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Missing: Travellers Insurance v. CA


Plaintiff 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 or AHAC-AIU.
In the first four insurance policies issued by AHAC-AIU the risk of loss from earthquake shock was
extended to only the plaintiffs two swimming pools, thus, earthquake shock endt. Subsequently,
AHAC-AIU issued in the plaintiffs favor Policy number 206-4182383-0 covering the period March 14,
1988 to March 14, 1989 and in the said policy, the earthquake endorsement clause was deleted and
the entry under Endorsements/Warranties at the time of issue read that plaintiff renewed its policy
with AHAC-AIU for the period of March 14, 1989 to March 14, 1990 under policy number 206-
4568061-9 which carried the entry under Endorsement/Warranties at Time of Issue which read
Endorsement to Include Earthquake Shock in the amount of P10,700 and paid P42,658.14 as
premium thereof.

The plaintiff agreed to insure with defendant the properties covered by AHAC-AIU Policy
number 206-4568061-9 provided that the policy wording and rates in the said policy be copied in the
policy to be issued by defendant. The defendant then issued Policy number 31944 to plaintiff covering
the period of March 14, 1990 to March 14, 1991 for P10,700,600 for a total premium of P45,159.92.
In Policy number 31944 issued by defendant, the shock endorsement provide:
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.

That in the said policy, the word included was deleted. On July 16, 1990 an earthquake
struck Central Luzon and Northern Luzon and the plaintiffs properties covered by Policy No. 31944
issued by defendant, including the two swimming pools in its Agoo Playa Resort were damaged.

After the earthquake, petitioner advised respondent that it would be making a claim under its
Insurance Policy No. 31944 for damages on its properties. Respondent instructed petitioner to file a
formal claim, then assigned the investigation of the claim to an independent claims adjuster. On July
30, 1990, respondent through its adjuster, requested petitioner to submit various documents in
support of its claim. Subsequently, the adjuster rendered a decision saying except for the swimming
pools, all affected items have no coverage for earthquake shocks. Petitioner then filed its formal
demand for settlement for the damage to all its properties in the Agoo Playa Resort.

The regional trial court ruled in favor of respondent stating that only the 2 swimming pools
had earthquake shock coverage. Upon appeal, the appellate court affirmed the decision of the trial

Whether or not the other properties in the Agoo Playa Resort are included in the earthquake
shock coverage of the said insurance policy

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 policy
cannot be construed piecemeal.

Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other
provisions. 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.

A careful examination of the premium recapitulation will show that it is the clear intent of the
parties to extend earthquake coverage shock only to the 2 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 similar risk
5. in consideration of the insurers promise, the insured pays a premium

an insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril. In the subject policy, no premium payments were made with
regard to earthquake shock coverage, except on the 2 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.
Hence, the judgment of the Court of Appeals is affirmed.

G.R. No. 154514; July 28, 2005
(BERMUDA) LTD., respondents

White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual
through Pioneer. It was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts
evidencing payments. When White Gold failed to fully pay its accounts, Steamship Mutual refused to
renew the coverage.

Steamship Mutual filed a case against White Gold for collection of sum of money. White Gold filed a
complaint before the Insurance Commission claiming that Steamship Mutual violated Sections
186 and 187 of the Insurance Code, while Pioneer violated Sections 299-301 in relation to Sections
302-303. It was dismissed, ruling that there was no need for Steamship Mutual to secure a license
because it was not engaged in the insurance business, as a Protection and Indemnity Club (P & I
Club). Pioneer also need not obtain another license as insurance agent and/or a broker for
Steamship Mutual. Moreover, Pioneer was already licensed. CA affirmed. Hence, the petition.

A P & I Club is an association composed of ship owners in general who band together for the specific
purpose of providing insurance cover on a mutual basis against liabilities incidental to ship owning
that the members incur in favor of third parties. As a P & I Club, Steamship Mutuals 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.

Whether Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines. YES
Whether Pioneer needs a license as an insurance agent/broker for Steamship Mutual. YES

Section 2 (2) of the Insurance Code enumerates what constitutes doing an insurance business or
transacting an insurance business. 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. 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.

In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as
the losses incident to a marine adventure. A mutual insurance company is a cooperative enterprise
where the members are both the insurer and insured. Additionally, mutual insurance associations, or
clubs, provide three types of coverage, namely, protection and indemnity, war risks, and defense

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.

