First Lepanto Insurance vs Chevron PhilippinesFacts: Fumitechniks, had applied for and was issued Surety Bond by First Lepanto Insurance for the amount of Php15,000,000. This is in compliance with the requirement for the grant of a credit line with Chevron “to guarantee payment/remittance of the cost of fuel products withdrawn within the stipulated time in accordance with the terms and conditions of the agreement.”. Fumitechniks later on failed default its obligation, it issued a check to Chevron in an amount of Php11,461,773.10, when it was presented to the to the bank it was dishonored for the reason that it was already closed. Chevron notified First Lepanto regarding to unpaid purchases of Fumitechniks for the amount of Php 15,084,030.30. First Lepanto now, wrote a letter to Fumitechniks that they submit the following (1) comment re: the letter sent to them by Chevron; (2) agreement between Fumitechniks and Chevron (Principal Agreement). Fumitechniks through its counsel reply to first lepanto informing that it cannot submit the requested agreement since no such agreement was executed between Fumitechniks and respondent.  Fumitechniks also enclosed a copy of another surety bond issued by CICI General Insurance Corporation in favor of respondent to secure the obligation of Fumitechniks and/or Prime Asia Sales and Services, Inc. in the amount of P15,000,000.00. Consequently, petitioner advised respondent of the non-existence of the principal agreement as confirmed by Fumitechniks.  Petitioner explained that being an accessory contract, the bond cannot exist without a principal agreement as it is essential that the copy of the basic contract be submitted to the proposed surety for the appreciation of the extent of the obligation to be covered by the bond applied for. On April 9, 2002, respondent formally demanded from petitioner the payment of its claim under the surety bond.  However, petitioner reiterated its position that without the basic contract subject of the bond, it cannot act on respondent’s claim; petitioner also contested the amount of Fumitechniks’ supposed obligation.

Issue: whether a surety is liable to the creditor in the absence of a written contract with the principal.

Ruling: No, The law is clear that a surety contract should be read and interpreted together with the contract entered into between the creditor and the principal.  Section 176 of theInsurance Code states:

Sec. 176.  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. 

          A surety contract is merely a collateral one, its basis is the principal contract or undertaking which it secures.[21] Necessarily, the stipulations in such principal agreement must at least be communicated or made known to the surety particularly in this case where the bond expressly guarantees the payment of respondent’s fuel products withdrawn by Fumitechniks in accordance with the terms and conditions of their agreement.  The bond specifically makes reference to a written agreement.  It is basic that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.[22]  Moreover, being an onerous undertaking, a surety agreement is strictly construed against the creditor, and every doubt is resolved in favor of the solidary debtor.[23]  Having accepted the bond, respondent as creditor must be held bound by the recital in the surety bond that the terms and conditions of its distributorship contract be reduced in writing or at the very least communicated in writing to the surety.  Such non-compliance by the creditor (respondent) impacts not on the validity or legality of the surety contract but on the creditor’s right to demand performance.

FLORENDO VS PHILAM PLANSFACTS: On October 30, 1997, Philam Plans issued a Pension Plan Agreement to Manuel Florendo. Manuel subsequently died for blood poisoning his wife Lourdes Florendo as beneficiary filed a claim with Philam Plans for the payment of benefits under her husband plan. Philam plan later on wrote a letter to Lourdes declining her claim. Philam Plan found out that Manuel on his maintenance medicine for his heart or his heart and had an implanted pacemaker.  Further, he suffered from diabetes mellitus and was taking insulin.  Lourdes renewed her demand for payment under the plan[ but Philam Plans rejected it. prompting her to file the present action against the pension plan company before the Regional Trial Court (RTC) of Quezon City.

ISSUE: Whether or not Manuel Florendo is guilty of concealing his illness.

RULING: Yes, when Manuel signed the pension plan application, he adopted as his own the written representations and declarations embodied in it.  It is clear from these representations that he concealed his chronic heart ailment and diabetes from Philam Plans. As already stated, Manuel had been taking medicine for his heart condition and diabetes when he submitted his pension plan application.  These clearly fell within the five-year period.  More, even if Perla’s knowledge of Manuel’s pacemaker may be applied to Philam Plans under the theory of imputed knowledge, it is not claimed that Perla was aware of his two other afflictions that needed medical treatments.  Pursuant to Section 27 of the Insurance Code, Manuel’s concealment entitles

Philam Plans to rescind its contract of insurance with him.

