(1) REPUBLIC v. SUNLIFE ASSURANCE COMPANY OF CANADA, GR NO.

158085, 2005-10-14
Facts:
Sun Life is a mutual life insurance company organized and existing under the laws of Canada. It is registered and
authorized by the Securities and Exchange Commission and the Insurance Commission to engage in business in the
Philippines as a mutual life insurance... company with principal office at Paseo de Roxas, Legaspi Village, Makati City.
Sun Life filed with the [Commissioner of Internal Revenue] (CIR) its insurance premium tax return for the third
quarter of 1997 and paid the premium tax in the amount"On October 20, 1997, S
On December 29, 1997, the [Court of Tax Appeals] (CTA) rendered its decision in Insular Life Assurance Co. Ltd. v.
[CIR], which held that mutual life insurance companies are purely cooperative companies and are exempt from the
payment of premium tax and DST.
Hence, on August 20, 1999, Sun Life filed with... the CIR an administrative claim for tax credit of its alleged
erroneously paid premium tax and DST for the aforestated tax periods.
"For failure of the CIR to act upon the administrative claim for tax credit and with the 2-year period to file a claim for
tax credit or refund dwindling away and about to expire, Sun Life filed with the CTA a petition for review
In its petition, it prayed... for the issuance of a tax credit certificate... representing... erroneously paid premium tax
for the third quarter of 1997... and... of DST on policies of insurance from August 21 to December 18, 1997.
the CTA found in favor of Sun Life.
Seeking reconsideration of the decision of the CTA, the CIR argued that Sun Life ought to have registered, foremost,
with the Cooperative Development Authority before it could enjoy the exemptions from premium tax and DST
extended to purely cooperative companies or associations
For its failure to register, it could not avail of the exemptions prayed for.
"Notwithstanding these arguments, the CTA denied the CIR's motion for reconsideration.
Ruling of the Court of Appeals
In upholding the CTA, the CA reasoned that respondent was a purely cooperative corporation duly licensed to engage
in mutual life insurance business in the Philippines.
Thus, respondent was deemed exempt from premium and documentary stamp taxes, because its affairs are
managed... and conducted by its members with money collected from among themselves, solely for their own
protection, and not for profit.
Hence, this Petition.
Issues:
Whether Respondent Is a Cooperative
Whether CDA Registration Is Necessary
Ruling:
Having satisfactorily proven to the Court of Tax Appeals, to the Court of Appeals and to this Court that it is a bona
fide cooperative, respondent is entitled to exemption from the payment of taxes on life insurance premiums and
documentary stamps. Not being... governed by the Cooperative Code of the Philippines, it is not required to be
registered with the Cooperative Development Authority in order to avail itself of the tax exemptions. Significantly,
neither the Tax Code nor the Insurance Code mandates this administrative... registration.
The Petition has no merit.
The Tax Code defines a cooperative as an association "conducted by the members thereof with the money collected
from among themselves and solely for their own protection and not for profit."[8] Without a doubt, respondent is a
cooperative engaged in a... mutual life insurance business.
First, it is managed by its members. Both the CA and the CTA found that the management and affairs of respondent
were conducted by its member-policyholders.[9]
Second, it is operated with money collected from its members. Since respondent is composed entirely of members
who are also its policyholders, all premiums collected obviously come only from them.
Third, it is licensed for the mutual protection of its members, not for the profit of anyone.
Under the Tax Code although respondent is a cooperative, registration with the Cooperative Development Authority
(CDA)[45] is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance
premiums, under Section 121; and... documentary stamp taxes on policies of insurance or annuities it grants, under
Section 199.

