insurance

Reso: Tongko vs Manulife (GR No. 167622 January 25, 2011)

Tongko vs Manufacturer’s Life Insurance Co.
GR No. 167622 January 25, 2011

Issue: Whether or not petitioner as insurance agent is an employee of respondent company.

Held: No. Based on the evidence on record, the petitioner’s occupation was to sell Manulife’s insurance policies and products from 1977 until the termination of the career agent’s agreement. The evidence also shows that through the years, Manulife permitted him to exercise guiding authority over other agents who operate under their own agency agreements with Manulife and whose commissions he shared. Under this scheme — an agreement that pervades the insurance industry — petitioner in effect became a “lead agent” and his own commissions increased as they included his share in the commissions of the other agents; he also receive greater reimbursement for expenses and was allowed to use Manulife’s facilities. His designation also changed from unit manager to branch manager and then to regional sales manager, to reflect the increase in the number of agents he recruited and guided, as well as the increase in the area where these agents operated.

In our June 29, 2010 resolution, we noted that there are built in elements of control specific to an insurance agency, which do not amount to the elements of control that characterizes an employment relationship governed by the labor code. The insurance code provides definite parameters in the way an agent negotiates for the sale of the company’s insurance products, his collection activities and his delivery of the insurance contract or policy. In addition, the civil code defines an agent as a person who binds himself to do something in behalf of another, with the consent or authority of the latter. Article 1887 of the civil code also provides that in the execution of the agency, the agent shall act in accordance with the instructions of the principal.

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Insular Life vs NLRC (GR No. 119930 March 12, 1998)

Insular Life Assurance Co. Ltd. vs National Labor Relations Commission (Delos Reyes)
GR No. 119930 March 12, 1998

Facts: On August 21, 1992 petitioner entered into an agency contract with respondent Pantaleon Delos Reyes authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commitment. The contract was prepared by petitioner in its entirety and Delos Reyes merely signed his confirmity thereto. It contained the stipulation that no employer-employee relationship shall be created between the parties and that the agent shall be free to exercise his own judgement as to time, place and means of soliciting insurance. Delos Reyes however was prohibited by petitioner from working for any other life insurance company, and violation of this stipulation was sufficient ground for termination of the contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit to the former all completed applications for insurance within 90 consecutive days, deliver policies, receive and collect initial premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on policy loans. Private respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written communication by petitioner to respondent Delos Reyes, the latter was urged to register with the Social Security System (SSS) as a self-employed individual as provided under PD 1636. On March 1, 1993, petitioner and private respondent entered into another contract where the latter was appointed as acting, unit manager under its office — the Cebu DSO vs Private respondent concurrently as agent and acting unit manager until he was notified by petitioner on November 18, 1993 that his services were terminated effective December 18, 1993. On November 7, 1994 he filed a complaint before the labor arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and separation pay.

Issue: Whether or not there is an employer-employee relationship between the parties to entitle jurisdiction of the case before the labor arbiter.

Held: Yes. It is axiomatic that existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the employee is an independent contractor when the terms of the agreement clearly shows otherwise. For, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. In determining the status of the management contract, the “four-fold test” on employment earlier mentioned has to be applied.

Unlike Basiao, herein respondent Delos Reyes was appointed acting unit manager, not agency manager. There is no evidence that to implement his obligations under the management contract, Delos Reyes had organized an office. Petitioner in fact has admitted that it provided Delos Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field. Placed under petitioner’s Cebu District Service Office, the unit was given a name by petitioner – Delos Reyes and Associates — and assigned code no. 11753 and recruitment no. 109398. Under the managership contract, Delos Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was imposed premium production quotas. Of course, the acting unit manager could not underwrite other lines of insurance because his permanent certificate of authority was for life insurance only and for no other. He was proscribed from accepting a managerial or supervisory position. In any other office including the government without the written consent of petitioner. Delos Reyes could only be promoted to permanent unit manager if he met certain requirements and his promotion was recommended by the petitioner’s district manager and regional manager and approved by its division manager. As acting unit manager, Delos Reyes performed functions beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised administrative functions which were necessary and beneficial to the business of insular life.

Exclusivity of service, control of assignment and removal of agents under private respondent’s unit, collection of premiums, furnishing company facilities and materials as well as capital described as unit development fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon Delos Reyes was an employee of herein petitioner.

