ALPHA INSURANCE AND SURETY CO. vs.
So,
ARSENIA SONIA CASTOR
FACTS: Arsenia Sonia Castor (Castor) obtained a
Motor Car Policy for her Toyota Revo DLX DSL with
Alpha Insurance and Surety Co (Alpha). The contract
of insurance obligates the petitioner to pay the
respondent the amount of P630,000 in case of loss
or damage to said vehicle during the period covered.
On April 16, 2007, respondent instructed her driver,
Jose Joel Salazar Lanuza to bring the vehicle to
nearby auto-shop for a tune up. However, Lanuza no
longer returned the motor vehicle and despite
diligent efforts to locate the same, said efforts proved
futile. Resultantly, respondent promptly reported the
incident to the police and concomitantly notified
petitioner of the said loss and demanded payment of
the insurance proceeds.
Alpha, however, denied the demand of Castor
claiming that they are not liable since the culprit who
stole the vehicle is employed with Castor. Under the
Exceptions to Section III of the Policy, the Company
shall not be liable for (4) any malicious damage
caused by the insured, any member of his family or
by A PERSON IN THE INSUREDS SERVICE.
Castor filed a Complaint for Sum of Money with
Damages against Alpha before the Regional Trial
Court of Quezon City. The trial court rendered its
decision in favor of Castor which decision is affirmed
in toto by the Court of Appeals. Hence, this Petition
for Review on Certiorari.
ISSUE: Whether or not the loss of respondents
vehicle is excluded under the insurance policy
HELD: NO. The words loss and damage mean
different things in common ordinary usage. The word
loss refers to the act or fact of losing, or failure to
keep possession, while the word damage means
deterioration or injury to property. Therefore,
petitioner cannot exclude the loss of Castors vehicle
under the insurance policy under paragraph 4 of
Exceptions to Section III, since the same refers
only to malicious damage, or more specifically,
injury to the motor vehicle caused by a person
under the insureds service. Paragraph 4 clearly
does not contemplate loss of property.
A contract of insurance is a contract of adhesion.
when the terms of the insurance contract contain
limitations on liability, courts should construe them in
such a way as to preclude the insurer from non-
compliance with his obligation. Thus, in Eternal
Gardens Memorial Park Corporation vs. Philippine
American Life Insurance Company, this Court ruled
that it must be remembered that an insurance
contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly
against the insurer in order to safeguard the latters
interest.
Violeta Lalican vs The Insular Life Insurance
Company
Facts: Violeta is the widow of the Eulogio Lalican.
During his lifetime, Eulogio applied for an insurance
policy with Insular Life on April 24, 1997 which
contained a 20-year endowment variable income
package flexi plan worth P500k with two riders worth
P500k each. Violeta was named the primary
beneficiary.
Under the terms, Eulogio was to pay premiums on a
quarterly basin in the amount of P8,062 with a grace
period of 31 days for the payment of each premium
subsequent to the first. If any premium was not paid
on or before the due date, the policy would be in
default, and if the premium remained unpaid until the
end of the grace period, the policy would
automatically lapse and become void.
Eulogio paid the premiums, however he failed to pay
the premium due on January 24, 1998, even after
the lapse of the grace period of 31 days. Therefore,
lapsed and become void. Eulogio submitted to the
Cabanatuan District Office of Insular Life an
application for reinstatement together with the
payment of the premium due on January 24. Insular
Life notified Eulogio that his application for
reinstatement could not be fully processed because
of the unpaid interest thereon. Eulogio was likewise
advised by Malaluan (insurance agent) to pay the
premiums that subsequently became due April 1998
and July 1998, plus interest.
September 17, 1998. Eulogio went to Malaluan's
house and paid for the interest which was received
by Malaluan's husband. Later that day, Eulogio died.
Without the knowledge of Eulogio's death, Malaluan
forwarded to the Insular Life the application for
reinstatement and the payment made by Eulogio.
However, Insular Life did not act upon such
reinstatement for they knew already of Eulogio's
death.
