CONSTANTINO V. ASIA LIFE INSURANCE, 87 PHIL 248 (1950)FACTS: There are two cases consolidated here. In the first case, Arcadio Constantino obtained a life insurance policy from Asia Life Insurance Company, a foreign company, in Sept 1941. He appointed Paz Lopez de Constantino was beneficiary. The insured paid the only the first premium (period covering up to Sept 1942). 1. Subsequently, war broke out and the insured was unable to pay the subsequent premiums. The insured died in 19442. In the second case, spouses Tomas Ruiz and Agustina Peralta obtained a life insurance from Asia Life in Aug 1938. He was paying his premiums until the war broke out in 1942. He died in 1945. His beneficiary was Agustina Peralta3. After the war, the beneficiaries of both insurance policies filed their claims but Asia Life (insurer) denied their claims. The beneficiaries argued that the obligation of the insured to pay the premiums was suspended due to the impossibility of performance (war), and as such, no unfavorable consequence should follow from such failure (New York Rule). They point out that the nonpayment was caused by the closing of the insurers offices in Manila during the Japanese occupation and the impossible circumstances created by war4. On the other hand, the insurer averred that the nonpayment of the premiums cancelled the insurance policy, following the United States Rule. The policies had lapsed for nonpayment of premiums in accordance with the contract of the parties and the law applicable to the situation

ISSUE: WON the beneficiaries are entitled to recover the amount insured despite the nonpayment of premiums caused by the war

HELD: No. Contracts ofinsuranceare contracts of indemnity within the terms and condition found therein. Aninsurancecompany for certain considerations guarantee the insured against loss or damage as may be stipulated, and when called to pay, the insurer may insist on the fulfillment of said stipulations. Failure of the insured to do so disqualifies recovery for the loss. Thus the terms of the policy determines the insurers liability. Compliance to the terms of the policy is a must as it is a condition precedent to the right of recovery. Therefore, from the terms of the policy it is clear that non-paymentof premium produces avoidance (forfeiture of the policy).

It would be unjust to permit the insurer to retain the reserve value of the policy or the excess of premiums paid over the actual risk when the policy was still effective as held in the Statham Case. The SC held that promptness ofpaymentis essential in the business of lifeinsurancesince all calculations of the company is based on the hypothesis of promptpayments. Forfeiture for non-paymentis necessary to protect said business from embarrassment otherwise confusion would abound. And that delinquency cannot be tolerated nor redeemed except at the option of the company. Moreover, the parties contracted both for peace and war times since the policies contained also wartime days. It follows that the parties contemplated uninterrupted operation of the contract even if armed conflict ensues.

ISSUE: What is the nature of the payment of premiums?

HELD: The annual premium is not a debt, nor is it an obligation which the insurer can maintain an action against the insured; nor its settlement governed by the rules onpaymentof debts.

A contract ofinsuranceis sui generis. This means though the insured may hold the insurer to the contract by the fulfillment of the condition, the latter has no power or right to compel the insured to maintain the contract relation longer than the insured may desire. It is optional upon the insured.

INSULAR LIFE V. EBRADO, 80 SCRA 181 (1977)FACTS: Buenaventura Ebrado (insured) obtained a life insurance policy from Insular Life (insurer) with a rider for accidental death. He designated Carponia Ebrado as the revocable beneficiary, whom he referred to as his wife1. Buenaventura died in Oct 1969 as a result of an accident when he was hit by a falling tree branch2. Insular Life was made liable for the amount of the policy plus the additional benefits for accidental death3. Carponia, then, filed with the insurer a claim for the proceeds of the policy as the designated beneficiary, although she admitted to be the common-law spouse of the insured4. Pascuala Vda de Ebrado also filed her claim as the widow of the insured decedent. She asserts that she, as the widow of the decedent, is entitled to the insurance proceeds5. As such, the insurer filed an interpleader to determine as to whom the insurance proceeds shall be paid6. The trial court held in favor of Pascuala and disqualified Carponia from becoming the beneficiary of the insured

ISSUE: WON a common-law spouse named as a beneficiary in the life insurance policy of a legally married man claim the proceeds thereof

HELD: No. Art 2011 NCC provides that the contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. When not otherwise specifically provided for by the Insurance Law, the contract of insurance is governed by the general rules of the civil law regulating contracts. And under Art 2012 NCC: any person who is forbidden from receiving donation under Art 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him. Common-law spouses are, definitely, barred from receiving donations from each other under Art 739.