Insular Life vs NLRC (GR No. 84484 November 15, 1989)

Insular Life Assurance Co. Ltd vs National Labor Relations Commission
GR No. 84484 November 15, 1989

Facts: On July 2, 1968, Insular Life Assurance Co. Ltd and Melecio T. Basiao entered into a contract by which:

  1. Basiao was “authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations” of the company;
  2. He would receive “compensation, in the form of commissions.. as provided in the schedule of commissions” of the contract to “constitute a part of the consideration of (said) agreement,” and;
  3. The “rules in (the company) rate book and its agent’s manual as well as all circulars and those which may from time to time be promulgated by it,” were made part of said contract.

Some four years later, in April 1972, the parties entered into another contract – An agency manager’s contract – and to implement his end of it Basiao organized an agency or office to which he gave the name M Basiao and Associates, while concurrently fulfilling this commitments under the first contract with the company.

In May 1979, the company terminated the Agency Manager’s contract. After seeking a reconsideration, Basiao sued the company in a civil action and this was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commission starting April 1, 1980.

Issue: Whether or not the Labor Arbiter have jurisdiction by virtue of the contract between the company and Basiao.

Held: No. In determining the existence of employer-employee relationship, the following elements are generally considered namely: 

  1. The selection and engagement of the employee;
  2. The payment of wages;
  3. The power of dismissal; and
  4. The power to control the employee’s conduct

— although the latter is the most important element.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance and is on that account subject to regulation by the state with respect, not only to the internal affairs of the insurance company. Rules and Regulations governing the conduct of the business are provided for in the insurance code and enforced by the insurance commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribes the qualifications of persons who may be insured, subject insurance applications to processing and approval by the company and also reserve to the company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agents contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish on employer-employee relationship between him and the company.

The labor arbiter’s decision makes reference to Basiao’s claim of having been connected with the company for 25 years whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao’s status under the contract of July 2, 1968, not the length of his relationship with the company.

The court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The labor arbiter erred in taking cognizance of and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the arbiter’s decision. This conclusion renders it unnecessary and premature to consider Basiao’s claim for commission on its merits.

SICI vs Cuenca (G.R. No. 173297 March 6, 2013)

Stronghold Insurance Company Inc. vs Cuenca
G.R. No. 173297 March 6, 2013

Facts: On January 19, 1998, Marañon filed a complaint in the RTC against the Cuencas for the collection of a sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application for the issuance of a writ of preliminary attachment. On January 26, 1998, the RTC granted the application for the issuance of the writ of preliminary attachment conditioned upon the posting of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Marañon amended the complaint to implead Tayactac as a defendant. On February 11, 1998, Marañon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary attachment. The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on February 16, 1998.

Issue: Whether or not the respondents have the legal standing to sue petitioner for the recovery of the attached properties and damages.

Held: No. To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted or defended in the name of the real party in interest. Under the same rule, a real party in interest is one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his interest must be a present substantial interest, not a mere expectancy, or a future, contingent, subordinate, or consequential interest.

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause of action. The reason for this is that the courts ought not to pass upon questions not derived from any actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction of the court as the plaintiff in an action. Nor does a court acquire jurisdiction over a case where the real party in interest is not present or impleaded.

The purposes of the requirement for the real party in interest prosecuting or defending an action at law are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case; (b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to sound public policy. Indeed, considering that all civil actions must be based on a cause of action, defined as the act or omission by which a party violates the right of another, the former as the defendant must be allowed to insist upon being opposed by the real party in interest so that he is protected from further suits regarding the same claim. Under this rationale, the requirement benefits the defendant because “the defendant can insist upon a plaintiff who will afford him a setup providing good res judicata protection if the struggle is carried through on the merits to the end.”

The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully interested in the litigation so that only real controversies will be presented and the judgment, when entered, will be binding and conclusive and the defendant will be saved from further harassment and vexation at the hands of other claimants to the same demand.

But the real party in interest need not be the person who ultimately will benefit from the successful prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the court should first ascertain the nature of the substantive right being asserted, and then must determine whether the party asserting that right is recognized as the real party in interest under the rules of procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuenca’s and Tayactac lacked the legal personality to claim the damages sustained from the levy of the former’s properties. According to Asset Privatization Trust v. Court of Appeals,  even when the foreclosure on the assets of the corporation was wrongful and done in bad faith the stockholders had no standing to recover for themselves moral damages; otherwise, they would be appropriating and distributing part of the corporation’s assets prior to the dissolution of the corporation and the liquidation of its debts and liabilities. Moreover, in Evangelista v. Santos, the Court, resolving whether or not the minority stockholders had the right to bring an action for damages against the principal officers of the corporation for their own benefit.