September 28, 1998, Violeta filed for the insurance
claim. Insular Life then informed Violeta in a letter
that her claim could not be processed because the
insurance policy had lapsed already and that Eulogio
failed to reinstate the same and the payment made
done thru Malaluan's husband was, under the
insurance policy, was considered a deposit only until
approval of the said application. Enclosed to this
letter was a check representing the full refund of the
past payments made by Eulogio, amounting to
P25,417.
Violeta requested for a reconsideration of her claim
and returned the check to Insular Life. Insular Life
agreed to conduct a re-evaluation of Violeta's claim.
Without waiting for the result of the re-evaluation,
Violeta filed with the RTC a complaint for death claim
benefit alleging the Insular Life was engaged in
unfair claim settlement practice and deliberately
failed to act with reasonable promptness on her
insurance claim. Violeta claims for the P1.5M
insurance, plus interest, attorney's fees and cost of
suit.
Insular Life filed with the RTC an answer with
counterclaim saying that the insurance claim was
rendered void due to non-payment of the premium
and countered that Violeta should be ordered to pay
attorney's fees and expenses of litigation incurred by
Insular Life.
RTC declared that Violeta failed to establish by
preponderance of evidence her cause of action
against the defendant. Violeta failed to establish that
the receipt of payment by Malaluan amounted to the
reinstatement of the insurance policy. Violeta filed for
motion for reconsideration but was denied as well;
hence she elevated her case for review on Certiorari.
Issues: (a) Whether the decision of the court can still
be reviewed despite having allegedly attained finality
and despite the mode of appeal of Violeta erroneous.
(b) Whether the RTC has decided the case on a
question of law not in accord with law and applicable
decisions of the Supreme Court.
Ruling: Petition lacks merit.
RTC's decision has long acquired finality for Violeta
failed to file a notice of appeal more than five months
after the decision was rendered.
As to the substantial claim of whether there is
insurable interest, the Court says that the matter of
insurable interest is entirely irrelevant and the real
point of contention herein is whether Eulogio was
able to reinstate the lapsed insurance policy on his
life before his death.
The Court rules in the negative, for the insurance
policy is clear on the procedure of the reinstatement
of the insurance contract, of which Eulogio has failed
to accomplish before his death. As provided by the
policy, insurance shall be deemed reinstated upon
the approval of the insurance policy of the
application for reinstatement. The approval should
be made during the lifetime of the insured, in the
case at bar, it wasnt.
ETERNAL VS. PHILAMLIFE
FACTS: Respondent Philamlife entered into an
agreement denominated as Creditor Group Life
Policy with petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients of
Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The
amount of insurance coverage depended upon the
existing balance of the purchased burial lots.
The relevant provisions of the policy are:
ELIGIBILITY.
EVIDENCE OF INSURABILITY.
LIFE INSURANCE BENEFIT.
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall
be effective on the date he contracts a loan with
the Assured. However, there shall be no
insurance if the application of the Lot Purchaser
is not approved by the Company.
xx
Eternal was required under the policy to submit to
Philamlife a list of all new lot purchasers, together
with a copy of the application of each purchaser, and
the amounts of the respective unpaid balances of all
insured lot purchasers. Eternal complied by
submitting a letter dated December 29, 1982,
containing a list of insurable balances of its lot
buyers for October 1982. One of those included in
the list as new business was a certain John
Chuang. His balance of payments was 100K. on
August 2, 1984, Chuang died.
Eternal sent a letter dated to Philamlife, which
served as an insurance claim for Chuangs death.
Attached to the claim were certain documents. In
reply, Philamlife wrote Eternal a letter requiring
Eternal to submit the additional documents relative to
its insurance claim for Chuangs death. Eternal
transmitted the required documents through a letter
which was received by Philamlife.
After more than a year, Philamlife had not furnished
Eternal with any reply to the latters insurance claim.
This prompted Eternal to demand from Philamlife the
payment of the claim for PhP 100,000.
