White Gold Services vs Pioneer Insurance

White Gold Marine Services, Inc. owns several shipping vessels. Steamship Mutual Underwriting
Association, Ltd. (based in Bermuda) is a protection and indemnity club which is an association
composed of shipowners in general who band together for the specific purpose of providing
insurance cover on a mutual basis against liabilities incidental to shipowning that the members
incur in favor of third parties. White Gold, through Pioneer Insurance (agent of Steamship Mutual
here), procured a protection and indemnity coverage from Steamship Mutual. Steamship Mutual
does not have authority from the Insurance Commission to conduct insurance business in the
Philippines but its collection agent here (Pioneer Insurance) has been licensed to conduct
insurance business.
Later, Steamship Mutual filed a case for collection of sum of money against White Gold due to
the latters failure to pay its balance with the former. White Gold averred that Steamship Mutual
has no license [hence it cannot collect]. Nor can it collect through Pioneer Insurance because,
though Pioneer Insurance is licensed as an insurance company, it is not licensed to be an
insurance broker/agent. Steamship Mutual insisted it is not conducting insurance business here
and is merely a protection and indemnity club. The Insurance Commission as well as the Court
of Appeals ruled against White Gold.
ISSUE: Whether or not Steamship Mutual needs a license to operate in the Philippines.
HELD: Yes. The test to determine if a contract is an insurance contract or not, depends on the
nature of the promise, the act required to be performed, and the exact nature of the agreement in
the light of the occurrence, contingency, or circumstances under which the performance becomes
requisite. It is not by what it is called. If it is a contract of indemnity, it must be a contract of
insurance. In fact, a protection and indemnity club is a form of insurance where the members are
both the insurers and the insured. It is a mutual insurance company. The club indemnifies the
member for whatever risks it may incur against a third party where the third party is other than the
club and the members. Hence, Steamship Mutual needs to procure a license from the Insurance
Commission in order to continue operating here.
Pioneer Insurance also needs to secure another license as an insurance broker/agent of
Steamship Mutual pursuant to Section 299 of the Insurance Code.
Verendia vs. CA
FACTS:
Rafael (Rex) Verendia's residential building was insured with Fidelity and Surety Insurance
Company, Country Bankers Insurance and Development Insurance with Monte de Piedad &
Savings Bank as beneficiary
December 28, 1980 early morning: the building was completely destroyed by fire
Fidelity refused the claim stating that there was a misrepresentation since the lessee was
not Roberto Garcia but Marcelo Garcia
trial court: favored Fidelity
CA: reversed
ISSUE: W/N there was false declaration which would forfeit his benefits under Section 13 of the
policy

HELD: YES.
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"
Robert Garcia then executed an affidavit before the National Intelligence and Security
Authority (NISA) to the effect that he was not the lessee of Verendia's house and that his
signature on the contract of lease was a complete forgery.
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

Rizal Surety and Insurance vs CA

Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased to
1.5 million. A four span building was part of the policy. A fire broke out and gutted the building,
together with a two storey building behind it were gaming machines were stored. The company
filed its claims but to no avail. Hence, it brought a suit in court. It aimed to make Rizal pay for
almost 3 million including legal interest and damages. Rizal claimed that the policy only covered
damage on the four span building and not the two storey building. The trial court ruled in
Transworlds favor and ordered Rizal to pay actual damages only. The court of appeals
increased the damages. The insurance company filed a MFR. The CA answered by modifying
the imposition of interest. Not satisfied, the insurance company petitioned to the Supreme Court.
Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the fire insurance
policy sued upon covered only the contents of the four-span building.
Held: Yes. Petition dismissed.
Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by them
forming part of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by Transworld and
second, said areas must form part of the building described in the policy xxx"
This generally means that the policy didnt limit its coverage to what was stored in the four-span
building.
As to questions of fact, both the trial court and the Court of Appeals found that the so called
"annex " was not an annex building but an integral part of the four-span building described in the
policy and consequently, the machines and spare parts stored were covered by the fire
insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete hollow
blocks under g.i. roof which is adjoining and intercommunicating with the repair of the first
right span of the lofty storey building and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or
uncertain are to be construed strictly and most strongly against the insurer, and liberally in favor
of the insured so as to effect the dominant purpose of indemnity or payment to the insured