MALAYAN INSURANCE VS PHILIPPINE FIRST INSURANCEFACTS: Wyeth executed a contract of carriage with Reputable. It turned out however that the representatives of Wyeth did not yet sign the said contract. Under the contract, Reputable is required to secure a insurance policy which later on contract Malayan for the security of goods of Wyeth. Considering also, that the said goods was also secured by Wyeth with the Marine Policy. Unfortunately, the truck carrying the products was hijacked by 10 armed men. After due investigation Marine Policy paid Wyeth with indemnity they later on demanded reimbursement against Reputable having been subrogated with the right. Subsequently in the case, Reputable impleaded Malayan as third party defendant. Disclaiming any liability, Malayan argued, among others, that under Section 5 of the SR Policy, the insurance does not cover any loss or damage to property which at the time of the happening of such loss or damage is insured by any marine policy and that the SR Policy expressly excluded third-party liability and invoking sec. 5 of the policy that provides for the prohibition on double insurance.

ISSUE: whether or not Malayan is liable for the damages.

RULING: Yes, Clearly, both Sections 5 and 12 presuppose the existence of a double insurance. The pivotal question that now arises is whether there is double insurance in this case such that either Section 5 or Section 12 of the SR Policy may be applied.

By the express provision of Section 93 of the Insurance Code, double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest. The requisites in order for double insurance to arise are as follows:

1. The person insured is the same;2. Two or more insurers insuring separately;3. There is identity of subject matter;4. There is identity of interest insured; and5. There is identity of the risk or peril insured against.

In the present case, while it is true that the Marine Policy and the SR Policy were both issued over the same subject matter, i.e. goods belonging to Wyeth, and both covered the same peril insured against, it is, however, beyond cavil that the said policies were issued to two different persons or entities. It is undisputed that Wyeth is the recognized insured of Philippines First under its Marine Policy, while Reputable is the recognized insured of Malayan under the SR Policy. The fact that Reputable procured Malayan’s SR Policy over the goods of Wyeth pursuant merely to the stipulated requirement under its contract of carriage with the latter does

not make Reputable a mere agent of Wyeth in obtaining the said SR Policy.

UNITED MERCHANTS CORP VS. COUNTRY BANKERS INSURANCE

FACTS: UMC insured its stock in trade of Christmas Lights against fire with defendant CBI for Php15,000,000. UMC and CBI executed an endorsement that UMC’s stocks were insured against additional perils, to wit; “typhoon, flood, ext. cover and full earthquake.” The sum insured was also increased to Php50,000,000. A fire gutted the warehouse and an investigation was conducted. Upon determination of the loss, UMC demanded for atleast 50% of the payment of its claim from CBIC. Through that demand CBI rejected the claim due to breach of condition no. 15 that provides regarding fraudulent acts and claim that the UMC’s claim was tainted of fraud because of its inconsistencies with their statement of inventory.

ISSUE: Whether or not CBI is liable for the loss.

RULING: NO, the Court ruled that the submission of false invoices to the adjusters establishes a clear case of fraud and misrepresentation which voids the insurer’s liability as per condition of the policy. Their falsity is the best evidence of the fraudulent character of plaintiff’s claim. Also, where the insured presented a fraudulent lease contract to support his claim for insurance benefits, the Court held that by its false declaration, the insured forfeited all benefits under the policy provision similar to Condition No. 15 of the Insurance Policy in this case.

PARAMOUNT INSURANCE CORPORATION VS. REMONDEULAZ,FACTS: On May 26, 1994, respondents insured with petitioner their 1994 Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one year. During the effectivity of said insurance, respondents’ car was unlawfully taken. Respondents alleged that a certain Ricardo Sales (Sales) took possession of the subject vehicle to add accessories and improvements thereon, however, Sales failed to return the subject vehicle within the agreed three-day period. Then, respondents notified petitioner to claim for the reimbursement of their lost vehicle. However, petitioner refused to pay. Accordingly, respondents lodged a complaint for a sum of money against petitioner before the Regional Trial Court of Makati City but dismissed the complaint filed by respondents. Not in conformity with the trial court’s Order, respondents filed an appeal to the Court of Appeals and in its decision the appellate court reversed and set aside the Order issued by the trial court. Petitioner, thereafter, filed a motion for reconsideration against said Decision, but the same was denied by the appellate court. Hence this Petition for Review on Certiorari.