(2) White Gold Marine Services, Inc. V. Pioneer Insurance Surety Corp. (2005)
G.R.No. 154514 July 28, 2005
Lessons Applicable: Mutual Insurance Companies (Insurance)

FACTS: (White Gold > Pioneer > Steamship Mutual)

 White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for its vessels from
The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual) through Pioneer
Insurance and Surety Corporation (Pioneer)
 When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage
 Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the
latter’s unpaid balance
 White Gold filed a complaint before the Insurance Commission
 Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code
 Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections 302 and 303, thereof
 Insurance Commission: dismissed the complaint
 no need for Steamship Mutual to secure a license because it wasa Protection and Indemnity Club (P & I Club)
(NOT engaged in the insurance business)
 Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because
Steamship Mutual was not engaged in the insurance business
 Moreover, Pioneer was already licensed
 CA: affirmed Insurance Commission
ISSUE:
1. W/N Steamship Mutual, a P & I Club, is engaged in the insurance business in the Philippines - YES.
2. W/N Pioneer as resident agent of Steamship Mutual is required to obtain a license as an insurance agent/broker -
YES

HELD: petition is PARTIALLY GRANTED. CA affirmed. the revocation of Pioneer’s Certificate of Authority and
removal of its directors and officers, is DENIED

1. YES
Insurance Code
Sec. 2(2)
(2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code,
shall include:

(a) making or proposing to make, as insurer, any insurance contract;

(b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to
any other legitimate business or activity of the surety;

(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of
an insurance business within the meaning of this Code;

(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance
contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be
deemed conclusive to show that the making thereof does not constitute the doing or transacting of 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
 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
 the members all contribute, by a system of premiums or assessments, to the creation of a fund from which all
losses and liabilities are paid, and where the profits are divided among themselves, in proportion to their interest
 provide 3 types of coverage:
 protection and indemnity
 war risks
 defense costs
 P & I Club
 a form of insurance against third party liability, where the third party is anyone other than the P & I Club and
the members
 Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business
 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
2. YES.
 Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance
agent for Steamship Mutual.
Insurance Code
Sec. 299
Sec. 299. No insurance company doing business in the Philippines, nor any agent thereof, shall pay any commission
or other compensation to any person for services in obtaining insurance, unless such person shall have first procured
from the Commissioner a license to act as an insurance agent of such company or as an insurance broker as
hereinafter provided.

No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement of applications
for insurance, or receive for services in obtaining insurance, any commission or other compensation from any
insurance company doing business in the Philippines, or any agent thereof, without first procuring a license to act
from the Commissioner, which must be renewed annually on the first day of January, or within six months thereafter.
Such license shall be issued by the Commissioner only upon the written application of the person desiring it, such
application if for a license to act as insurance agent, being approved and countersigned by the company such person
desires to represent, and shall be upon a form prescribed by the Commissioner giving such information as he may
require, and upon payment of the corresponding fee hereinafter prescribed. The Commissioner shall satisfy himself
as to competence and trustworthiness of the applicant and shall have the right to refuse to issue or renew and to
suspend or revoke any such license in his discretion. No such license shall be valid after the thirtieth day of June of
the year following its issuance unless it is renewed.

(3) 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 were gaming 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 Transworld’s 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"
This generally means that the policy didn’t limit its coverage to what was stored in the four-span building.
As to questions of fact, both the trial court and the Court of Appeals found that the so called "annex " was not an
annex building but an integral part of the four-span building described in the policy and consequently, the machines
and spare parts stored were covered by the fire insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete hollow blocks under g.i. roof
which is adjoining and intercommunicating with the repair of the first right span of the lofty storey building
and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain 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’
The issue of whether or not Transworld has an insurable interest in the fun and amusement machines and spare
parts, which entitles it to be indemnified for the loss thereof, had been settled in another SC case.

(4) Philippine Health Care v CIR G.R. No. 167330 September 18, 2009
J. Corona

Facts:
Philippine Health Care’s objectives were:
"[t]o 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.”
It lost the case in 2004 when it was made to pay over 100 million in VAT deficiencies. At the time the MFR was filed,
it was able to avail of tax amnesty under RA 9840 by paying 5 percent of the tax or 5 million pesos.
Petitioner passed an MFR but the CA denied. Hence, this case.