The issue of whether or not Transworld has an insurable interest in the fun and amusement
machines and spare parts, which entitles it to be indemnified for the loss thereof, had been
settled in another SC case.
PhilamCare Health Systems vs CA
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question
asking if he or his family members were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and outpatient benefits. After the period expired, he was given an expanded coverage for Php 75,000.
During the period, he suffered from heart attack and was confined at MMC. The wife tried to
claim the benefits but the petitioner denied it saying that he concealed his medical history by
answering no to the aforementioned question. She had to pay for the hospital bills amounting to
76,000. Her husband subsequently passed away. She filed a case in the trial court for the
collection of the amount plus damages. She was awarded 76,000 for the bills and 40,000 for
damages. The CA affirmed but deleted awards for damages. Hence, this appeal.
Issue: WON a health care agreement is not an insurance contract; hence the incontestability
clause under the Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year
duration. It contended that there was no indemnification unlike in insurance contracts. It
supported this claim by saying that it is a health maintenance organization covered by the DOH
and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply
because two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husbands health was the insurable interest. The health care agreement was in
the nature of non-life insurance, which is primarily a contract of indemnity. The provider must
pay for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract
stated that:
that any physician is, by these presents, expressly authorized to disclose or give testimony at
anytime relative to any information acquired by him in his professional capacity upon any
question affecting the eligibility for health care coverage of the Proposed Members.
This meant that the petitioners required him to sign authorization to furnish reports about his
medical condition. The contract also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the insured to
disclose information was a grounds for revocation simply because the answer assailed by the
company was the heart condition question based on the insureds opinion. He wasnt a medical
doctor, so he cant accurately gauge his condition.

Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is
obligated to make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
Having assumed a responsibility under the agreement, petitioner is bound to answer the same
to the extent agreed upon. In the end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the agreement or whenever he
avails of the covered benefits which he has prepaid.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract
of insurance.
As to cancellation procedure- Cancellation requires certain conditions:
1.
Prior notice of cancellation to insured;
2.
Notice must be based on the occurrence after effective date of the policy of one or more
of the grounds mentioned;
3.
Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4.
Must state the grounds relied upon provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that under the title Claim procedures of expenses, the
defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the
Agreement within which to contest the membership of the patient if he had previous ailment of
asthma, and six months from the issuance of the agreement if the patient was sick of diabetes
or hypertension. The periods having expired, the defense of concealment or misrepresentation
no longer lie.
Fortune Insurance and Surety vs CA
Facts:
Producers Banks money was stolen while it was being transported from Pasay to Makati. The
people guarding the money were charged with the theft. The bank filed a claim for the amount of
Php 725,000, and such was refused by the insurance corporation due to the stipulation:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer,
employee, partner, director, trustee or authorized representative of the Insured whether acting
alone or in conjunction with others. . . .
In the trial court, the bank claimed that the suspects were not any of the above mentioned. They
won the case. The appellate court affirmed on the basis that the bank had no power to hire or
dismiss the guard and could only ask for replacements from the security agency.
Issue: Did the guards fall under the general exceptions clause of the insurance policy and thus
absolved the insurance company from liability?
Held: Yes to both. Petition granted.
Ratio:
The insurance agency contended that the guards automatically became the authorized
representatives of the bank when they cited International Timber Corp. vs. NLRC where a
contractor is a "labor-only" contractor in the sense that there is an employer-employee
relationship between the owner of the project and the employees of the "labor-only" contractor.
They cited Art. 106. Of the Labor Code which said:

Contractor or subcontractor. There is "labor-only" contracting where the person supplying

workers to an employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited and placed
by such persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
The bank asserted that the guards were not its employees since it had nothing to do with their
selection and engagement, the payment of their wages, their dismissal, and the control of their
conduct.
They cited a case where an employee-employer relationship was governed by (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.
The case was governed by Article 174 of the Insurance Code where it stated that casualty
insurance awarded an amount to loss cause by accident or mishap.
The term "employee," should be read as a person who qualifies as such as generally and
universally understood, or jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, or as statutorily declared even in a limited
sense as in the case of Article 106 of the Labor Code which considers the employees under a
"labor-only" contract as employees of the party employing them and not of the party who
supplied them to the employer.
But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to
safely transfer the money to its head office, thus, they were representatives. According to the
court, a representative is defined as one who represents or stands in the place of another; one
who represents others or another in a special capacity, as an agent, and is interchangeable with
agent.
Gulf Resorts vs Phil Charter Insurance
FACTS:
Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company
which includes loss or damage to shock to any of the property insured by this Policy
occasioned by or through or in consequence of earthquake
July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties
and 2 swimming pools in its Agoo Playa Resort were damaged
August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort
Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of
the earthquake shock coverage. Thus, the policy extended earthquake shock coverage to
all of the insured properties.
RTC: Favored American Home - endorsement rider means that only the two swimming
pools were insured against earthquake shock
CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

It is basic that all the provisions of the insurance policy should be examined and interpreted
in consonance with each other.
All its parts are reflective of the true intent of the parties.

Insurance Code
Section 2(1)
contract of insurance as an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent
event
An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril.
In the subject policy, no premium payments were made with regard to earthquake shock
coverage, except on the two swimming pools.
MANILA MAHOGANY MFG CORP V CA & ZENITH INSURANCE
OCT 12, 1997; PADILLA, J
FACTS:
From March 6, 1970 1971, petitioner insured its Mercedes Benz 4-door sedan w/
respondent insurance company. On May 4, 1970, vehicle was bumped and damaged by
a truck owned by San Miguel Corp (SMC).
Zenith paid P5K to petitioner in amicable settlement. Petitioners general manager
executed a Release Claim, subrogating respondent company to all its right to action
against SMC
Dec. 11, 1972 respondent co. wrote Insurance Adjusters Inc. To demand
reimbursement from SMC. Insurance Adjusters refused saying that SMC had already
paid petitioner P4,500 for the damages to petitioners vehicle, as evidenced by a cash
voucher and Release of Claim executed by the GM of petitioner discharging SMC from
all actions, claims, demands the rights of action that now exist or hereafter develop
arising out of or as a consequence of the accident
Respondent demanded the P4.5K amount from petitioner. Petitioner refused. Suit filed
for recovery.
City Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with
modification that petitioner was to pay respondent the total amount of 5K it had received
from respondent co.
Petitioners argument: Since the total damages were valued at P9,486.43 and only 5K was
received by petitioner from respondent, petitioner argues that it was entitled to go after SMC to
claim the additional which was eventually paid to it
Respondents argument: No qualification to its right of subrogation
ISUE: WON petitioner should pay respondent despite the subrogation in the Release of Claim
was conditioned on recovery of the total amount of damages petitioner has sustained?
HELD/RATIO: NO.
SC: no other evidence to support its allegation that a gentlemans agreement existed
between the parties, not embodied in the Release of Claim, such Release of Claim must
be taken as the best evidence of the intent and purpose of the parties
CA correct in holding petitioner should reimburse respondent 5K

