Suretyship1. Prudential Guarantee Assurance Inc vs. Equinox Land Corporation GR Nos. 15205-06 September 1, 2007 - Derick Mallari Facts:Sometime in 1996, Equinox Land Corporation (Equinox), respondent, decided to construct five (5) additional floors to its existing building, the Eastgate Centre, located at 169 EDSA, Mandaluyong City. It then sent invitations to bid to various building contractors. Four (4) building contractors, Finding the bid of J’Marc to be the most advantageous, Equinox offered the construction project to it. On February 22, 1997, J’Marc accepted the offer. Two days later, Equinox formally awarded to J’Marc the contract to build the extension for a consideration of P37,000,000.00. On February 24, 1997, J’Marc submitted to Equinox two (2) bonds, namely: (1) a surety bond issued by Prudential Guarantee and Assurance, Inc. (Prudential), herein petitioner, in the amount of P9,250,000.00 to guarantee the unliquidated portion of the advance payment payable to J’Marc; and (2) a performance bond likewise issued by Prudential in the amount of P7,400,000.00 to guarantee J’Marc’s faithful performance of its obligations under the construction agreement. On March 17, 1997, Equinox and J’Marc signed the contract and related documents. Under the terms of the contract, J’Marc would supply all the labor, materials, tools, equipment, and supervision required to complete the project. In accordance with the terms of the contract, Equinox paid J’Marc a downpayment of P9,250,000.00 equivalent to 25% of the contract price. J’Marc did not adhere to the terms of the contract. It failed to submit the required monthly progress billings for the months of March and April 1997. Its workers neglected to cover the drainpipes, hence, they were clogged by wet cement. This delayed the work on the project. On May 23, 1997, J’Marc requested an unscheduled cash advance of P300,000.00 from Equinox, explaining it had encountered cash problems. Equinox granted J’Marc’s request to prevent delay. On May 31, 1997, J’Marc submitted its first progress billing showing that it had accomplished only 7.3825% of the construction work estimated at P2,731,535.00. After deducting the advanced payments, the net amount payable to J’Marc was only P1,285,959.12. Of this amount, Equinox paid J’Marc only P697,005.12 because the former paid EXAN P588,954.00 for concrete mix. Shortly after Equinox paid J’Marc based on its first progress billing, the latter again requested an advanced payment of P150,000.00. Again Equinox paid J’Marc this amount. Eventually, Equinox found that the amount owing to J’Marc’s laborers was only P121,000.00, not P150,000.00. In June 1997, EXAN refused to deliver concrete mix to the project site due to J’Marc’s recurring failure to pay on time. Faced with a looming delay in the project schedule, Equinox acceded to EXAN’s request that payments for the concrete mix should be remitted to it directly. On June 30, 1997, J’Marc submitted its second progress billing showing that it accomplished only 16.0435% of the project after 4 months of construction work. Based on the contract and its own schedule, J’Marc should have accomplished at least 37.70%. Faced with the problem of delay, Equinox formally gave J’Marc one final chance to take remedial steps in order to finish the project on time. However, J’Marc failed to undertake any corrective measure. Consequently, on July 10, 1997, Equinox terminated its contract with J’Marc and took over the project. On the same date, Equinox sent Prudential a letter claiming relief from J’Marc’s violations of the contract. On July 11, 1997, the work on the project stopped. The personnel of both Equinox and J’Marc jointly conducted an inventory of all materials, tools, equipment, and supplies at the construction site. They also measured and recorded the amount of work actually accomplished. As of July 11, 1997, J’Marc accomplished only 19.0573% of the work or a shortage of 21.565% in violation of the contract. The cost of J’Marc’s accomplishment was only P7,051,201.00. In other words, Equinox overpaid J’Marc in the sum of P3,974,300.25 inclusive of the 10% retention on the first progress billing amounting to P273,152.50. In addition, Equinox also paid the wages of J’Marc’s laborers, the billings for unpaid supplies, and the amounts owing to subcontractors of J’Marc in the total sum of P664,998.09. On August 25, 1997, Equinox filed with the Regional Trial Court (RTC), Branch 214, Mandaluyong City a complaint for sum of money and damages against J’Marc and Prudential. Equinox prayed that J’Marc be ordered to reimburse the amounts corresponding to its (Equinox) advanced payments and unliquidated portion of its downpayment; and to pay damages. Equinox also prayed that Prudential be ordered to pay its liability under