Republic vs Del Motors (G.R. No. 156956 October 9, 2006)

Republic of the Philippines vs Del Motors Inc.
G.R. No. 156956 October 9, 2006

Facts: On January 15, 2002, the RTC rendered a Decision in Civil Case No. Q-97-30412, finding the defendants (Vilfran Liner, Inc., Hilaria Villegas and Maura Villegas) jointly and severally liable to pay Del Monte Motors, Inc., P 11,835,375.50 representing the balance of Vilfran Liners service contracts with respondent. The trial court further ordered the execution of the Decision against the counterbond posted by Vilfran Liner on June 10, 1997, and issued by Capital Insurance and Surety Co., Inc. (CISCO).  On April 18, 2002, CISCO opposed the Motion for Execution filed by respondent, claiming that the latter had no record or document regarding the alleged issuance of the counterbond; thus, the bond was not valid and enforceable.

Issue: Whether or not the security deposit held by the Insurance Commissioner pursuant to Section 203 of the Insurance Code may be levied or garnished in favor of only one insured.

Held: No. Section 203 of the Insurance Code provides as follows:

Sec. 203. Every domestic insurance company shall, to the extent of an amount equal in value to twenty-five per centum of the minimum paid-up capital required under section one hundred eighty-eight, invest its funds only in securities, satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government-owned or controlled corporations and entities, including the Central Bank of the Philippines: Provided, That such investments shall at all times be maintained free from any lien or encumbrance; and Provided, further, That such securities shall be deposited with and held by the Commissioner for the faithful performance by the depositing insurer of all its obligations under its insurance contracts. The provisions of section one hundred ninety-two shall, so far as practicable, apply to the securities deposited under this section.

Except as otherwise provided in this Code, no judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held on deposit pursuant to the requirement of the Commissioner.

Our Insurance Code is patterned after that of California. Thus, the ruling of the states Supreme Court on a similar concept as that of the security deposit is instructive. Engwicht v. Pacific States Life Assurance Co. held that the money required to be deposited by a mutual assessment insurance company with the state treasurer was a trust fund to be ratably distributed amongst all the claimants entitled to share in it. Such a distribution cannot be had except in an action in the nature of a creditors bill, upon the hearing of which, and with all the parties interested in the fund before it, the court may make equitable distribution of the fund, and appoint a receiver to carry that distribution into effect.

Basic is the statutory construction rule that provisions of a statute should be construed in accordance with the purpose for which it was enacted. That is, the securities are held as a contingency fund to answer for the claims against the insurance company by all its policy holders and their beneficiaries. This step is taken in the event that the company becomes insolvent or otherwise unable to satisfy the claims against it. Thus, a single claimant may not lay stake on the securities to the exclusion of all others. The other parties may have their own claims against the insurance company under other insurance contracts it has entered into.

The Insurance Code has vested the Office of the Insurance Commission with both regulatory and adjudicatory authority over insurance matters.  The general regulatory authority of the insurance commissioner is described in Section 414 of the Code.

Pursuant to these regulatory powers, the commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to persons or entities desiring to engage in insurance business in the Philippines; (2) revoke or suspend these certificates of authority upon finding grounds for the revocation or suspension; (3) impose upon insurance companies, their directors and/or officers and/or agents appropriate penalties — fines, suspension or removal from office — for failing to comply with the Code or with any of the commissioners orders, instructions, regulations or rulings, or for otherwise conducting business in an unsafe or unsound manner.

As the officer vested with custody of the security deposit, the insurance commissioner is in the best position to determine if and when it may be released without prejudicing the rights of other policy holders. Before allowing the withdrawal or the release of the deposit, the commissioner must be satisfied that the conditions contemplated by the law are met and all policy holders protected.  

