Cases - Digests - Prelim.docx

1. GR NO. 82027 (ROMARICO G. VITUG v. CA) G.R. No. 82027 March 29, 1990 ROMARICO G. VITUG, petitioner, vs. THE HONORABLE COURT OF APPEALS ROWENA FAUSTINO-CORONA, respondents.

Issue: Whether or not the amount from the survivorship agreement was part of the petitioner Vitug and the decedent’s conjugal property? and

Previous Case: Involved the probate of the two wills of the late Dolores Luchangco Vitug, who died in New York, U. S.A., and named private respondent Rowena Faustino-Corona as executrix. In that previous decision, it upheld the appointment of Nenita Alonte as co-special administrator of Mrs. Vitug's estate with her (Mrs. Vitug's) widower, petitioner Romarico G. Vitug, pending probate. Facts: Romarico G. Vitug filed a motion asking for authority from the probate court to sell certain shares of stock and real properties belonging to the estate to cover allegedly his advances to the estate in the sum of P667,731.66, alleging that such amount was his personal funds, allegedly obtained from a survivorship agreement executed between him, his late wife, and the Bank of American National Trust Savings Association.The said agreement contained the following stipulations: (1) All money deposited and to be deposited with the Bank in their joint savings current account shall be both their property and shall be payable to and collectible or withdrawable by either or any of them during their lifetime; and (2) After the death of one of them, the same shall belong to and be the sole property of the surviving spouse and payable to and collectible or withdrawable by such survivor Rowena Corona opposed the motion to sell on the ground that the same funds withdrawn from savings account were conjugal partnership properties and part of the estate, and hence, there was allegedly no ground for reimbursement. She also sought his ouster for failure to include the sums in question for inventory and for "concealment of funds belonging to the estate." The trial court upheld the survivorship agreement and granted the motion to sell. The Court of Appeals, in the petition for certiorari filed by the herein private respondent, held that the abovequoted survivorship agreement constitutes a conveyance mortis causa which "did not comply with the formalities of a valid will as prescribed by Article 805 of the Civil Code”

Held: NO. The Court ruled that a Survivorship Agreement is neither a donation mortis causa nor a donation inter vivos, because it was to take effect after the death of one party. Secondly, it is not a donation between the spouses because it involved no conveyance of a spouse's own properties to the other. It is in the nature of an aleatory contract whereby one or both of the parties reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is to occur at an indeterminate time or is uncertain, such as death. Under Article 2010 of the Code: ART. 2010. By an aleatory contract, one of the parties or both reciprocally bind themselves to give or to do something in consideration of what the other shall give or do upon the happening of an event which is uncertain, or which is to occur at an indeterminate time. Under the aforequoted provision, the fulfillment of an aleatory contract depends on either the happening of an event which is (1) "uncertain," (2) "which is to occur at an indeterminate time." A survivorship agreement, the sale of a sweepstake ticket, a transaction stipulating on the value of currency, and insurance have been held to fall under the first category, while a contract for life annuity or pension under Article 2021, et sequentia, has been categorized under the second. In either case, the element of risk is present. In the case at bar, the risk was the death of one party and survivorship of the other. The conclusion is accordingly unavoidable that Mrs. Vitug having predeceased her husband, the latter has acquired upon her death a vested right over the amounts under savings account No. 35342-038 of the Bank of America. Insofar as the respondent court ordered their inclusion in the inventory of assets left by Mrs. Vitug, we hold that the court was in error. Being the separate property of petitioner, it forms no more part of the estate of the deceased. Additional Notes: However, the Court has warned:

But although the survivorship agreement is per se not contrary to law its operation or effect may be violative of the law. For instance, if it be shown in a given case that such agreement is a mere cloak to hide an inofficious donation, to transfer property in fraud of creditors, or to defeat the legitime of a forced heir, it may be assailed and annulled upon such grounds. There is no demonstration here that the survivorship agreement had been executed for such unlawful purposes, or, as held by the respondent court, in order to frustrate our laws on wills, donations, and conjugal partnership. 2. G.R. No. 167330 (PHILIPPINE HEALTH CARE PROVIDERS, INC v. CIR) FACTS: On January 27, 2000, respondent Commissioner of Internal Revenue sent petitioner a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. The deficiency DST (documentary stamp tax) assessment was imposed on petitioner's health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Section 185. Stamp tax on fidelity bonds and other insurance policies. - On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association or company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of fifty centavos (P0.50) on each four pesos (P4.00), or fractional part thereof, of the premium charged. (emphasis supplied)

Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST assessments. On April 5, 2002, the CTA rendered a decision partially granting the petition for review. Respondent appealed the CTA decision to the CA insofar as it cancelled the DST assessment. He claimed that petitioner's health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code. On August 16, 2004, the CA rendered its decision. It held that petitioner's health care agreement was in the nature of a non-life insurance contract subject to DST. Petitioner moved for reconsideration but the CA denied it. Hence, this petition. Petitioner essentially argues that its health care agreement is not a contract of insurance but a contract for the provision on a prepaid basis of medical services, including medical check-up, that are not based on loss or damage. Petitioner also insists that it is not engaged in the insurance business. It is a health maintenance organization regulated by the Department of Health, not an insurance company under the jurisdiction of the Insurance Commission. For these reasons, petitioner asserts that the health care agreement is not subject to DST.

Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-life insurance policy. Contrary to petitioner's claim, its health care agreement is not a contract for the provision of medical services. Petitioner does not actually provide medical or hospital services but merely arranges for the same and pays for them up to the stipulated maximum amount of coverage. It is also incorrect to say that the health care agreement is not based on loss or damage because, under the said agreement, petitioner assumes the liability and indemnifies its member for hospital, medical and related expenses (such as professional fees of physicians). The term "loss or damage" is broad enough to cover the monetary expense or liability a member will incur in case of illness or injury. Under the health care agreement, the rendition of hospital, medical and professional services to the member in case of sickness, injury or emergency or his availment of so-called "out-patient services" (including physical examination, x-ray and laboratory tests, medical consultations, vaccine administration and family planning counseling) is the contingent event which gives rise to liability on the part of the member. In case of exposure of the member to liability, he would be entitled to indemnification by petitioner.

ISSUE: Is a health care agreement in the nature of an insurance contract and therefore subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)? HELD: Yes. In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or liability. Under the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The event insured against must be designated in the contract and must either be unknown or contingent.

Furthermore, the fact that petitioner must relieve its member from liability by paying for expenses arising from the stipulated contingencies belies its claim that its services are prepaid. The expenses to be incurred by each member cannot be predicted beforehand, if they can be predicted at all. Petitioner assumes the risk of paying for the costs of the services even if they are significantly and substantially more than what the member has "prepaid." Petitioner does not bear the costs alone but distributes or spreads them out among a large group of persons bearing a similar risk, that is, among all the other members of the health care program. This is insurance. Petitioner's contention that it is a health maintenance organization and not an insurance company is irrelevant. Contracts between companies like petitioner and the beneficiaries under their plans are treated as insurance contracts. Moreover, DST is not a tax on the business transacted but an excise on the privilege, opportunity, or facility

offered at exchanges for the transaction of the business. It is an excise on the facilities used in the transaction of the business, separate and apart from the business itself. What is Documentary Stamp Tax? The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. It is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction of the business. 3. GR No. 67835 (MALAYAN INSURANCE CO. v. GREGORIA CRUZ ARNALDO) No. L-67835. October 12, 1987.* MALAYAN INSURANCE CO., INC. (MICO), petitioner, us.GREGORIA CRUZ ARNALDO, in her capacity as the INSURANCE COMMISSIONER, and CORONACION PINCA, respondents.

Facts: On June 7, 1981, the petitioner Malayan Insurance Co.(MICO) issued to the private respondent, Coronacion Pinca, Fire Insurance Policy No. F-00117212 on her property for the amount of P100,000.00, effective July 22, 1981, until July 22, 1982. On October 15, 1981, MICO allegedly cancelled the policy for non-payment, of the premium and sent the corresponding notice to Pinca. On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora, agent of MICO. On January 15, 1982, Adora remitted this payment to MICO, together with other payments. On January 18, 1982, Pinca's property was completely burned. On February 5, 1982, Pinca's payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept it. In due time, Pinca made the requisite demands for payment, which MICO rejected. She then went to the Insurance Commission. It is because she was ultimately sustained by the public respondent that the petitioner has come to us for relief.

Issue: Whether Pinca is entitled to claim the insurance premiums

Ruling: Yes. The SC held that there was an existing insurance at the time of the loss was sustained by Pinca. Payment was made, rendering the policy operative as of June 22, 1981, and removing it from the provisions of Article 77. Thereafter, the policy could be cancelled on any of the supervening grounds enumerated in Article 64 (except "nonpayment of premium") provided the cancellation was made in accordance therewith and with Article 65. The petitioner relies heavily on Section 77 of the Insurance Code providing that: "SEC. 77, An insurer is entitled to payment of the premium as soon as the thing 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 a life or an industrial life policy whenever the grace period provision applies." The above provision is not applicable because payment of the premium was in fact eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amount of P930.60 on "12-24-81" by Domingo Adora.14 This is important because it suggests an understanding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO. The payment was made on December 24, 1981, and the fire occurred on January 18, 1982. It is not disputed that the premium was actually paid by Pinca to Adora on December 24, 1981, who received it on behalf of MICO, to which it was remitted on January 15, 1982. What is questioned is the validity of Pinca's payment and of Adora's authority to receive it. MICO's acknowledgment of Adora as its agent defeats its contention that he was not authorized to receive the premium payment on its behalf. It is clearly provided in Section 306 of the Insurance Code that:

"SEC. 306. x x x x x x x x x "Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance 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."

And it is a well-known principle under the law of agency that: "Payment to an agent having authority to receive or collect payment is equivalent to payment to the principal himself; such payment is complete when the money delivered is into the agent's hands and is a discharge of the indebtedness owing to the principal." 4. G.R. No. L-31845 April 30, 1979 GREAT PACIFIC LIFE ASSURANCE COMPANY vs. HONORABLE COURT OF APPEALS FACTS: It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endowment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting. Mondragon finally type-wrote the data on the application form which was signed by private respondent Ngo Hing. The latter paid the annual premium the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific Life. Upon the payment of the insurance premium, the binding deposit receipt was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of the insurance application. Then on April 30, 1957, Mondragon received a letter from Pacific Life disapproving the insurance application. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such coverage. It was when things were in such state that on May 28, 1957 Helen Go died of influenza with complication of bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds of the insurance, but

having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu, which rendered the adverse decision as earlier referred to against both petitioners. ISSUE: Whether or not the respondent is entitled to the insurance HELD: No. Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. As held by this Court, where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself It bears repeating that through the intra-company communication of April 30, 1957 Pacific Life disapproved the insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action, which private respondent failed to accept. In the absence of a meeting of the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the above quoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between then Acordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life. The Supreme Court held that it is not impressed with private respondent's contention that failure of petitioner Mondragon to communicate to him the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary contract In this first place, there was no contract perfected between the parties who had no meeting of their minds. Private respondent, being an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably aware that said company does not offer the life insurance applied for. When he filed the insurance application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will approve the recommendation

of Mondragon for the acceptance and approval of the application in question along with his proposal that the insurance company starts to offer the 20-year endowment insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of his one-year old daughter, aside from being an insurance agent and an offense associate of petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on the processing of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance application. This Court is of the firm belief that private respondent had deliberately concealed the state of health and physical condition of his daughter Helen Go. Where private respondent supplied the required essential data for the insurance application form, he was fully aware that his one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be ensconced nor distinguished. Nonetheless, private respondent, in apparent bad faith, withheld the fact material to the risk to be assumed by the insurance company. As an insurance agent of Pacific Life, he ought to know, as he surely must have known. his duty and responsibility to such a material fact. Had he diamond said significant fact in the insurance application form Pacific Life would have verified the same and would have had no choice but to disapprove the application outright. Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance. Private respondent appears guilty thereof. SC was constrained to hold that no insurance contract was perfected between the parties with the noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined, having been combated by herein private respondent. 5. G.R. No. L-24833 (FIELDMEN'S INSURANCE CO., INC. v. MERCEDES VARGAS VDA. DE SONGCO, ET AL. and CA) FIELDMEN'S INSURANCE CO., INC., vs. MERCEDES VARGAS VDA. DE SONGCO, ET AL. and COURT OF APPEALS G.R. No. L-24833 September 23, 1968 FERNANDO, J.: Facts: Federico Songco, a man of scant education [first grader], owned a private jeepney. He was induced by

Fieldmen's Insurance Company (FIC) agent Benjamin Sambat to apply for a Common Carrier's Liability Insurance Policy covering his motor vehicle. As testified by Songco’s son Amor later, he said that their vehicle is an ‘owner’ private vehicle and not for passengers, but agent Sambat said that they can insure whatever kind of vehicle because their company is not owned by the government, so they could do what they please whenever they believe a vehicle is insurable. FIC Inc. issued a Common Carriers Accident Insurance Policy with a duration of 1 year. Upon expiration, FIC Inc, the policy was renewed. During the effectivity of the renewed policy, the insured vehicle while being driven by Rodolfo Songco, a duly licensed driver and son of Federico (the vehicle owner) collided with a car where Federico and Rodolfo died, while Carlos Songco and his wife Angelita, and a family friend sustained physical injuries. Issue: 1.

2.

Whether Fieldmen’s Insurance Company (FIC) is estopped from enforcing forfeitures in its favor- YES Whether FIC can escape liability under a common carrier insurance policy on the pretext that what was insured was a private vehicle and not a common carrier, the policy being issued upon the agent’s insistence.- NO

Ruling: 1.

FIC is "estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured.

In Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd., It was held that where inequitable conduct is shown by an insurance firm, it is "estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured.” After petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico Songco to believe that he could qualify under the common carrier liability insurance policy, and to enter into contract of insurance paying the premiums due, it could not, thereafter, in any litigation arising out of such representation, be permitted to change its stand to the detriment of the heirs of the insured. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious reliance, the failure to apply it in this case would result in a gross travesty of justice

… . lt would now rely on the fact that the insured owned a private vehicle, not a common carrier, something which it knew all along when not once but twice its agent, no doubt without any objection in its part, exerted the utmost pressure on the insured, a man of scant education, to enter into such a contract.

2. Fieldmen’s Insurance incurred legal liability under the policy. Since some of the conditions contained in the policy issued by the defendant-appellant were impossible to comply with under the existing conditions at the time and 'inconsistent with the known facts,' the insurer 'is estopped from asserting breach of such conditions.’ Except for the fact, that they were not fare paying passengers, their status as beneficiaries under the policy is recognized therein. Even if it be assumed that there was an ambiguity, ambiguities or obscurities must be strictly interpreted against the party that caused them ( Qua Chee Gan v. Law Union and Rock Insurance Co., Ltd.) The contract of insurance is one of perfect good faith (uberima fides) not for the insured alone, but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility." 6. G.R. No. 154514. July 28, 2005 WHITE GOLD MARINE SERVICES, INC., Petitioners, vs. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD., Respondents. FACTS: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety Corporation. Subsequently, White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latter’s unpaid balance. White Gold on the other hand, filed a

complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187 of the Insurance Code, while Pioneer violated Sections 299, 300 and 301 in relation to Sections 302 and 303, thereof. The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous. The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I Clubs vis-à-vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual. CONTENTIONS: The parties admit that Steamship Mutual is a P & I Club. Steamship Mutual admits it does not have a license to do business in the Philippines although Pioneer is its resident agent. This relationship is reflected in the certifications issued by the Insurance Commission. Petitioner insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals as "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." It stresses that as a P & I Club, Steamship Mutual’s primary purpose is to solicit and provide protection and indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its agent. Respondents contend that although Steamship Mutual is a P & I Club, it is not engaged in the insurance business in the Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against liabilities incidental to shipowning. Respondents aver Hyopsung is inapplicable in this case

because the issue in Hyopsung was the jurisdiction of the court over Hyopsung. ISSUES: (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? YES (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? YES RULING: 1.) Section 2(2) of the Insurance Code enumerates what constitutes "doing an insurance business" or "transacting an insurance business". These are: (a) making or proposing to make, as insurer, any insurance contract; (b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

The same provision also provides, the fact that no profit is derived from the making of insurance contracts, agreements or transactions, or that no separate or direct consideration is received therefor, shall not preclude the existence of an insurance business.

Relatedly, a mutual insurance company is a cooperative enterprise where the members are both the insurer and insured. In it, the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest. Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs. A P & I Club is "a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members." By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission. Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission.

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.

2.) Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual.

Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.

Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:

In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance.

SEC. 299 . . . No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications for insurance, or receive for services in obtaining insurance, any

commission or other compensation from any insurance company doing business in the Philippines or any agent thereof, without first procuring a license so to act from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter. . .

judgment in favor of Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for damages and absolved petitioner Reverente. Hence, this petition for review raising the primary argument that a health care agreement is not an insurance contract; hence the “incontestability clause” under the Insurance Code does not apply.

7. G.R. No. 125678 March 18, 2002 PHILAMCARE HEALTH SYSTEMS, INC., petitioner, Vs. COURT OF APPEALS and JULITA TRINOS, respondents. YNARES-SANTIAGO, J.:

ISSUE 1: Whether or not the health care agreement is not an insurance contract

INTERNET DIGEST ONLY FACTS: Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question ‘Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year from March 1, 1988 to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount of coverage to a maximum sum of P75,000 per disability. During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center (MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement. However, the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his medical history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus, Julita paid for all the hospitalization expenses. After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband home again. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same day. Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered

HELD 1: YES. 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 of the Insurance Code states that any contingent or unknown event, whether past or future, which my damnify a person having an insurable against him, may be insured against. Every person has an insurable interest in the life and health of himself. Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of his spouse and of his children. The insurable interest of respondent’s husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract. ISSUE 2: Whether or not there is concealment of material fact made by Ernani HELD 2: NO. The answer assailed by petitioner was in response to the question relating to the medical history of the applicant. This largely depends on opinion rather than fact, especially coming from respondent’s husband who was not a medical doctor. Where matters of opinion or judgment are called for answers made I good faith and without intent to deceive will not avoid a policy even though they are untrue. The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with or without the

authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer 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 wherever he avails of the covered benefits which he has prepaid. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract – the insurer. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture. This is equally applicable to Health Care Agreements. ISSUE 3: W/N the spouse being "not" legal wife can claim - YES HELD 3: Sec. 10. Every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children; (2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest; (3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and (4) of any person upon whose life any estate or interest vested in him depends.



not the legal wife (deceased was previously married to another woman who was still alive)  health care agreement is in the nature of a contract of indemnity.  payment should be made to the party who incurred the expenses 8. G.R. No. 169737 February 12, 2008 CORONA, J.: BLUE CROSS HEALTH CARE, INC., vs. NEOMI* and DANILO OLIVARES QUICK FACTS: Neomi Olivares applied for a health care program with Blue Cross. A month after she applied, she suffered from a stroke. Ailments due to “pre-existing conditions” were excluded from the coverage. She was confined in Medical City and discharged with a bill of P34,217.20. Blue Cross refused to pay unless she had her physician’s certification that she was suffering from a pre-existing condition. When Blue Cross still refused to pay, she filed suit in the MTC. The health care company rebutted by saying that the physician didn’t

disclose the condition due to the patient’s invocation of the doctor-client privilege.

FACTS: Respondent Neomi T. Olivares applied for a health care program with petitioner Blue Cross Health Care, Inc., a health maintenance firm. From October 16, 2002 to October 15, 2003, she paid the amount of P11,117. She also availed of the additional service of limitless consultations for an additional amount of P1,000. The application was approved on October 22, 2002. In the health care agreement, ailments due to "preexisting conditions" were excluded from the coverage. On November 30, 2002, or barely 38 days from the effectivity of her health insurance, respondent Neomi suffered a stroke and was admitted at the Medical City which was one of the hospitals accredited by petitioner. On December 2, 2002, she was informed that she could be discharged from the hospital. She incurred hospital expenses amounting to P34,217.20. Consequently, she requested from the representative of petitioner at Medical City a letter of authorization in order to settle her medical bills. But petitioner refused to issue the letter and suspended payment pending the submission of a certification from her attending physician that the stroke she suffered was not caused by a pre-existing condition. She was discharged from the hospital on December 3, 2002. On December 5, 2002, she demanded that petitioner pay her medical bill. When petitioner still refused, she and her husband, respondent Danilo Olivares, were constrained to settle the bill. They thereafter filed a complaint for collection of sum of money against petitioner in the MeTC on January 8, 2003. In its answer dated January 24, 2003, petitioner maintained that it had not yet denied respondents' claim as it was still awaiting Dr. Saniel's report.

Petitioner argues that respondents prevented Dr. Saniel from submitting his report regarding the medical condition of Neomi. Hence, it contends that the presumption that evidence willfully suppressed would be adverse if produced should apply in its favor. Respondents counter that the burden was on petitioner to prove that Neomi's stroke was excluded from the coverage of their agreement because it was due to a pre-existing condition. It failed to prove this.

the courts with "extreme jealousy" and "care" and with a "jaundiced eye." Since petitioner had the burden of proving exception to liability, it should have made its own assessment of whether respondent Neomi had a preexisting condition when it failed to obtain the attending physician's report. It could not just passively wait for Dr. Saniel's report to bail it out. The mere reliance on a disputable presumption does not meet the strict standard required under our jurisprudence.

ISSUE #1: Whether or not petitioner was able to prove that respondent Neomi's stroke was caused by a preexisting condition and therefore was excluded from the coverage of the health care agreement.

ISSUE #2: Whether or not petitioner was liable for moral and exemplary damages and attorney's fees HELD #2: The RTC and CA found that there was a factual basis for the damages adjudged against petitioner. They found that it was guilty of bad faith in denying a claim based merely on its own perception that there was a pre-existing condition. *Please see full text for the List of Disabilities considered pre-existing conditions. *

HELD #1: No. We agree with respondents. In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement is in the nature of a non-life insurance. It is an established rule in insurance contracts that when their terms contain limitations on liability, they should be construed strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and enforced stringently against the insurer which prepared the contract. This doctrine is equally applicable to health care agreements. Petitioner never presented any evidence to prove that respondent Neomi's stroke was due to a pre-existing condition. It merely speculated that Dr. Saniel's report would be adverse to Neomi, based on her invocation of the doctor-patient privilege. This was a disputable presumption at best.

11

Dr. Saniel stated that there was patient-physician confidentiality and as a doctor, she should not release any medical information concerning her neurologic status to anyone without her approval. MeTC: dismissed the complaint for lack of cause of action. It held that the best person to determine whether or not the stroke she suffered was not caused by "pre-existing conditions" is her attending physician Dr. Saniel who treated her and conducted the test during her confinement. RTC: reversed MeTC and ordered petitioner to pay respondents.The RTC held that it was the burden of petitioner to prove that the stroke of respondent Neomi was excluded from the coverage of the health care program for being caused by a pre-existing condition. It was not able to discharge that burden. CA: affirmed the decision of the RTC

Section 3 (e), Rule 131 of the Rules of Court states: Sec. 3. Disputable presumptions. ― The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: xxx xxx xxx (e) That evidence willfully suppressed would be adverse if produced. Suffice it to say that this presumption does not apply if (a) the evidence is at the disposal of both parties; (b) the suppression was not willful; (c) it is merely corroborative or cumulative and (d) the suppression is an exercise of a privilege. Here, respondents' refusal to present or allow the presentation of Dr. Saniel's report was justified. It was privileged communication between physician and patient. Furthermore, as already stated, limitations of liability on the part of the insurer or health care provider must be construed in such a way as to preclude it from evading its obligations. Accordingly, they should be scrutinized by

9. G.R. No. 167330 (PHILIPPINE HEALTH CARE PROVIDERS, INC. v. CIR) PHILIPPINE HEALTH CARE PROVIDERS, INC., v. COMMISSIONER OF INTERNAL REVENUE G.R. No. 167330 June 12, 2008 Corona, J. Note: Contention of Petitioner: its health care agreement is not a contract of insurance but a contract for the provision on a prepaid basis of medical services, including medical check-up, that are not based on loss or damage. Petitioner also insists that it is not engaged in the insurance business. It is a health maintenance organization regulated by the Department of Health, not an insurance company under the jurisdiction of the Insurance Commission. For these reasons, petitioner asserts that the health care agreement is not subject to DST. Provision Involved: Section 185 of the 1997 Tax Code which provides: Section 185. Stamp tax on fidelity bonds and other insurance policies. - On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association or company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing

of anything therein specified, and on all obligations guaranteeing the validity or legality of any bond or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of fifty centavos (P0.50) on each four pesos (P4.00), or fractional part thereof, of the premium charged. Facts: Petitioner is a domestic corporation whose primary purpose is "to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization." Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services. The deficiency DST assessment was imposed on petitioner's health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested the assessment in a letter. As respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals seeking the cancellation of the deficiency VAT and DST assessments. The CTA rendered a decision, where the Petition is Partially Granted. Respondent appealed the CTA decision to the CA. He claimed that petitioner's health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code. The CA rendered its decision. It held that petitioner's health care agreement was in the nature of a non-life insurance contract subject to DST.

through the execution of specific instruments. In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity for loss, damage, or liability. Under the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. The event insured against must be designated in the contract and must either be unknown or contingent. Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-life insurance policy. Contrary to petitioner's claim, its health care agreement is not a contract for the provision of medical services. Petitioner does not actually provide medical or hospital services but merely arranges for the same and pays for them up to the stipulated maximum amount of coverage. It is also incorrect to say that the health care agreement is not based on loss or damage because, under the said agreement, petitioner assumes the liability and indemnifies its member for hospital, medical and related expenses. Furthermore, the fact that petitioner must relieve its member from liability by paying for expenses arising from the stipulated contingencies belies its claim that its services are prepaid. The expenses to be incurred by each member cannot be predicted beforehand, if they can be predicted at all. Petitioner assumes the risk of paying for the costs of the services even if they are significantly and substantially more than what the member has "prepaid." This is insurance. Petitioner's health care agreement is substantially similar to that involved in Philamcare Health Systems, Inc. v. CA. This Court ruled in Philamcare Health Systems, Inc.:

Petitioner moved for reconsideration but the CA denied it. Hence, this petition. Issue: Whether the contract is a health care agreement in the nature of an insurance contract and therefore subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 Tax Code of 1997? Held: Yes, the DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships

The insurable interest of the subscriber in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingency, the health care provider must pay for the same to the extent agreed upon under the contract.

Similarly, the insurable interest of every member of petitioner's health care program in obtaining the health care agreement is his own health. Under the agreement, petitioner is bound to indemnify any member who incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingency to the extent agreed upon under the contract. Petitioner's contention that it is a health maintenance organization and not an insurance company is irrelevant. Contracts between companies like petitioner and the beneficiaries under their plans are treated as insurance contracts.

10. G.R. No. 112329 (VIRGINIA A. PEREZ v. COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION)

FACTS: Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20,000.00. Sometime in October 1987, an agent of the insurance corporation, Rodolfo Lalog, visited Perez in Guinayangan, Quezon and convinced him to apply for additional insurance coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if the premium were paid annually. On October 20, 1987, Primitivo B. Perez accomplished an application form for the additional insurance coverage of P50,000.00. On the same day, petitioner Virginia A. Perez, Primitivos wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was a "deposit.”] Unfortunately, Lalog lost the application form accomplished by Perez and so on October 28, 1987, he asked the latter to fill up another application form. On November 1, 1987, Perez was made to undergo the required medical examination, which he passed. Pursuant to the established procedure of the company, Lalog forwarded the application for additional insurance of Perez, together with all its supporting papers, to the office of BF Lifeman Insurance Corporation at Gumaca, Quezon which office was supposed to forward the papers to the Manila office. On November 25, 1987, Perez died in an accident. He was riding in a banca which capsized during a storm. At

the time of his death, his application papers for the additional insurance of P50,000.00 were still with the Gumaca office. Lalog testified that when he went to follow up the papers, he found them still in the Gumaca office and so he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation. It was only on November 27, 1987 that said papers were received in Manila. Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50,000.00 on December 2, 1987. Virginia went to Manila to claim the benefits and was given 40,000.00 php. Then she claimed additional for the coverage under the 50,000.00 plan. The partial payment made was refunded and the contract was rescinded by BF Lifeman Insurance Corp. The lower court ruled in favor of Perez but the CA reversed the decision.

11. G. R. No. L-2294 (FILIPINAS COMPANIA DE SEGUROS v. CHRISTERN, HUENEFELD & CO., INC.)

G.R. No. L-2294

May 25, 1951

FILIPINAS COMPAÑIA DE SEGUROS, petitioner, vs. CHRISTERN, HUENEFELD and CO., INC., respondent. Facts: Respondent Christern obtained from Filipinas a fire insurance policy of P1000,000, covering merchandise contained in a building located at Binondo. During the Japanese military occupation, the building and insured merchandise were burned. The respondent its claim under the policy. The total loss suffered by the respondent was fixed at P92,650.

ISSUE: Was there a perfected insurance contract? RULING: None. The contract was not perfected. As a contract, consent, object, cause must be complied with. The assent of private respondent BF Lifeman Insurance Corporation therefore was not given when it merely received the application form and all the requisite supporting papers of the applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicant pays the premium and receives and accepts the policy while he is in good health that the contract of insurance is deemed to have been perfected. It is not disputed, however, that when Primitivo died on November 25, 1987, his application papers for additional insurance coverage were still with the branch office of respondent corporation in Gumaca and it was only two days later, or on November 27, 1987, when Lalog personally delivered the application papers to the head office in Manila. Consequently, there was absolutely no way the acceptance of the application could have been communicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead. In the case of Enriquez vs. Sun Life Assurance Co. of Canada, recovery on the life insurance of the deceased was disallowed on the ground that the contract for annuity was not perfected since it had not been proved satisfactorily that the acceptance of the application ever reached the knowledge of the applicant.

The petitioner refused to pay the claim on the ground that the policy in favor of the respondent had ceased to be in force on the date the U.S. declared war on Germany with the respondent Corporation being controlled by German subjects and the petitioner being a company under American jurisdiction (though organized by Philippine laws) when the policy was issued on October 1, 1941. The petitioner, however, paid to the respondent the sum of P92,650 on April 19, 1943 under orders from the military government. The insurer filed for a suit to recover the sum. The contention was that the policy ceased to be effective because of the outbreak of the war and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. The trial and the appellate courts dismissed the action. The Court of Appeals overruled the contention of the petitioner that the respondent corporation became an enemy when the United States declared war against Germany, relying on English and American cases which held that a corporation is a citizen of the country or state by and under the laws of which it was created or organized. It rejected the theory that nationality of private corporation is determine by the character or citizenship of its controlling stockholders. Issue: Whether or not the insurance policy became ineffective upon the declaration of the war?

Held: YES. The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an insured becomes a public enemy. There is no question that majority of the stockholders of the respondent corporation were German subjects. This being so, said respondent became an enemy corporation upon the outbreak of the war between the United States and Germany. The respondent having become an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid and enforcible, and since the insured goods were burned after December 10, 1941, and during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner. 12. G.R. NO. 114427

FEBRUARY 6, 1995

ARMANDO GEAGONIA v. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION FACTS: Armando Geagonia, the owner of Norman's Mart, obtained from Country Bankers Insurance Corporation (Country Bankers) fire insurance policy for P100,000.00. The 1 year period policy covered Stock-intrade consisting principally of dry goods. The said policy contained the following condition: 3. The insured shall give notice to the Company of any insurance or insurances already affected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00.

On 27 May 1990, fire of accidental origin broke out destroying Geogonia’s insured stock-in-trade. This prompted him to file with Country Bankers a claim under the policy. The latter denied the claim because it found that at the time of the loss Geogonia's stocks-in-trade were likewise covered by fire insurance policies for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). The basis of the Country Banker's denial was Geogonia's alleged violation of Condition 3 of the policy. Geogonia then filed a complaint for the recovery of P100,000.00 under fire insurance policy. In a letter, he admitted that at the time he obtained the Country Banker's fire insurance policy he knew that the two policies issued by the PFIC were already in existence; however, he had no knowledge of the provision in the Country Banker's policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by the their agent; and had it been mentioned, he would not have withheld such information. He further asserted that the total of the amounts claimed under the three policies was below the actual value of his stocks at the time of loss, which was P1,000,000.00. In its answer, Country Bankers specifically denied the allegations in the complaint and set up as its principal defense the violation of Condition 3 of the policy. The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC. This was reversed by the Court of Appeals ISSUE: (a) whether the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the policy; and (b) if he had, whether he is precluded from recovering therefrom. HELD: (a) YES. Geogonia knew of the prior policies issued by the PFIC. His letter to Country Bankers conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original. Condition 3 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that "[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." Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to constitute a violation, the other insurance must be upon same subject matter, the same interest therein, and the same risk. (b) NO. It is a cardinal rule on insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being, undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any construction which would result in the forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom they are intended to operate. The reason for this is that, except for riders which may later be inserted, the insured sees the contract already in its final form and has had no voice in the selection or arrangement of the words employed therein. On the other hand, the language of the contract was carefully chosen and deliberated upon by experts and legal advisers who had acted exclusively in the interest of the insurers and the technical language employed therein is rarely understood by ordinary laymen. With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not totally free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a coinsurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-

insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer is interested in preventing a situation in which a fire would be profitable to the insured.

13. Spouses NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO., INC., petitioners, vs. COURT OF APPEALS and CKS DEVELOPMENT CORPORATION, respondents. G.R. No. 124520. August 18, 1997 FACTS: Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease contract with private respondent CKS Development Corporation, as lessor, on 5 October 1988. One of the stipulations of the one (1) year lease contract states: 18. x x x. The LESSEE shall not 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. If the LESSEE obtain(s) the insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own benefit; x x x Notwithstanding the above stipulation in the lease contract, the Cha spouses insured against loss by fire their merchandise inside the leased premises for Five Hundred Thousand (P500,000.00) with the United Insurance Co., Inc. (without the written consent of private respondents CKS. On the day that the lease contract was to expire, fire broke out inside the leased premises.When CKS learned of the insurance earlier procured by the Cha spouses (without its consent), it wrote the insurer (United) a demand letter asking that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract with Cha spouses. United refused to pay CKS. Hence, the latter filed a complaint against the Cha spouses and United.

RTC: ordered defendant United to pay CKS the amount of P335,063.11 and defendant Cha spouses to pay P50,000.00 as exemplary damages, P20,000.00 as attorney’s fees and costs of suit. CA: affirmed the trial court decision, deleting however the awards for exemplary damages and attorney’s fees.

ISSUE: Whether or not the paragraph 18 of the lease contract entered into between CKS and the Cha spouses is valid insofar as it provides that any fire insurance policy obtained by the lessee (Cha spouses) over their merchandise inside the leased premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained without the prior written of the latter. HELD: NO. It is, of course, basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good customs, public order or public policy. Sec. 18 of the Insurance Code provides: 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 at 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, which provides: 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. In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise

inside the leased premises under the provisions of Section 17 of the Insurance Code which provide.

should not be held liable because it was destroyed due to fortuities event or force majeure

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."

- RTC held that IMC and LSPI retained ownership of the delivered goods until fully paid, it must bear the loss (res perit domino) while the CA: Reversed - sales invoices is an exception under Article 1504 (1) of the Civil Code to res perit domino

Therefore, respondent CKS cannot, under the Insurance Code a special law be validly a beneficiary of the fire insurance policy taken by the petitionerspouses over their merchandise. This insurable interest over said merchandise remains with the insured, the Cha spouses. 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 Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the property insured. 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. 14. GAISANO CAGAYAN, INC. vs. INSURANCE COMPANY OF NORTH AMERICA G.R. No. 147839 June 8, 2006 AUSTRIA-MARTINEZ, J.: FACTS: Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. while Levi Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co. IMC and LSPI separately obtained from Insurance Company of North America fire insurance policies for their book debt endorsements related to their ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines which are unpaid 45 days after the time of the loss. On February 25, 1991, Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano Cagayan, Inc., containing the ready-made clothing materials sold and delivered by IMC and LSPI was consumed by fire and On February 4, 1992 Insurance Company of North America filed a complaint for damages against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their respective fire insurance policies which it paid thus it was subrogated to their rights. Gaisano Cagayan, Inc alleged that they

ISSUE: WON Insurance Company of North America can claim against Gaisano Cagayan for the debt that was insured HELD: YES. It was partly granted and the order to pay P535,613 is DELETED. The Insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and delivered to the customers and dealers of the insured Under ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has been made or not, except that: (1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer's risk from the time of such delivery; Here, IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest is not determined by concept of title, but whether insured has substantial economic interest in the property Under Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured." Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. Anyone has an insurable interest in property who derives a benefit

from its existence or would suffer loss from its destruction. It is sufficient that the insured is so situated with reference to the property that he would be liable to loss should it be injured or destroyed by the peril against which it is insured an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of such an interest insurance in this case is not for loss of goods by fire but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire the obligation is pecuniary in nature obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event.

1975, Tan Lee Siong died of hepatoma. Hence, petitioners filed with respondent company their claim for the proceeds of the life insurance policy.

Under Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation (Genus nunquan perit) The subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured, but also the amount paid to settle the insurance claim.

ISSUE: WON the Philippine American Life Insurance Company didn’t have the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

Under Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. Here, as to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate the claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613. 15. G.R. No. 48049 June 29, 1989 EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, Petitioners, vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, Respondents. Ponente: GUTIERREZ, JR., J. FACTS: Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P80,000.00 with respondent company Philippine American Life Insurance Company. Said application was approved and a corresponding policy was issued effective November 5, 1973, with petitioners as the beneficiaries. On April 26,

However, the insurance company denied the said claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance. The premiums paid on the policy were thereupon refunded. The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for lack of merit.

HELD: No. Petition dismissed. The Insurance Code states in Section 48:“Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent.” The so-called "incontestability clause" in the second paragraph prevents the insurer from raising the defenses of false representations insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The policy was in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation.

The "incontestability clause" added by the second paragraph of Section 48 is in force for two years. After this, the defenses of concealment or misrepresentation no longer lie. The petitioners argue that no evidence was presented to show that the medical terms were explained in a layman's language to the insured. They also argue that no evidence was presented by respondent company to show that the questions appearing in Part II of the application for insurance were asked, explained to and understood by the deceased so as to prove concealment on his part. This couldn’t be accepted because the insured signed the form. He affirmed the correctness of all the entries. The company records show that the deceased was examined by Dr. Victoriano Lim and was found to be diabetic and hypertensive. He was also found to have suffered from hepatoma. Because of the concealment made by the deceased, the company was thus misled into accepting the risk and approving his application as medically fit. 16. VIOLETA R. LALICAN vs. THE INSULAR LIFE ASSURANCE COMPANY LIMITED, AS REPRESENTED BY THE PRESIDENT VICENTER AVILON, G.R. No. 183526, 25 August 2009 FACTS: During his lifetime Eulogio Lalican, husband of Violeta Lalican herein petitioner, applied for insurance policy with INSURANCE LIFE , through agent named GASPAN MALALUAN, which contained a 20-Year Endowment Variable Income Package Flexi Plan worth P500,000.00,[6] with two riders valued at P500,000.00 each.[7] Thus, the value of the policy amounted to P1,500,000.00. Violeta was named as the primary beneficiary. Under the terms of the policy Eulogio was to pay the premiums on a quarterly basis in the amount of P8,062.00, payable every 24 April, 24 July, 24 October and 24 January of each year, until the end of the 20-year period of the policy. According to the Policy Contract, there was a grace period of 31 days for the payment of each premium subsequent to the first. If any premium was not paid on or before the due date, the policy would be in default, and if the premium remained unpaid until the end of the grace period, the policy would automatically lapse and become void.

Eulogio paid the premiums due on 24 July 1997 and 24 October 1997. However, he failed to pay the premium due on 24 January 1998, even after the lapse of the grace period of 31 days. Policy No. 9011992, therefore, lapsed and became void.

To reinstate a policy means to restore the same to premium-paying status after it has been permitted to lapse.[39] Both the Policy Contract and the Application for Reinstatement provide for specific conditions for the reinstatement of a lapsed policy.

On 26 May 1998, an Application for Reinstatement which was not processed because the interest was not paid. On 17 September 1998, Eulogio went to Malaluans house and submitted a second Application for Reinstatement] of Policy No. 9011992, including the amount of P17,500.00, representing payments for the overdue interest on the premium for 24 January 1998, and the premiums which became due on 24 April 1998 and 24 July 1998.

2. Yes, However, An insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance.[36] Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life. Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

A while later, on the same day, 17 September 1998, Eulogio died of cardio-respiratory arrest secondary to electrocution. On 28 September 1998, Violeta filed with Insular Life a claim for payment of the full proceeds of Policy No. 9011992 which was not granted because the reinstatement application was not granted. Hence Violeta filed a Complaint for Death Claim Benefit in the RTC. RTC dismissed the action, hence this petition for review on certiorari.

ISSUE: 1. WON Violeta is entitled to the insurance benefit. 2. WON EULOGIO has insurable interest. HELD: 1. No. That Policy No. 9011992 had already lapsed is a fact beyond dispute. Eulogios filing of his first Application for Reinstatement with Insular Life, through Malaluan, on 26 May 1998, constitutes an admission that Policy No. 9011992 had lapsed by then. Insular Life did not act on Eulogios first Application for Reinstatement, since the amount Eulogio simultaneously deposited was sufficient to cover only the P8,062.00 overdue premium for 24 January 1998, but not the P322.48 overdue interests thereon. On 17 September 1998, Eulogio submitted a second Application for Reinstatement to Insular Life, again through Malaluan, depositing at the same time P17,500.00, to cover payment for the overdue interest on the premium for 24 January 1998, and the premiums that had also become due on 24 April 1998 and 24 July 1998. On the very same day, Eulogio passed away.

Upon more extensive study of the Petition, it becomes evident that the matter of insurable interest is entirely irrelevant in the case at bar. It is actually beyond question that while Eulogio was still alive, he had an insurable interest in his own life, which he did insure under Policy No. 9011992. The real point of contention herein is whether Eulogio was able to reinstate the lapsed insurance policy on his life before his death on 17 September 1998. __________________________________ The New Lexicon Websters Dictionary defines ambiguity as the quality of having more than one meaning and an idea, statement or expression capable of being understood in more than one sense. In Nacu vs. Court of Appeals, 231 SCRA 237 (1994), the Supreme Court stated that[:]

Any ambiguity in a contract, whose terms are susceptible of different interpretations as a result thereby, must be read and construed against the party who drafted it on the assumption that it could have been avoided by the exercise of a little care.

In the instant case, the dispute arises from the aforequoted provisions written on the face of the second

application for reinstatement. Examining the said provisions, the court finds the same clearly written in terms that are simple enough to admit of only one interpretation. They are clearly not ambiguous, equivocal or uncertain that would need further construction. The same are written on the very face of the application just above the space where [Eulogio] signed his name. It is inconceivable that he signed it without reading and understanding its import.

17. NEW LIFE ENTERPRISES and JULIAN SY vs HON. COURT OF APPEALS, EQUITABLE INSURANCE CORPORATION, RELIANCE SURETY AND INSURANCE CO., INC. and WESTERN GUARANTY CORPORATION, G.R. No. 94071 March 31, 1992 Facts: New Life Enterprises, owned by Julian Sy and Jose Sy Bang, engaged in the sale of construction materials at Iyam, Lucena City. Julian Sy insured the stocks in trade of New Life Enterprises with Western Guaranty Corporation, Reliance Surety and Insurance Co. Inc., and Equitable Insurance Corporation, all sister companies. Western Guaranty Corporation issued Fire Insurance Policy No. 37201 in the amount of P350,000.00. Reliance Surety and Insurance Co., Inc. issued Fire Insurance Policy No. 69135 in the amount of P300,000.00. Equitable Insurance Corporation issued Fire Insurance Policy No. 39328 in the amount of P200,000.00. The building occupied by the New Life Enterprises was gutted by fire at about 2:00 o'clock in the morning of October 19, 1982, the stocks in trade inside said building were insured against fire in the total amount of P1,550,000.00. Ultimately, the three insurance companies denied plaintiffs' claim for payment from the insurance policy. Because of the denial of their claims for payment by the three (3) insurance companies, petitioner filed separate civil actions against the former before the Regional Trial Court, which was granted in favor of petitioner New Life.

Respondent Court of Appeals reversed said judgment of the trial court. Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly contained in all the aforestated insurance contracts of herein petitioners, as follows: "3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed on this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of loss or damage is not more than P200,000.00."

Issue: Whether or not petitioner violated the “Other Insurance Clause” of the insurance contracts? Held: YES. The terms of the contract are clear and unambiguous. The insured is specifically required to disclose to the insurer any other insurance and its particulars which he may have effected on the same subject matter. The knowledge of such insurance by the insurer's agents, even assuming the acquisition thereof by the former, is not the "notice" that would estop the insurers from denying the claim. Furthermore, when the words and language of documents are clear and plain or readily understandable by an ordinary reader thereof, there is absolutely no room for interpretation or construction anymore. Additionally, it is and was incumbent upon petitioner Sy to read the insurance contracts, and this can be reasonably expected of him considering that he has been a businessman. Unfortunately, he inexplicably claimed that he had not read the terms of the policies. Whether or not there was notice to the other companies due to the fact that the policies were obtained from the same agent? NO. The conclusion of the trial court that Reliance and Equitable are "sister companies" is an unfounded conjecture drawn from the mere fact that Yap Kam Chuan was an agent for both companies which also had

the same insurance claims adjuster. Availment of the services of the same agents and adjusters by different companies is a common practice in the insurance business and such facts do not warrant the speculative conclusion of the trial court. Whether or not petitioner’s claim was filed out of time? YES. Policy Condition No. 27 of their insurance contract with Reliance provides: "27. Action or suit clause. - If a claim be made and rejected and an action or suit be not commenced either in the Insurance Commission or any court of competent jurisdiction of notice of such rejection, or in case of arbitration taking place as provided herein, within twelve (12) months after due notice of the award made by the arbitrator or abitrators or umpire, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."

The condition contained in an insurance policy that claims must be presented within one year after rejection is not merely a procedural requirement but an important matter essential to a prompt settlement of claims against insurance companies as it demands that insurance suits be brought by the insured while the evidence as to the origin and cause of destruction have not yet disappeared. In the case at hand, there was a considerable lapse of time from their receipt of the insurer's clarificatory letter dated March 30, 1983, up to the time the complaint was filed in court on January 31, 1984. The one-year prescriptive period was yet to expire on November 29, 1983 or about eight (8) months from the receipt of the clarificatory letter, but petitioners let the period lapse without bringing their action in court. We accordingly find no "peculiar circumstances" sufficient to relax the enforcement of the one-year prescriptive period and we, therefore, hold that petitioners' claim was definitely filed out of time. 18. MANULIFE PHILIPPINES, INC. vs HERMENEGILDA YBANEZ, G.R. No. 204736, November 28, 2016 [ G.R. No. 204736, November 28, 2016 ] MANULIFE PHILIPPINES, INC.,[1] PETITIONER, VS. HERMENEGILDA YBAÑEZ, RESPONDENT. D E C I S I O N, DEL CASTILLO, J.: FACTS:

Manulife Philippines, Inc. (Manulife) instituted a Complaint for Rescission of Insurance Contracts against Hermenegilda Ybañez (Hermenegilda) and the BPI Family Savings Bank (BPI Family). It is alleged in the Complaint that Insurance which Manulife issued in favor of Dr. Gumersindo Solidum Ybañez (insured), were void due to concealment or misrepresentation of material facts in the latter's applications for life insurance; that Hermenegilda, wife of the said insured, was revocably designated as beneficiary in the subject insurance policies; that on November 17, 2003, when one of the subject insurance policies had been in force for only one year and three months, while the other for only four months, the insured died; that Manulife conducted an investigation into the circumstances leading to the said insured's death, in view of the aforementioned entries in the said insured's Death Certificate; that Manulife thereafter concluded that the insured misrepresented or concealed material facts at the time the subject insurance policies were applied for; and that for this reason Manulife accordingly denied Hermenegilda's death claims and refunded the premiums that the insured paid on the subject insurance policies. Due to the Insured's concealment of material facts at the time the subject insurance policies were applied for and issued, [Manulife] exercised its right to rescind the subject insurance contracts and denied the claims on those policies. Manulife thus prayed that judgment be rendered finding its act of rescinding the subject insurance policies proper; declaring these subject insurance policies null and void; and discharging. it from any obligation whatsoever under these policies. Hermenegilda countered that Manulife's own insurance agent, Ms. Elvira Monteclaros herself] assured [the insured,] that there would be no problem regarding the application for the insurance policy. In tact, it was Monteclaros who filled up everything in the questionnaire (Annex "C" of the [C]omplaint), so that [all that the insured needed to do was sign it,] and it's done. [It was also Ms. Monteclaros who herself] checked in advance all the boxes in Annex "C," [that the insured himself was required to answer or check]. [Manulife] accepted [the insured's] application, and now that a claim for the benefits [is] made, [Manulife now] says that [the insured] misrepresented and concealed his past illnesses[!] In the form filled up by [Dr. Winifredo F. Lumapas,] Manulife's [company] physician, dated 9/10/02, [the insured] checked the column which says ''yes" (to] the following questions:





Have you had electrocardiograms, when, why, result? ([Manulife's company physician] wrote the answer which stated that result was normal.)

Have you seen a doctor, or had treatment operation on hospital case during the last five years?

Hermegegilda further claimed that at the time when both insurance policies in question were submitted for approval to [Manulife, the latter had had all the forewarnings that should have put it on guard or on notice that things were not what it wanted them to be, reason enough to bestir it into exercising greater prudence and caution to further inquire into) the health or medical history of [the insured]. In particular, Manulife ought to have noted the fact that the insured was at that time already 65 years old, x x x that he had a previous operation, and x x x that his health was "below average. Manulife presented its sole witness in the person of Ms. Jessiebelle Victoriano (Victoriano ), the Senior Manager of its Claims and Settlements Department. The oral testimony of this witness chiefly involved identifying herself as the Senior Manager of Manulife's Claims and Settlements Department and also identifying the evidence. After due proceedings, the RTC dismissed Manulife's Complaint. The RTC found no merit at all in Manulife's Complaint for rescission of the subject insurance policies because it utterly failed to prove that the insured had committed the alleged misrepresentation/s or concealment/s. The CA affirmed the decision of RTC. ISSUE: Whether the CA committed any reversible error in affirming the RTC Decision dismissing Manulife's Complaint for rescission of insurance contracts for failure to prove concealment on the part of the insured. HELD: NO. The present recourse essentially challenges anew the findings of fact by both the RTC and the CA that the Complaint for rescission of the insurance policies in question will not prosper because Manulife failed to prove concealment on the part of the insured. This is not allowed. It is horn-book law that in appeal by certiorari to this Court under Rule 45 of the Revised Rules of Court, the findings of fact by the CA especially where such findings of fact are affirmatory or

confirmatory of the findings of fact of the RTC, as in this case, are conclusive upon this Court. Thus, this Court must defer to the findings of fact of the RTC - as affirmed or confirmed by the CA - that Manulife's Complaint for rescission of the insurance policies in question was totally bereft of factual and legal bases because it had utterly failed to prove that the insured had committed the alleged misrepresentation/s or concealment/s of material facts imputed against him. The RTC correctly held that the CDH’s medical records that might have established the insured’s purported misrepresentation/s or concealment/s was inadmissible for being hearsay, given the fact that Manulife failed to present the physician or any responsible official of the CDH who could confirm or attest to the due execution and authenticity of the alleged medical records. Manulife's sole witness gave no evidence at all relative to the particulars of the purported concealment or misrepresentation allegedly perpetrated by the insured. In fact, Victoriano merely perfunctorily identified the documentary exhibits adduced by Manulife; she never testified in regard to the circumstances attending the execution of these documentary exhibits much less in regard to its contents. Of course, the mere mechanical act of identifying these documentary exhibits, without the testimonies of the actual participating parties thereto, adds up to nothing. These documentary exhibits did not automatically validate or explain themselves. "The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer." For failure of Manulife to prove intent to defraud on the part of the insured, it cannot validly sue for rescission of insurance contracts.

application that he had undergone lithotripsy due to kidney stone in 1987, but was discharged after three days, and no recurrence claimed. On February 5, 2001, Sun Life approved Atty. Jesus Jr.’s application and issued an insurance policy. The policy indicated that his beneficiaries are entitled to death benefits should he die on or before February 5, 2021 or a certain sum of money if Atty. Jesus is still living on the endowment date. On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As such, Ma. Daisy filed a Claimant’s Statement with Sun Life to seek the death benefits indicated in his insurance policy. Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.’s medical history were not disclosed in his application. Simultaneously, Sun Life tendered a check representing the refund of the premiums paid by Atty. Jesus Jr. It later filed a Complaint for Rescission before the RTC and prayed for judicial confirmation of Atty. Jesus Jr.’s rescission of insurance policy. According to Sun Life, the undisclosed fact suggested that the insured was in “renal failure” and at a high risk medical condition. Consequently, had it known such fact, it would not have issued the insurance policy in favor of Atty. Jesus Jr.11 RTC: Sun Life violated Sections 241, paragraph 1(b), (d), and (e) and 242 of the Insurance Code when it refused to pay the rightful claim of the respondents. It held that Atty. Jesus Jr. did not commit material concealment and misrepresentation when he applied for life insurance with Sun Life. It observed that given the disclosures and the waiver and authorization to investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the means of ascertaining the facts allegedly concealed by the applicant. CA: Affirmed the RTC decision.

19. G.R. No. 211212, June 8, 2016 SUN LIFE OF CANADA (PHILIPPINES), INC. vs MA, DAISY S. SIBYA, JESUS MANUEL S. SIBY A Ⅲ. JAIME LUIS S. SIBYA, and The Estate of the deceased ATTY. JESUS SIBYA JR., Facts: On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life insurance with Sun Life. In his Application for Insurance, he indicated that he had sought advice for kidney problems. He indicated in his

Issue: Whether there was misrepresentation on the part of Atty. Jesus during his insurance application, hence, he is not entitled to the insurance claim. Ruling: No. In Manila Bankers Life Insurance Corporation v. Aban,22 the Court held that if the insured dies within the two-year contestability period, the insurer is bound to

because the two-year contestability period had not yet lapsed inasmuch as the insurance policy was reinstated only on December 27, 1999, whereas Felipe died on September 22, 2001

make good its obligation under the policy, regardless of the presence or lack of concealment or misrepresentation. The Court held: Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an insurer is given two years — from the effectivity of a life insurance contract and while the insured is alive — to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general. In the present case, Sun Life issued Atty. Jesus Jr.’s policy on February 5, 2001. Thus, it has two years from its issuance, to investigate and verify whether the policy was obtained by fraud, concealment, or misrepresentation. Upon the death of Atty. Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the policy, Sun Life loses its right to rescind the policy. As discussed in Manila Bankers, the death of the insured within the two-year period will render the right of the insurer to rescind the policy nugatory. As such, the incontestability period will now set in. Assuming, however, for the sake of argument, that the incontestability period has not yet set in, the Court agrees, nonetheless, with the CA when it held that Sun Life failed to show that Atty. Jesus Jr. committed concealment and misrepresentation. Indeed, the intent to defraud on the part of the insured must be ascertained to merit rescission of the insurance contract. Concealment as a defense for the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In the present case, Sun Life failed to clearly and satisfactorily establish its allegations, and is therefore liable to pay the proceeds of the insurance.

20. THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. PAZ Y. KHU, FELIPE Y. KHU, JR., and FREDERICK Y. KHU, G.R. No. 195176, April 18, 2016 G.R. No. 195176. April 18, 2016. *

THE INSULAR LIFE ASSURANCE COMPANY, LTD., petitioner, vs. PAZ Y. KHU, FELIPE Y. KHU, JR., and FREDERICK Y. KHU, respondents. FACTS: On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life under the latter's Diamond Jubilee Insurance Plan. Felipe accomplished the required medical questionnaire wherein he did not declare any illness or adverse medical condition. Insular Life thereafter issued him Policy Number A000015683 with a face value of PI million. This took effect on June 22, 1997. On June 23, 1999, Felipe's policy lapsed due to nonpayment of the premium covering the period from June 22, 1999 to June 23, 2000 On September 7, 1999, Felipe applied for the reinstatement of his policy and paid P25,020.00 as premium On October 12, 1999, Insular Life advised Felipe that his application for reinstatement may only be considered if he agreed to certain conditions such as payment of additional premium and the cancellation of the riders pertaining to premium waiver and accidental death benefits. Felipe agreed to these conditions[8] and on December 27, 1999 paid the agreed additional premium of P3,054.50 On September 22, 2001, Felipe died On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y. Khu (collectively, Felipe's beneficiaries or respondents) filed with Insular Life a claim for benefit under the reinstated policy. This claim was denied. Petitioner’s Arguments: respondents should not be allowed to recover on the reinstated insurance policy

[ Sec. 48. Of the Insurance Code, Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.]

Respondents’ Arguments: the phrase “effective June 22, 1999” found in both the Letter of Acceptance and in the Endorsement is unclear whether it refers to the subject of the sentence, i.e., the “reinstatement of this policy” or to the subsequent phrase “changes are made on the policy”; that granting that there was any obscurity or ambiguity in the insurance policy, the same should be laid at the door of Insular Life as it was this insurance company that prepared the necessary documents that make up the same ISSUE: Whether Felipe's reinstated life insurance policy is already incontestable at the time of his death. HELD: Yes. It was more than two years had lapsed from the time the subject insurance policy was reinstated on June 22, 1999 vis-à-vis Felipe’s death on September 22, 2001. As such, the subject insurance policy has already become incontestable at the time of Felipe’s death. In Lalican v. The Insular Life Assurance Company, Limited, 597 SCRA 159 (2009), which coincidentally also involves the herein petitioner, it was there held that the reinstatement of the insured’s policy is to be reckoned from the date when the application was processed and approved by the insurer. There, we stressed that: To reinstate a policy means to restore the same to premium-paying status after it has been permitted to lapse. x x x x x x x In the instant case, Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of Policy No. 9011992. True, Eulogio, before his death, managed to file his Application for

Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon with Malaluan; but Policy No. 9011992 could only be considered reinstated after the Application for Reinstatement had been processed and approved by Insular Life during Eulogio’s lifetime and good health. Thus, it is settled that the reinstatement of an insurance policy should be reckoned from the date when the same was approved by the insurer. it is settled that the reinstatement of an insurance policy should be reckoned from the date when the same was approved by the insurer. In this case, the parties differ as to when the reinstatement was actually approved. Insular Life claims that it approved the reinstatement only on December 27, 1999. On the other hand, respondents contend that it was on June 22, 1999 that the reinstatement took effect.

in such a way as to preclude the insurer from noncompliance with its obligations.

21. VIRGINIA A. PEREZ vs. COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION, G.R No. 112329, 28 January 2000 YNARES-SANTIAGO, J.: Doctrine: A contract of insurance, like all other contracts, must be assented to by both parties, either in person or through their agents and so long as an application for insurance has not been either accepted or rejected, it is merely a proposal or an offer to make a contract. Facts:

The resolution of this issue hinges on the following documents: 1) Letter of Acceptance; and 2) the Endorsement. The Letter of Acceptance wherein Felipe affixed his signature was actually drafted and prepared by Insular Life. After Felipe accomplished this form, Insular Life, through its Regional Administrative Manager, Jesse James R. Toyhorada, issued an Endorsement dated January 7, 2000. 33

This finding must be upheld not only because it accords with the evidence, but also because this is favorable to the insured who was not responsible for causing the ambiguity or obscurity in the insurance contract. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest. Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation for P20,000.00. Agent Rodolfo Lalog, convinced him to apply for additional insurance coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if the premium were paid annually. Primitivo accomplished an application form for the additional insurance coverage of P50,000.00. On the same day, petitioner Virginia A. Perez, Primitivo’s wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was a "deposit." Unfortunately, Lalog lost the application form accomplished by Perez and so asked the latter to fill up another application form. Lalog forwarded the application for additional insurance of Perez, together with all its supporting papers, to the office of BF Lifeman Insurance Corporation at Gumaca, Quezon which office was supposed to forward the papers to the Manila office. On November 25, 1987, Perez died in an accident. At the time of his death, his application papers for the additional insurance of P50,000.00 were still with the Gumaca office. So, Lalog he personally brought the papers to the Manila office of BF Lifeman Insurance Corporation. It was only on November 27, 1987 that said papers were received in Manila. Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the application and issued the corresponding policy for the P50,000.00 on December 2, 1987. Nc

Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies of the deceased. She was paid P40,000.00 under the first insurance policy for P20,000.00 (double indemnity in case of accident) but the insurance company refused to pay the claim under the additional policy coverage of P50,000.00, the proceeds of which amount to P150,000.00 in view of a triple indemnity rider on the insurance policy. The insurance company maintained that the insurance for P50,000.00 had not been perfected at the time of the death of Primitivo Perez. Consequently, the insurance company refunded the amount of P2,075.00 which Virginia Perez had paid. On September 21, 1990, private respondent BF Lifeman Insurance Corporation filed a complaint against Virginia A. Perez seeking the rescission and declaration of nullity of the insurance contract in question. Virginia A. Perez averred that the deceased had fulfilled all his prestations under the contract and all the elements of a valid contract are present. RTC: Ruled in favor of petitioner; held that the premium for the additional insurance of P50,000.00 had been fully paid and even if the sum of P2,075.00 were to be considered merely as partial payment, the same does not affect the validity of the policy. The trial court further stated that the deceased had fully complied with the requirements of the insurance company. He paid, signed the application form and passed the medical examination. He should not be made to suffer the subsequent delay in the transmittal of his application form to private respondents head office since these were no longer within his control. CA: Reversed the decision of the RTC; The insurance contract for P50,000.00 could not have been perfected since at the time that the policy was issued, Primitivo was already dead. Issue: Whether there was a perfected Insurance Contract Held: NO. Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils. A contract, on the other hand, is a meeting of the minds between two persons whereby one binds himself, with respect to the other to give something or to render some service. Under Article 1318 of the Civil Code, there is no contract unless the following requisites concur:

1. 2. 3.