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. CA decision REVERSED AND SET ASIDE. Steamship Mutual
and Pioneer are ORDERED to obtain licenses.

Petitioner, Present:

VELASCO, JR., J., Chairperson,
ABAD, and

x ------------------------------------------------- x


- versus -

Respondent. August 24, 2011

x --------------------------------------------------------------------------------------- x


These consolidated petitions involve a cargo owners right to recover damages from the loss of
insured goods under the Carriage of Goods by Sea Act and the Insurance Code.


PetitionerNew 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
toOakland, California, where it was loaded on S/S California Luna V59, owned and operated by
NYK Fil-Japan Shipping 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 typhoonKadiang 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.

An examination of the three generator sets in the presence of petitioner New Worlds
representatives, Federal Builders (the project contractor) and surveyors of petitioner New Worlds
insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three sets
suffered extensive damage and could no longer be repaired.

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, 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 New World filed an action for specific performance and damages
against all the respondents before the Regional Trial Court (RTC) of Makati City.

RTCs Ruling:

1. On August 16, 2001 the RTC absolved all respondents except NYK.

2. 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.

3. However, RTC ruled 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 Worldfiled 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

4. As regards petitioner New Worlds claim against Seaboard, its insurer, the RTC held that
Seaboard cannot be faulted for denying the claim against it since New World refused
to submit the itemized list that Seaboard needed for assessing the damage to
the shipment. Likewise, the LATE filing of the complaint prejudiced Seaboards
right to pursue a claim against NYK in the event of subrogation.

CAs Decision:

1. Affirmed RTC rulings except with respect to Seaboards liability.

2. 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
Worlds right under the insurance policy since it was the Insurance Code that
governed the relation between the insurer and the insured.

- New World filed a petition for review of the CA decision
- Seaboard chose to file a motion for reconsideration of that decision.

CAs Amended Decision:

On August 17, 2006 the CA reversed itself as regards the claim against Seaboard.

1. The CA held that the submission of the itemized listing was a reasonable requirement
that Seaboard asked of New World.

2. 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.

3. New Worlds failure to comply promptly with what was required of it prejudiced such right.

1. In G.R. 171468 --
Whether 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

2. In G.R. 174241 --
a) Whether 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

b)Whether 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.


1. In G.R. 171468 --NO

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. 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.

2. In G.R. 174241 --

a. YES. Itemized listing is not substantially necessary.

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 damageexcept 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.

The policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in
voyage, or vessels unseaworthiness, among others.But Seaboard had been unable to show that
petitioner New Worlds loss or damage fell within some or one of the enumerated

Moreover, New World has submitted various documents, namely:
(1) copy of the Suppliers Invoice;
(2) copy of the Packing List;
(3) copy of the Bill of Lading;
(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.

Seaboard cannot pretend that the above documents are inadequate since they were precisely
the documents listed in its insurance policy.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.

b. YES.Seaboard itself was the cause of the delay.

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 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 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
thePhilippines 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.

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.

Republic of the Philippines, (represented by Eduardo Malinis in his capacity as Insurance
Commisioner) vs. Del Monte Motors Inc.
G.R. No, . 156956 October 9, 2006
C.J. Panganiban


On January 15, 2002, the RTC rendered a decision in a civil case finding Vilfran Liner, Hilaria
Villegas and Maura Villegas jointly and severally liable to pay Del Monte Motors lost P11,835,375.50
for service contracts with Del Monte. The Trial Court further ordered the execution of the decision
against the counterbond posted by Vilfran and issued by Capital Insurance and Surety Co.
CISCO opposed the Motion for Execution claiming that they had no record or document
regarding the alleged issuance of the counterbond, theus the bond was not valid and enforceable.
However, 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. It explained that the commissioner had no legal justification for his refusal
to allow the withdrawal of CISCOs security deposit. Hence, this petition.

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


1. NO.
Sec 203 of the Insurance Code provides, 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 claims 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. YES.
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 this Code.
The commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to
persons or entities desiring 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 satisfaction of
the Commissioner that it has no further liability under any of its policies in the Philippines.
He has been given great discretion to regulate the business to protect the public. Also An
implied trust is created by the law 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.