In response to Eternals demand, Philamlife denied
Eternals insurance claim in a letter a portion of
which reads:
The deceased was 59 years old when he entered
into Contract #9558 and 9529 with Eternal Gardens
Memorial Park in October 1982 for the total
maximum insurable amount of P100,000.00
each. No application for Group Insurance was
submitted in our office prior to his death on August
2, 1984
Eternal filed a case with the RTC for a sum of
money against Philamlife, which decided in favor of
Eternal, ordering Philamlife to pay the former 100K
representing the proceeds of the policy.
CA reversed. Hence this petition.
ISSUE: WON Philamlife should pay the 100K
insurance proceeds
HELD: petition granted.
YES. An examination of the provision of the POLICY
under effective date of benefit, would show
ambiguity between its two sentences. The first
sentence appears to state that the insurance
coverage of the clients of Eternal already became
effective upon contracting a loan with Eternal while
the second sentence appears to require Philamlife to
approve the insurance contract before the same can
become effective.
It must be remembered that an insurance contract is
a contract of adhesion which must be construed
liberally in favor of the insured and strictly against the
insurer in order to safeguard the latters interest
On the other hand, the seemingly conflicting
provisions must be harmonized to mean that upon a
partys purchase of a memorial lot on installment
from Eternal, an insurance contract covering the lot
purchaser is created and the same is effective, valid,
and binding until terminated by Philamlife by
disapproving the insurance application. The second
sentence of the Creditor Group Life Policy on the
Effective Date of Benefit is in the nature of a
resolutory condition which would lead to the
cessation of the insurance contract. Moreover, the
mere inaction of the insurer on the insurance
application must not work to prejudice the insured; it
cannot be interpreted as a termination of the
insurance contract. The termination of the insurance
contract by the insurer must be explicit and
unambiguous.
New Life v CA G.R. No. 94071 March 31, 1992
Facts: Julian Sy, owner of New Life, insured his
building in 3 different insurance agencies for
350,000, 1,000,000, and 200,000. When his building
and the goods inside burned down, he claimed for
insurance indemnities, but these were rejected by
the three companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where
he won all suits against the insurance companies.
The court of appealsreversed the decision of the trial
court.
Issue: Did the petitioner violate conditions 3 and 27
of the three insurance policies, thereby foreiting
collection of indemnities?
Held: Yes.
Condition 3. The insured shall give notice to the
Company of any insurance or insurances already
effected, or which may subsequently be effected,
covering any of the property or properties consisting
of stocks in trade, goods in process and/or
inventories only hereby insured, and unless such
notice be given and the particulars of such
insurance or insurances be stated therein or
endorsed on this policy pursuant to Section 50 of
the Insurance Code, by or on behalf of the Company
before the occurrence of any loss or damage, all
benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply
when the total insurance or insurances in force at the
time of loss or damage not more than P200,000.00.
Sy never disclosed co-insurance in the contracts he
entered into with the three corporations. The insured
is specifically required to disclose the insurance that
he had contracted with other companies. Sy also
contended that the insurance agentsknew of the co-
insurance. However, the theory of imputed
knowledge, that the knowledge of the agent is
presumed to be known by the principal, is not
enough.
When the words of the document are readily
understandable by an ordinary reader, there is no
need for construction anymore.
The conformity of the insured to the terms of the
policy is implied with his failure to disagree with the
terms of the contract.
Since Sy, was a businessman, it
was incumbent upon him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap-
The obvious purpose of the aforesaid requirement in
the policy is to prevent over-insurance and thus avert
the perpetration of fraud. The public, as well as the
insurer, is interested in preventing the situation in
which a fire would be profitable to the insured.
Also, policy condition 15 was used. It stated: 15.. . .
if any false declaration be made or used in support
thereof, . . . all benefits under this Policy shall
be forfeited . . .
As for condition number 27, the stipulation read:
27. Action or suit clause. If a claim be made and
rejected and an action or suit be not commenced
either in the Insurance Commission or any court of
competent jurisdiction of notice of such rejection, or
in case of arbitration taking place as provided herein,
within twelve (12) months after due notice of the
award made by the arbitrator or arbitrators or umpire,
then the claim shall for all purposes be deemed to
have been abandoned and shall not thereafter be
recoverable hereunder.