Issue:
Was petitioner, as an HMO, engaged in the business of insurance during the pertinent taxable years, and was thus
liable for DST?

Held: No. Mfr granted. CIR must desist from collecting tax.

Ratio:
Section 185 of the NIRC . Stamp tax on fidelity bonds and other insurance policies. – On all policies of insurance or
bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person,
association or company or corporation transacting the business of accident, fidelity, employer’s liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire
insurance).
Two requisites must concur before the DST can apply, namely: (1) the document must be a policy of insurance or an
obligation in the nature of indemnity and (2) the maker should be transacting the business of accident, fidelity,
employer’s liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance
(except life, marine, inland, and fire insurance).
Under RA 7875, 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."
Various courts in the United States have determined that HMOs are not in the insurance business. One test that they
have applied is whether the assumption of risk and indemnification of loss 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 such is incidental and service is the principal purpose, then the business is not insurance.
Applying the "principal object and purpose test," there is significant American case law supporting the argument that
a corporation, whose main object is to provide the members of a group with health services, is not engaged in the
insurance business.
For the purpose of determining what "doing an insurance business" means, we have to scrutinize the operations of
the business as a whole. This is of course only prudent and appropriate, taking into account laws applicable to those
in the insurance business.
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. In fact, in a letter dated September 3, 2000, the
Insurance Commissioner confirmed that petitioner is not engaged in the insurance business.
As to whether the business is covered by the DST, we can see that while the contract did contains all the elements of
an insurance contract, as stated in Sec 2., Par 1 of the Insurance Code, the primary purpose of the company is to
render service. The primary purpose of the parties in making the contract may negate the existence of an insurance
contract.
Also, there is no loss, damage or liability on the part of the member that should be indemnified by petitioner as an
HMO. Under the agreement, the member pays petitioner a predetermined consideration in exchange for the hospital,
medical and professional services rendered by the petitioner’s physician or affiliated physician to him.
In other words, 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" presume 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.
Also, a member can take advantage of the bulk of the benefits anytime, e.g. laboratory services, x-ray, routine
annual physical examination and consultations, vaccine administration as well as family planning counseling, even in
the absence of any peril, loss or damage on his or her part.
Petitioner is obliged to reimburse the member who receives care from a non-participating physician or hospital.
However, this is only a very minor part of the list of services available. The assumption of the expense by petitioner
is not confined to the happening of a contingency but includes incidents even in the absence of illness or injury.
Consequently, there is a need to distinguish prepaid service contracts (like those of petitioner) from the usual
insurance contracts.
However, assuming that petitioner’s commitment to provide medical services to its members can be construed as an
acceptance of the risk that it will shell out more than the prepaid fees, it still will not qualify as an insurance contract
because petitioner’s objective is to provide medical services at reduced cost, not to distribute risk like an insurer.
If it had been the intent of the legislature to impose DST on health care agreements, it could have done so in clear
and categorical terms. It had many opportunities to do so. But it did not. The fact that the NIRC contained no
specific provision on the DST liability of health care agreements of HMOs at a time they were already known as such,
belies any legislative intent to impose it on them. As a matter of fact, petitioner was assessed its DST liability only on
January 27, 2000, after more than a decade in the business as an HMO.
In view of petitioner’s availment of the benefits of [RA 9840], and without conceding the merits of this case as
discussed above, respondent concedes that such tax amnesty extinguishes the tax liabilities of petitioner.
21 Our Insurance Code was based on California and New York laws. When a statute has been adopted from some
other state or country and said statute has previously been construed by the courts of such state or country, the
statute is deemed to have been adopted with the construction given.

(5) Gulf Resorts Inc. V. Philippine Charter Insurance Corp. (2005)

G.R. No. 156167 May 16, 2005

Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)

FACTS:
 Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which
includes loss or damage to shock to any of the property insured by this Policy occasioned by or through or
in consequence of earthquake
 July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and 2 swimming
pools in its Agoo Playa Resort were damaged
  August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded earthquake
shock coverage to the two swimming pools of the resort
 Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the
earthquake shock coverage. Thus, the policy extended earthquake shock coverage to all of the
insured properties.
 RTC: Favored American Home - endorsement rider means that only the two swimming pools were insured
against earthquake shock
 CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

HELD: YES. Affirmed.

 It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance
with each other.
 All its parts are reflective of the true intent of the parties.
Insurance Code
Section 2(1)
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
 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 two swimming pools.

(6) Philamcare v CA G.R. No. 125678. March 18, 2002

J. Ynares-Santiago

Facts: Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his
family members were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After
the period expired, he was given an expanded coverage for Php 75,000. During the period, he suffered from heart
attack and was confined at MMC. The wife tried to claim the benefits but the petitioner denied it saying that he
concealed his medical history by answering no to the aforementioned question. She had to pay for the hospital bills
amounting to 76,000. Her husband subsequently passed away. She filed a case in the trial court for the collection of
the amount plus damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but
deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the “incontestability clause” under the
Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio: Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It
contended that there was no indemnification unlike in insurance contracts. It supported this claim by saying that it is
a health maintenance organization covered by the DOH and not the Insurance Commission. Lastly, it claimed that the
Incontestability clause didn’t apply because two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as “an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.”
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity. The provider must pay for the medical expenses resulting from
sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that:
“that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any
information acquired by him in his professional capacity upon any question affecting the eligibility for health
care coverage of the Proposed Members.”
This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The
contract also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isn’t valid.
They can’t also invoke the “Invalidation of agreement” clause where failure of the insured to disclose information was
a grounds for revocation simply because the answer assailed by the company was the heart condition question based
on the insured’s opinion. He wasn’t a medical doctor, so he can’t accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated to make
further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
“Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed
upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or
injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of insurance.”
As to cancellation procedure- Cancellation requires certain conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds
mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured,
to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that “under the title Claim procedures of expenses, the defendant
Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to
contest the membershipof the patient if he had previous ailment of asthma, and six months from the issuance of the
agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of
concealment or misrepresentation no longer lie.”

(7) Eternal Gardens Memorial Park Corp. V. Philippine American Life Insurance Corp. (2008)
G.R. No. 166245 April 9, 2008
Lessons Applicable: Exception to Perfection (Insurance)

FACTS:
 December 10, 1980: Philippine American Life Insurance Company (Philamlife) entered into an agreement
denominated as Creditor Group Life Policy No. P-19202 with Eternal Gardens Memorial Park Corporation
(Eternal)
 Under the policy (renewable annually), the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife
 amount of insurance coverage depended upon the existing balance
 Eternal complied by submitting a letter dated December 29, 1982, a list of insurable balances of its lot
buyers for October 1982 which includes John Chuang which was stamped as received by Philam Life
 August 2, 1984, Chuang died with a balance of 100,000 php
 April 25, 1986: Philamlife had not furnished Eternal with any reply on its insurance claim so its demanded its
claim
 According to Philam Life, since the application was submitted only on November 15, 1984, after his death,
Mr. John Uy Chuang was not covered under the Policy since his application was not approved. Moreover,
the acceptance of the premiums are only in trust for and not a sign of approval.
 RTC: favored Eternal
 CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance contract.

HELD: YES. CA reversed

 construed in favor of the insured and in favor of the effectivity of the insurance contract
 Upon a party’s 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
 Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the
insured
 The termination of the insurance contract by the insurer must be explicit and unambiguous

(8) Development Bank of the Philippines v CA

231RA 370; March 21, 1994

Facts:

 Juan B. Dans, together with his family applied for a loan of P500,000 with DBP. As
principal mortgagor, Dans, then 76 years of age was advised by DBP to obtain a
mortgage redemption insurance (MRI) with DBP MRI pool. A loan in the reduced
amount was approved and released by DBP. From the proceeds of the loan, DBP
deducted the payment for the MRI premium. The MRI premium of Dans, less the DBP
service fee of 10%, was credited by DBP to the savings account of DBP MRI-Pool.
Accordingly, the DBP MRI Pool was advised of the credit.
  Dans died of cardiac arrest. 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.
DBP apprised Candida Dans of the disapproval of her late husband’s MRI application.
DBP offered to refund the premium 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 of the loan. She, likewise, refused to accept an ex gratia settlement
which DBP later offered. Hence the case at bar.