Ong Lim Sing vs FEB Leasing (G.R. No. 168115 June 8, 2007)

Ong Lim Sing Jr. FEB Leasing & Finance Corporation
G.R. No. 168115 June 8, 2007

Facts: On March 9, 1995, FEB Leasing and Finance Corporation (FEB) entered into a lease of equipment and motor vehicles with JVL Food Products (JVL). On the same date, Vicente Ong Lim Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB to guarantee the prompt and faithful performance of the terms and conditions of the aforesaid lease agreement. Corresponding Lease Schedules with Delivery and Acceptance Certificates over the equipment and motor vehicles formed part of the agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental of One Hundred Seventy Thousand Four Hundred Ninety-Four Pesos (P 170,494.00).  JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in arrears, including penalty charges and insurance premiums, amounted to Three Million Four Hundred Fourteen Thousand Four Hundred Sixty Eight and 75/100 Pesos (P3,414,468.75). On August 23, 2000, FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to pay.

Issue: Whether or not JVL as the lessee have an insurable interest over the leased items.

Held: Yes. The stipulation in Section 14 of the lease contract, that the equipment shall be insured at the cost and expense of the lessee against loss, damage, or destruction from fire, theft, accident, or other insurable risk for the full term of the lease, is a binding and valid stipulation. Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance Code provides that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. It cannot be denied that JVL will be directly damnified in case of loss, damage, or destruction of any of the properties leased.

It has also been held that the test of insurable interest in property is whether the assured has a right, title or interest therein that he will be benefited by its preservation and continued existence or suffer a direct pecuniary loss from its destruction or injury by the peril insured against.

Lalican vs Insular Life (G.R. No. 183526 August 25, 2009)

Lalican vs The Insular Life Assurance Company Limited
G.R. No. 183526  August 25, 2009

Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio). During his lifetime, Eulogio applied for an insurance policy with Insular Life. On 24 April 1997, Insular Life, through Josephine Malaluan (Malaluan), its agent in Gapan City, issued in favor of Eulogio Policy No. 9011992, which contained a 20-Year Endowment Variable Income Package Flexi Plan worth P500,000.00, with two riders valued at P 500,000.00 each. Thus, the value of the policy amounted to P1,500,000.00. Violeta was named as the primary beneficiary. P Under the terms of Policy No. 9011992, Eulogio was to pay the premiums on a quarterly basis in the amount of 8,062.00, payable every 24 April, 24 July, 24 October and 24 January of each year, until the end of the 20-year period of the policy. According to the Policy Contract, there was 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 due on 24 July 1997 and 24 October 1997. However, he failed to pay the premium due on 24 January 1998, even after the lapse of the grace period of 31 days. Policy No. 9011992, therefore, lapsed and became void. Eulogio submitted to the Cabanatuan District Office of Insular Life, through Malaluan, on 26 May 1998, an Application for Reinstatement of Policy No. 9011992, together with the amount of P 8,062.00 to pay for the premium due on 24 January 1998. In a letter dated 17 July 1998, Insular Life notified Eulogio that his Application for Reinstatement could not be fully processed because, although he already deposited P8,062.00 as payment for the 24 January 1998 premium, he left unpaid the overdue interest thereon amounting to P322.48. Thus, Insular Life instructed Eulogio to pay the amount of interest and to file another application for reinstatement. Eulogio was likewise advised by Malaluan to pay the premiums that subsequently became due on 24 April 1998 and 24 July 1998, plus interest. On 17 September 1998, Eulogio went to Malaluans house and submitted a second Application for Reinstatement of Policy No. 9011992, including the amount of P17,500.00, representing payments for the overdue interest on the premium for 24 January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998. As Malaluan was away on a business errand, her husband received Eulogios second Application for Reinstatement and issued a receipt for the amount Eulogio deposited.  A while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory arrest secondary to electrocution.

Issue: Whether or not Eulogio had an existing insurable interest in his own life until the day of his death in order to have the insurance policy validly reinstated.

Held: No. An insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance. Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life. Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

In the instant case, Eulogios death rendered impossible full compliance with the conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death, managed to file his Application for Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be considered reinstated after the Application for Reinstatement had been processed and approved by Insular Life during Eulogios lifetime and good health.

The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon written application does not give the insured absolute right to such reinstatement by the mere filing of an application. The insurer has the right to deny the reinstatement if it is not satisfied as to the insurability of the insured and if the latter does not pay all overdue premium and all other indebtedness to the insurer. After the death of the insured the insurance Company cannot be compelled to entertain an application for reinstatement of the policy because the conditions precedent to reinstatement can no longer be determined and satisfied.

Malaluan did not have the authority to approve Eulogios Application for Reinstatement. Malaluan still had to turn over to Insular Life Eulogios Application for Reinstatement and accompanying deposits, for processing and approval by the latter.