the bonds. Issue: Whether or not Prudential solidarily liable with J’Marc to Equinox for damages? Held: Yes, it is not disputed that Prudential entered into a suretyship contract with J’Marc. Section 175 of the Insurance Code defines a suretyship as “a contract or agreement whereby a party, called the suretyship, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of a third party, called the obligee. It includes official recognizances, stipulations, bonds, or undertakings issued under Act 536, as amended.” Corollarily, Article 2047 of the Civil Code provides that suretyship arises upon the solidary binding of a person deemed the surety with the principal debtor for the purpose of fulfilling an obligation. In Castellvi de Higgins and Higgins v. Seliner, 41 Phil. 142 (1920), we held that while a surety and a guarantor are alike in that each promises to answer for the debt or default of another, the surety assumes liability as a regular party to the undertaking and hence its obligation is primary. In Security Pacific Assurance Corporation v. Tria-Infante, we reiterated the rule that while a contract of surety is secondary only to a valid principal obligation, the surety’s liability to the creditor is said to be direct, primary, and absolute. In other words, the surety is directly and equally bound with the principal. Thus, Prudential is barred from disclaiming that its liability with J’Marc is solidary. 2. DBP Pool of Accredited Insurance Co. vs Radio Mindanao Network Inc GR No. 147039 January 27, 2006 - Pauline Ollero G.R. NO. 147039 January 27, 2006 DBP POOL OF ACCREDITED INSURANCE COMPANIES, Petitioner, vs. RADIO MINDANAO NETWORK, INC., Respondent. FACTS: ● Respondent owns several broadcasting stations all over the country. Provident covered respondent’s transmitter equipment and generating set for the amount of P13,550,000.00 under Fire Insurance Policy No. 30354, while petitioner covered respondent’s transmitter, furniture, fixture and other transmitter facilities for the amount of P5,883,650.00. ● Respondent’s radio station was razed by fire causing damage in the amount of P1,044,040.00. Respondent sought recovery under the two insurance policies but the claims were denied on the ground that the cause of loss was an excepted risk excluded under condition no. 6 (c) and (d), to wit: “6. This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following consequences, namely: (c) War, invasion, act of foreign enemy, hostilities, or warlike operations (whether war be declared or not), civil war. (d) Mutiny, riot, military or popular rising, insurrection, rebellion, revolution, military or usurped power.” ● Insurance companies maintained that the evidence showed that the fire was caused by members of the Communist Party of the Philippines/New People’s Army (CPP/NPA); and consequently, denied the claims. Hence, respondent was constrained to file Civil Case against petitioner and Provident. ISSUES and HELD: 1.) Whether or not Petitioner Insurer is liable for the loss due to fire. (Petitioner assails the factual finding of both the trial court and the CA that its evidence failed to support its allegation that the loss was caused by an excepted risk, i.e., members of the CPP/NPA caused the fire) YES!!! The trial court found that: “The only evidence which the Court can consider to determine if the fire was due to the intentional act committed by the members of the New People’s Army (NPA), are the testimony of witnesses Lt. Col. Nicolas Torres and SPO3 Leonardo Rochar who were admittedly not present when the fire occurred. Their testimony was limited to the fact that an investigation was conducted and in the course of the investigation they were informed by bystanders that "heavily armed men entered the transmitter house, poured gasoline in it and then lighted it. After that, they went out shouting "Mabuhay ang NPA". The persons whom they investigated and actually saw the burning of the station were not presented as witnesses. The documentary evidence particularly Exhibits "5" and "5-C" do not satisfactorily prove that the author of the burning were members of the NPA. Exhibit "5-B" which is a letter released by the NPA merely mentions some dissatisfaction with the activities of some people in the media in Bacolod. There was no mention there of any threat on media facilities.” The CA went over the evidence on record and sustained the findings of the trial court, to wit: “x x x. We examined carefully the report on the police blotter of the burning of DYHB, the certification issued by the Integrated National Police of Bacolod City and the fire investigation report prepared by SFO III Rochas and there We found that none of them categorically stated that the twenty (20) armed men which burned DYHB were members of the CPP/NPA. The