G.R. No. 167330 September 18, 2009




On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent Philhealth a
formal demand letter and the corresponding assessment notices demanding the payment of
deficiency taxes for the taxable years 1996 and 1997 in the total amount of P224,702,641.18.
Philhealth protested the assessment and, as CIR did not act on the protest, Philhealth filed a petition
for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST
(documentary stamp tax) assessments. CTA rendered a decision ordering the Philhealth to pay the
deficiency VAT for 1996 and 1997 and canceling the 1996 and 1997 deficiency DST assessment
against it.

CIR appealed the CTA decision to CA insofar as it cancelled the DST assessment claiming that
petitioners health care agreement was a contract of insurance subject to DST under Section 185 of
the 1997 Tax Code.

CA reversed the decision of CTA and upheld that the petitioners health care agreement was
in the nature of non-life insurance contract subject to DST.

1. WON the respondent is a Health Maintenance Organization (HMO)
2. WON petitioner, as an HMO, engaged in the business of insurance during the pertinent
taxable years
3. WON a health care agreement is an insurance contract.

1. Philhealth is admittedly an HMO. Under RA 7875 (or "The National Health Insurance Act
of 1995"), an HMO is an entity that provides, offers or arranges for coverage of designated health
services needed by plan members for a fixed prepaid premium.

2. NO, Philhealth is not engaged in the business of insurance. Pursuant to the principal
object and purpose test adopted by the Supreme Court, the primary purpose of a medical service
corporation, such as Philhealth, is NOT the assumption of risk and indemnification, but rather to
provide physicians who will render services to subscribers on a prepaid basis. In fact, a substantial
portion of petitioners services covers preventive and diagnostic medical services intended to keep
members from developing medical conditions or diseases. As an HMO, it is its obligation to maintain
the good health of its members. Accordingly, its health care programs are designed to prevent or to
minimize the possibility of any assumption of risk on its part. Thus, its undertaking under its
agreements is not to indemnify its members against any loss or damage arising from a medical
condition but, on the contrary, to provide the health and medical services needed to prevent such
loss or damage. Petitioner, as an HMO, is not part of the insurance industry. This is evident from the
fact that it is not supervised by the Insurance Commission but by the Department of Health.

3. NO, a healthcare agreement is not an insurance contract. The agreements between the
petitioner and its members do not possess all the elements of an insurance contract provided in Sec.
2(1) of the Insurance Code because the healthcare's primary purpose is to render service and not to
assume risk and indemnify another. Also, there is nothing in petitioner's agreements that gives rise to
a monetary liability on the part of the member to any third party-provider of medical services which
might in turn necessitate indemnification from petitioner. The terms "indemnify" or "indemnity"
presuppose that a liability or claim has already been incurred. There is no indemnity precisely
because the member merely avails of medical services to be paid or already paid in advance at a pre-
agreed price under the agreements.


Principal object and purpose test of United State jurisprudence, to wit: whether the
assumption of risk and indemnification of loss (which are elements of an insurance business)
are the principal object and purpose of the organization or whether they are merely incidental
to its business. If these are the principal objectives, the business is that of insurance. But if
they are merely incidental and service is the principal purpose, then the business is not

In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health Systems. He
was asked if he was ever treated for high blood, heart trouble, diabetes, cancer, liver disease,
asthma, or peptic ulcer; he answered no. His application was approved and it was effective for one
year. His coverage was subsequently renewed twice for one year each. While the coverage was still in
force in 1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the
hospitalization amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare
for them to pay the hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to
disclose the fact that he was diabetic, hypertensive, and asthmatic. Julita ended up paying the
hospital expenses. Ernani eventually died. In July 1990, Julita sued Philamcare for damages.
Philamcare alleged that the health coverage is not an insurance contract; that the concealment made
by Ernani voided the agreement.
ISSUE: Whether or not Philamcare can avoid the health coverage agreement.
HELD: No. The health coverage agreement entered upon by Ernani with Philamcare is a non-life
insurance contract and is covered by the Insurance Law. It 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. There is no concealment on the part of Ernani. He answered the question with
good faith. He was not a medical doctor hence his statement in answering the question asked of him
when he was applying is an opinion rather than a fact. Answers made in good faith will not void the
Further, Philamcare, in believing there was concealment, should have taken the necessary steps to
void the health coverage agreement prior to the filing of the suit by Julita. Philamcare never gave
notice to Julita of the fact that they are voiding the agreement. Therefore, Philamcare should pay the
expenses paid by Julita.

CHRISTERN, HUENEFELD and CO., INC., respondent.
G.R. No. L-2294 May 25, 1951
Ponente: PARAS, C.J.:
On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc., after
payment of corresponding premium, obtained from the petitioner ,Filipinas Cia. de Seguros, fire policy
No. 29333 in the sum of P1000,000, covering merchandise contained in a building located at No. 711
Roman Street, Binondo Manila. On February 27, 1942, or during the Japanese military occupation, the
building and insured merchandise were burned.
Respondent then claimed under its policy with the petitioner. The salvage goods were sold at
public auction and, after deducting their value, the total loss suffered by the respondent was fixed at
P92,650. 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 United States declared war against Germany,
the respondent Corporation (though organized under and by virtue of the laws of the Philippines)
being controlled by the German subjects and the petitioner being a company under American
jurisdiction when said policy was issued on October 1, 1941. The petitioner, however, in pursuance of
the order of the Director of Bureau of Financing, Philippine Executive Commission, dated April 9,
1943, paid to the respondent the sum of P92,650 on April 19, 1943.
After trial, the Court of First Instance of Manila dismissed the action filed by the petitioner to
recover the amount from respondent. Upon appeal to the Court of Appeals, the judgment of the
Court of First Instance of Manila was affirmed. Hence this petition.
ISSUE: Whether or not Filipinas Cia de Seguros can claim the amount it paid against respondent.
1) In case of war, the control test applies to determine the nationality of a
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.
There is no question that majority of the stockholders of the respondent corporation were German
subjects. This being so, we have to rule that said respondent became an enemy corporation upon the
outbreak of the war between the United States and Germany. The English and American cases relied
upon by the Court of Appeals have lost their force in view of the latest decision of the Supreme Court
of the United States in Clark vs. Uebersee Finanz Korporation, decided on December 8, 1947, 92 Law.
Ed. Advance Opinions, No. 4, pp. 148-153, in which the controls test has been adopted. This
pronouncement was based on the situation that arise during the WWI and WWII.
2) The Philippine Insurance Law prohibits the granting of insurance against a public
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.
Effect of war, generally. All intercourse between citizens of belligerent powers which is
inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes
all negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to
increase, its income or resources; all acts of voluntary submission to it; or receiving its
protection; also all acts concerning the transmission of money or goods; and all contracts
relating thereto are thereby nullified. It further prohibits insurance upon trade with or by the
enemy, upon the life or lives of aliens engaged in service with the enemy; this for the reason
that the subjects of one country cannot be permitted to lend their assistance to protect by
insurance the commerce or property of belligerent, alien subjects, or to do anything
detrimental too their country's interest. The purpose of war is to cripple the power and
exhaust the resources of the enemy, and it is inconsistent that one country should destroy its
enemy's property and repay in insurance the value of what has been so destroyed, or that it
should in such manner increase the resources of the enemy, or render it aid, and the
commencement of war determines, for like reasons, all trading intercourse with the enemy,
which prior thereto may have been lawful. All individuals therefore, who compose the
belligerent powers, exist, as to each other, in a state of utter exclusion, and are public
enemies. (6 Couch, Cyc. of Ins. Law, pp. 5352-5353.)
In the case of an ordinary fire policy, which grants insurance only from year, or for some
other specified term it is plain that when the parties become alien enemies, the contractual
tie is broken and the contractual rights of the parties, so far as not vested. lost. (Vance, the
Law on Insurance, Sec. 44, p. 112.)
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.

There are two cases consolidated here. First is that of Constantino who acquired a life insurance from
Asia Life in September 1941. He paid the first premium which was good until September 1942. War
broke out and he was not able to pay the second and subsequent premiums. He died in 1944.
The second case was that of Tomas Ruiz who acquired his life insurance from Asia Life in August
1938. He has been paying his premium religiously but due to the war, he was not able to pay his
subsequent premiums in 1942. He died in 1945.
The beneficiaries from both insurance policies filed their claims when the war is over. They point out
that the obligation of the insured to pay premiums was excused (suspended) during the war owing to
impossibility of performance, and that consequently no unfavorable consequences should follow from
such failure (New York Rule).
Asia Life argued that the nonpayment of premiums cancelled the insurance policy. An insurance
contract is one in which time is material and of the essence. Non-payment at the day involves
absolute forfeiture if such be the terms of the contract (United States Rule)
ISSUE: Whether or not the beneficiaries are entitled to the claims.
HELD: No. The Supreme Court adopts the United States Rule. It should be noted that the parties
contracted not only for peacetime conditions but also for times of war, because the policies contained
provisions applicable expressly to wartime days. The logical inference, therefore, is that the parties
contemplated uninterrupted operation of the contract even if armed conflict should ensue.