Violeta did not adduce any evidence that Eulogio might have failed to fully understand the import and meaning of the provisions of his Policy Contract and/or Application for Reinstatement, both of which he voluntarily signed. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company, yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms, which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense.

New World vs NYK-FILJapan (G.R. No. 171468 August 24, 2011)

New World International Philippines Inc. vs Nyk-FilJapan Shipping Corp.
G.R. No. 171468 August 24, 2011

Facts: Petitioner New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator sets worth US$721,500.00.  DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went by train to Oakland, California, where it was loaded on S/S California Luna V59, owned and operated by NYK Fil-Japan Shipping Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the goods in good condition.  NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on October 5, 1993 respecting the loss and damage that the goods on board his vessel suffered. Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargo-handling operator, received the shipment on October 7, 1993. Upon inspection of the three container vans separately carrying the generator sets, two vans bore signs of external damage while the third van appeared unscathed. The shipment remained at Pier 3s Container Yard under Marinas care pending clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs authorities allowed petitioners customs broker, Serbros Carrier Corporation (Serbros), to withdraw the shipment and deliver the same to petitioner New Worlds job site in Makati City. An examination of the three generator sets in the presence of petitioner New Worlds representatives, Federal Builders (the project contractor) and surveyors of petitioner New Worlds insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three sets suffered extensive damage and could no longer be repaired. For these reasons, New World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged receipt of the demand, both denied liability for the loss.

Issue: Whether or not petitioner is entitled to the claim based from the insurance policy including interests in the delay of the release of such claim.

Held: Yes. The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy insured against all causes of conceivable loss or damage except when otherwise excluded or when the loss or damage was due to fraud or intentional misconduct committed by the insured. The policy covered all losses during the voyage whether or not arising from a marine peril.

Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in voyage, or vessels unseaworthiness, among others. But Seaboard had been unable to show that petitioner New Worlds loss or damage fell within some or one of the enumerated exceptions.

Seaboard cannot pretend that the above documents are inadequate since they were precisely the documents listed in its insurance policy. Being a contract of adhesion, an insurance policy is construed strongly against the insurer who prepared it. The Court cannot read a requirement in the policy that was not there.

Section 241 of the Insurance Code provides that no insurance company doing business in the Philippines shall refuse without just cause to pay or settle claims arising under coverages provided by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim. And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling prescribed by the Monetary Board.

Notably, Seaboard already incurred delay when it failed to settle petitioner New Worlds claim as Section 243 required. Under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created by the failure of the insurer to pay the claim within the time fixed in Section 243.

Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of the delay until the claim is fully satisfied at the rate of twice the ceiling prescribed by the Monetary Board. The term ceiling prescribed by the Monetary Board means the legal rate of interest of 12% per annum provided in Central Bank Circular 416, pursuant to Presidential Decree 116. Section 244 of the Insurance Code also provides for an award of attorneys fees and other expenses incurred by the assured due to the unreasonable withholding of payment of his claim.

UMC vs Country Bankers (G.R. No. 198588 July 11, 2012)