In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a done, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Art 739 NCC should equally operate in life insurance contracts.

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QUA CHEE GAN V. LAW UNION ROCK INSURANCE, 98 PHIL 86 (1955)Plaintiff Qua Chee Gan owned 4 warehouses used for the storage of stocks of copra and of hemp. Plaintiff obtained a fire insurance policy over the 4 warehouses and its contents with Law Union & Rock Insurance for the total amount of P370, 000.1. Of the 4 warehouses, 3 were totally destroyed by a fire in July 1940. As such, plaintiff filed a claim based on the insurance policy.1. The insurance company denied payment on the claim and alleged, among others, that plaintiff had violated the warranties and conditions provided in the policy. 1. The insurance policy provides that there shall be fire hydrants installed for every 150 feet of external wall measurement of the buildings. Since, the bodegas insured had an external wall perimeter of 500 meters (1,640 feet), then there should be 11 fire hydrants in the compound when in fact, he had only 2 with another pair nearby belonging to the municipality.

ISSUE: WON the insurance contract is void

HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan because it is estopped from invoking the same. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture.

An insurer should not be allowed, by the use of obscure phrases and exceptions, to defeat the very purpose for which the policy was procured.

The contract of insurance is one of perfect good faith (uferrimal fidei) not for the insured alone, but equally so for the insurer; in fact, it is mere so for the latter, since its dominant bargaining position carries with it stricter responsibility.

TY V. FILIPINAS CIA DE SEGUROS, 17 SCRA 364 (1966)FACTS: Diosdado Ty, a mechanic operator, took personal accident policies from several insurance companies, on different dates, effective for 12 months1. During the effectivity of these policies, a fire broke out in the factory where Ty was working. As he was trying to put out the fire, a heavy object fell upon his left hand and sustained injuries2. Ty then filed a claim before the insurance companies. The respondent insurer refused to pay his claim 3. Ty contends that to be entitled to indemnification under the insurance policy, it is enough that the insured is disabled to such an extent that he cannot perform all acts or duties necessary in the ordinary course of his business. It is argued that what is compensable is the disability, not the amputation of the hand.

ISSUE: WON Tys claim is valid

HELD: No. 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.

DEL ROSARIO V. EQUITABLE INSURANCE & CASUALTY CO, 8 SCRA 343 (1963)FACTS: Equitable Insurance issued a life insurance policy on the life of Francisco del Rosario (aka Paquito Bolero), son of plaintiff1. While on board the motor launch Islama, the insured jumped out of the launch after a fire broke out on said vessel, and as a result, the insured and the beneficiary (Remedios Jayme) died of drowning2. Simeon del Rosario, the father of the insured and sole heir, filed a claim for payment of the proceeds on the insurance policy for P1,000. Plaintiff received said amount but later demanded additional P3,0003. The insurer refused to pay the additional amount, claiming that it had been released of its obligation having paid the full amount of P1,000 and as per the opinion of the Insurance Commissioner

ISSUE: WON Del Rosario is entitled to recover P3,000

HELD: Yes. Terms in an insurance policy, which are ambiguous, equivocal, or uncertain are to be constructed strictly against the insurer and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where a forfeiture is involved. The reason for this rule is that the insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by expert and legal advisers employed by, and acting exclusively in the interest of, the insurance company.

It is well-settled that where two interpretations, equally fair, of languages used in an insurance policy may be made, that which allows the greater indemnity will prevail.

CAB: The policy covers death or disability by accidental means, and the insurer agreed to pay P1,000 to P3,000 as indemnity for the death of the insured.

INSURANCE; INDEMNITY; AMBIGUITY IN TERMS AND CONDITIONS OF A LIFE ACCIDENT POLICY RESOLVED AGAINST INSURER. Where there is an ambiguity with respect to the terms and conditions of a policy, the same will be resolved against the one responsible thereof. Generally, the insured, has little, if any, participation in the preparation of the policy, together with the drafting of its terms and conditions. The interpretation of obscure stipulations in a contract should not favor the party who caused the obscurity (Art. 1377, N.C.C.) which, in the case at bar, is the insurance company.