This is regarding Sys claim for one of the
companies. Recovery was filed in court by
petitioners only on January 31, 1984, or after more
than one (1) year had elapsed from petitioners'
receipt of the insurers' letter of denial on November
29, 1982. This made it void.
First Quezon City v CA GR. 98414 Feb 8, 1993
Facts: One Jose del Rosario was injured while
boarding a bus owned by DMTC in the Manila
International Airport. He was hospitalized for forty
days. He filed suit against the bus company and the
court granted him of over 100,000 pesos in
damages. The appellate court reduced damages to
55,090 pesos. The insurance companys liability was
limited to 12,000. The amount for insurance was
made Php 50,000 in the appellate courts decision.
First Quezon City, the insurer of DTMC, filed a
motion for reconsideration to limit the damages back
to 12,000 pesos, the amount stipulated in the
contract. This was denied hence this petition for
review.
Issue: Can the amount of the insurance
companys liability be limited to Php 12,000?
Held: Yes
Ratio: The contract stipulated liability at Php 12,000
per passenger and at Php 50,000 as the
maximum liability per accident. This means that the
insurers liability for a single accident will not exceed
50,000 pesos. The court gave the example of 10
persons injured leaving a total of Php 120,000 in
insurance liability payments. But with the Php 50,000
limit, only such value was to be paid by the company
to the insured.

GULF RESORTS V. PHILIPPINE CHARTER
INSURANCE CORP
FACTS: Gulf Resorts is the owner of the Plaza
Resort situated at Agoo, La Union, and had its
properties in said resort insured originally with the
American Home Assurance Co (AHAC).
1. In the first 4 policies issued, the risks of loss
from earthquake shock was extended to only
petitioners two swimming pools.
2. Gulf Resorts agreed to insure with Phil
Charter the properties covered by the AHAC
policy provided that the wordings and rate in
the AHAC policy be copied in the policy to be
issued by Phil Charter
3. On Jul 16, 1991 and while the policy was in
effect, an earthquake struck Central and
North Luzon and Gulf Resorts properties,
including the two swimming pools in
Agoo, were damaged
4. As such, Gulf Resorts filed a claim for
damage on its properties with Phil Charter.
Phil Charter denied the claim on the ground
that its insurance policy only covered the two
swimming pools in its Agoo resort
5. The trial court ruled in favor of Phil Charter. It
found that the insured only paid a premium of
P393 against the perils of earthquake shock,
the same premium it paid AHAC on the two
swimming pools
ISSUE: WON the Phil Charter policy covers only
the two swimming pools owned by Gulf Resorts and
does not extend to other properties damaged by the
earthquake
HELD: Yes. All the provisions and riders,
taken and interpreted together, indubitably show
the intention of the parties to extend earthquake
shock coverage to the two swimming pools only.
An insurance contract exists where the following
elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss
by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general
scheme to distribute actual losses among a large
group of persons bearing a similar risk; and
5. In consideration of the insurer's promise, the
insured pays a premium.
An insurance premium is the consideration paid an
insurer for undertaking to indemnify the insured
against a specified peril. In fire, casualty, and marine
insurance, the premium payable becomes a debt as
soon as the risk attaches.
In the subject policy, no premium payments
were made with regard to earthquake shock
coverage, except on the two swimming pools.
There is no mention of any premium payable
for the other resort properties with regard to
earthquake shock. This is consistent with the history
of petitioner's previous insurance policies from
AHAC-AIU.
There is no ambiguity in the terms of the contract
and its riders. Petitioner cannot rely on the
general rule that insurance contracts are contracts
of adhesion which should be liberally construed in
favor of the insured and strictly against the insurer
company which usually prepares it.
A contract of adhesion is one wherein a
party, usually a corporation, prepares the
stipulations in the contract, while the other party
merely affixes his signature or his "adhesion"
thereto. Through the years, the courts have held that
in these type of contracts, the parties do not bargain
on equal footing, the weaker party's
participation being reduced to the alternative to take
it or leave it. Thus, these contracts are viewed as
traps for the weaker party whom the courts of
justice must protect. Consequently, any
ambiguity therein is resolved against the
insurer, or construed liberally in favor of the
insured.