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Rizal Surety v CA G.R. No. 112360.

July 18, 2000


Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased to 1.5 million.
A four span building was part of the policy. A fire broke out and gutted the building, together with a two
storey building behind it weregaming machines were stored. The company filed its claims but to no avail.
Hence, it brought a suit in court. It aimed to make Rizal pay for almost 3 million including legal interest and
damages. Rizal claimed that the policy only covered damage on the four span building and not the two
storey building. The trial court ruled in Transworlds favor and ordered Rizal to pay actual damages only.
The court of appeals increased the damages. The insurance company filed a MFR. The CA answered by
modifying the imposition of interest. Not satisfied, the insurance company petitioned to the Supreme
Court.
Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy sued
upon covered only the contents of the four-span building.
Held: Yes. Petition dismissed.
Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by them forming part
of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by Transworld and second,
said areas must form part of the building described in the policy xxx"
Both the trial court and the CA found that the so-called annex as not an annex building but an integral
and inseparablepart of the four-span building described in the policy and consequently, the machines and
spare parts stored therein were covered by the fire insurance in dispute.
So also, considering that the two-storey building aforementioned was already existing when subject fire
insurance policy contract was entered into on Jan. 12, 1981, having been constructed some time in 1978,
petitioner should have specifically excluded the said two-storey building from the coverage of the fire
insurance if minded to exclude the same but if did not, and instead, went on to provide that such fire
insurance policy covers the products, raw materials and supplies stored within the premises of Transworld
which was an integral part of the four-span building occupied by Transworld, knowing fully well the
existence of such building adjoining and intercommunicating with the right section of the four-span
building.
Also, in case of doubt in the stipulation as to the coverage of the fire insurance policy, under Art. 1377 of
the New Civil Code, the doubt should be resolved against the Rizal Surety, whose layer or managers
drafted the fire insurance policy contract under scrutiny.
In Landicho vs. Government Service Insurance System, the Court ruled that the terms in an insurance
policy, which are ambiguous, equivocal or uncertain x x x are to be construed strictly and most strongly
against the insurer, and liberally in favor of the insured so as to effect the dominant purpose
of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this is
that the insured usually has no voice in the selection or arrangement of the words employed and that the
language of the contract is selected with great care and deliberation by experts and legal advisers
employed by, and acting exclusively in the interest of, the insurance company.
PHILAMCARE VS CA
FACTS:
Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question
Have you or any of your family members ever consulted or been treated for high blood pressure, heart
trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?, Ernani answered No. Under the
agreement, Ernani is entitled to avail of hospitalization benefits and out-patient benefits. The coverage was
approved for a period of one year from March 1, 1988 to March 1, 1989. The agreement was however
extended yearly until June 1, 1990 which increased the amount of coverage to a maximum sum of P75,000
per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical
Center (MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the
health care agreement. However, the Philamcare denied her claim alleging that the agreement was void
because Ernani concealed his medical history. Doctors at the MMC allegedly discovered at the time of
Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in the
application form. Thus, Julita paid for all the hospitalization expenses.
After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was
admitted at the Chinese General Hospital. Due to financial difficulties, however, respondent brought her
husband home again. In the morning of April 13, 1990, Ernani had fever and was feeling very weak.
Respondent was constrained to bring him back to the Chinese General Hospital where he died on the same
day.
Julita filed an action for damages and reimbursement of her expenses plus moral damages attorneys fees
against Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered
judgment in favor of Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for
damages and absolved petitioner Reverente. Hence, this petition for review raising the primary argument
that a health care agreement is not an insurance contract; hence the incontestability clause under the
Insurance Code does not apply.
ISSUES:(1) Whether or not the health care agreement is not an insurance contract
(2) Whether or not there is concealment of material fact made by Ernani
HELD:
(1)YES. Section2 (1)of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage, or liability arising from an
unknown or contingent event.
Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future,
which my damnify a person having an insurable against him, may be insured against. Every person has an
insurable interest in the life and health of himself.
Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of his
spouse and of his children.
The insurable interest of respondents husband in obtaining the health care agreement was his own health.
The health care agreement was in the nature of non-life insurance, which is primarily a contract of
indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or
other stipulated contingent, the health care provider must pay for the same to the extent agreed upon
under the contract.
(2) NO. The answer assailed by petitioner was in response to the question relating to the medical history of
the applicant. This largely depends on opinion rather than fact, especially coming from respondents
husband who was not a medical doctor. Where matters of opinion or judgment are called for answers made
I good faith and without intent to deceive will not avoid a policy even though they are untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance
contract. Concealment as a defense for the health care provider or insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests
upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is liable for
claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound

to answer to the extent agreed upon. In the end, the liability of the health care provider attaches once the
member is hospitalized for the disease or injury covered by the agreement or wherever he avails of the
covered benefits which he has prepaid.
Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the
party which prepared the contract the insurer. By reason of the exclusive control of the insurance
company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted
against the insurer and liberally in favor of the insured, especially to avoid forfeiture. This is equally
applicable to Health Care Agreements.
GULF RESORTS ,INC. VS PHILIPPINE CHARTER INSURANCE
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 the 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 insurancecovers 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 itsinsurance policy
only afforded earthquake shock coverage to the two 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. Aninsurance 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 premiumpayments 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 petitionersinsurance policies with AHAC.
PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL REVENUE
FACTS:
Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and operate
a prepaid group practice health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal,
and financial responsibilities of the organization. On January 27, 2000, respondent CIR sent petitioner a
formal deman letter and the corresponding assessment notices demanding the payment of deficiency
taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of

P224,702,641.18. The deficiency assessment was imposed on petitioners health care agreement with the
members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested the
assessment in a letter dated February 23, 2000. As respondent did not act on the protest, petitioner filed a
petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST
assessments. On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the deficiency
VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January 20, 1997
until fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus 20%
interest from January 20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No.
[231]-88 is declared void and without force and effect. The 1996 and 1997 deficiency DST assessment
against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from
collecting the said DST deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it
cancelled the DST assessment. He claimed that petitioners health care agreement was a contract of
insurance subject to DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioners health care agreement was
in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the deficiency
Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.

ISSUES:
(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.
(2) Whether or not the agreements between petitioner and its members possess all elements necessary in
the insurance contract.
HELD:
NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June 12,
2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its agreements are
treated as insurance contracts and the DST is not a tax on the business but an excise on the privilege,
opportunity or facility used in the transaction of the business. Petitioner, however, submits that it is of
critical importance to characterize the business it is engaged in, that is, to determine whether it is an HMO
or an insurance company, as this distinction is indispensable in turn to the issue of whether or not it is
liable for DST on its health care agreements. Petitioner is admittedly an HMO. Under RA 7878 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. The payments do not vary with the extent, frequency or type of
services provided. Section 2 (2) of PD 1460 enumerates what constitutes doing an insurance business or
transacting an insurance businesswhich are making or proposing to make, as insurer, any insurance
contract; 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; 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; 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.
Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative
medical services), but these are incidental to the principal activity of providing them medical care. The
insurance-like aspect of petitioners business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.
Great Pacific Life Assurance Corp vs Court of Appeals

Facts: A contract of group life insurance was executed between Grepalife and DBP. The former agreed to
insure the lives of eligible housing loan mortgagors of DBP. Dr. Leuterio applied membership in the group
life insurance plan. He answered in the application form that he has never consulted a physician for heart
condition, high blood pressure, cancer, diabetes, lung, kidney, or stomach disorderor any other physical
impairment, and that to the best of his knowledge he is in good condition. During the subsistence of
theinsurance he died from massive cerebral hemorrhage. Grepalife denied the claim because of
concealment since it was discovered that he had high blood. His widow filed a claim.
Issue: Whether or not there was misrepresentaion so as to warrant denial of claim; Whether or not the
widow of Leuterio is a real party in interest
Held: The Supreme Court ruled that there was no sufficient proof that the insured suffered from
hypertension. It is a well-settled ruled that the fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract. As regards the second issue, the widow can be
regarded as real party in interest because in mortgage redemption insurance the mortgagor and not the
mortgagee is the contracting party. The mortgagor merely assigns the proceeds to the mortgagee.
Therefore, since by principle of succession the widow may claim.
ETERNAL GARDENS V 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:
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 prompted 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 letter 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 memorial 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.
Development Bank of the Philippines vs. Court of Appeals [GR 109937, 21 March 1994]
Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for
a
loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal
mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance
(MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). A loan, in the reduced amount
of P300,000.00, was approved by DBP on 4 August 1987 and released on 11 August 1987. From the
proceeds
of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On 15 August 1987,
Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP
MRI Pool." On 20 August 1987, the MRI premium of Dans, less the DBP service fee of 10%, was credited by
DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