ISSUE: Whether or not Paramount Insurance Corporation is liable under the insurance policy for the loss of respondents’ vehicle. RULING: The Supreme Court DENIED the motion of Paramount Insurance Company and AFFIRMED

theDecision of the Court of Appeals entirely.Paramount Insurance Corporation is liable under the insurance policy.In People v. Bustinera this Court had the occasion to interpret the "theft clause" of an insurancepolicy. In this case, the Court explained that when one takes the motor vehicle of another without the latter’s consent even if the motor vehicle is later returned, there is theft there being intent to gain asthe use of the thing unlawfully taken constitutes gain. Also, in Malayan Insurance Co., Inc. v. Court of Appeals this Court held that the taking of a vehicleby another person without the permission or authority from the owner thereof is sufficient to place it within the ambit of the word theft as contemplated in the policy, and is therefore, compensable.Records would show that respondents entrusted possession of their vehicle only to the extent thatSales will introduce repairs and improvements thereon, and not to permanently deprive them of possession thereof. Since, Theft can also be committed through misappropriation, the fact that Sales failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence, since repondents’ car is undeniably covered by aComprehensive Motor Vehicle Insurance Policy that allows for recovery in cases of theft petitioner is liable under the policy for the loss of respondents’ vehicle under the "theft clause."

ASIAN TERMINALS, INC. vs. MALAYAN INSURANCE, CO., INC.FACTS: On November 14, 1995, Shandong Weifang Soda Ash Plant shipped on board the vessel MV "Jinlian I"  60,000 plastic bags of soda ashdense from China to Manila. The shipment, with an invoice value of US$456,000.00, was insured with respondent Malayan Insurance Company, Inc., and covered by a Bil l of Lading issued by Tianjin Navigation Company with Phil ippine Banking Corporation as the consignee and Chemphil Albright and Wilson Corporation as the notify party. On November 21, 1995, upon arrival of the vessel in Manila, the stevedores of petitioner Asian Terminals, Inc., a duly registered domestic corporation engaged in providing arrastre and stevedoring services, unloaded the 60,000 bags of soda ashdense from the vessel and brought them to the open storage area of petitioner for temporary storage and safekeeping. When the unloading of the bags was completed on November 28, 1995, 2,702 bags were found to be in bad order condition. On November 29, 1995, the stevedores of petitioner began loading the bags in the trucks of MEC Customs Brokerage for transport and delivery to the consignee. On December 28, 1995, after all the bags were unloaded in the warehouses of the consignee, a total of 2,881 bags were in bad order condition due to spillage, caking, and hardening of the contents. On April 19, 1996, respondent, as insurer, paid the value of the lost/ damaged cargoes to the consignee in the amount of P643,600.25. On November 20, 1996, respondent, as subrogee of the consignee, filed before the RTC of Manila a complaint for damages against petitioner (Asian Terminals, Inc.), the shipper (Inchcape Shipping Services), and the cargo broker (MEC Customs

Brokerage). The RTC rendered a decision finding petitioner liable for the damage/loss sustained by the shipment but absolving the other defendants - Inchcape Shipping Services and MEC Customs Brokerage. The RTC found that the proximate cause of the damage/loss was the negligence of petitioner’s stevedores who handled the unloading of the cargoes from the vessel. The RTC emphasized that despite the admonitions of Marine Cargo Surveyors not to use steel hooks in retrieving and picking-up the bags, petitioner’s stevedores continued to use such tools, which pierced the bags and caused the spil lage. The RTC, thus, ruled that petitioner, as employer, is liable for the acts and omissions of its stevedores and is ordered to pay plaintiff Malayan Insurance Company, Inc. Aggrieved, petitioner appealed to the CA but the appeal was denied. The CA agreed with the RTC that the damage/loss was caused by the negligence of petitioner’s stevedores in handling and storing the subject shipment. The CA likewise rejected petitioner’s assertion that it received the subject shipment in bad order condition as this was disproved by the Marine Cargo Surveyors who testified that the actual counting of bad order bags was done only after all the bags were unloaded from the vessel and that the Turn Over Survey of Bad Order Cargoes (TOSBOC) upon which petitioner anchors its defense was prepared only on November 28, 1995 or after the unloading of the bags was completed. Petitioner moved for reconsideration but the CA denied the same in a Resolution for lack of merit.