MISAMIS LUMBER V. CAPITAL INSURANCE & SURETY CO, 17 SCRA 228 (1966)FACTS: Misamis Lumber (insured) insured its vehicle for P14,000 with Capital Insurance (insurer) against loss or damage. 1. The policy stipulated that the insured may authorize the repair of the vehicle necessitated by damage and the liability of the insured is limited to P1502. On Nov 25, 1961 and while the insurance policy was in effect, the crankcase and flywheel housing of the car broke when it hit a hollow block lying alongside a water hole in Quezon City. As a result, the car was towed and repaired amounting to P302.273. Misamis Lumber, then, file a claim for the repairs on the vehicle which Capital Insurance 4. During the trial, the insurer admitted its liability in the amount of P150, but not for any excess thereof 5. The lower court held in favor of the insured citing that the insurers absolution would render the insurance contract one-sided and the insurer had not shown that the cost of repairs is unreasonable, excessive or padded

ISSUE: WON the insurer may be held liable for more than the repair limit stipulated in the insurance contract

HELD: No. The insurance contract may be onerous or one-sided 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.

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.

CAB: The policy drew out the not only the limits of the insurers 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 insurer per par. 2 of the policy. However, the insurer was deprived of the option because the insured took it upon itself to have the repairs made, and only notified the insurer after the repair. As consequence, par. 4 which limits the insurers liability to P150 applies.

VERENDIA V. COURT OF APPEALS AND FIDELITY & SURETY INSURANCE CO, 217 SCRA 417 (1993)FACTS: Fidelity & Surety Insurance issued a fire insurance policy effective for one year over Rafael Verendias residential building in Antipolo for P385,000. Monte de Piedad & Savings Bank was designated as beneficiary1. It appears that Verendia also insured the building with two other insurance companies: Country Bankers Insurance for P56,000, and Development Insurance for P400,0002. While the 3 fire insurance policies were in force, the insured property was completely destroyed by fire. Verendia filed a claim with Fidelity however, the latter refused to pay 3. Fidelity averred that the policy was voided by reason of over-insurance and that Verendia maliciously misrepresented that the building was leased to Roberto Garcia when in fact it was Marcelo Garcia who was the lessee4. The trial court held in favor of Fidelity citing that Verendia violated the insurance policy when it failed to inform Fidelity of his other insurance coverages. On appeal, CA reversed the trial court decision

ISSUE: WON Verendia can claim on the insurance despite the misrepresentation as to the lessee and the over-insurance

HELD: No. An insurance contract, being a contract of indemnity, is the law between the parties. Its terms and conditions constitute the measure of the insurers liability and compliance therewith is a condition precedent to the insureds right to recovery from the insurer. Since it is a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it.

Considering, however, the fact Verendia used a false lease contract to support his claim, the terms of the policy should be strictly construed against the insured. Verendia failed to live by the terms of the policy, particularly if there was fraud in the claim or in the means used by the insured to obtain any benefit under the policy. Having presented a false declaration in the lease contract, he forfeited all the benefits therein.

CIVIL LAW; INSURANCE CONTRACT; LAW BETWEEN THE PARTIES; GENERALLY, SHOULD BE CONSTRUED IN FAVOR OF THE INSURED. Basically a contract of indemnity, an insurance contract is the law between the parties (Pacific Banking Corporation v. Court of Appeals 168 SCRA 1 [1988]). Its terms and conditions constitute the measure of the insurers liability and compliance therewith is a condition precedent to the insureds right to recovery from the insurer (Oriental Assurance Corporation v. Court of Appeals, 200 SCRA 459 [1991], citing Perla Compania de Sequros, Inc. v. Court of Appeals, 185 SCRA 741 [1991]). As it is also a contract of adhesion, an insurance contract should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares itg b (Western Guaranty Corporation v. Court of Appeals, 187 SCRA 652 [1980]).