United Merchants Corporation vs Country Bankers Insurance Corporation
G.R. No. 198588 July 11, 2012
Facts: Petitioner United Merchants Corporation (UMC) is engaged in the business of buying, selling, and manufacturing Christmas lights. UMC leased a warehouse at 19-B Dagot Street, San Jose Subdivision, Barrio Manresa, Quezon City, where UMC assembled and stored its products.  On 6 September 1995, UMCs General Manager Alfredo Tan insured UMCs stocks in trade of Christmas lights against fire with defendant Country Bankers Insurance Corporation (CBIC) for P 15,000,000.00. The Fire Insurance Policy No. F-HO/95-576 (Insurance Policy) and Fire Invoice No. 12959A, valid until 6 September 1996. On 7 May 1996, UMC and CBIC executed Endorsement F/96-154 and Fire Invoice No. 16583A to form part of the Insurance Policy. Endorsement F/96-154 provides that UMCs stocks in trade were insured against additional perils, to wit: typhoon, flood, ext. cover, and full earthquake. The sum insured was also increased to P50,000,000.00 effective 7 May 1996 to 10 January 1997. On 9 May 1996, CBIC issued Endorsement F/96-157 where the name of the assured was changed from Alfredo Tan to UMC. On 3 July 1996, a fire gutted the warehouse rented by UMC. CBIC designated CRM Adjustment Corporation (CRM) to investigate and evaluate UMCs loss by reason of the fire. CBICs reinsurer, Central Surety, likewise requested the National Bureau of Investigation (NBI) to conduct a parallel investigation. On 6 July 1996, UMC, through CRM, submitted to CBIC its Sworn Statement of Formal Claim, with proofs of its loss.
Issue: Whether or not UMC is entitled to claim from CBIC the full coverage of its fire insurance policy. 
Held: No. Burden of proof is the duty of any party to present evidence to establish his claim or defense by the amount of evidence required by law, which is preponderance of evidence in civil cases. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. Particularly, in insurance cases, once an insured makes out a prima facie case in its favor, the burden of evidence shifts to the insurer to controvert the insureds prima facie case. In the present case, UMC established a prima facie case against CBIC. CBIC does not dispute that UMCs stocks in trade were insured against fire under the Insurance Policy and that the warehouse, where UMCs stocks in trade were stored, was gutted by fire on 3 July 1996, within the duration of the fire insurance. However, since CBIC alleged an excepted risk, then the burden of evidence shifted to CBIC to prove such exception.  
An insurer who seeks to defeat a claim because of an exception or limitation in the policy has the burden of establishing that the loss comes within the purview of the exception or limitation. If loss is proved apparently within a contract of insurance, the burden is upon the insurer to establish that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.
In Uy Hu & Co. v. The Prudential Assurance Co., Ltd., the Court held that where a fire insurance policy provides that 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 devices are used by the Insured or anyone acting on his behalf to obtain any benefit under this Policy, and the evidence is conclusive that the proof of claim which the insured submitted was false and fraudulent both as to the kind, quality and amount of the goods and their value destroyed by the fire, such a proof of claim is a bar against the insured from recovering on the policy even for the amount of his actual loss. 
In the present case, as proof of its loss of stocks in trade amounting to P 50,000,000.00, UMC submitted its Sworn Statement of Formal Claim together with the following documents: (1) letters of credit and invoices for raw materials, Christmas lights and cartons purchased; (2) charges for assembling the Christmas lights; and (3) delivery receipts of the raw materials. However, the charges for assembling the Christmas lights and delivery receipts could not support its insurance claim. The Insurance Policy provides that CBIC agreed to insure UMCs stocks in trade. UMC defined stock in trade as tangible personal property kept for sale or traffic. Applying UMCs definition, only the letters of credit and invoices for raw materials, Christmas lights and cartons may be considered. 
It has long been settled that a false and material statement made with an intent to deceive or defraud voids an insurance policy. 
The most liberal human judgment cannot attribute such difference to mere innocent error in estimating or counting but to a deliberate intent to demand from insurance companies payment for indemnity of goods not existing at the time of the fire. This constitutes the so-called fraudulent claim which, by express agreement between the insurers and the insured, is a ground for the exemption of insurers from civil liability. 

Manila Bankers vs Aban (G.R. No. 175666 July 29, 2013)

Manila Bankers Life Insurance Corporation vs Aban
G.R. No. 175666 July 29, 2013

Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance Corporation (Bankers Life), designating respondent Cresencia P. Aban (Aban), her niece, as her beneficiary. Petitioner issued Insurance Policy No. 747411 (the policy), with a face value of P 100,000.00, in Sotero’s favor on August 30, 1993, after the requisite medical examination and payment of the insurance premium. On April 10, 1996, when the insurance policy had been in force for more than two years and seven months, Sotero died. Respondent filed a claim for the insurance proceeds on July 9, 1996. Petitioner conducted an investigation into the claim, and came out with the following findings: 1. Sotero did not personally apply for insurance coverage, as she was illiterate; 2. Sotero was sickly since 1990; 3. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No. 747411; 4. Sotero did not sign the July 3, 1993 application for insurance; and 5. Respondent was the one who filed the insurance application, and x x x designated herself as the beneficiary. For the above reasons, petitioner denied respondent’s claim on April 16, 1997 and refunded the premiums paid on the policy.

Issue: Whether or not Manila Bankers is barred from denying the insurance claims based on fraud or concealment.

Held: Yes. The “incontestability clause” is a provision in law that after a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of fraudulent concealment or misrepresentation of the insured or his agent.

The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance of the policy or its last reinstatement.

The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within a period of two (2) years. It is not fair for the insurer to collect the premiums as long as the insured is still alive, only to raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat the right of the beneficiary to recover under the policy.

Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an insurer is given two years – from the effectivity of a life insurance contract and while the insured is alive – to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general.