said documents simply stated that the said armed men were ‘believed’ to be or ‘suspected’ of being members of the said group. Even SFO III Rochas admitted that he was not sure that the said armed men were members of the CPP-NPA, thus: X x x. In fact the only person who seems to be so sure that that the CPP-NPA had a hand in the burning of DYHB was Lt. Col. Nicolas Torres. However, though We found him to be persuasive in his testimony regarding how he came to arrive at his opinion, We cannot nevertheless admit his testimony as conclusive proof that the CPP-NPA was really involved in the incident considering that he admitted that he did not personally see the armed men even as he tried to pursue them. Note that when Lt. Col. Torres was presented as witness, he was presented as an ordinary witness only and not an expert witness. Hence, his opinion on the identity or membership of the armed men with the CPP-NPA is not admissible in evidence. Anent the letter of a certain Celso Magsilang, who claims to be a member of NPA-NIROC, being an admission of person which is not a party to the present action, is likewise inadmissible in evidence under Section 22, Rule 130 of the Rules of Court. The reason being that an admission is competent only when the declarant, or someone identified in legal interest with him, is a party to the action.” When supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties, which this Court will not review unless there are exceptional circumstances. There are no exceptional circumstances in this case that would have impelled the Court to depart from the factual findings of both the trial court and the CA. Both the trial court and the CA were correct in ruling that petitioner failed to prove that the loss was caused by an excepted risk. 2.) Whether or not Petitioner Insurer is correct in saying that private respondent is responsible for proving that the cause of the damage/loss is covered by the insurance policy, that the burden of proof is upon the Insured that such loss or damage is covered under the Policy. ● An insurance contract, being a contract of adhesion, should be so interpreted as to carry out the purpose for which the parties entered into the contract which is to insure against risks of loss or damage to the goods. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations. ● The "burden of proof" contemplated by the aforesaid provision actually refers to the "burden of evidence" (burden of going forward). As applied in this case, it refers to the duty of the insured to show that the loss or damage is covered by the policy. The foregoing clause notwithstanding, the burden of proof still rests upon petitioner to prove that the damage or loss was caused by an excepted risk in order to escape any liability under the contract. ● Burden of proof is the duty of any party to present evidence to establish his claim or defense by the amount of evidence required by law, which is preponderance of evidence in civil cases. The party, whether plaintiff or defendant, who asserts the affirmative of the issue has the burden of proof to obtain a favorable judgment. For the plaintiff, the burden of proof never parts. For the defendant, an affirmative defense is one which is not a denial of an essential ingredient in the plaintiff’s cause of action, but one which, if established, will be a good defense – i.e. an "avoidance" of the claim. ● Particularly, in insurance cases, where a risk is excepted by the terms of a policy which insures against other perils or hazards, loss from such a risk constitutes a defense which the insurer may urge, since it has not assumed that risk, and from this it follows that an insurer seeking to defeat a claim because of an exception or limitation in the policy has the burden of proving that the loss comes within the purview of the exception or limitation set up. If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability. ● Consequently, it is sufficient for private respondent to prove the fact of damage or loss. Once respondent makes out a prima facie case in its favor, the duty or the burden of evidence shifts to petitioner to controvert respondent’s prima facie case. In this case, since petitioner alleged an excepted risk, then the burden of evidence shifted to petitioner to prove such exception. It is only when petitioner has sufficiently proven that the damage or loss was caused by an excepted risk does the burden of evidence shift back to respondent who is then under a duty of producing evidence to show why such excepted risk does not release petitioner from any liability. Unfortunately for petitioner, it failed to discharge its primordial burden of proving that the damage or loss was caused by an excepted risk. A witness can testify only to those facts which he knows of his personal knowledge, which means those facts which are derived from his perception. A witness may not testify as to what he merely learned from others either because he was told or read or heard the same. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. The hearsay rule is based upon serious concerns about the trustworthiness and reliability of hearsay evidence inasmuch as such evidence are not given under oath or solemn affirmation and, more importantly, have not been subjected to cross-examination by opposing counsel to test the perception, memory, veracity and articulateness of the out-of- court declarant or actor upon whose reliability on which the worth of the out-of-court statement depends. Res gestae, as an exception to the hearsay rule, refers to those exclamations and statements made by either the participants, victims, or spectators to a crime immediately before, during, or after the commission of the crime, when the circumstances are such that the statements were made as a spontaneous reaction or utterance inspired by the excitement of the occasion and there was no opportunity for the declarant to deliberate and to fabricate a false statement. The rule in res gestae applies when the declarant himself did not testify and provided that the testimony of the witness who heard the declarant complies with the following requisites: (1) that the principal act, the res gestae, be a startling occurrence; (2) the statements were made before the declarant had the time to contrive or devise a falsehood; and (3) that the statements must concern the occurrence in question and its immediate attending circumstances. The Court is not convinced to accept the declarations as part of res gestae. While it may concede that these statements were made by the bystanders during a startling occurrence, it cannot be said however, that these utterances were made spontaneously by the bystanders and before they had the time to contrive or devise a falsehood. Both SFO III Rochar and Lt. Col. Torres received the bystanders’ statements while they were making their investigations during and after the fire. It is reasonable to assume that when these statements were noted down, the bystanders already had enough time and opportunity to mill around, talk to one another and exchange information, not to mention theories and speculations, as is the usual experience in disquieting situations where hysteria is likely to take place. It cannot therefore be ascertained whether these utterances were the products of truth. That the utterances may be mere idle talk is not remote. Furthermore, admissibility of evidence should not be equated with its weight and sufficiency. Admissibility of evidence depends on its relevance and competence, while the weight of evidence pertains to evidence already admitted and its tendency to convince and persuade. Even assuming that the declaration of the bystanders that it was the members of the CPP/NPA who caused the fire may be admitted as evidence, it does not follow that such declarations are sufficient proof. These declarations should be calibrated vis-à-vis the other evidence on record. 3. Philippine Pryce Assurance Co. vs CA, G.R. No. 107062 February 21, 1994 - Francis Gillean Orpilla Facts: Interworld Assurance Corporation (now Philippine Pryce Assurance Corporation), was the butt of the complaint for collection of sum of money by Gegroco, Inc. The complaint alleged that petitioner issued two surety bonds in behalf of its principal Sagum General Merchandise for P500,000.00 and P1,000,000.00, respectively. Petitioner admitted having executed the said bonds, but denied liability because allegedly 1) the checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of its principal's obligation, thus, excussion is necessary. Issue: Whether or not these two defenses of petitioner are tenable. Ruling: No. Section 177 of the Insurance Code states that "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." The above provision outrightly negates petitioner's first defense. In a desperate attempt to escape liability, petitioner further asserts that the above provision is not applicable because the respondent allegedly had not accepted the surety bond, hence could not have delivered the goods to Sagum Enterprises. This statement clearly intends to muddle the facts as found by the trial court and which are on record. In the first place, petitioner, in its answer, admitted to have issued the bonds subject matter of the original action. Secondly, the testimony of Mr. Leonardo T. Guzman, witness for the respondent, reveals that as a condition and terms for the sale of spare parts, it required the principal Sagum Entrprises to present surety bonds. The surety bonds presented were the surety bonds issued by Pryce. Consequently, spare