October 13, 1999
GR No. 113899


Great Pacific Life Assurance (Grepalife) assailed the decision of the CA, which affirmed the decision of
the RTC (Misamis Oriental) when it ruled that Grepalife should pay Development Bank of the
Philippines (DBP) as creditor of the insured Dr. WilfredoLeuterio (Php 86,200.00).

A contract of GROUP LIFE INSURANCE was executed between Grepalife and DBP. Grepalife agreed to
insure the lives of ELIGIBLE HOUSING LOAN MORTGAGORS of DBP. Dr. WilfredoLeutorio applied for
membership and answered the question concerning his health conditions:

7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [ ] No.

Grepalife issued certificate insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage
indebtedness amounting to P86, 200.00 pesos. Dr. Leuterio DIED due to massive cerebral

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 on November 15, 1983. 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.

The widow of the late Dr. Leuterio, respondent Medarda V. Leuterio, filed a complaint with the
Regional Trial Court of Misamis Oriental, Branch 18, against Grepalife for Specific Performance with

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 the respondent widow, 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.

Trial court rendered a decision in favor of respondent widow and against Grepalife. The widow
appealed to the CA but CA sustained trial courts decision.


1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group
life insurance contract from a complaint filed by the widow of the decedent/mortgagor? NO.
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had
hypertension, which would vitiate the insurance contract? NO.
3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six
thousand, two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage
payable by the mortgagor to DBP. NO.



rationale of a group insurance policy of mortgagors, otherwise known as the mortgage
redemption insurance, is a device for the protection of both the mortgagee and the mortgagor.
a. 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.
b. 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.
Consequently, where the mortgagor pays the insurance premium under the group insurance policy,
making the loss payable to the mortgagee, the insurance is on the mortgagors interest, and the
mortgagor continues to be a party to the contract. 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.

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.
1. PETITIONERS CONTENTION: Petitioner alleges that the complaint was instituted by
the widow of Dr. Leuterio, not the real party in interest, hence the trial court acquired no
jurisdiction over the case.

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. 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.
2. PETITIONERS CONTENTION: Concealment exists where the assured had knowledge of
a fact material to the risk, and honesty, good faith, and fair dealing requires that he
should communicate it to the assured, but he designedly and intentionally withholds the

On the contrary the medical findings were not conclusive because Dr. Mejia did not conduct an
autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had no
knowledge of Dr. Leuterios any previous hospital confinement. Dr. Leuterios death certificate stated
that hypertension was only the possible cause of death. It was considered as hearsay. 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, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore
liable to pay the proceeds of the insurance.

3. PETITIONERS CONTENTION: Petitioner claims that there was no evidence as to the
amount of Dr. Leuterios outstanding indebtedness to DBP at the time of the mortgagors

Petitioners 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

NOTE: (Supervening event) Court of Appeals decision was promulgated on May 17, 1993. In private
respondents memorandum, she states that 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
alteriusdetrimenio protest). Hence, it cannot collect the insurance proceeds, after it already
foreclosed on the mortgage. The proceeds now rightly belong to Dr. Leuterios heirs represented by
his widow, herein private respondent MedardaLeuterio.


Davide, 1995

Armando Geagonia is the owner of Normans Mart located in the public market in Agusan del Sur. In
1989, he obtained from Country Bankers Insurance a fire insurance policy. In 1990, fire of accidental
origin broke out at the public market. Geagonias insured stock-in-trade were completely destroyed,
prompting him to file with CBI a claim under the policy. CBI denied the claim because it found that at
the time of the loss, the stocks-in-trade were likewise covered by fire insurance policies issued by the
Philippines First Insurance Co. These policies have a mortgage clause stating that loss shall be
payable to Cebu Tesing Textitles.

Geagonia filed a complaint against CBI with the Insurance Commission for the recovery of P100,000
under the fire insurance policy. Geagonia claims he had no knowledge of the provision in the policy
requiring him to inform it of the prior policies. The Insurance Commission found that the petitioner
DID NOT violate the condition as he had no knowledge of the existence of the 2 fire insurance
policies obtained from FPIC. The IC also ruled that it was CTT which procured the PFIC policies and
that CTT, as his creditor, had insurable interest on the stocks. These findings were based on the
petitioners testimony that he came to know of the PFIC policies only when he filed his claim with CBI
and that CTT obtained them and paid for their premiums without informing him thereof. The IC
ordered CBI to pay Geagonia the sum of 100K.

