissioner. No such
license shall be valid after the thirtieth day of June of the
year following its issuance unless it is renewed.
The errors and omissions (professional liability or
professional indemnity) policies mentioned above shall
indemnify the applicant against any claim or claims for
breach of duty as reinsurance broker which may be made
against him by reason of any negligent act, error or
omission, whenever or wherever committed or alleged to
have been committed, on the part of the applicant or any
person who has been, is now, or may hereafter during the
subsistence of the policies be employed by the said
applicant in his capacity as reinsurance broker; Provided,
That the filing of any claim or claims under one of such
policies shall preclude the filing of the said claim or claims
under the other policy. The said policies shall be issued
separately by two insurance companies authorized to do
business in the Philippines and shall be in such amounts
as may be prescribed by the Insurance Commissioner,
depending upon the size or amount of the broking
business of the applicant, but in no case shall the amount
of each of such policies be less than five hundred
thousand pesos.
The Commissioner may recall, suspend or revoke the
license granted to a reinsurance broker for violation of any
existing law, rule and regulation, or any provision of this
Code after due notice and hearing.
Section 322 of Insurance Code
Every adjuster shall keep his or its books, records, reports,
accounts, and vouchers in such manner that the
Commissioner or his duly authorized representatives may
readily verify the quarterly reports of the said adjuster and
ascertain whether the said adjuster has complied with the
provisions of law or regulations obligatory upon him or
whether the method of doing business of the said adjuster
has been fair, just and honest.
Section 344 of Insurance Code
Rating organization shall be subject to examination by the
Commissioner, as often as he may deem such examination
expedient, pursuant to the provisions of this Code
applicable to the examination of insurance companies. He
shall cause such an examination of each rating
organization to be made at least once in every five years.
Section 375 of Insurance Code
The Commissioner shall furnish the Land Transportation
Commissioner with a list of insurance companies
authorized to issue the policy of insurance or surety bond
required by this chapter
Section 376 of Insurance Code
The Land Transportation Commission shall not allow the
registration or renewal of registration of any motor vehicle
without first requiring from the land transportation operator
or motor vehicle owner concerned the presentation and
filing of a substantiating documentation in a form approved
by the Commissioner evidencing that the policy of
insurance or guaranty in cash or surety bond required by
this chapter is in effect.
Section 377 of Insurance Code
Every land transportation operator and every owner of a
motor vehicle shall, before applying for the registration or
renewal of registration of any motor vehicle, at his option,
either secure an insurance policy or surety bond issued
by any insurance company authorized by the
Commissioner or make a cash deposit in such amount as
herein required as limit of liability for purposes specified
in section three hundred seventy-four.
(1) In the case of a land transportation operator, the
insurance guaranty in cash or surety bond shall cover
liability for death or bodily injuries of third-parties and/or
passengers arising out of the use of such vehicle in the
amount not less than twelve thousand pesos per
passenger or third party and an amount, for each of such
categories, in any one accident of not less than that set
forth in the following scale:
(a) Motor vehicles with an authorized capacity
of twenty-six or more passengers: Fifty
thousand pesos;
(b) Motor vehicles with an authorized capacity
of from twelve to twenty-five passengers: Forty
thousand pesos;
(c) Motor vehicles with an authorized capacity of
from six to eleven passengers: Thirty thousand
pesos;
(d) Motor vehicles with an authorized capacity
of five or less passengers: Five thousand pesos
multiplied by the authorized capacity.
Provided, however, That such cash deposit made to, or
surety bond posted with, the Commissioner shall be
resorted to by him in cases of accidents the indemnities
for which to third-parties and/or passengers are not
settled accordingly by the land transportation operator
and, in that event, the said cash deposit shall be
replenished or such surety bond shall be restored with
sixty days after impairment or expiry, as the case may be,
by such land transportation operator, otherwise, he shall
secure the insurance policy required by this chapter. The
aforesaid cash deposit may be invested by the
Commissioner in readily marketable government bonds
and/or securities.
(2) In the case of an owner of a motor vehicle, the
insurance or guaranty in cash or surety bond shall cover
liability for death or injury to third parties in an amount not
less than that set forth in the following scale in any one
accident:
I. Private Cars
(a) Bantam : Twenty thousand pesos;
(b) Light : Twenty thousand pesos;
(c) Heavy : Thirty thousand pesos;
II. Other Private Vehicles
(a) Tricycles, motorcycles, and
scooters : Twelve thousand pesos;
(b) Vehicles with an unladen weight of
2,600 kilos or less : Twenty thousand
pesos;
(c) Vehicles with an unladen weight of
between 2,601 kilos and 3,930 kilos :
Thirty thousand pesos;
(d) Vehicles with an unladen weight
over 3,930 kilos : Fifty thousand pesos.
The Commissioner may, if warranted, set forth schedule
of indemnities for the payment of claims for death or
bodily injuries with the coverages set forth herein.