ID.; ID.; BENEFITS THEREUNDER SHALL BE FORFEITED IF ANY FALSE DECLARATIONS BE MADE IN SUPPORT OF THE CLAIM; CASE AT BAR. Considering that Verendia used a false lease contract to support his claim under Fire Insurance Policy No. F-18876, the terms of the policy should be strictly construed against the insured. Verendia failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone acting in his behalf to obtain any benefit under the policy." Verendia, having presented a false declaration to support his claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the policy in the absence of proof that Fidelity waived such provision (Pacific Banking Corporation v. Court of Appeals, supra). Worse yet, by presenting a false lease contract, Verendia reprehensibly disregarded the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith (Velasco v. Apostol, 173 SCRA 228 [1989]).

ID.; ID.; SUBROGATION RECEIPTS, NOT AN INDICATION OF PRESENCE OF MUTUAL AGREEMENT TO SETTLE CLAIM OF INSURED. There is no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity bound itself to a "mutual agreement" to settle Verendias claims in consideration of the amount of P142,685.77. While the said receipt appears to have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It might be that there had been efforts to settle Verendias claims, but surely, the subrogation receipt by itself does not prove that a settlement had been arrived at and enforced. Thus, to interpret Fidelitys presentation of the subrogation receipt in evidence as indicative of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of the parties.

GULF RESORTS V. PHILIPPINE CHARTER INSURANCE CORP, 458 SCRA 550 (2005)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 Charter3. 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 damaged4. 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 resort5. 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; and5. 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.

PAN MALAYAN INSURANCE CORP V. COURT OF APPEALS AND ERLINDA FABIE, 184 SCRA 54 (1990)FACTS: Pan Malayan insured a vehicle registered to Canlubang Automotive Resources Corp. On May 26, 1985, the car figured in an accident caused by the carelessness and reckless of an unknown driver of a pick-up truck owned by Erlinda Fabie. As a result, the car sustained damages amounting to P42,052.1. Pan Malayan defrayed the cost of repairs and as such, was subrogated to the rights of Canlubang. Despite repeated demands, Fabie failed and refused to pay the claim of Pan Malayan2. Pan Malayan then filed an action against Fabie. Fabie filed a motion to dismiss alleging that Pan Malayan has no cause of action against them. They argued that the payment under the own damage of the insurance policy precluded subrogation under Art 2207, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault3. Pan Malayan contended that pursuant to a motor vehicle insurance policy, it had indemnified Canlubang for the damage to the insured car resulting from a traffic accident allegedly caused by the negligence of Fabies driver. As such, it has a cause of action against Fabie under Art 2207 NCC

ISSUE: WON Pan Malayan was subrogated to the rights of Canlubang against the driver and his employer

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

There are exceptions to this rule:1. If the assured by his own actreleases the wrongdoer or third party liable for the loss or damage, from liability2. Where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assureds claim for loss3. Where the insurer pays the assured for a loss which is not a risk covered by the policy (voluntary payment)

None of the exceptions are availing in the present case.

It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and meaning of the terms which theparties theretohave used. In the case of property insurance policies, the evident intention of the contracting parties,i.e., the insurer and the assured, determine the import of the various terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous, equivocal or uncertain, such that the parties themselves disagree about the meaning of particular provisions that the courts will intervene. In such an event, the policy will be construed by the courts liberally in favor of the assured and strictly against the insurer

FEDERAL EXPRESS CORP V. AMERICAN HOME ASSURANCE CORP, 437 SCRA 50 (2004)FACTS: Smithklein caused the transportation of 109 cartons of veterinary biologicals. 1. The shipment was initially loaded to Burlington Air Express and then forwarded to petitioner Federal Express for delivery to the consignee. 2. When the consignee received the same, it was found out that the goods was damaged and decided to abandon the shipment and declared a total loss and then claimed against the insurance company. 3. The insurance company paid the loss.

ISSUE: WON there is a legal subrogation on the part of the insurance company

HELD: Yes. Upon payment, the insurers entitlement to subrogation pro tanto equips the insurance company with a cause of action in case of a contractual breach or negligence. The insurance company stands in the same footing or in substitution of the insured party.

In the exercise of its subrogatory right, an insurer may proeed against an erring carrier. For all intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the insurer and the consignee are bound by the contractual stipulations under the bill of lading.

FIREMANS FUND INSURANCE CO AND FIRESTONE TIRE & RUBBER CO V. JAMILA INC, 70 SCRA 23 (1976)FACTS:

ISSUE:

HELD: