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CA (MENDOZA) NATURE The petition herein seeks the review and reversal of the decision of respondent Court of Appeals affirmingin toto the judgment of the Regional Trial Court inanaction for damages filed by private respondentVicente Mendoza, Jr. as heirof his mother who waskilled in a vehicular accident. FACTS -an old lady was hit by a taxicab. The taxicab waslater identified and a case was filedagainst the driverand owner. Later, an amendment was filed to includethe insurancecompany. RTC and CA ordered that theowner, driver as well as the insurancecompany beheld solidarily liable. ISSUE WON RTC and CA erred HELD YES- Where the contract provides for indemnity againstliability to third persons, then thirdpersons to whomthe insured is liable can sue the insurer. Wherethecontract is for indemnity against actual loss orpayment, then third personscannot proceed against the insurer, the contract being solely to reimbursetheinsured for liability actually discharged by him thru payment to third persons, said third persons recourse being thus limited to the insured alone. Butin the case at bar, there was no contract shown.What then was the basis of the RTC and the CAto saythat the insurance contract was a third-party liability insurance policy? Consequently, thetrial court was confused as it did not distinguishbetween theprivate respondent's cause of actionagainst the owner and the driver of the LadyLovetaxicab and his cause of action against petitioner.The former is based on tortsand quasi-delicts whilethe latter is based on contract.- Even assuming arguendothat there was such acontract, private respondent's cause of action cannotprevail because he failed to file the writtenclaim mandated by the Insurance Code (beforeit wasamended-action must be brought withinsix months from date of the accident (this iswhats applicable here) ; after amendment-"action or suit for recovery of damage due to loss orinjury mustbe brought in proper cases, with theCommissioner or the Courts within oneyear fromdenial of the claim, otherwise the claimant's right of action shall prescribe" ) He is deemed, under thislegal provision, to have waived his rights as againstpetitioner-insurer. Disposition: petition granted GULF RESORTS INC V PHIL GULF INSURANCE Plaintiff correctly points out that a policy of insurance is a contract of adhesion hence, where the language used in an insurance contract or application is such as to create ambiguity the same should be resolved against the party responsible therefor, i.e., the insurance company which prepared the contract. To the mind of [the] Court, the language used in the policy in litigation is clear and unambiguous hence there is no need for interpretation or construction but only application of the provisions therein. Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only to petitioners two swimming pools. Gulf Resorts agreed to insure with Phil Charter the properties covered by t he AHAC policy provided that the policy wording and rates in said policy be copied in the policy to be issued by Phil Charter. Phil

Charter issued Policy No. 31944 to Gulf Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant, the shock endorsement provided that In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged. Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944 for damages on its properties. Respondent denied petitioners claim on the ground that its insurance policy only afforded earthquake shock coverage to the t wo swimming pools of the resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same premium it had paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC. Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts and does not extend to all properties damaged therein Held: YES. All the provisions and riders taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marine insurance, the premium becomes a debt as soon as the risk attaches. In the subject policy, no premium payments were made with regard to earthquake shock coverage except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioners insurance policies with AHAC. -A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimming pools. 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. Thus, an insurance contract exists where the following elements concur: 1. The insured has an insurable interest; 2. The insured is subject to a risk of loss by the happening of the designated peril; 3. The insurer assumes the risk; 4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and 5. In consideration of the insurer's promise, the insured pays a premium.[26] (Emphasis ours) An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril.[27] In fire, casualty, and marine insurance, the premium payable becomes a debt as soon as the risk attaches.[28] In the subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. This is consistent with the history of petitioners previous insurance policies from AHAC-AIU. -In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the general rule that insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it.[31] A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his "adhesion" thereto. Through the years, the courts have held that in these type of contracts, the parties do not bargain on equal footing, the weaker party's participation being reduced to the alternative to take it or leave it. Thus, these contracts are viewed as traps for the weaker party whom the courts of justice must protect.[32] Consequently, any ambiguity therein is resolved against the insurer, or construed liberally in favor of the insured. We cannot apply the general rule on contracts of adhesion to the case at bar. Petitioner cannot claim it did not know the provisions of the policy. From the inception of the policy, petitioner had required the respondent to copy verbatim the provisions and terms of its

latest insurance policy from AHAC-AIU. The testimony of Mr. Leopoldo Mantohac, a direct participant in securing the insurance policy of petitioner, is reflective of petitioners knowledge

NEW WORLD INTL V NYK Petitioner New World International Development (Phils.), Inc. (New World) bought from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency generator sets worth US$721,500.00. DMT shipped the generator sets by truck from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in Chicago, Illinois. From there, the shipment went by train to Oakland, California, where it was loaded on S/S California Luna V59, owned and operated by NYK Fil-Japan Shippin

g Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading, declaring that it received the goods in good condition. NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose captain filed a sea protest on arrival at the Manila South Harbor on October 5, 1993 respecting the loss and damage that the goods on board his vessel suffered. Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargo-handling operator, received the shipment on October 7, 1993. Upon inspection of the three container vans separately carrying the generator sets, two vans bore signs of external damage while the third van appeared unscathed. The shipment remained at Pier 3s Container Yard under Marinas care pending clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs authorities allowed petitioners custo ms broker, Serbros Carrier Corporation (Serbros), to withdraw the shipment and deliver the same to petitioner New Worlds job site in Makati City. An examination of the three generator sets in the presence of petitioner New Worlds representative s, Federal Builders (the project contractor) and surveyors of petitionerNew Worlds insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three sets suffered extensive damage and could no longer be repaired. For these reasons, New World demanded recompense for its loss from respondents NYK, DMT, Advatech, LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged receipt of the demand, both denied liability for the loss. Since Seaboard covered the goods with a marine insurance policy, petitioner New World sent it a formal claim dated November 16, 1993. Replying on February 14, 1994, Seaboard required petitioner New World to submit to it an itemized list of the damaged units, parts, and accessories, with corresponding values, for the processing of the claim. But petitioner New World did not submit what was required of it, insisting that the insurance policy did not include the submission of such a list in connection with an insurance claim. Reacting to this, Seaboard refused to process the claim. On October 11, 1994 petitioner New World filed an action for specific performance and damages against all the respondents before the Regional Trial Court (RTC) ofMakati City, Branch 62, in Civil Case 94-2770. On August 16, 2001 the RTC rendered a decision absolving the various respondents from liability with the exception of NYK. The RTC found that the generator sets were damaged during transit while in the care of NYKs vessel, ACX Ruby. The latter failed, according to the RTC, to exercise the degree of diligence required of it in the face of a foretold raging typhoon in its path. The RTC ruled, however, that petitioner New World filed its claim against the vessel owner NYK beyond the one year provided under the Carriage of Goods by Sea Act (COGSA). New World filed its complaint on October 11, 1994 when the deadline for filing the action (on or before October 7, 1994) had already lapsed. The RTC held that the one-year period should be counted from the date the goods were delivered to the arrastre operator and not from the date they were delivered to petitioners job site. [1]

As regards petitioner New Worlds claim against Seaboard, its insurer, the RTC held that the latter cannot be faulted for den ying the claim against it since New Worldrefused to submit the itemized list that Seaboard needed for assessing the damage to the shipment. Likewise, the belated filing of the complaint prejudiced Seaboards right to pursue a claim against NYK in the event of subrogation. On appeal, the Court of Appeals (CA) rendered judgment on January 31, 2006,[2] affirming the RTCs rulings except with respect to Seaboards liability. The CA held that petitioner New World can still recoup its loss from Seaboards marine insurance policy, considering a) that the submission of the itemized listing is an unreasonable imposition and b) that the one-year prescriptive period under the COGSA did not affect New Wor lds right under the insurance policy since it was the Insurance Code that governed the relation between the insurer and the insured. Although petitioner New World promptly filed a petition for review of the CA decision before the Court in G.R. 171468, Seaboard chose to file a motion for reconsideration of that decision. On August 17, 2006 the CA rendered an amended decision, reversing itself as regards the claim against Seaboard. The CA held that the submission of the itemized listing was a reasonable requirement that Seaboard asked of New World. Further, the CA held that the one-year prescriptive period for maritime claims applied to Seaboard, as insurer and subrogee of New Worlds right against the vessel owner. New Worlds failure to comply promptly with what was required of it prejudiced such right. Instead of filing a motion for reconsideration, petitioner instituted a second petition for review before the Court in G.R. 174241, assailing the CAs amended decision. The Issues Presented a) In G.R. 171468, whether or not the CA erred in affirming the RTCs release from liability of respondents DMT, Advatech, LEP, LEP Profit, Marina, and Serbros who were at one time or another involved in handling the shipment; and b) b) In G.R. 174241, 1) whether or not the CA erred in ruling that Seaboards request from petitioner New World for an itemized list is a reasonable imposition and did not violate the insurance contract between them; and 2) whether or not the CA erred in failing to rule that the one-year COGSA prescriptive period for marine claims does not apply to petitioner New Worlds prosecution of its claim against Seaboard, its insurer. The Courts Rulings In G.R. 171468 -Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP Profit, Marina and Serbros in handling and transporting its shipment from Wisconsinto Manila collectively resulted in the damage to the same, rendering such respondents solidarily liable with NYK, the vessel owner. But the issue regarding which of the parties to a dispute incurred negligence is factual and is not a proper subject of a petition for review on certiorari. And petitioner New World has been unable to make out an exception to this rule.[3] Consequently, the Court will not disturb the finding of the RTC, affirmed by the CA, that the generator sets were totally damaged during the typhoon which beset the vessels voyage from Hong Kong to Manila and that it was her negligence in continuing with that journey despite the adverse condition which caused petitioner New Worlds loss. That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code, does not automatically relieve the common carrier of liability. The latter had the burden of proving that the typhoon was the proximate and only cause of loss and that it exercised due diligence to prevent or minimize such loss before, during, and after the disastrous typhoon.[4] As found by the RTC and the CA, NYK failed to discharge this burden. In G.R. 174241 -One. The Court does not regard as substantial the question of reasonableness of Seaboards additional requirement of an itemized listing of the damage that the generator sets suffered. The record shows that petitioner New World complied with the documentary requirements evidencing damage to its generator sets. The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy insured against all causes of conceivable loss or damage except when otherwise excluded or when the loss or damage was due to fraud or intentional misconduct committed by the insured. The policy covered all losses during the voyage whether or not arising from a marine peril.[5] Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in voyage, or vessels unseaworthiness, among others.[6] But Seaboard had been unable to show that petitioner New Worlds loss or damage fell within some or one of the enumerated exceptions.

What is more, Seaboard had been unable to explain how it could not verify the damage that New Worlds goods suffered going by the documents that it already submitted, na mely, (1) copy of the Suppliers Invoice KL2504; (2) copy of the Packing List; (3) copy of the Bill of Lading 01130E93004458; (4) the Delivery of Waybill Receipts 1135, 1222, and 1224; (5) original copy of Marine Insurance Policy MA-HO-000266; (6) copies of Damage Report from Supplier and Insurance Adjusters; (7) Consumption Report from the Customs Examiner; and (8) Copies of Received Formal Claim from the following: a) LEP International Philippines, Inc.; b) Marina Port Services, Inc.; and c) Serbros Carrier Corporation.[7] Notably, Seaboards own marine surveyor attended the inspection of the generator sets. Seaboard cannot pretend that the above documents are inadequate since they were precisely the documents listed in its insurance policy.[8] Being a contract of adhesion, an insurance policy is construed strongly against the insurer who prepared it. The Court cannot read a requirement in the policy that was not there. Further, it appears from the exchanges of communications between Seaboard and Advatech that submission of the requested itemized listing was incumbent on the latter as the seller DMTs local agent. Petitioner New World should not be made to suffer for Advatechs shortcomings. Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the ship shall be discharged from all liability in case of loss or damage unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. But whose fault was it that the suit against NYK, the common carrier, was not brought to court on time? The last day for filing such a suit fell on October 7, 1994. The record shows that petitioner New World filed its formal claim for its loss with Seaboard, its insurer, a remedy it had the right to take, as early as November 16, 1993 or about 11 months before the suit against NYK would have fallen due. In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would have been subrogated to petitioner New Worlds right to recover from NYK. And it could have then filed the suit as a subrogee. But, as discussed above, Seaboard made an unreasonable demand on February 14, 1994 for an itemized list of the damaged units, parts, and accessories, with corresponding values when it appeared settled that New Worlds loss was total and when the insurance policy did not require the production of such a list in the event of a claim. Besides, when petitioner New World declined to comply with the demand for the list, Seaboard against whom a formal claim was pending should not have remained obstinate in refusing to process that claim. It should have examined the same, found it unsubstantiated by documents if that were the case, and formally rejected it. That would have at least given petitioner New World a clear signal that it needed to promptly file its suit directly against NYK and the others. Ultimately, the fault for the delayed court suit could be brought to Seaboards doorstep. Section 241 of the Insurance Code provides that no insurance company doing business in the Philippines shall refuse without just cause to pay or settle claims arising under coverages provided by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim. And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the ceiling prescribed by the Monetary Board. Notably, Seaboard already incurred delay when it failed to settle petitioner New Worlds claim as Section 243 required. Under Section 244, a prima facie evidence of unreasonable delay in payment of the claim is created by the failure of the insurer to pay the claim within the time fixed in Section 243. Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of the delay until the claim is fully satisfied at the rate of twice the ceiling prescribed by the Monetary Board. The term ceiling prescribed by the Monetary Board means the legal rate of interest of 12% per annum provided in Central Bank Circular 416, pursuant to Presidential Decree 116.[9] Section 244 of the Insurance Code also provides for an award of attorneys fees and other expenses incurred by the assured due to the unreasonable withholding of payment of his claim. In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc.,[10] the Court regarded as proper an award of 10% of the insurance proceeds as attorneys fees. Such amount is fair considering the length of time that has passed in prosecuting the claim.[11] Pursuant to the Courts ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[12] a 12% interest per annum from the

finality of judgment until full satisfaction of the claim should likewise be imposed, the interim period equivalent to a forbearance of credit. Petitioner New World is entitled to the value stated in the policy which is commensurate to the value of the three emergency generator sets or US$721,500.00 with double interest plus attorneys fees as discussed above. WHEREFORE, the Court DENIES the petition in G.R. 171468 and AFFIRMS the Court of Appeals decision of January 31, 2006 insofar as petitioner New World International Development (Phils.), Inc. is not allowed to recover against respondents DMT Corporation, Advatech Industries, Inc., LEP International Philippines, Inc., LEP Profit International, Inc., Marina Port Services, Inc. and Serbros Carrier Corporation. With respect to G.R. 174241, the Court GRANTS the petition and REVERSES and SETS ASIDE the Court of Appeals Amended Decision of August 17, 2006. The Court DIRECTS Seaboard-Eastern Insurance Company, Inc. to pay petitioner New World International Development (Phils.), Inc. US$721,500.00 under Policy MA-HO-000266, with 24% interest per annum for the duration of delay in accordance with Sections 243 and 244 of the Insurance Code and attorneys fees equivalent to 10% of the insurance proceeds. Seaboard shall also pay, from finality of judgment, a 12% interest per annum on the total amount due to petitioner until its full satisfaction.

WHITEGOLD MARINE SERVICES INC V PIONEER INSURANCE (SEC 2 ) White Gold Marine Services, Inc. (White Gold) 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 (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and Acceptance.[3] 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 latters unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code, while Pioneer violated Sections 299,[6] 300[7] and 301[8] 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. ISSUE: WON STEAMSHIP MUTUAL WAS ENGAGED IN THE INSURANCE BUSINESS? SC RULING: The Court ruled in the affirmative. 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.[12] 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.[13] 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. 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.[17] Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense costs.[18] 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.[19] 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[20] 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. 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: SEC. 299 The Steamship Mutual Underwriting Association (Bermuda) Ltd., and Pioneer Insurance and Surety Corporation are ORDERED to obtain licenses and to secure proper authorizations to do business as insurer and insurance agent, respectively.

Republic v Del MontE Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million pesos for service contracts with Del Monte, and such was sourced from the counterbond posted by Vilfran. CISCO issued the counterbond. CISCO opposed but was rebuffed. The RTC released a motion for execution commanding the sheriff to levy the amount on the property of CISCO. To completely satisfy the amount, the Insurance Commissioner was also commanded to withdraw the security deposit filed by CISCO with the Commission according to Sec 203 of the Insurance Code. Insurance Commissioner Malinis was ordered by the RTC to withdraw the security bond of CISCO for the payment of the insurance indemnity won by Del Monte Motor against Vilfran Liner, the insured. Malinis didnt obey the order, so the respondent moved to cite him in contempt of Court. The RTC ruled against Malinis because he didnt have legal basis.

Issues: 1. Whether or not the security deposit held by the Insurance Commissioner pursuant to Section 203 of the Insurance Code may be levied or garnished in favor of only one insured. 2. Whether or not the Insurance Commissioner has power to withhold the release of the security deposit. Held: No. Yes. Petition granted. Ratio: 1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held on deposit pursuant to the requirement of the Commissioner. The court also claimed that the security deposit shall be (1) answerable for all the obligations of the depositing insurer under its insurance contracts; (2) at all times free from any liens or encumbrance; and (3) exempt from levy by any claimant. To allow the garnishment of that deposit would impair the fund by decreasing it to less than the percentage of paid -up capital that the law requires to be maintained. Further, this move would create, in favor of respondent, a preference of credit over the other policy holders and beneficiaries. Also, the securities are held as a contingency fund to answer for the claim s against the insurance company by all its policy holders and their beneficiaries. This step is taken in the event that the company becomes insolvent or otherwise unable to satisfy the claims against it. Thus, a single claimant may not lay stake on the securities to the exclusion of all others. The other parties may have their own claims against the insurance company under other insurance contracts it has entered into. 2. The Insurance Code has vested the Office of the Insurance Commission with both regulatory and adjudicatory authority over insurance matters. Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings, instructions, circulars, orders and decisions as he may deem necessary to secure the enforcement of the provisions of th is Code. The commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to persons or entities desirin g to engage in insurance business in the Philippines;16 (2) revoke or suspend these certificates of authority upon finding grounds for the revocation or suspension; (3) impose upon insurance companies, their directors and/or officers and/or agents appropriate penalties -- fines, suspension or removal from office -- for failing to comply with the Code or with any of the commissioner's orders, instructions, regulations or rulings, or for otherwise conducting business in an unsafe or unsound manner. Included here is the duty to hold security deposits under Secs 191 and 202 of the Code for the benefit of policy holders. Sec 192, on the other hand, states: the securities deposited as aforesaid shall be returned upon the company's making application therefor and proving to the sa tisfaction of the Commissioner that it has no further liability under any of its policies in the Philip pines. He has been given great discretion to regulate the business to protect the public. Also An implied trust is created by the l aw for the benefit of all claimants under subsisting insurance contracts issued by the insurance company. He believed that the security deposit was exempt from execution to protect the policy holders. -the business of insurance is imbued with public interest. It is subject to regulation by the State, with respect not only to the relations between the insurer and the insured, but also to the internal affairs of insurance companies.[8] As this case is undeniably endowed with public interest and involves a matter of public policy, this Court shall not shirk from its duty to educate the bench and the bar by formulating guiding and controlling principles, precepts, doctrines and rules.

Philippine Health Care Providers v CIR Facts:

The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found that the organization had a deficiency in the payment of the DST under Section 185 of the 1997 Tax Code which stipulated its implementation: 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 o ther branch of insurance (except life, marine, inland, and fire insurance) The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for 1996-1997 in the total amount of P224,702,641.18. The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the company had to go to the CTA. The latter declared judgment against them and reduced the taxes. It ordered them to pay 22 million pesos for deficiency VAT for 1997 and 31 million deficiency VAT for 1996. CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to 1997. Issues: WON 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. Petition dismissed. Ratio: 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. The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction of the business. 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. 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. 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 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. Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. 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 contra ct.

Philamcare v CA Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family members were treated to heart trouble, asthma, diabetes, etc. The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After the period expired, he was given an expanded coverage for Php 75,000. During the period, he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but the petitioner denied it saying that he concealed his medical history by answering no to the aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband subsequently passed away. She filed

a case in the trial court for the collection of the amount plus damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted awards for damages. Hence, this appeal. Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause under the Insurance Code does not apply. Held: No. Petition dismissed Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended that there was no indemnification unlike in insurance contracts. It supported this claim by saying that it is a health maintenance organization covered by the DOH and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply because two -year and not one-year effectivity periods were required. 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 states: every person has an insurable interest in the life and health: (1) of himself, of his spouse and of his children.

In this case, the husbands health was the insurable interest. The health care agreement was in the nature of non -life insurance, which is primarily a contract of indemnity. The provider must pay for the medical expenses resulting from sickness or injury. While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that: that any physician is, by these presents, expressly authorized to d isclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members. This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The contract also authorized Philam to inquire directly to his medical history. Hence, the contention of concealment isnt valid. They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose information was a grounds for revocation simply because the answer assailed by the company was the heart condition question based on the insureds opinion. He wasnt a medical doctor, so he cant accurately gauge his condition. Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider. Having assumed a responsibility under the agreement, petitioner is bound to answer the same 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 whenever he avails of the covered benefits which he has prepaid. Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of insurance. As to cancellation procedure- Cancellation requires certain conditions: 1. 2. 3. Prior notice of cancellation to insured; Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; Must be in writing, mailed or delivered to the insured at the address shown in the policy;

4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based

None were fulfilled by the provider. As to incontestability- The trial court said that under the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.

ETERNAL VS. PHILAMLIFE FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The relevant provisions of the policy are: ELIGIBILITY. xx EVIDENCE OF INSURABILITY. xx LIFE INSURANCE BENEFIT. xx EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company. xx Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. Eternal complied by submitting a letter dated December 29, 1982, containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as new business was a certain John Chuang. His balance of payments was 100K. on August 2, 1984, Chuang died. Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuangs death. Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a letter requiring Eternal to submit the additional documents relative to its insurance claim for Chuangs death. Eternal transmitted the required documents through a letter which was received by Philamlife. After more than a year, Philamlife had not furnished Eternal with any reply to the latters insurance claim. This prompte d Eternal to demand from Philamlife the payment of the claim for PhP 100,000. In response to Eternals demand, Philamlife denied Eternals insurance claim in a l etter a portion of which reads: The deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No application for Group Insurance was submitted in our office prior to his death on August 2, 1984 Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor of Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy. CA reversed. Hence this petition. ISSUE: WON Philamlife should pay the 100K insurance proceeds HELD: petition granted.

YES. An examination of the provision of the POLICY under effective date of benefit, would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective.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 latters interest. On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a partys purchase of a memoria l lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of the Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.

Filipinas Cia de Seguros vs Christern Fact: Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de Seguros to cover merchandise contained in a building. During the Japanese military occupation, this same merchandise and the building were burned, so Huenefeld filed a claim under the policy. However, Filipinas Compania de Seguros refused to pay alleging that the policy had ceased to be in force when the United States declared war against Germany. Filipinas Compania contended that although organized and created under Philippine laws, Huenefeld is a German subject, and hence, a public enemy, since majority of its stockholders are Germans. On the other hand, Filipinas Compania is under American jurisdiction. The Director of Bureau of Financing, Philippine Executive Commission ordered Filipinas Compania to pay, so Filipinas Compania did pay. The case at bar is about the recovery of that sum paid. ISSUES: 1. Whether or not Christern Huenefeld is a German subject. 2. Whether the fire insurance policy is enforceable against an enemy state. On October 1, 1941, the respondent corporation, Christern Huenefeld and Co., Inc., after payment of corresponding premium, obtained from the petitioner, Filipinas Cia de Seguros fire policy covering merchandise contained in a building located at Binondo, Manila. On February 27, 1942 or during the Japanese military occupation, the building and insured merchandise were burned. In due time the respondent submitted to the petitioner its claim under the policy. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent that ceased to be a force on the date the United States declared war against Germany, the respondent corporation (through organized under and by virtue of the laws of Philippines) being controlled by German subjects and the petitioner being a company under American jurisdiction when said policy was issued on October 1, 1941. The theory of the

petitioner is that the insured merchandise was burned after the policy issued in 1941 had ceased to be effective because the outbreak of the war between United States and Germany on December 10, 1941, and that the payment made by the petitioner to the respondent corporation during the Japanese military occupation was under pressure. Issue: W/N a public enemy can be insured. Ruling: Since the majority of stockholders of the respondent corporation were German subjects, the respondent became an enemy of the state upon the outbreak of the war between US and Germany. The English and American cases relied upon by the Court of Appeals lost in force upon the latest decision of the Supreme Court of US in which the control test has adopted. Since World War I, the determination of enemy nationality of corporations has been discussed in many countries, belligerent and neutral. A corporation was subject to enemy legislation when it was controlled by enemies, namely managed under the influence of individuals or corporations themselves considered as enemies... 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.The respondent having an enemy corporation on December 10, 1941, the insurance policy issued in its favor on October 1, 1941, by the petitioner had ceased to be valid and enforceable, and since the insured good were burned during the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However, elementary rule of justice (in the absence of specific provisions 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.

CONSTANTINO V. ASIA LIFE- NON-PAYMENT OF INSURANCE PREMIUMS Facts: > Appeal consolidates two cases. > Asia life insurance Company (ALIC) was incorporated in Delaware. > For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary. First premium covered the period up to Sept. 26, 1942. No further premiums were paid after the first premium and Arcadio died on Sept. 22, 1944. > Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945. > On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20 years. The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940. Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly premiums were paid until Nov. 18, 1941. Last payment covered the period until Jan. 31, 1942. Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary. > Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC. Aside from this the insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942. > Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such payment shall cause this policy to lapse unless and except as kept in force by the grace period condition. > Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the policies less all sums due for premiums in arrears. They also allege that non-payment of the premiums were caused by the closing of ALICs offices during the war and the impossible circumstances by the war, therefore, they should be excused and the policies should not be forfeited. > Lower court ruled in favor of ALIC. -FIRST CASE: Respondent Corporation was paid P 176.04 as annual premium by Arcadio Constantino in exchange for policy no. 93212 on 1941 for P 3,000 which lasted for 20 years. Petitioner Paz Constantino was made beneficiary. However after the first

