February 2012 Philippine Supreme Court Decisions on Commercial Law

Here are select February 2012 rulings of the Supreme Court of the Philippines on commercial law:

Carriage of Goods by Sea Act (COGSA);  applicability of prescription period to arrastre operator.  Under the COGSA, the carrier and the ship may put up the defense of prescription if the action for damages is not brought within one year after the delivery of the goods or the date when the goods should have been delivered.  It has been held that not only the shipper, but also the consignee or legal holder of the bill may invoke the prescriptive period. However, the COGSA does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator. Insurance Company of North America vs. Asian Terminals, Inc., G.R. No. 180784, February 15, 2012.

COGSA; bad order survey.  As early as November 29, 2002, the date of the last withdrawal of the goods from the arrastre operator, respondent ATI was able to verify that five (5) packages of the shipment were in bad order while in its custody. The certificate of non-delivery referred to in the Contract is similar to or identical with the examination report on the request for bad order survey.  Like in the case of New Zealand Insurance Company Ltd. v. Navarro, the verification and ascertainment of liability by respondent ATI had been accomplished within thirty (30) days from the date of delivery of the package to the consignee and within fifteen (15) days from the date of issuance by the Contractor (respondent ATI) of the examination report on the request for bad order survey.  Although the formal claim was filed beyond the 15-day period from the issuance of the examination report on the request for bad order survey, the purpose of the time limitations for the filing of claims had already been fully satisfied by the request of the consignee’s broker for a bad order survey and by the examination report of the arrastre operator on the result thereof, as the arrastre operator had become aware of and had verified the facts giving rise to its liability. Hence, the arrastre operator suffered no prejudice by the lack of strict compliance with the 15-day limitation to file the formal complaint. Insurance Company of North America vs. Asian Terminals, Inc., G.R. No. 180784, February 15, 2012.

Insurance policy; misrepresentation.  Lourdes points out that, seeing the unfilled spaces in Manuel’s pension plan application relating to his medical history, Philam Plans should have returned it to him for completion.  Since Philam Plans chose to approve the application just as it was, it cannot cry concealment on Manuel’s part.  Further, Lourdes adds that Philam Plans never queried Manuel directly regarding the state of his health. Consequently, it could not blame him for not mentioning it.

But Lourdes is shifting to Philam Plans the burden of putting on the pension plan application the true state of Manuel’s health.  She forgets that since Philam Plans waived medical examination for Manuel, it had to rely largely on his stating the truth regarding his health in his application.  For, after all, he knew more than anyone that he had been under treatment for heart condition and diabetes for more than five years preceding his submission of that application.  But he kept those crucial facts from Philam Plans.

Besides, 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. Ma. Lourdes S. Florendo vs. Philam Plans, Inc., Perla Abcede, et al., G.R. No. 186983, February 22, 2012.

Insurance policy; misrepresentation.  Lourdes insists that Manuel had concealed nothing since Perla, the soliciting agent, knew that Manuel had a pacemaker implanted on his chest in the 70s or about 20 years before he signed up for the pension plan. But by its tenor, the responsibility for preparing the application belonged to Manuel.  Nothing in it implies that someone else may provide the information that Philam Plans needed.  Manuel cannot sign the application and disown the responsibility for having it filled up.  If he furnished Perla the needed information and delegated to her the filling up of the application, then she acted on his instruction, not on Philam Plans’ instruction. Ma. Lourdes S. Florendo vs. Philam Plans, Inc., Perla Abcede, et al., G.R. No. 186983, February 22, 2012.

Insurance policy; incontestability clause.  In a final attempt to defend her claim for benefits under Manuel’s pension plan, Lourdes points out that any defect or insufficiency in the information provided by his pension plan application should be deemed waived after the same has been approved, the policy has been issued, and the premiums have been collected.

The Court cannot agree.  The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period.  It states:

VIII.  INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any claim for insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or that you are not insurable at the time you bought this pension program by reason of age.  If this Agreement lapses but is reinstated afterwards, the one (1) year contestability period shall start again on the date of approval of your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued on the ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in.  Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her husband’s pension plan. Ma. Lourdes S. Florendo vs. Philam Plans, Inc., Perla Abcede, et al., G.R. No. 186983, February 22, 2012.

(Hector thanks Mary Caroline A. Tan for her assistance to Lexoterica.)

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