On 3 September 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the
DBP
MRI Pool. On 23 September 1987, the DBP MRI Pool notified DBP that Dans was not eligible for MRI
coverage, being over the acceptance age limit of 60 years at the time of application. On 21 October 1987,
DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP offered to
refund the premium of P1,476.00 which the deceased had paid, but Candida Dans refused to accept the
same,
demanding payment of the face value of the MRI or an amount equivalent to the loan. She, likewise,
refused
to accept an ex gratia settlement of P30,000.00, which the DBP later offered. On 10 February 1989, the
Estate
of the Late Juan B. Dans, through Candida Dans as administratrix, filed a complaint with the Regional Trial
Court, Branch I, Basilan, against DBP and the insurance pool for collection of Sum of Money with Damages.
On 10 March 1990, the trial court rendered a decision in favor of the Estate and against DBP. The DBP MRI
Pool, however, was absolved from liability, after the trial court found no privity of contract between it and
the
deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually
collecting the premium and the service fee, despite knowledge of his age ineligibility. The court ordered
DBP
to return and reimburse the Estate the amount of P139,500.00 plus legal rate of interest as amortization
payment paid under protest; to consider the mortgage loan of P300,000.00 including all interest
accumulated
or otherwise to have been settled, satisfied or set-off by virtue of the insurance coverage of the late Juan
B.
Dans; to pay the Estate the amount of P10,000.00 as attorney's fees; to pay the Estate the amount of
P10,000.00 as costs of litigation and other expenses, and other relief just and equitable. The DBP appealed
to
the Court of Appeals. In a decision dated 7 September 1992, the appellate court affirmed in toto the
decision
of the trial court. The DBP's motion for reconsideration was denied in a resolution dated 20 April 1993. DBP
filed the petition for review on certiorari.
Issue [1]: Whether there was a perfected contract of insurance for DBP MRI Pool to be held liable.
Held [1]: NO. When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP
Pool" with the following declaration: "I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my knowledge and belief and form part of
my
application for insurance. It is understood and agreed that no insurance coverage shall be effected unless
and
until this application is approved and the full premium is paid during my continued good health." Under the
aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be approved
by
the insurance pool; and (2) when the full premium is paid during the continued good health of the
applicant.
These two conditions, being joined conjunctively, must concur. Undisputably, the power to approve MRI
applications is lodged with the DBP MRI Pool. The pool, however, did not approve the application of Dans.
There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with full
knowledge that it was payment for Dan's premium. There was, as a result, no perfected contract of
insurance;
hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.
Issue [2]: Whether DBP is liable for the entire value of the insurance policy, as it led Dans to believe that
he
has fulfilled all the requirements for the MRI and that the issuance of his policy was forthcoming.
Held [2]: It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI
coverage. Instead of allowing Dans to look for his own insurance carrier or some other form of insurance
policy, DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was
released on 11 August 1987, DBP already deducted from the proceeds thereof the MRI premium. Four days
latter, DBP made Dans fill up and sign his application for MRI, as well as his health statement. The DBP
later
submitted both the application form and health statement to the DBP MRI Pool at the DBP Main Building,
Makati Metro Manila. As service fee, DBP deducted 10% of the premium collected by it from Dans. In
dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an insurance

agent. As an insurance agent, DBP made Dans go through the motion of applying for said insurance,
thereby
leading him and his family to believe that they had already fulfilled all the requirements for the MRI and
that
the issuance of their policy was forthcoming. Apparently, DBP had full knowledge that Dan's application
was
never going to be approved. The maximum age for MRI acceptance is 60 years as clearly and specifically
provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984 by all the
insurance
companies concerned. The DBP is not authorized to accept applications for MRI when its clients are more
than 60 years of age. Knowing all the while that Dans was ineligible for MRI coverage because of his
advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by
collecting the insurance premium, and deducting its agent's commission and service fee. The liability of an
agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits
of
the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit
applications for MRI. If the third person dealing with an agent is unaware of the limits of the authority
conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure
thereof
by the agent, then the latter is liable for damages to him. The DBP's liability, however, cannot be for the
entire
value of the insurance policy. To assume that were it not for DBP's concealment of the limits of its
authority,
Dans would have secured an MRI from another insurance company, and therefore would have been fully
insured by the time he died, is highly speculative. Considering his advanced age, there is no absolute
certainty
that Dans could obtain an insurance coverage from another company. It must also be noted that Dans died
almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day
from
the date of release of his loan.
Commissioner Of Internal Revenue V. Lincoln Philippine Life Insurance Co., Inc (2002)
FACTS:

Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) issued a
special kind of life insurance policy known as the "Junior Estate Builder Policy" with a distinguishing
feature. It had a "automatic increase clause" upon attainment of a certain age by the insured.

Commissioner of Internal Revenue issued deficiency documentary stamps tax assessment for the
year 1984 pertaining to the amount in the automatic increase clause

Lincoln questioned the deficiency assessments

Court of Tax Appeals: found no valid basis and cancelled it

CA: affirmed CTA

CIR claims that "automatic increase clause" in the subject insurance policy is separate
ISSUE: W/N the "automatic increase clause" should not be taxed with the main policy
HELD: NO. CA set aside

Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in
which a contract of insurance is set forth

Section 50 of the same Code provides that the policy, which is required to be in printed form, may
contain any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary
to complete the contract of insurance.

any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of
such policy or contract of insurance

Section 173 that the payment of documentary stamp taxes is done at the time the act is done or
transaction had and the tax base for the computation of documentary stamp taxes on life insurance
policies under Section 183 is the amount fixed in policy, unless the interest of a person insured is
susceptible of exact pecuniary measurement

the amount fixed in the policy is the figure written on its face and whatever increases will take
effect in the future by reason of the "automatic increase clause" embodied in the policy without the
need of another contract

the amount insured by the policy at the time of its issuance necessarily included the additional sum
covered by the automatic increase clause because it was already determinable at the time the
transaction was entered into and formed part of the policy
to claim that the increase in the amount insured (by virtue of the automatic increase clause
incorporated into the policy at the time of issuance) should not be included in the computation of the
documentary stamp taxes due on the policy would be a clear evasion of the law requiring that the tax
be computed on the basis of the amount insured by the policy
Lalican v. Insular Life Assurance Company Limited (2009)
Summary: Eulogio applied for an insurance policy with Insular Life through its agent
Josephine Malaluan who issued him a 20-Year Endowment Variable Income Package Flexi Plan worth
P500,000 with 2 riders at P500,000 each with Violeta as the primary beneficiary. However, he failed to
pay and allowed the policy to be void after the lapse of the 31-day grace period. Just when he was to
pay the default amount with interest, he died before Malaluan was able to submit his application for
reinstatement to Insular life for approval. Violeta filed a case with the RTC and was not able to appeal
due to the negligence of her lawyer so he filed a petition for Certiorari. RTC, SC: denied.
Laws: Section. 19 of the Insurance Code
Doctrines:
The stipulation in a life insurance policy giving the insured the privilege to reinstate it
upon written application does not give the insured absolute right to such reinstatement by the mere
filing of an application. The insurer has the right to deny the reinstatement if it is not satisfied as to
the insurability of the insured and if the latter does not pay all overdue premium and all other
indebtedness to the insurer. After the death of the insured the insurance Company cannot be
compelled to entertain an application for reinstatement of the policy because the conditions precedent
to reinstatement can no longer be determined and satisfied.
Pineda v Insular G.R. No. 105562 September 27, 1993

Facts:
PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during the effectivity of the policy,
perished while the ship sank in Morocco. The families of the victims then wanted to claim the benefits of
the insurance. Hence, under the advice of Nuval, the president of PMSI, they executed a special power of
attorney authorizing Capt. Nuval to, "follow up, ask, demand, collect and receive" for their benefit the
indemnities.
Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00 and another for
P40,00.00,payable to the order the families. The checks were given to PMSI. Nuval, the PMSI president,
pocketed the amounts in hisbank account.
When the families went to insular to get the benefits, their request was denied because Insular claimed
that the checks were already given to PMSI.
The families filed a petition with the Insurance Commission. They won and Insular was ordered to pay them
500 a day until the amount was furnished to them. The insurance Commission held that the special powers
of attorney executed by complainants do not contain in unequivocal and clear terms authority to Nuval to
obtain and receive from respondent company insurance proceeds arising from the death of the seamaninsured; also, that Insular Life did not convincingly refuted the claim of Mrs. Alarcon that neither she nor
her husband executed a special power of authority in favor of Capt. Nuval and that it did not observe Sec
180(3), when it released the benefits due to the minor children of Ayo and Lontok, when the said
complainants did notpost a bond as requiredInsular Life appealed to the CA. CA modified the decision of the Insurance Commission, eliminating the
award to the minor children.
Hence, this petition by the beneficiary families.
Issues:
1. WON Insular Life should still be liable to the complainants when they relied on the special powers of
attorney, which Capt. Nuval presented as documents, when they released the checks to the latter.
2. WON Insular Life should be liable to the complainants when they released the check in favor of Ayo and
Lontok, even if no bond was posted as required.
Held: Yes to both. Petition granted.
Ratio:

1. The special powers of attorney "do not contain in unequivocal and clear terms authority to Capt. Nuval
to obtain, receive, receipt from respondent company insurance proceeds arising from the death of
the seaman-insured.
Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such
proceeds was a deviation from its practice with respect to group policies.
They gave the proceeds to the policyholder instead of the beneficiaries themselves. Even the Isnular rep
admitted that he gave the checks to the policyholder.
Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it acted imprudently
and negligently in the premises by relying without question on the special power of attorney.
Strong vs. Repide- third persons deal with agents at their peril and are bound to inquire as to the extent of
the power of the agent with whom they contract.
Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also act with ordinary
prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is
exceeding his authority, he cannot claim protection the party dealing with him may not shut his eyes to
the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from
the principal the true condition of affairs.
Insular delivered the checks to a party not the agent of the beneficiaries.
2. Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of their
unemancipated common child without the necessity of a court appointment. In case of disagreement, the
father's decision shall prevail, unless there is judicial order to the contrary.
Where the market value of the property or the annual income of the child exceeds P50,000, the parent
concerned shall be required to furnish a bond in such amount as the court may determine, but not less
than ten per centum (10%) of the value of the property or annual income, to guarantee the performance of
the obligations prescribed for general guardians.
If the market value of the property or the annual income of the child exceeds P50,000.00, a bond has to
be posted by the parents concerned to guarantee the performance of the obligations of a
general guardian.
On group insurance :
Group insurance is essentially a single insurance contract that provides coverage for many individuals,
particularly for the employees of one employer.
There is a master agreement issued to an employer. The employer acts as the collector of the dues and
premiums. Disbursement of insurance payments by the employer is also one of his duties.
They require an employee to pay a portion of the premium, which the employer deducts from wages while
the remainder is paid by the employer. This is known as a contributory plan as compared to a noncontributory plan where the premiums are solely paid by the employer.
Although the employer may be the policyholder, the insurance is actually for the benefit of the employee.
In a non-contributory plan, the payment by the employer of the entire premium is a part of the total
compensation paid for the services of the employee.
The primary aim of group insurance is to provide the employer with a means of
procuring insurance protection for his employees at a low cost and thereby retain their loyalty and
efficiency.
INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO
FACTS:
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd., on a
whole-life for P5,882.00 with a rider for Accidental Death for the same amount. He designated Carponia T.
Ebrado, his common-law wife as the revocable beneficiary in his policy. He referred to her as his wife in the
policy. On October 21, 1969, He died as a result of an accident when he was hit by a failing branch of a
tree. As the policy was in force, the insurance company was liable to pay the coverage in the total amount
of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional
benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the
premium due November, 1969, minus the unpaid premiums and interest thereon due for January and
February, 1969, in the sum of P36.27. Carponia T. Ebrado filed a claim for the proceeds of the Policy as the
designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado
were merely living as husband and wife without the benefit of marriage. Pascual T. Ebrado, also filed a
claim to the insurance company, this time claiming to be the legal wife Buenaventura. She asserts that she

has a better right over the proceeds than Carponia who is a common-law wife. As the insurance company
is at a loss as to whom to give the proceeds, it commenced an action for interpleader in court. After the
issues have been joined, a pre-trial conference was held on July 8, 1972, that there is no possibility of
amicable settlement. The Court proceeded to have the parties submit their evidence for the purpose of the
pre-trial and make admissions for the purpose of pretrial. On September 25, 1972, the trial court rendered
judgment declaring among others, Carponia T. Ebrado disqualified from becoming beneficiary of the
insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of
the deceased insured. From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on
July 11, 1976, the Appellate Court certified the case to Us as involving only questions of law.
ISSUE:
Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally married
man claim the proceeds thereof in case of death of the latter.
HELD:
The appealed judgment of the lower court is hereby affirmed.
Carponia T. Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado
in his life insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the
estate of the deceased insured. Costs against Carponia T. Ebrado.
A common-law wife named as a beneficiary in the life insurance policy of a legally married man cannot
claim the proceeds thereof in case the death of the latter. The contract of insurance is govern by the
provisions of the new civil code on matters not specifically provided for in the insurance code. Rather, the
general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the
New Civil Code states: The contract of insurance is governed by special laws. Matters not expressly
provided for in such special laws shall be regulated by this Code. When not otherwise specifically provided
for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law
regulating contracts. And under Article 2012 of the same Code, any person who is forbidden from
receiving any donation under Article 739 cannot be named beneficiary of a fife insurance policy by the
person who cannot make a donation to him. Common-law spouses are, definitely, barred from receiving
donations from each other. Also conviction for adultery or concubinage is not required as only
preponderance of evidence is necessary. In essence, a life insurance policy is no different from a civil
donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality.
A beneficiary is like a donee, because the premiums of the policy which the insured pays out of liberality,
the beneficiary will receive the proceeds or profits of said insurance.