When Manila Mahogany executed another release claim discharging SMC from
all rights of action after the insurer had paid the proceeds of the policy the
compromise agreement of 5K- the insurer is entitled to recover from the insured
the amount of insurance money paid
o Petitioner by its own acts released SMC, thereby defeating respondents right of
subrogation, the right of action against the insurer was also nullified
Since the insurer can be subrogated to only such rights as the insured may have, should
the insured, after receiving payment from the insurer, release the wrongdoer who
caused the loss, the insurer losses his rights against the latter. But in such a case, the
insurer will be entitled to recover from the insured whatever it has paid to the latter,
unless the release was made w/ the consent of the insurer

DISPOSITIVE: PETITION DENIED

Federal express vs American Home Assurance Company
FACTS: Shipper SMITHKLINE USA delivered to carrier Burlington Air Express
(BURLINGTON), an agent of [Petitioner] Federal Express Corporation, a shipment of 109
cartons of veterinary biologicals for delivery to consignee SMITHKLINE and French Overseas
Company in Makati City. The shipment was covered by Burlington Airway Bill No. 11263825
with the words, REFRIGERATE WHEN NOT IN TRANSIT and PERISHABLE stamp marked
on its face. That same day, Burlington insured the cargoes with American Home Assurance
Company (AHAC). The following day, Burlington turned over the custody of said cargoes to
FEDEX which transported the same to Manila.
The shipments arrived in Manila and was immediately stored at [Cargohaus Inc.s]
warehouse. Prior to the arrival of the cargoes, FEDEX informed GETC Cargo International
Corporation, the customs broker hired by the consignee to facilitate the release of its cargoes
from the Bureau of Customs, of the impending arrival of its clients cargoes.
12 days after the cargoes arrived in Manila, DIONEDA, a non-licensed customs broker who
was assigned by GETC, found out, while he was about to cause the release of the said cargoes,
that the same [were] stored only in a room with 2 air conditioners running, to cool the place
instead of a refrigerator. DIONEDA, upon instructions from GETC, did not proceed with the
withdrawal of the vaccines and instead, samples of the same were taken and brought to the
Bureau of Animal Industry of the Department of Agriculture in the Philippines by SMITHKLINE
for examination wherein it was discovered that the ELISA reading of vaccinates sera are below
the positive reference serum.
As a consequence of the foregoing result of the veterinary biologics test, SMITHKLINE
abandoned the shipment and, declaring total loss for the unusable shipment, filed a claim with
AHAC through its representative in the Philippines, the Philam Insurance Co., Inc. (PHILAM)
which recompensed SMITHKLINE for the whole insured amount. Thereafter, PHILAM filed an
action for damages against the FEDEX imputing negligence on either or both of them in the
handling of the cargo.

Trial ensued and ultimately concluded with the FEDEX being held solidarily liable for the loss.
Aggrieved, petitioner appealed to the CA. The appellate court ruled in favor of PHILAM and held
that the shipping Receipts were a prima facie proof that the goods had indeed been delivered to
the carrier in good condition.
ISSUE: Is FEDEX liable for damage to or loss of the insured goods
HELD: petition granted. Assailed decision reversed insofar as it pertains to FEDEX
Prescription of Claim
From the initial proceedings in the trial court up to the present, petitioner has tirelessly pointed
out that respondents claim and right of action are already barred. Indeed, this fact has never
been denied by respondents and is plainly evident from the records.
Airway Bill No. 11263825, issued by Burlington as agent of petitioner, states:
6. No action shall be maintained in the case of damage to or partial loss of the shipment
unless a written notice, sufficiently describing the goods concerned, the approximate date of
the damage or loss, and the details of the claim, is presented by shipper or consignee to an
office of Burlington within (14) days from the date the goods are placed at the disposal of the
person entitled to delivery, or in the case of total loss (including non-delivery) unless presented
within (120) days from the date of issue of the [Airway Bill]. xxx
Relevantly, petitioners airway bill states:
12./12.1 The person entitled to delivery must make a complaint to the carrier in writing in the
case:
12.1.1 of visible damage to the goods, immediately after discovery of the damage and at the
latest within fourteen (14) days from receipt of the goods; xxx
Article 26 of the Warsaw Convention, on the other hand, provides:
Xxx (2) In case of damage, the person entitled to delivery must complain to the carrier
forthwith after the discovery of the damage, and, at the latest, within 3 days from the date of
receipt in the case of baggage and 7 days from the date of receipt in the case of goods. xx
(3) Every complaint must be made in writing upon the document of transportation or by
separate notice in writing dispatched within the times aforesaid.
(4) Failing complaint within the times aforesaid, no action shall lie against the carrier, save in
the case of fraud on his part. xxx
Condition Precedent
In this jurisdiction, the filing of a claim with the carrier within the time limitation therefor actually
constitutes a condition precedent to the accrual of a right of action against a carrier for loss of or
damage to the goods. The shipper or consignee must allege and prove the fulfillment of the
condition. If it fails to do so, no right of action against the carrier can accrue in favor of the