parts were purchased, delivered and received by Sagum Enterprise as evidenced by invoices on records. Petitioner's defense that it did not have authority to issue a Surety Bond when it did is an admission of fraud committed against respondent. No person can claim benefit from the wrong he himself committed. A representation made is rendered conclusive upon the person making it and cannot be denied or disproved as against the person relying thereon. Life Insurance 1. Republic vs Sun Life Assurance Company of Canada GR No. 158085 October 14, 2005 - Krystle Rosales REPUBLIC vs. SUNLIFE ASSURANCE CO. OF CANADA G.R. No. 158085 October 14, 2005 PANGANIBAN, J.: p FACTS: Sunlife, a Canadian-organized mutual life insurance company is registered and authorized to engage in business in the Philippines by the SEC and the Insurance Commission. Sunlife sought a refund of its premium tax and documentary stamp tax (DST) payments made with the Commissioner of Internal Revenue (CIR) on the basis of the Dec. 1997 Court decision in Insular Life vs CIR that “mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST” but the CIR denied on the ground that Sunlife failed to register with the Cooperative Development Authority (CDA). Sunlife filed with the Court of Tax Appeals and later with the CA a petition for review where both courts ruled in favor of Sunlife holding that Sunlife had satisfactorily shown with substantial evidence that it is similarly situated with Insular as a mutual life insurance company as defined in Sec. 121 of the Tax Code not required to be registered with the CDA and as such was entitled to exemptions from payment of premium taxes & DST. ISSUES: 1. Whether or not Sunlife is a mutual life insurance company entitled to tax exemptions under the Tax Code? 2. Whether or not registration of Sunlife with the CDA is necessary to be exempted from payment of percentage taxes on insurance premiums and documentary stamp taxes on policies of insurance or annuities it grants under the Tax Code? HELD: 1. YES. Sunlife being a mutual life insurance corp. does not operate for profit but for the mutual benefit of its member- policyholders. It is a non-profit entity where earning profits is merely secondary; authorized to invest its corporate funds to earn additional income to pay off its operating expenses and meet the benefit claims of its members. The economic benefits earned were distributed among members in correlation with the resources the association utilized and the excess profit can only be used for the furtherance of the purpose for which it was organized. Sunlife, being a cooperative is exempted from the 5% tax on insurance premiums under Sec. 121 and the DST under Sec. 199 of the Tax Code. Further, RA 8424 amending the Tax Code has deleted the income tax of 10 percent imposed upon the gross investment income of mutual life insurance companies -- domestic and foreign – while the provisions of Sections 121 and 199 remain unchanged. 2. NO. Although a cooperative, Sunlife need not register with the CDA as “only cooperatives to be formed or organized under the Cooperative Code needed registration with the CDA (Art. 16, RA 6938). Sunlife already existed before the passage of the new law on cooperatives and was not even required to organize under the Cooperative Code, not only because it performed a different set of functions, but also because it did not operate to serve the same objectives under the new law -- particularly on productivity, marketing and credit extension (Art. 7, RA 6938). There was also no provision in the Tax Code requiring registration with the CDA since registration is not necessary to be exempted from the payment of both percentage and documentary stamp taxes (Secs. 121 & 199) The Court denied the Republic’s petition, affirming the assailed Decision & Resolution of the CTA and the CA holding that the grant of a tax credit certificate to respondent was correct. No pronouncement as to costs. 2. Kanapi vs Insular Life Ass Co., G.R. No. L-5642 February 25, 1954 - Maria Jennifer Santos Facts: This is an action on a life insurance policy. (Re: recovery of additional sum) Insurer- Insular Life insured- Henri Kanapi Beneficiary- herminia Kanapi (wife) ● Insular issued a policy on the life of Henry G. Kanapi, whereby defendant undertook to pay to Herminia as beneficiary, upon the death of the insured the sum of -P5,000 if the death be due to natural causes and -an additional P5,000 if the death be due to accidental means ● Payment of this additional sum being provided for in the "Accidental Death Benefit Policy Clause" -expressly made subject to the exception that the clause would not apply where death resulted from injury "intentionally inflicted by a third party." ● During the life of the policy, the insured died