Insurance Case Digest: American Home Assurance Co. v. Chua (1999)

G.R. No. 130421  June 28, 1999

Lessons Applicable: Acknowledgement receipt (Insurance)

Laws Applicable: Section 29, Section 66,Section 75, Section 77,Section 78, Section 306 of the Insurance Code

FACTS:

• April 5, 1990: Antonio Chua renewed the fire insurance for its stock-in-trade of his business, Moonlight Enterprises with American Home Assurance Companyby issuing a check of P2,983.50 to its agent James Uy who delivered the Renewal Certificate to him.
• April 6, 1990: Moonlight Enterprises was completely razed by fire with an est. loss of P4,000,000 to P5,000,000
• April 10, 1990: An official receipt was issued and subsequently, a policy was issued covering March 25 1990 to March 25 1991
• Antonio Chua filed an insurance claim with American Home and 4 other co-insurers (Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc. and Filipino Merchants Insurance Co)
• American Home refused alleging the no premium was paid
• RTC: favored Antonio Chua for paying by way of check a day before the fire occurred
• CA: Affirmed 

ISSUE: 
1. W/N there was a valid payment of premium considering that the check was cashed after the occurrence of the fire since the renewal certificate issued containing the acknowledgement receipt
2. W/N Chua violated the policy by his submission of fraudulent documents and non-disclosure of the other existing insurance contracts or “other insurance clause"

HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for loss of profit, P200,000 as moral damages and P100,000 as exemplary damages, and reducing the award of attorney’s fees from P50,000 to P10,000

1. YES. 

• Section 77 of the Insurance Code
• An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.  Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of life or an industrial life policy whenever the grace period provision applies
• Section 66 of the Insurance Code - not applicable since not termination but renewal
• renewal certificate issued contained the acknowledgment that premium had been paid 
• Section 306 of the Insurance Code provides that any insurance company which delivers a policy or contract of insurance to an insurance agent or insurance broker shall be deemed to have authorized such agent or broker to receive on its behalf payment of any premium which is due on such policy or contract of insurance at the time of its issuance or delivery or which becomes due thereon
• best evidence of such authority is the fact that petitioner accepted the check and issued the official receipt for the payment.  It is, as well, bound by its agent’s acknowledgment of receipt of payment
• Section 78 of the Insurance Code
• An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid.
• This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77 

2. NO.

• purpose for the “other insurance clause”  is to prevent an increase in the moral hazard
• failure to disclose was not intentional and fraudulent
• Section 75
• A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.
• American Home is estopped because its loss adjusters had previous knowledge of the co-insurers 
• The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose awareness of the other insurance contracts binds petitioner
• no legal and factual basis for the award of P200,000 for loss of profit
• no such fraud or bad faith = no moral damages
• grant of attorney’s fees as part of damages is the exception rather than the rule
• award attorney’s fees where it deems just and equitable that it be so granted
• reduced to P10,000

Insurance Case Digest: Valenzuela v. CA (1990)

G.R. No. 83122   October 19, 1990

Lessons Applicable: Effect of Non-Payment (Insurance)

Laws Applicable: Art. 19,Art. 20,Art. 21, Art. 2200 of the new Civil Code;Section 77 of the Insurance Code

FACTS:

• Valenzuela, General Agent of Philippine American General Insurance Company, Inc authorized to sell in behalf of Philamgen solicited marine insurance from Delta Motors, Inc. amounting to P4.4M  entitling him to a 32% commission or P1.6M
• 1976-1978: premium payments of P1,946,886 were paid directly to Philamgen.  Philamgen wanted a 50% share of Valenzuela's commission but Valenzuela refused.
• Because of his refusal, the officers of Philamgen reversed his commission due him, placed agency transactions on a cash and carry basis thus removing the 60-day credit for premiums due, threatened to cancel policies issued by his agency and leaked out the news that he has substantial accounts with Philamgen.
• December 27, 1978: His agency with Philamgen was terminated
• Valenzuela sought relief from the RTC
• RTC: favored Valenzuela with reinstatement, commission with interest, monthly compensatory damages, moral damages, attorney's fees and cost of suit
• CA modified by holding Philamgen and Valenzuela jointly and severally liable for the premium

ISSUE: W/N Valuenuela should be NOT be held liable since non-payment of the premium renders the policy invalid

HELD: YES. petition is GRANTED. RTC reinstated with modification that upon satisfaction of the judgment, contractual relationship is terminated

• The principal may not defeat the agent's right to indemnification by a termination of the contract of agency. Where the principal terminates or repudiates the agent's employment in violation of the contract of employment and without cause ... the agent is entitled to receive either the amount of net losses caused and gains prevented by the breach, or the reasonable value of the services rendered. Thus, the agent is entitled to prospective profits which he would have made except for such wrongful termination provided that such profits are not conjectural, or speculative but are capable of determination upon some fairly reliable basis. 
• If a principal violates a contractual or quasi-contractual duty which he owes his agent, the agent may as a rule bring an appropriate action for the breach of that duty. The agent may in a proper case maintain an action at law for compensation or damages 
• question of whether or not the agency agreement is coupled with interest is helpful to the petitioners' cause but is not the primary and compelling reason 
• Section 77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding
• unless premium is paid, an insurance contract does not take effect
• since admittedly the premiums have not been paid, the policies issued have lapsed
• to sue Valenzuela for the unpaid premiums would be the height of injustice and unfair dealing
• Under Article 2200 of the new Civil Code, "indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain."