CBI appealed to the CA, which reversed the decision of the IC because it found that petitioner knew
of the existence of the 2 other policies, which stated that Discount Mart was the assured and that
CTT was only the mortgagee of the goods. It also said the premiums on both policies were paid for
by Geagonia. Hence, this petition.

(1) Whether Geagonia had prior knowledge of the two insurance policies issued by the PFIC
when obtained the policy from CBI
(2) If he had, whether he is precluded from recovering therefrom

Petitioner knew of the prior policies. His letter to CBI conclusively proves this knowledge.
The fire insurance policies issued by the PFIC name the petitioner as the assured and contain a
mortgage clause which is a SIMPLE LOSS PAYABLE CLAUSE, not a standard mortgage clause.

The condition in CBIs policy, however, does not absolutely declare void any violation thereof. It
expressly provides that the 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. The prohibition applies only to double
insurance and the nullity of the policy shall only be to the extent exceeding P200,000 of the total
policies obtained. A double insurance exists where the same person is insured by several insurers
separately in respect of the same subject and interest. The insurable interests of a mortgagor and a
mortgagee on the mortgaged property are distinct and separate. Since the 2 policies of the PFIC do
not cover the same interest as that covered by the policy of the private respondent, no double
insurance exists. The non disclosure then of the former policies was not fatal to the petitioners right
to recover on the CBIs policy.

Furthermore, by stating with the condition itself that the same shall not apply if the total insurance in
force at the time of loss does not exceed P200,000, the private respondent was amenable to assume
a co-insurers liability up to a loss not exceeding P200,000. What it had in mind was to discourage

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 2 or more insurers in a total amount that exceeds the property 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.

Petition is hereby granted.

Bautista, 1955

Palileo obtained from Cosio a loan in the sum of P12K subject to the condition that Palielo shall pay to
Cosio an interest in the amount of P250 a month, that Cosio shall deduct form the loan certain
obligations of Palileo to thirds persons, and that after making said deductions, Cosio shall deliver to
Palileo only the balance of the loan. To secure payment of
The loan, Cosio required Palileo to sign a document known as conditional sale of residential building
purporting to convey to Cosio with right to repurchase a two-story building belonging to Palileo. This
document did not express the real intention of the parties which was to place said property as
security for the payment of the loan.

After the execution of the said document, Cosio insured the building against fire with the Associated
Insurance and Surety Co, the insurance policy having been issued in the name of defendant. The
building was partly destroyed by fire and after proper demand, Cosio collected from the insurance
company an indemnity. Palileo demanded from Cosio that she be credited with the necessary amount
to pay her obligation out of the insurance proceeds but Cosio refused.

Cherie Palileo filed a complaint against Beatriz Cosio praying that the transaction entered into
between them be declared as one of loan and the document executed covering the transaction as
one of equitable mortgage to secure the payment of said loan; that Cosio be ordered to credit to
Palileo with the necessary amount from the sum received by Cosio from Associated Insurance and
Surety Co. and to apply the same to the payment of Palileos obligation thus considering it as fully
paid; and that Cosio be order to pay to Palileo the difference between the alleged indebtedness of
Palileo and the sum received by Cosio from the said insurance company.

Cosio, however, said that the transaction was one of sale with option to repurchase but the period for
repurchase had expired, the ownership of the property now consolidated in the defendant.

The trial court granted the relief prayed for in the complaint.

Whether the obligation of Palileo is fully compensated by the insurance amount
Whether Cosio should refund to Palileo the sum representing the difference of the loan and sum
collected by Cosio from the insurance company notwithstanding the fact that it was not proven that
the insurance was taken for the benefit of the mortgagor?

Where a mortgagee independently of the mortgagor insures the property in his own name and for his
own interest, he is entitled to the insurance proceeds in case of loss but in such case, he is not
allowed to retain his claim against the mortgagor but is passed by subrogation to the insurer to the
extent of the money paid. The insurer is subrogated to the rights of the mortgagee under the

Lower court erred in declaring that the proceeds of the insurance taken out by Cosio on the property
mortgaged inured to the benefit of palileo and in ordering Cosio to deliver to the difference between
her indebtedness and the amount of the insurance received by Cosio.