ISSUE: Whether or not the court can take judicial notice of the Management Contract between petitioner and PPA in determining petitioners liability.

RULING: NO, Finally, petitioner implores us to take judicial notice of Section 7.01, Article VII of the Management Contract for cargo handling services it entered with the PPA, which limits petitioner’s liability to P5,000.00 per package. Unfortunately for the petitioner, it cannot avail of judicial notice. The Management Contract entered into by petitioner and the PPA is not among the matters which the courts can take judicial notice of. It cannot be considered an official act of the executive department. The PPA, which was created by virtue of Presidential Decree No. 857, as amended, is a government-owned and controlled corporation in charge of administering the ports in the country. Obviously, the PPA was only performing a  proprietary function when it entered into a Management Contract with petitioner. As such, judicial notice cannot be applied.

NFA vs COUNTRY BANKERS INSURANCE CORPORATION

FACTS: Country Bankers Insurance Corporation (Country Bankers) issued Warehouse Bonds by which Nelson Santos was the bond principal, Lagman was the surety and the Republic of the Philippines, through the NFA was the oblige. The said bonds were used by Nelson as a requirement for his application for Warehouse business. In consideration of these issuances, corresponding Indemnity Agreements6 were executed by Santos, as bond principal, together with Ban Lee Lim Santos (Ban Lee Lim), Rhosemelita Reguine (Reguine) and Lagman, as co-signors. The latter bound themselves jointly and severally liable to Country Bankers for any damages which it may sustain as a consequence of the said bond. Santos then secured a loan using his warehouse receipts as collateral.8

When the loan matured, Santos defaulted in his payment. By virtue of the surety bonds, Country Bankers was compelled to pay P1,166,750.37. Consequently, Country Bankers filed a complaint for a sum of money. The bond principals, Santos and Ban Lee Lim, were not served with summons because they could no longer be found.12 The case was eventually dismissed against them without prejudice. the trial court rendered judgment declaring Reguine and Lagman jointly and severally liable to pay Country Bankers. Lagman filed an appeal to the Court of Appeals, docketed as CA G.R. CV No. 61797. He insisted that the lifetime of the 1989 Bonds, as well as the corresponding Indemnity Agreements was only 12 months. The CA reversed the decision of the trial court.

ISSUE: Whether or not the warehouse bonds were effective only for one year.

RULING: The official receipts in question serve as proof of payment of the premium for one year on each surety bond. It does not, however, automatically mean that the surety bond is effective for only one (1) year. In fact, the effectivity of the bond is not wholly dependent on the payment of premium. Section 177 of the Insurance Code expresses:Sec. 177. 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. (Emphasis supplied)

The 1989 Bonds have identical provisions and they state in very clear terms the effectivity of these bonds, viz:

NOW, THEREFORE, if the above-bounded Principal shall well and truly deliver to the depositors PALAY received by him for STORAGE at any time that demand therefore is made, or shall pay the market value therefore in case he is unable to return the same, then this obligation shall be null and void; otherwise it shall remain in full force and effect and may be enforced in the manner provided by said Act No. 3893 as amended by Republic Act No. 247 and P.D. No. 4. This bond shall remain in force until cancelled by the Administrator of National Food Authority.

This provision in the bonds is but in compliance with the second paragraph of Section 177 of the Insurance Code, which specifies that a continuing bond, as in this case where there is no fixed expiration date, may be cancelled only by the obligee, which is the NFA, by the Insurance Commissioner, and by the court.

NEW WORLD INTERNATIONAL VS. NYK SHIPPINGFacts: This case involves a cargo owner’s right to recover damages from the loss of insured goods under the Carriage of Goods by Sea Act and the Insurance Code. Petitioner New World International Development (Phils.), Inc. bought from DMT Corporation throught its agent, Advatech Industries, Inc. three emergency generator sets worth US $721.5 million. DMT shipped the generator sets by truck from Wisconsin, USA to LEP Profit International 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 for delivery to 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 transhipped it to S/S ACX Ruby V/72 that it owned and operated. On its journey to Manila, it encountered typhoon Kadiang and upon arrival at the Manila South Harbor, its captain filed a sea protest respecting the loss and damage that the goods on board his vessel suffered. An examination of the 3 generator sets revealed that all 3 sets suffered extensive damage and could no longer be repaired. For these reasons, New World demanded from NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Marina and Serbros recompense for its loss. Later in 1994, it filed an action for specific performance and damages against all the respondents before the Makati City RTC. Going back to November 1993, , New World sent a formal claim to Seaboard-Eastern Insurance Company since it covered the goods with a marine insurance policy to which it required, in its reply on February 1994, the former to submit to it an itemized list of the damaged units, parts and accessories, with

corresponding values, for the processing of the claim. But, New World did not submit what was required, insisting that the insurance policy did not include the submission; thus, Seaboard, refused to process the claim.