Consent of the contracting parties; Object certain which is the subject matter of the contract; Cause of the obligation which is established.

Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. When Primitivo filed an application for insurance, paid P2,075.00 and submitted the results of his medical examination, his application was subject to the acceptance of private respondent BF Lifeman Insurance Corporation. The perfection of the contract of insurance between the deceased and respondent corporation was further conditioned upon compliance with the following requisites stated in the application form: "there shall be no contract of insurance unless and until a policy is issued on this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in person while I/We, am/are in good health." The assent of private respondent BF Lifeman Insurance Corporation therefore was not given when it merely received the application form and all the requisite supporting papers of the applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicant pays the premium and receives and accepts the policy while he is in good health that the contract of insurance is deemed to have been perfected.

In the case of Enriquez vs. Sun Life Assurance Co. of Canada, recovery on the life insurance of the deceased was disallowed on the ground that the contract for annuity was not perfected since it had not been proved satisfactorily that the acceptance of the application ever reached the knowledge of the applicant. Contention: Petitioner insists that the condition imposed by respondent corporation that a policy must have been delivered to and accepted by the proposed insured in good health is potestative being dependent upon the will of the corporation and is therefore null and void. SC: A potestative condition depends upon the exclusive will of one of the parties. For this reason, it is considered

void. Article 1182 of the New Civil Code states: When the fulfillment of the condition depends upon the sole will of the debtor, the conditional obligation shall be void. In the case at bar, the following conditions were imposed by the respondent company for the perfection of the contract of insurance: (a).......a policy must have been issued; (b).......the premiums paid; and (c).......the policy must have been delivered to and accepted by the applicant while he is in good health. The condition imposed by the corporation that the policy must have been delivered to and accepted by the applicant while he is in good health can hardly be considered as a potestative or facultative condition. On the contrary, the health of the applicant at the time of the delivery of the policy is beyond the control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by the applicant while he is in good health. There was non-fulfillment of the condition, however, inasmuch as the applicant was already dead at the time the policy was issued. Hence, the non-fulfillment of the condition resulted in the non-perfection of the contract. Sdaa mi so As stated above, a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement. Prescinding from the foregoing, respondent corporation cannot be held liable for gross negligence. It should be noted that an application is a mere offer which requires the overt act of the insurer for it to ripen into a contract. Delay in acting on the application does not constitute acceptance even though the insured has forwarded his first premium with his application. The corporation may not be penalized for the delay in the processing of the application papers. Moreover, while it may have taken some time for the application papers to reach the main office, in the case at bar, the same was acted upon less than a week

after it was received. The processing of applications by respondent corporation normally takes two to three weeks, the longest being a month. In this case, however, the requisite medical examination was undergone by the deceased on November 1, 1987; the application papers were forwarded to the head office on November 27, 1987; and the policy was issued on December 2, 1987. Under these circumstances, we hold that the delay could not be deemed unreasonable so as to constitute gross negligence.

As to the recission of the Insurance Policy 056300 SC: True, rescission presupposes the existence of a valid contract. A contract which is null and void is no contract at all and hence could not be the subject of rescission. 22. GULF RESORTS, INC. vs. PHILIPPINE CHARTER INSURANCE CORPORATION, G.R. No. 156167, May 16, 2005 Kareen 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.

the office of the defendant only on April 15, 1963. PACIFIC claimed for insurance to the value of P19,286.79. Woodmen’s requested an adjustment company (First Philippine Adjustment Corporation) to assess the damage. It submitted its report, where it found that the loss of 30 pieces of logs is not covered by Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered by Cover Note 1010 insured for $70,000.00.

At any rate, it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid by petitioner due on the insurance coverage, which must be deemed to include the Cover Note. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued, the purpose and function of the Cover Note would be set Insurance Code at naught or rendered meaningless, for it is in a real sense a contract, not a mere application for insurance Section 2(1) The adjustment company submitted a computation of the which is a mere offer. WORKMEN’S probable liability on the loss sustained by contract of insurance as an agreement whereby one undertakes forthe a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event shipment, in the total amount of P11,042.04. The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due WORKMENS wrote PACIFIC denying the latter's claim it as if there had been payment of premium, for non An insurance premium is the consideration on the ground they defendant's investigation revealed payment by it was not chargeable against its fault. Had paid an insurer for undertaking to that the entire shipment of logs covered by the two all the logs been lost during the loading operations, but indemnify the insured against a specified marine policies were received in good order at their point after the issuance of the Cover Note, liability on the note peril. of destination. It was further stated that the said loss may would have already arisen even before payment of  In the subject policy, no premium be considered as covered under Cover Note No. 1010 premium. This is how the cover note as a “binder” should payments were made with regard because the said Note had become null and void by legally operate; otherwise, it would serve no practical to earthquake shock coverage, virtue of the issuance of Marine Policy Nos. 53 HO 1032 purpose in the realm of commerce, and is supported by except on the two swimming and 1033. the doctrine that where a policy is delivered without pools. The denial of the claim by the defendant was brought by requiring payment of the premium, the presumption is the plaintiff to the attention of the Insurance  Ana si maam sa duha ka swimming pool lang that a credit was intended and policy is valid. Commissioner. The Insurance Commissioner ruled in liable 23. G.R. No. L-38613 February 25, 1982 DE CASTRO, ** J.: PACIFIC TIMBER EXPORT CORPORATION, petitioner, Vs. THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY, INC., respondents.

favor of indemnifying Pacific Timber. The company added that the cover note is null and void for lack of valuable consideration. The trial court ruled in petitioner’s favor while the CA dismissed the case. Hence this appeal.

FACTS: The Pacific Timber Export Corporation secured temporary insurance from the Workmen's Insurance Company, Inc. for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from Quezon Province to Okinawa and Tokyo, Japan. Workmen’s Insurance issued a cover note insuring the cargo of the plaintiff subject to its terms and conditions. After the issuance of the cover note, but before the issuance of the two marine policies, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. While the logs were alongside the vessel, bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. 45 pieces of logs were salvaged, but 30 pieces were verified to have been lost or washed away as a result of the accident. Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during loading of SS woodlock. Although dated April 4, 1963, the letter was received in

ISSUE #1: Whether or not the cover note was null and void for lack of valuable consideration HELD #1: A “Cover Note” issued in advance of the issuance of a marine policy is binding as an insurance contract although no separate premium was paid therefor.  The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioner’s contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. As a logical consequence, no separate premiums are intended or required to be paid on a Cover Note. This is a fact admitted by an official of respondent company, Juan Jose Camacho, in charge of issuing cover notes of the respondent company

ISSUE #2: Whether or not the Insurance company was absolved from responsibility due to unreasonable delay in giving notice of loss. HELD #2: Delay of insured in reporting the loss must be objected to promptly by insurer. Sending of insurance adjuster to assess the loss amounts to waiver of delay in giving notice of loss.  The defense of delay as raised by private respondent in resisting the claim cannot be sustained. The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. The undisputed facts show that instead of invoking the ground of delay in objecting to petitioner’s claim of recovery on the cover note, it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place, so that it could determine whether delay would be a valid ground upon which to object to a claim against it. In the proceedings that took place later in the Office of the Insurance Commissioner, private respondent should then have raised this ground of delay to avoid liability. It

did not do so. It must be because it did not find any delay, as this Court fails to find a real and substantial sign thereof. But even on the assumption that there was delay, this Court is satisfied and convinced that as expressly provided by law, waiver can successfully be raised against private respondent. 24. GREAT PACIFIC LIFE ASSURANCE COMPANY vs. HONORABLE COURT OF APPEALS, G.R. No. L- 31845 April 30, 1979 Janine GREAT PACIFIC LIFE ASSURANCE COMPANY v. HONORABLE COURT OF APPEALS G.R. No. L-31845 April 30, 1979 De Castro, J. NOTE: Conditions by the company to approve life insurance: The provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the applicant is not able according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant. FACTS: On March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company for a twenty-year endownment policy on the life of his one-year old daughter Helen Go. Mondragon type-wrote the data on the application form which was signed by private respondent Ngo Hing. The latter paid the annual premium going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific Life. Then on April 30, 1957, Mondragon received a letter from Pacific Life disapproving the insurance application. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner Mondragon to private respondent Ngo Hing. Instead, Mondragon wrote back Pacific Life again strongly

recommending the approval of the 20-year endowment insurance plan to children. Thereafter, Helen Go died of influenza with complication of bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu. ISSUE: Whether the binding deposit receipt constituted a temporary contract of the life insurance in question? HELD: NO, the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time. The binding deposit receipt is, merely conditional and does not insure outright. As held by this Court, where an agreement is made between the applicant and the agent, no liability shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself. As held in De Lim vs. Sun Life Assurance Company of Canada, supra, "a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents ... The contract, to be binding from the date of the application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds of the parties have met in agreement." Other relevant facts: No meeting of the minds: We are not impressed with private respondent's contention that failure of petitioner Mondragon to communicate to him the rejection of the insurance application would not have any adverse effect on the allegedly perfected temporary contract. In this first place, there was no contract perfected between the parties who had no meeting of their minds. Private respondent, being

an authorized insurance agent of Pacific Life at Cebu branch office, is indubitably aware that said company does not offer the life insurance applied for. When he filed the insurance application in dispute, private respondent was, therefore, only taking the chance that Pacific Life will approve the recommendation of Mondragon for the acceptance and approval of the application in question along with his proposal that the insurance company starts to offer the 20-year endowment insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of his one-year old daughter, aside from being an insurance agent and an offense associate of petitioner Mondragon, private respondent Ngo Hing must have known and followed the progress on the processing of such application and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance application.

25. MELECIO COQUIA, MARIA ESPANUEVA and MANILA YELLOW TAXICAB CO., INC. vs. FIELDMEN'S INSURANCE CO., INC., G.R. No. L-23276 November 29, 1968 Terry WEB DIGEST.

FACTS: On Dec. 1, 1961, Fieldmen’s Insurance co. Issued in favor of the Manila Yellow Taxicab a common carrier insurance policy with a stipulation that the company shall indemnify the insured of the sums which the latter wmy be held liable for with respect to “death or bodily injury to any fair paying passenger including the driver and conductor”. The policy also stated that in “the event of the death of the driver, the Company shall indemnify his personal representatives and at the Company’s option may make indemnity payable directly to the claimants or heirs of the claimants.” During the policy’s lifetime, a taxicab of the insured driven by Coquia met an accident and Coquia died. When the company refused to pay the only heirs of Coquia, his parents, they institued this complaint. The company contends that plaintiffs have no cause of action since the Coquias have no contractual relationship with the company.