from a bullet wound inflicted, without provocation, by one Conrado Quemosing, who, as author of the killing, was found guilty of murder and sentenced to prison. ● Upon receiving proof of the insured's death, defendant paid plaintiff P5,000, but refused to pay the additional P5,000 claimed upon the accidental death benefit clausE ● Upholding defendant's stand, the lower court dismissed the action, plaintiff appealed to this Court Issue: WON Herminia is entitled to the additional P5,000 claimed under the accident benefit clause. Held: NO. This clause provide for the payment of the sum upon proof "that the death of the Insured resulted directly from bodily injury affected through external and violent means sustained in an accident . . . and independently of all other clauses." But far from proving that the insured died from bodily injury sustained in an accident, the agreed facts are to the effect that the insured was murdered, thus making it indisputable that his death resulted from injury "intentionally inflicted by a third party"; which is one of the exceptions to the accident benefit clause, according to which the benefit shall not apply to death resulting from "(5) Any injury received . . . (e) that has been inflicted intentionally by a third party, either with or without provocation on the part of the Insured, and whether or not the attack or the defense by the third party was caused by a violation of the law by the Insured. . . ." There is nothing to the suggestion that the case comes under exception 5 (d) or that portion of it which excepts from the benefit any injury received "in any assault provoked by the Insured", it being argued that by express mention of provoked assault an unprovoked one is inferentially excluded. The inference is not admissible because where the injury is inflicted without provocation the case comes within the terms of exception 5 (e), which, is, therefore, the one that should be applied. We find the decision appealed from to be in accordance with law and the facts. It is, therefore, affirmed, with costs. 3. Biagtan vs Insular Life Ass Co, G.R. No. L-25579 March 29, 1972 - Miguel Sebastian C. Soller INSURANCE Page 74 44 SCRA 58MAKALINTAL; March 29, 1972 NATURE Appeal from decision of CFI Pangasinan. FACTS - Juan Biagtan was insured with Insular for P5k and a supplementary contract “Accidental Death Benefit” clause for another P5k if "the death of the Insured resulted directly from bodily injury effected solely through external and violent means sustained in an accident . . . and independently of all other causes."The clause, however, expressly provided that it woul dnot apply where death resulted from an injury"intentionally inflicted by a third party."- One night, a band of robbers entered their house.Juan went out of his room and he was met with 9knife stabs. He died. The robbers were convicted of robbery with homicide.- The family was claiming the additional P5k from Insular, under the Accidental Death Benefit clause. Insular refused on the ground that the death resulted from injuries intentionally inflicted by 3 rd parties and was therefore not covered. Biagtans filed against Insular. CFI ruled in favor of Biagtan. ISSUE WON the injuries were intentionally inflicted HELD YES- Whether the robbers had the intent to kill or merely to scare the victim or to ward off any defense he might offer, it cannot be denied that the act itself of inflicting the injuries was intentional.- The exception in the accidental benefit clause invoked by the appellant does not speak of the purpose — whether homicidal or not — of a third party in causing the injuries, but only of the fact that such injuries have been "intentionally" inflicted —this obviously to distinguish them from injuries which, although received at the hands of a third party, are purely accidental.- Examples of unintentional:>> A gun which discharges while being cleaned and kills a bystander;>> a hunter who shoots at his prey and hits a person instead;>> an athlete in a competitive game involving gphysical effort who collides with an opponent and fatally injures him as a result.- In Calanoc vs. CA : Where a shot was fired and I turned out afterwards that the watchman was hit int he abdomen, the wound causing his death, the Court held that it could not be said that the killing was intentional for there was the possibility that the malefactor had fired the shot to scare the people around for his own protection and not necessarily to kill or hit the victim. A similar possibility is clearl ruled out by the facts in this case. For while a single shot fired from a distance, and by a person who was not even seen aiming at the victim, could indeed have been fired without intent to kill or injure, nine wounds inflicted with bladed weapons at close range cannot conceivably be considered as innocent insofaras such intent is concerned.