Issue: Whether or not the submission of an itemized list is necessary before the insurance claim be processed

Decision: Action for specific performance and damages against all the respondents were dismissed except for NYK. Meanwhile, it directs Seaboard to pay New World US $721.5 million with 24% interest for duration of delay in accordance with Sections 243 and 244 of the Insurance Code and attorney’s fees equivalent to 10% of insurance proceeds. Seaboard shall also pay a 12% interest per annum on the total amount due to petitioner until full satisfaction. 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. Moreover, 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. Moreover, 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. If 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 (the legal interest rate of 12% per annum). Notably, Seaboard incurred delay when it failed to settle New World’s claim as required by Section 243. The Insurance Code also provides for an award of attorney’s fees and other expenses incurred by the assured due to the unreasonable withholding of payment of his claim.

LALICAN VS THE INSULAR LIFEFACTS: Eulogio Lalican applied for an insurance policy with the Insular Life amounting to Php 1,500,000. Under the terms of the policy, Eulogio was to pay the premiums on a quarterly basis, having 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 the first two succeeding payment dates but failed to pay subsequent premiums even after the lapse of the grace period thereby rendering the policy void. He submitted an application for reinstatement of policy through Josephine Malaluan, an agent of Insular Life, together with the payment of the unpaid premiums. However, the Insular Life notified him that his application could not be processed because he failed to pay the overdue interest of the unpaid premiums. On Sept. 17, 1998, Eulogio submitted to Malaluan’s house a second application for reinstatement including

the payment for the overdue interest as well as for the premiums due for April and July of that year, which was received by Malaluan’s husband on her behalf and was thereby issued a receipt for the amount Eulogio deposited. However, on that same day, Eulogio died of cardio-respiratory arrest secondary to electrocution. Violeta, Eulogio’s widow filed with the Insular Life a claim for payment of the full proceeds of the policy but the latter informed her that the claim could not be granted since at the time of Eulogio’s death, his policy has already lapsed and he failed to reinstate the same. Violeta requested a reconsideration of her claim but the same was also rejected. Therefore, she filed a complaint for death claim benefits with the RTC alleging the unfair claim settlement practice of Insular Life and its deliberate failure to act with reasonable promptness on her insurance claim. The trial court rendered a decision in favour of Insular Life and after the former denied her motion for reconsideration, she directly elevated her case to the Supreme Court via the petition for review on Certiorari.

ISSUE : Whether or not the policy of Eulogio was reinstated before his death.

RULING: To reinstate a policy means to restore the same to preium-paying status after it has been permitted to lapse. Both the policy contract and application for reinstatement provide for specific conditions for the reinstatement of a lapsed policy. According to the Application for Reinstatement, the policy would only be considered reinstated upon the approval of the application by Insular Life during the applicant’s “lifetime and good health” and whatever amount the application paid in connection was considered to be a deposit only until approval of said application. Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of policy even though, before his death, he managed to file his application for reinstatement and deposit the amount for payment of his overdue premiums and interest thereon with Malaluan. As expressly provided on the policy contract, agents of Insular Life have no authority to approve any application for reinstatement. They still had to turn over to Insular Life the application for reinstatement and accompanying deposit, for processing and approval of the latter.

HEIRS OF GEORGE Y POE VS MALAYAN INSURANCE

FACTS: POE while waiting for a ride to work in front of Capital Garments Corp. in ortigas was run over by a ten wheeler Izuzu truck owned by Rhoda Santos, and was driven by Willie Labrador the said truck was insured with Malayan Insurance. Due to death the heirs of POE filed with the RTC a complaint for damages against Santos and Malayan Insurance. Rhoda and respondent MICI denied liability for George’s death averring, among other defenses, that:  a) the accident was caused by the negligent act of the victim George, who surreptitiously and

unexpectedly crossed the road, catching the driver Willie by surprise, and despite the latter’s effort to swerve the truck to the right, the said vehicle still came into contact with the victim; b) the liability of respondent MICI, if any, would attach only upon a judicial pronouncement that the insured Rhoda and her driver Willie are liable; c) the liability of MICI should be based on the extent of the insurance coverage as embodied in Rhoda’s policy; and d) Rhoda had always exercised the diligence of a good father of a family in the selection and supervision of her driver Willie.