ISSUE: Whether or not plaintiffs have the right to collect on the policy. RULING: YES. Athough, in general, only parties to a contract may bring an action based thereon, this rule is subject to exceptions, one of which is found in the second paragraph of Article 1311 of the Civil Code of the Philippines, reading: "If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person." This is but the restatement of a well-known principle concerning contracts pour autrui, the enforcement of which may be demanded by a third party for whose benefit it was made, although not a party to the contract, before the stipulation in his favor has been revoked by the contracting parties In the case at bar, the policy under consideration is typical of contracts pour autrui this character being made more manifest by the fact that the deceased driver paid fifty percent (50%) of the corresponding premiums, which were deducted from his weekly commissions. Under these conditions, it is clear that the Coquias — who, admittedly, are the sole heirs of the deceased — have a direct cause of action against the Company, and, since they could have maintained this action by themselves, without the assistance of the insured it goes without saying that they could and did properly join the latter in filing the complaint herein.

26.G.R. No. 113899

OCTOBER 13, 1999

GREAT PACIFIC LIFE ASSURANCE CORP. V. CA

FACTS: A contract of group life insurance was executed between Great Pacific Life Assurance Corporation (Grepalife; insurer) and Development Bank of the Philippines (DBP; creditor of the insured Dr. Wilfredo Leuterio). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for

membership in the group life insurance plan. In his insurance application, he answered that he was in good health and that he had not consulted a doctor or any of the enumerated ailments, including hypertension. On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Consequently, DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. On October 20, 1986, the widow of the late Dr. Leuterio, Medarda V. Leuterio, filed a complaint against Grepalife. During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejias findings, based partly from the information given by Medarda, stated that Dr. Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled out. The RTC ruled in favor of Medarda and held Grepalife liable to pay DBP. This was sustained by the CA.

ISSUE: 1. WON DBP has insurable interest as creditor 2. WON Grepalife should be held liable (this refers to an alleged concealment that Grepalife interposed as its defense to annul the insurance contract). HELD: 1. YES, DBP has insurable interest as creditor. Section 8 of the Insurance Code provides: Unless the policy provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor. The insured Dr. Leuterio did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have been fully paid, an amount to pay the outstanding

indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor. When DBP submitted the insurance claim against Grepalife, the latter denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of Dr. Leuterio. In Gonzales La O vs. Yek Tong Lin Fire & Marine Ins. Co. we held: Insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. * * * Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. * * * Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his own name, especially where the mortgagees interest is less than the full amount recoverable under the policy. Indeed, Insured may be regarded as the real party in interest, although he has assigned the policy for the purpose of collection, or has assigned as collateral security any judgment he may obtain. 2. YES, Grepalife should be held liable. It merely relied on the testimony of Dr. Hernando Mejia, as supported by the information given by the widow of the decedent. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the decedent. Furthermore, there was no sufficient proof that the insured had suffered from hypertension. Aside from the statement of the insured’s widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, Grepalife had not proven nor produced any witness who could attest to Dr. Leuterios medical history. Since Grepalife had failed to establish that there was concealment made by the insured, it cannot refuse payment of the claim. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, Grepalife failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance.

As to Grepalife’s claims that there was no evidence as to the amount of Dr. Leuterios outstanding

indebtedness to DBP at the time of the mortgagors death. The Supreme Court held: Grepalife’s claim is without merit. A life insurance policy is a valued policy. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy. The mortgagor paid the premium according to the coverage of his insurance, which states that: The policy states that upon receipt of due proof of the Debtors death during the terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid.In the event of the debtors death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor. Furthermore, DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan. Considering this supervening event, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity dictates that DBP should not unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio protest). Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage.

27. BANKERS INSURANCE CORP. (Formerly Country Bankers Insurance & Surety Co. Inc.) vs. THE TRAVELLERS INSURANCE AND SURETY CORP., and THE HONORABLE COURT OF APPEALS, G.R No. 82509 August 16, 1989 Jean

travellers Insurance as the insurer of the truck, but the latter failed to act on petitioner's claim. Then petitioner filed a complaint against the private respondent, the driver and the owner of the truck. The RTC rendered a decision in favor of the petitioner and ordered private respondent to pay petitioner the amount paid to PTCI, but dismissed the complaint as against the other two defendants. On appeal, the CA affirmed the finding of the RTC that it was the negligence and recklessness of Alfredo Sion, the driver of the Isuzu Cargo Truck, which led to the vehicular accident. The CA also held that as the insurer of the truck, private respondent is liable to herein petitioner as the subrogee to all the rights and causes of action of the owner of the damaged Toyota Land Cruiser. Nevertheless, the CA dismissed the complaint on the ground that petitioner's cause of action had prescribed because the complaint was not filed until almost seventeen (17) months after the accident. Petitioner company contends that the finding of respondent court that its cause of action had prescribed is erroneous since the one-year prescriptive period under Section 384 of the Insurance Code is counted not from the date of the accident but from the date of the rejection of the claim by the insurer. Petitioner further argues that even assuming that the one-year prescriptive period should be counted from the date of the accident, the running of the period of prescription was interrupted when petitioner filed a notice of claim with respondent insurance company since under the Civil Code an extrajudicial demand is sufficient to interrupt the running of the prescriptive period.

FACTS: A vehicular accident occurred involving a Toyota Land Cruiser owned by Philippine Technical Consultants Inc. (PTCI) and an Isuzu Cargo Truck registered in the name of Avelino Matundan. The Toyota Land Cruiser, which was driven by Norlito R. Limen had stopped at a red light along Epifanio de los Santos Avenue when it was bumped from behind by the Isuzu Cargo Truck driven by Alfredo Sion. The Toyota Land Cruiser suffered extensive damage so that its owner declared a total loss and claimed the proceeds of the insurance policy issued by petitioner Country Bankers Insurance Corporation. Finding the claim to be meritorious, petitioner paid PTCI the amount of eighty-three thousand four hundred seventy pesos (P83,470.00).lâwphî1.ñèt As subrogee to all rights and causes of action of PTCI, petitioner demanded reimbursement from the driver and owner of the Isuzu Cargo truck and from private respondent

ISSUE: Whether or not petitioner's cause of action had prescribed. --- NO! HELD: There is no dispute that respondent insurance company is liable as the insurer of the Isuzu Cargo Truck and should reimburse to petitioner the amount paid by the latter to PTCI for the damage sustained by the Toyota Land Cruiser. Whether or not petitioner's cause of action had prescribed. Section 384 of the Insurance Code (prior to its amendment by B.P. 874) provides that:

Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the amount of his loss, and/or the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought in proper cases, with the Commission or the Courts within one year from date of accident, otherwise the claimant's right of action shall prescribe. [Emphasis supplied]. In the case of Summit Guaranty & Insurance Co., Inc. v. De Guzman [G.R. Nos. 50997, L-48679, L-48758, June 30,1987,151 SCRA 389.] which involves similar facts, in rejecting the insurance company's defense of prescription, the Court held that: Petitioner company is trying to use Section 384 of the Insurance Code as a cloak to hide itself from its liabilities. The facts of these cases * evidently reflect the deliberate efforts of petitioner company to prevent the filing of a formal action against it. Bearing in mind that if it succeeds in doing so until one year lapses from the date of the accident it could set up the defense of prescription, petitioner company made private respondents believe that their claims would be settled in order that the latter will not find it necessary to immediately bring suit. In violation of its duties to adopt and implement reasonable standards for the prompt investigation of claims, and with manifest bad faith, petitioner company devised means and ways of stalling settlement proceedings. To prevent the insurance company from evading its responsibility to the insured through this clever scheme, and to protect the insuring public against similar acts by other insurance companies, the Court held that the oneyear period under Section 384 should be counted not from the date of the accident but from the date of the rejection of the claim by the insurer. The Court further held that it is only from the rejection of the claim by the insurer that the insured's cause of action accrued since a cause of action does not accrue until the party obligated refuse, expressly or impliedly, to comply with its duty. In the instant case, petitioner sent a notice of claim to respondent insurance company as early as July 26, 1979 or two months after the accident. This was followed by a letter dated August 3, 1979 urging respondent insurance company to take it appropriate action" on petitioner's claim. However, it was only a year later, on August 3, 1980 that respondent replied to petitioner's letter

informing it that they could not take appropriate action on petitioners claim because the attending adjuster was still negotiating the case. Two months later, when respondent insurance company still failed to act on its claim, petitioner filed the present case in court. During the hearing before the RTC, respondent insurance company never raised the defense of prescription. It was only on appeal that Section 384 of the Insurance Code was invoked by respondent insurance company and the CA, relying on the plain language of the law, dismissed the case on the ground of prescription. In the light of the Court's decision in the Summit case, respondent insurance company can no longer invoke Section 384 to defeat petitioner's claim. As aforestated, it was precisely to prevent unscrupulous insurance companies from using Section 384 in evading their responsibilities that the Court applied Section 384 strictly against insurance companies in the Summit case. The requirement that any claim or action for recovery of damage under an insurance policy must be brought within one year from the date of the accident was intended to ensure that suits be brought by the insured while evidence as to the origin and cause of destruction have not yet disappeared.lâwphî1.ñèt This is to enable the insurance companies to make proper assessment of whether or not the insured can recover and, if so, to determine the amount recoverable. However, where, as in this case, the delay in bringing the suit against the insurance company was not caused by the insured or its subrogee but by the insurance company itself, it is unfair to penalize the insured or its subrogee by dismissing its action against the insurance company on the ground of prescription. The latter should bear the consequences of its failure to act promptly on the insured's claim. Under the law, insurance companies are duty bound to adopt and implement reasonable standards for the prompt, fair and equitable settlement of claims [Section 241, Insurance Code]. Therefore, considering the attendant facts of this case, the Court finds that the doctrine laid down in the Summit case is applicable, and accordingly holds that petitioner's cause of action has not prescribed. It might not be amiss to state that Section 384 was amended in 1985 by Batas Pambansa Blg. 874. The amendment was inserted by the then Batasang Pambansa after realizing that Section 384 of the Insurance Code has created so many problems for the insuring public [Summit, supra at p. 398]. Thus, as amended, the law now provides that:

Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought in proper cases, with the Commissioner or the Courts within one year from denial of the claim, otherwise the claimant's right of action shall prescribe. [Emphasis supplied].