payment, no further premiums were made. Thereafter the insured died on 1944. Later, due to the war (Japanese occupation) Respondent Corporation had to close down its branch in the country. SECOND CASE: Similarly, Respondent Corporation issued on 1938 another insurance policy no. 78145 for Spouses Ruiz and Peralta also for P 3,000, lasting for 20 years. Regular payments were made however due also to the war, it became impossible to transact further payments. The insured nevertheless was able to borrow P 234 from the policy. Ruiz died on 1945. Peralta was the beneficiary. In both cases the plaintiffs demanded payment but was refused due to Respondent Corporations refusal on the ground of nonpayment of the premiums. The lower court favored Respondent. Issues: (1) Whether or not the beneficiaries are entitled to recover the amount insured despite non-payment caused by the Japanese occupation. (2) Whether or not the periodic payments of the premiums, those after the first, is not an obligation of the insured so that it is not a debt enforceable by the action of the insurer. Held: (1) The beneficiaries are not entitled to recover for non-payment despite the presence of war. Contracts of insurance are contracts of indemnity within the terms and condition found therein. An insurance company for certain considerations guarantee the insured against loss or damage as may be stipulated, and when called to pay, the insurer may insist on the fulfillment of said stipulations. Failure of the insured to do so disqualifies recovery for the loss. Thus the terms of the policy determines the insurers liability. Compliance to the terms of the policy is a must as it is a condition precedent to the right of recovery. Therefore, from the terms of the policy it is clear that non-payment of premium produces avoidance (forfeiture of the policy). Moreover, since act 2427, Philippine law on insurance and the Civil Code) are mostly based from the Civil Code of California, An intention to supplement our laws with the prevailing principles of the US arises. Thus, Prof. Vance of Yaled declares that the United States Rule must be followed, where the contract is not merely suspended but is abrogated by reason of non-payment of premiums since the time of payments is peculiar to the essence of the contract. Further it would be unjust to permit the insurer to r etain the reserve value of the policy or the excess of premiums paid over the actual risk when the policy was still effective as held in the Statham Case which was more logical and juridically sound. In said case it was hold that promptness of payment is essential in the business of life insurance since all calculations of the company is based on the hypothesis of prompt payments. Forfeiture for nonpayment is necessary to protect said business from embarrassment otherwise confusion would abound. And that delinquency cannot be tolerated nor redeemed except at the option of the company. Lastly parties contracted both for peace and war times since the policies contained also wartime days. It follows that the parties contemplated uninterrupted operation of the contract even if armed conflict ensues. (2) The annual premium is not a debt, nor is it an obligation which the insurer can maintain an action against the insured; nor its settlement governed by the rules on payment of debts. A contract of insurance is sui generis. This means though the insured may hold the insurer to the contract by the fulfillment of the condition, the latter has no power or right to compel the insured to maintain the contract relation longer than the insured may desire. It is optional upon the insured.

Great Pacific Life vs. CA

There was an existing group life insurance executed between Great Pacific Life Assurance (Grepalife) and the Development Bank of the Philippines (DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. In November 1983, Wilfredo Leuterio, mortgagor of DBP applied to be a member of the group life insurance. He filled out a form where he indicated he never consulted any physician regarding any illness (heart condition etc) and that he is in good health. He was eventually included in the group life insurance and he was covered for the amount of his indebtedness (P86,200.00).

In August 1984, Wilfredo died. DBP submitted a death claim but it was denied by Grepalife as it insisted that Wilfredo actually concealed that he was suffering from hypertension at the time of his insurance application. Grepalife relied on the statement made by the doctor who issued Wilfredos death certificate wherein it was stated that Wilfredos immediate cause of death was massive cerebral hemorrhage secondary to hypertension or hypertension as a possible cause of death . Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuterio (widow) sued Grepalife. Grepalife assailed the suit and insisted that Medarda is not a proper party in interest. The lower court ruled in favor of Medarda and the court ordered Grepalife to pay the amount of the insurance to DBP. The Court of Appeals affirmed this decision in 1993. Grepalife appealed to the Supreme Court. In 1995, pending resolution of the case in the SC, DBP foreclosed the property of Medarda. ISSUE: Whether or not Grepalife is liable to pay the insurance claim. HELD: Yes. Grepalife is liable to pay the insurance claim. Medarda is a proper party in interest (note that it was Wilfredo who has been paying the premium, as the insured, he is the real party in interest and this status was transferred to his widow). The group life insurance or mortgage redemption insurance provides that DBP as the mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredos death before his indebtedness to DBP is paid, proceeds from the insurance shall first be applied to the s um of the balance insured. But this does not cease Wilfredo to be a party to the insurance contract. Grepalife failed to prove that Wilfredo concealed that he was suffering from hypertension at the time of his application. The doctors finding as to the cause of death is not conclusive because no autopsy was conducted. The doctor who issued the death certificate has no knowledge of Wilfredos hospital confinement [if there are any]. 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. Grepalife must however pay the claim to Medarda considering that DBP already foreclosed the property. -The rationale of a group of insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is a devi ce for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the mortgagee a party to the contract. The 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, such as a mortgagee. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.