ISSUE: whether or not Santos is Liable for the death of George.

RULING: Yes,  It is settled that where the insurance contract provides for indemnity against liability to third persons, the liability of the insurer is direct and such third persons can directly sue the insurer.  The direct liability of the insurer under indemnity contracts against third party liability does not mean, however, that the insurer can be held solidarily liable with the insured and/or the other parties found at fault, since they are being held liable under different obligations.  The liability of the insured carrier or vehicle owner is based on tort, in accordance with the provisions of the Civil Code; while that of the insurer arises from contract, particularly, the insurance policy.  The third-party liability of the insurer is only up to the extent of the insurance policy and that required by law; and it cannot be held solidarily liable for anything beyond that amount. Any award beyond the insurance coverage would already be the sole liability of the insured and/or the other parties at fault.           In Vda. de Maglana v. Consolacion, it was ruled that an insurer in an indemnity contract for third-party liability is directly liable to the injured party up to the extent specified in the agreement, but it cannot be held solidarily liable beyond that amount.  According to respondent MICI, its liability as insurer of Rhoda’s truck is limited. Following Vda. de Maglana, petitioners would have had the option either (1) to claim the amount awarded to them from respondent MICI, up to the extent of the insurance coverage, and the balance from Rhoda; or (2) to enforce the entire judgment against Rhoda, subject to reimbursement from respondent MICI to the extent of the insurance coverage.  The Court, though, is precluded from applying its ruling in Vda. de Maglana by the difference in one vital detail between the said case and the one at bar.  The insurer was able to sufficiently establish its limited liability in Vda. de Maglana, while the same cannot be said for respondent MICI herein.

HEIRS OF LORETO MARAMAG

FACTS: Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto

Maramag) and his concubine Eva de Guzman Maramag, also suspected in the killing of Loreto and his illegitimate children are claiming for his insurance. Vicenta alleges that Eva is disqualified from claiming RTC: Granted - civil code does NOT apply CA: dismissed the case for lack of jurisdiction for filing beyond reglementary period

ISSUE: Whether or not Eva can claim even though prohibited under the civil code against donation.

HELD: YES. Petition is DENIED. Any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy of the person who cannot make any donation to him If a concubine is made the beneficiary, it is believed that the insurance contract will still remain valid, but the indemnity must go to the legal heirs and not to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.  SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy. GR: only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if the insured is already deceased, upon the maturation of the policy. EX: situation where the insurance contract was intended to benefit third persons who are not parties to the same in the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and claim from the insurer It is only in cases where the insured has not designated any beneficiary, or when the designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the estate of the insured

PHILHEALTH CARE VS CIR

FACTS: Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization. On January 27, 2000, respondent CIR sent petitioner a formal deman letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. The deficiency assessment was imposed on petitioner’s health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals

(CTA) seeking the cancellation of the deficiency VAT and DST assessments. On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-88 is declared void and without force and effect. The 1996 and 1997 deficiency DST assessment against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting the said DST deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it cancelled the DST assessment. He claimed that petitioner’s health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.On August 16, 2004, the CA rendered its decision which held that petitioner’s health care agreement was in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the deficiency Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.

ISSUE: Whether or not the agreements between petitioner and its members possess all elements necessary in the insurance contract.

RULING: NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June 12, 2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its agreements are treated as insurance contracts and the DST is not a tax on the business but an excise on the privilege, opportunity or facility used in the transaction of the business. Petitioner, however, submits that it is of critical importance to characterize the business it is engaged in, that is, to determine whether it is an HMO or an insurance company, as this distinction is indispensable in turn to the issue of whether or not it is liable for DST on its health care agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is “an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium. The payments do not vary with the extent, frequency or type of services provided. Section 2 (2) of PD 1460 enumerates what constitutes “doing an insurance business” or “transacting an insurance business”which are making or proposing to make, as insurer, any insurance contract; making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative medical services), but these are incidental to the principal activity of providing them medical care. The “insurance-like” aspect of petitioner’s business is miniscule compared to its noninsurance activities. Therefore, since it substantially provides health care services rather than insurance services, it cannot be considered as being in the insurance business.