- In Hucthcraft's Ex'r vs. Travelers' Ins. Co. (UScase): where the insured was waylaid and assassinated for the purpose of robbery, the court rendered judgment for the insurance company and held that while the assassination of the insured wasas to him an unforeseen event and therefore accidental, "the clause of the proviso that excludes the (insurer's) liability, in case death or injury is intentionally inflicted by any other person, applies tothis case." Disposition CFI decision reversed. 4. Calanoc vs CA, G.R. L-8151 December 16, 1955 Chris Val Calanoc vs. Court of Appeals G.R. No. L-8151, December 16, 1955 AMBIGUOUS TERMS IN INSURANCE POLICY— While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of less, and may expressly except other risks or causes of loss therefrom", however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. The reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company." FACTS: Melencio Basilio was a watchman of the Manila Auto Supply located at the corner of Avenida Rizal and Zurbaran. He secured a life insurance policy from the Philippine American Life Insurance Company in the amount of P2,000 to which was attached a supplementary contract covering death by accident. On January 25, 1951, he died of a gunshot wound on the occasion of a robbery committed in the house of Atty. Ojeda at the corner of streets. Virginia Calanoc, the widow, was paid the sum of P2,000, face value of the policy, but when she demanded the payment of the additional sum of P2,000 representing the value of the supplemental policy, the company refused alleging, as main defense, that the deceased died because he was murdered by a person who took part in the commission of the robbery and while making an arrest as an officer of the law which contingencies were expressly excluded in the contract and have the effect of exempting the company from liability. The Municipal Court of Manila ruled in favour of the plaintiff which was affirmed by the court of first instance. But on appeal to the Court of Appeals the judgment was reversed and the case is now before us on a petition for review. ISSUE: Whether or not the death of Basilio is an accident covered by the insurance? HELD: Yes. The circumstance that he was a mere watchman and had no duty to heed the call of Atty. Ojeda should not be taken as a capricious desire on his part to expose his life to danger considering the fact that the place he was in duty-bound to guard was only a block away. In volunteering to extend help under the situation, he might have thought, rightly or wrongly, that to know the truth was in the interest of his employer it being a matter that affects the security of the neighborhood. No doubt there was some risk coming to him in pursuing that errand, but that risk always existed it being inherent in the position he was holding. He cannot therefore be blamed solely for doing what he believed was in keeping with his duty as a watchman and as a citizen. And he cannot be considered as making an arrest as an officer of the law, as contended, simply because he went with the traffic policeman, for certainly he did not go there for that purpose nor was he asked to do so by the policeman. Much less can it be pretended that Basilio died in the course of an assault or murder considering the very nature of these crimes. Nor can it be said that the killing was intentional for there is the possibility that the malefactor had fired the shot merely to scare away the people around for his own protection and not necessarily to kill or hit the victim. In any event, while the act may not exempt the triggerman from liability for the damage done, the fact remains that the happening was a pure accident on the part of the victim. The victim could have been either the policeman or Atty. Ojeda for it cannot be pretended that the malefactor aimed at the deceased precisely because he wanted to take his life. The SC take note that these defenses are included among the risks excluded in the supplementary contract which enumerates the cases which may exempt the company from liability. While as a general rule "the parties may limit the coverage of the policy to certain particular accidents and risks or causes of loss, and may expressly except other risks or causes of loss therefrom" ,however, it is to be desired that the terms and phraseology of the exception clause be clearly expressed so as to be within the easy grasp and understanding of the insured, for if the terms are doubtful or obscure the same must of necessity be interpreted or resolved against the one who has caused the obscurity. The reason for this rule is that the "insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company. Decision of the CA was reversed. 