former. The aforementioned requirement is a reasonable condition precedent; it does not

constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not an empty formalism. The
fundamental reasons for such a stipulation are (1) to inform the carrier that the cargo has been
damaged, and that it is being charged with liability therefor; and (2) to give it an opportunity to
examine the nature and extent of the injury. This protects the carrier by affording it an
opportunity to make an investigation of a claim while the matter is fresh and easily investigated
so as to safeguard itself from false and fraudulent claims.
NOTES: as to proper payee:
The Certificate specifies that loss of or damage to the insured cargo is payable to order x x x
upon surrender of this Certificate. Such wording conveys the right of collecting on any such
damage or loss, as fully as if the property were covered by a special policy in the name of the
holder itself. At the back of the Certificate appears the signature of the representative of
Burlington. This document has thus been duly indorsed in blank and is deemed a bearer
instrument.
Since the Certificate was in the possession of Smithkline, the latter had the right of collecting or
of being indemnified for loss of or damage to the insured shipment, as fully as if the property
were covered by a special policy in the name of the holder. Hence, being the holder of the
Certificate and having an insurable interest in the goods, Smithkline was the proper payee of the
insurance proceeds.
Subrogation
Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation
Receipt in favor of respondents. The latter were thus authorized to file claims and begin suit
against any such carrier, vessel, person, corporation or government. Undeniably, the
consignee had a legal right to receive the goods in the same condition it was delivered for
transport to petitioner. If that right was violated, the consignee would have a cause of action
against the person responsible therefor.
Eternal Gardens Memorial Park vs Phil American Life Insurance Co.
FACTS:
December 10, 1980: Philippine American Life Insurance Company (Philamlife) entered into
an agreement denominated as Creditor Group Life Policy No. P-19202 with Eternal Gardens
Memorial Park Corporation (Eternal)
Under the policy (renewable annually), the clients of Eternal who purchased burial lots from
it on installment basis would be insured by Philamlife
amount of insurance coverage depended upon the existing balance
Eternal complied by submitting a letter dated December 29, 1982, a list of insurable
balances of its lot buyers for October 1982 which includes John Chuang which was stamped
as received by Philam Life
August 2, 1984, Chuang died with a balance of 100,000 php
April 25, 1986: Philamlife had not furnished Eternal with any reply on its insurance claim so
its demanded its claim

According to Philam Life, since the application was submitted only on November 15, 1984,
after his death, Mr. John Uy Chuang was not covered under the Policy since his application
was not approved. Moreover, the acceptance of the premiums are only in trust for and not a
sign of approval.
RTC: favored Eternal
CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance contract.

HELD: YES. CA reversed

construed in favor of the insured and in favor of the effectivity of the insurance contract
Upon a partys purchase of a memorial lot on installment from Eternal, an insurance contract
covering the lot purchaser is created and the same is effective, valid, and binding until
terminated by Philamlife by disapproving the insurance application
Moreover, the mere inaction of the insurer on the insurance application must not work to
prejudice the insured
The termination of the insurance contract by the insurer must be explicit and unambiguous