PIONEER INSURANCE AND SURETY CORPORATION vs. KEPPEL CEBU SHIPYARD, INC

FACTS: WG & A JEBSENS SHIPMGMT. Owner/Operator of M/V "SUPERFERRY 3" and KEPPEL CEBU SHIPYARD, INC. (KCSI) enter into an agreement that the Drydocking and Repair of the above-named vessel ordered by the Owner’s Authorized Representative shall be carried out under the Keppel Cebu Shipyard Standard Conditions of Contract for Ship repair, guidelines and regulations on safety and security issued by Keppel Cebu Shipyard. In the course of its repair, M/V "Superferry 3" was gutted by fire. Claiming that the extent of the damage was pervasive, WG&A declared the vessel’s damage as a "total constructive loss" and, hence, filed an insurance claim with Pioneer. Pioneer paid the insurance claim of WG&A, which in turn, executed a Loss and Subrogation Receipt in favor of Pioneer. Pioneer tried to collect from KCSI, but the latter denied any responsibility for the loss of the subject vessel. As KCSI continuously refused to pay despite repeated demands, Pioneer, filed a Request for Arbitration before the Construction Industry Arbitration Commission CIAC seeking for payment of U.S.$8,472,581.78 plus interest, among others. The CIAC rendered its Decision declaring both WG&A and KCSI guilty of negligence, the CIAC ordered KCSI to pay Pioneer the amount of P25,000,000.00, with interest at 6% per annum. Both Keppel and Pioneer appealed to the CA. The cases were consolidated in the CA. the CA rendered a decision dismissing petitioner’s claims in its entirety. Keppel was declared as equally negligent.

ISSUE: To whom may negligence over the fire that broke out on board M/V "Superferry 3" be imputed? What is the extent of the damage, if any?

RULING: 1. The issue of negligenceUndeniably, the immediate cause of the fire was the hot work done by Angelino Sevillejo (Sevillejo) on the accommodation area of the vessel, specifically on Deck A. As established before the CIAC –Pioneer contends that KCSI should be held liable because Sevillejo was its employee who, at the time the fire broke out, was doing his assigned task, and that KCSI was solely responsible for all the hot works done on board the vessel. We rule in favor of Pioneer.

At the time of the fire, Sevillejo was an employee of KCSI and was subject to the latter’s direct control and supervision.There was a lapse in KCSI’s supervision of Sevillejo’s work at the time the fire broke out.KCSI failed to exercise the necessary degree of caution and foresight called for by the circumstances.The circumstances, taken collectively, yield the inevitable conclusion that Sevillejo was negligent in the performance of his assigned task. His negligence was the proximate cause of the fire on board M/V "Superferry 3." As he was then definitely engaged in the performance of his assigned tasks as an employee of KCSI, his negligence gave rise to the vicarious liability of his employer43 under Article 2180 of the Civil Code.KCSI failed to prove that it exercised the necessary diligence incumbent upon it to rebut the legal presumption of its negligence in supervising Sevillejo.44 Consequently, it is responsible for the damages caused by the negligent act of its employee, and its liability is primary and solidary.

2. Damages In marine insurance, a constructive total loss occurs under any of the conditions set forth in Section 139 of the Insurance Code, which provides—Sec. 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion hereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril;(b) If it is injured to such an extent as to reduce its value more than three-fourths;

It cannot be denied that M/V "Superferry 3" suffered widespread damage from the fire that occurred on February 8, 2000, a covered peril under the marine insurance policies obtained by WG&A from Pioneer. The estimates given by the three disinterested and qualified shipyards show that the damage to the ship would exceed P270,000,000.00, or ¾ of the total value of the policies – P360,000,000.00. These estimates constituted credible and acceptable proof of the extent of the damage sustained by the vessel. Considering the extent of the damage, WG&A opted to abandon the ship and claimed the value of its policies. Pioneer, finding the claim compensable, paid the claim, with WG&A issuing a Loss and Subrogation Receipt evidencing receipt of the payment of the insurance proceeds from Pioneer. The Loss and Subrogation Receipt issued by WG&A to Pioneer is the best evidence of payment of the insurance proceeds to the former, and no controverting evidence was presented by KCSI to rebut the presumed

authority of the signatory to receive such payment.