Wednesday, May 17, 2006

Insurance Law - New Cases

White Gold Marine Services vs Pioneer Insurance and Surety Corp and Steamship Mutual Underwriting Assoc.
(GR No 154514, July 28, 2005, Quisumbing)

White Gold obtained an indemnity coverage of its vessel from SMUA, a foreign cooperative, thru Pioneer Insurance as its broker. Pioneer has a license to do insurance business in the Philippines.

Is SMUA doing insurance business/transacting insurance business?
If you have been duly-licensed to engage in insurance business but you wanted to act as broker or agent of an insurance company, do you need a separate license thereof?

Yes. SMUA is insurance business/transacting insurance business because it partakes that of a mutual insurance whereby it operates as a cooperative enterprise where the members thereof are the insurers and the insured themselves. The members contribute premiums to their common fund. And if one of them suffers loss, the common fund shall pay for the loss.
Yes. Sec 299 of the ICP provides that no person shall act as insurance agent or broker in soliciting or procuring insurance without first securing a license from the Insurance Commission of the Philippines.

FGU Insurance Corp vs CA/Estate of Ang Wee vs CA
(Mar 31, 2005, Nasario)

If the insured himself or his agents were negligent, is this negligence a defense available to the insurance company in order to defeat payment of the insurance claims?

SC held that if it is:

Ordinary negligence – their negligence will not lie as a defense for the Insurance Co to defeat their claim because the purpose of the insured in taking out indemnity coverage is to protect the insured against the consequences of his own negligence as well as that of his agent.

Blatant or Gross Negligence – the insurer will be exonerated from liability.

In this case, the SC held that the negligence is so blatant or gross that it already amount to a wrongful act. The tug boat was left in a wharf despite the fact of bad weather condition and not withstanding the earlier request to transfer the same to a safer place. The carrier’s own acts and refusal amounted to blatant or gross negligence that enabled the Insurance Co to defeat their claims.

Danzas Corporation vs All Transport Network Inc
(GR No 141462, Dec 15, 2005)

What happens if after the proceeds of the policy has been paid, the wrongdoer enters into a compromise/settlement with the insured party and the insured party accepted the same. Will this circumstance defeat subrogation on the part of the Insurance Company?

General Rule:
In the case of Manila Mahogany Manufacturing vs CA, 154 SCRA 650, 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 loses his right 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 with the consent of the insurer.

As laid down by the SC in this case, where the wrongdoer himself is in bad faith, he settles with the insured knowing for the fact that the insured has been paid the proceeds of the policy and knowing that the insurer has the right of subrogation, this circumstance will not defeat subrogation on the part of the insurer.

Golf Resorts Incorporated vs Philippine Charter Insurance Corp
(GR No. 156167, May 16, 2005, Puno)

Golf Resorts obtained an indemnity coverage on its properties and the insurance policy contains an “earthquake shock clause”. During the period of its effectivity an earthquake struck the Luzon area and among those damaged where the properties of Golf Resorts, among which are two swimming pools and other properties of Golf. Golf claims indemnification for the swimming pools and other properties rellying upon the earthquake shock loss contained in the policy.

Does the clause extend to properties of the petitioner other that the two swimming pools in question?

Applying the rule on construction, the SC held that each of the provisions of the insurance policy must be interpreted in consonance with each other. A reading of the policy including riders and clauses taken all together show that the intention of the parties is to extend the earthquake shock clause only to the two swimming pools. The evidence presented to the trial court readily showed that only the swimming pools are intended to be covered by the earthquake shock clause. Aside from this, no premiums were paid for other properties in consideration for the earthquake shock clause other than for the two swimming pools in violation of Sec 77 of the ICP.

William Tiu vs Arriesgado
(GR No 130060, Sept 1, 2004, Callejo)

In third-party liability insurance, would it be possible for a third party to sue the insurer directly?
Would it be possible for an insurance company to be held jointly and severally liable with the insured?

Yes. This is an exception to the rule on mutuality of contract. Whenever a contract contains stipulation for the benefit of a third person and the moment the third person communicates his assent thereto, the contract becomes binding upon him. The fact that a third person demands fulfillment of the insurance policy may be reasonably construed as an assent on his part to the benefit provided in the policy. This provision arms him with the requisite legal personality to bring an action on the insurance policy. (stipulation pour artrui)
No. The basis of cause of action is different. The cause of action against the insurer is based on contract while the cause of action against the insured is based on torts. Considering that there are two different causes of action, it will be legally impossible for them to be made as jointly and severally liable to the injured third party.

Federal Express Corporation vs American Home Insurance Corp and Philam Insurance Company
(GR No 150094, Aug 18, 2004)

Smithklein caused the transportation of 109 cartons of veterinary biologicals. The Shipment was initially loaded to Burlington Air Express and then later on forwarded to the petitioner for delivery to the consignee. When the consignee received the same it was found out that goods was damaged and decided to abandon the shipment and declared a total loss and then claimed against the insurance company. The insurance company paid the loss.

Is there legal subrogation on the part of the Insurance Company?

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

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