Insurance Case Digest: Cha v. CA (1997)

G.R. No. 124520  August 18, 1997

Lessons Applicable: Effect of Lack of Insurable Interest (Insurance)

Laws Applicable: Sec. 17, Sec. 18, Sec. 25 of the Insurance Code

FACTS:

• Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation entered a 1 year lease contract with a stipulation not to insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent and approval of the lessor.  But it insured against loss by fire their merchandise inside the leased premises for P500,000 with the United Insurance Co., Inc. without the written consent of CKS
• On the day the lease contract was to expire, fire broke out inside the leased premises and CKS learning that the spouses procured an insurance wrote to United to have the proceeds be paid directly to them. But United refused so CKS filed against Spouses Cha and United.
• RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to pay P50,000 as exemplary damages, P20,000 as attorney’s fees and costs of suit
• CA: deleted exemplary damages and attorney’s fees

ISSUE: W/N the CKS has insurable interest because the spouses Cha violated the stipulation

HELD: NO. CA set aside. Awarding the proceeds to spouses Cha.

• Sec. 18.  No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured
• A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract of indemnity.  Insurable interest in the property insured must exist a t the time the insurance takes effect and at the time the loss occurs.  The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of loss of the property.  In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code.
• SECTION 25.  Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void
• Section 17.  The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury thereof
• The automatic assignment of the policy to CKS under the provision of the lease contract previously quoted is void for being contrary to law and/or public policy.  The proceeds of the fire insurance policy thus rightfully belong to the spouses.  The liability of the Cha spouses to CKS for violating their lease contract in that Cha spouses obtained a fire insurance policy over their own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.

Insurance Case Digest: Tanco Jr. v. Philippine Guaranty Co. (1965)

G.R. No.L-17312           November 29, 1965

Lessons Applicable: Definition and Coverage of Casualty Insurance (Insurance)

Laws Applicable: 

FACTS:

• While Tanco's automobile was driven by his brother Manuel Tanco, who at the time didn't have a valid license since it was not renewed until the next week, had a collision with a pick-up delivery van at the southern approach of the Jones bridge
• The repairs cost P2,536.99 so he filed a claim against the insurance company which was rejected 
• He filed a claim in the Municipal Court of Manila and elevated to the Court of First Instance of Manila on Appeal which favored Tanco
• exception clause "the company shall not be liable in respect of any accident, loss, damage or liability caused, sustained or incurred ... whilst (the insured vehicle) is ... being driven by or is for the purpose of being driven by him in the charge of any person other than an Authorized Driver.
• Authorized Driver" to be the insured himself and "(b) any person driving on the Insured's order or with his permission, provided that the person driving is permitted in accordance with the licensing or other laws or regulations to drive the Motor Vehicle or has been permitted and is not disqualified by order of a court of law or by reason of any enactment or regulation in that behalf from driving such Motor Vehicle.

ISSUE: W/N the Tanco can claim because it was not covered by the exemption clause

HELD: NO. appealed from is reversed, with costs

• The exclusion clause in the contract invoked by appellant is clear. It does not refer to violations of law in general, which indeed would tend to render automobile insurance practically a sham, but to a specific situation where a person other than the insured himself, even upon his order or with his permission, drives the motor vehicle without a license or with one that has already expired. No principle of law or of public policy militates against the validity of such a provision.

Insurance Case Digest: Commissioner of Internal Revenue v. Lincoln Philippine Life Insurance Co., Inc (2002)

G.R. No. 119176      March 19, 2002
Lessons Applicable: Measure of Indemnity (Insurance Code)

Laws Applicable: Section 173,Section 183 of the National Internal Revenue Code, Section 49,Section 50 Title VI of the Insurance Code

FACTS:

• Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) issued a special kind of life insurance policy known as the "Junior Estate Builder Policy" with a distinguishing feature.  It had a "automatic increase clause" upon attainment of a certain age by the insured.
• Commissioner of Internal Revenue issued deficiency documentary stamps tax assessment for the year 1984 pertaining to the amount in the automatic increase clause
• Lincoln questioned the deficiency assessments
• Court of Tax Appeals: found no valid basis and cancelled it
• CA: affirmed CTA 
• CIR claims that "automatic increase clause" in the subject insurance policy is separate 

ISSUE: W/N the "automatic increase clause" should not be taxed with the main policy

HELD: NO. CA set aside

• Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a contract of insurance is set forth
• Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance.
• any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance
• Section 173 that the payment of documentary stamp taxes is done at the time the act is done or transaction had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section 183 is the amount fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary measurement
• the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the future by reason of the "automatic increase clause" embodied in the policy without the need of another contract
• the amount insured by the policy at the time of its issuance necessarily included the additional sum covered by the automatic increase clause because it was already determinable at the time the transaction was entered into and formed part of the policy
• to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the amount insured by the policy