5. Dela Cruz vs Capital Ins & Surety Co, G.R. No. L-21574 June 30, 1966 - Lester Anonuevo Eduardo de la Cruz, employed as a mucker in Itogon-Suyoc Marines Inc. in Baguio, was the holder of an accident insurance policy underwritten by Capital Insurance and Surety Co. Itogon-Suyoc Marines sponsored a boxing contest, in celebration of New Year, for general entertainment. Cruz, a non-professional boxer, slipped and was hit by his opponent on the left part of the back of the head. He was brought to Baguio General Hospital and was reported as hemorrhage, intracranial, left. Simon de la Cruz, the beneficiary, claimed for indemnity under the policy. It was denied, hence the petition for specific performance. CISCO set up the defense that the death of the insured, caused by his participation to boxing, was not accidental and was not covered by insurance. In the policy, Eduardo was insured against death or disability caused by accidental means. WON: De la Cruz can recover from the policy, and that the incident falls within the definition of accident HELD: The generally accepted rule is that death or injury does not result from accident or accidental means within the terms of an accident-policy if it is the natural result of the insured’s voluntary act, unaccompanied by anything unforeseen except the death or injury. There is no accident when the deliberate act is performed unless some additional, unexpected, independent, and unforeseen happening occurs which produces or brings about the result of injury or death. In the present case, while the participation of the insured in the boxing contest is voluntary, the injury was sustained when he slid, giving occasion to the infliction by his opponent of the blow that threw him to the ropes of the ring. Without this incident (the unintentional slipping of the deceased), perhaps he could not have received that blow in the head. The fact that boxing is attended with some risks of external injuries does not make injuries received in the course of the game not accidental. Death or disablement resulting from engagement in boxing contests was not declared outside of the protection of the insurance contract. Failure of the defendant insurance company to include death resulting from a boxing match or other sports. 6. Finman General Assurance Corp v CA, G.R. No. 100970 September 2, 1992 - Amiel Arada FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS and JULIA SURPOSA, respondents. Aquino and Associates for petitioner. Public Attorney’s Office for private respondent. Ponente: NOCON FACTS: Carlie Suposa was killed while on his way home from a party. When his family tried to collect on the insurance proceeds, the insurer denied the claim saying that murder and assault were not within the scope of coverage of the insurance policy, because it was not accidental but a deliberate and intentional act of the assailant. The Insurance Commission said the death was covered by the policy, a decision upheld by the CA. The CA pointed out that: 1. The record is barren of how the stab wound was inflicted 2. While the act may not exempt the unknown perpetrator from criminal liability, the happening was a pure accident on the part of the victim 3. The personal accident policy enumerated 10 circumstances wherein no liability attaches to insurer and murder and assault were not expressly mentioned. Failure of the insurer to include these leads to the conclusion that it did not intend to exempt itself from liability for such death. [P]etitioner filed this petition alleging grave abuse of discretion on the part of the appellate court in applying the principle of “expresso unius exclusio alterius” in a personal accident insurance policy since death resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in killing the former as indicated by the location of the lone stab wound on the insured. Therefore, said death was committed with deliberate intent which, by the very nature of a personal accident insurance policy, cannot be indemnified. ISSUE: Whether or not death petitioner is correct that results from assault or murder deemed are not included in the terms “accident” and “accidental”. HELD: NO. Petition for certiorari with restraining order and preliminary injunction was denied for lack of merit. RATIO: The terms “accident” and “accidental” as used in insurance contracts have not acquired any technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the terms have been taken to mean that which happen by chance or fortuitously, without intention and design, and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without one’s foresight or expectation — an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected. [I]t is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its beneficiary.