Issue:

 Whether or not the DBP MRI Pool should be held liable on the ground that the contract
was already perfected?

Held:

 No, it is not liable. The power to approve MRI application is lodged with the DBP MRI
Pool. The pool, however, did not approve the application. There is also no showing that it
accepted the sum which DBP credited to its account with full knowledge that it was
payment for the 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
 In dealing with Dans, DBP was wearing 2 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. DBP had full knowledge that the application was never going to be
approved. 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, DBP
exceeded the scope of its authority when it accepted the application for MRI by collecting
the insurance premium and deducting its agent’s commission and service fee. Since the
third person dealing with an agent is unaware of the limits of the authority conferred by
the principal on the agent and he has been deceived by the non-disclosure thereof by the
agent, then the latter is liable for damages to him.

(9) Great Pacific v CA G.R. No. L-31845 April 30, 1979

Facts: Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential data
which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the annual
premium the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as
his commission for being a duly authorized agent of Pacific Life.

Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing. Likewise,
petitioner Mondragon handwrote at the bottom of the back page of the application form his strong
recommendation for the approval of the insurance application. Then Mondragon received a letter from
Pacific Life disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old, but
Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is
acceptable, the Juvenile Non-Medical Declaration be sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner
Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific
Life again strongly recommending the approval of the 20-year endowment insurance plan to children,
pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but having
failed in his effort, he filed the action for the recovery before the Court of First Instance of Cebu, which
ruled against him.

Issues:

1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question

2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which rendered
void the policy

Held: No. Yes. Petition dismissed.

Ratio:The receipt was intended to be merely a provisional insurance contract. Its perfection was subject
to compliance of the following conditions: (1) that the company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company does not accept the application and offers to issue a
policy for a different plan, the insurance contract shall not be binding until the applicant accepts the
policy offered; otherwise, the deposit shall be refunded; and (3) that if the company disapproves
the application, the insurance applied for shall not be in force at any time, and the premium paid shall
be returned to the applicant.

The receipt is merely an acknowledgment that the latter's branch office had received from the applicant
the insurance premium and had accepted the application subject for processing by the insurance
company. There was still approval or rejection the same on the basis of whether or not the applicant is
"insurable on standard rates." Since Pacific Life disapproved the insurance application of respondent
Ngo Hing, the binding deposit receipt in question had never become in force at any time. The binding
deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.

The deposit paid by private respondent shall have to be refunded by Pacific Life.

2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he supplied
data, he was fully aware that his one-year old daughter is typically a mongoloid child. He withheld the
fact material to the risk insured.

“The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and
perfect candor or openness and honesty; the absence of any concealment or demotion, however slight.”

The concealment entitles the insurer to rescind the contract of insurance.

(10) Enriquez V. Sun Life Assurance Co. Of Canada (1920)

G.R. No. L-15895 November 29, 1920

Lessons Applicable: Perfection (Insurance)

FACTS:

 September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance Company of
Canada through its office in Manila for a life annuity

 2 days later: he paid P6,000 to the manager of the company's Manila office and was given a
receipt

 according to the provisional receipt, 3 things had to be accomplished by the insurance

company before there was a contract:
  (1) There had to be a medical examination of the applicant; -check

 (2) there had to be approval of the application by the head office of the company; and
- check

 (3) this approval had in some way to be communicated by the company to the
applicant - ?

 November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable
to Manila but this was not mailed

 December 4, 1917: policy was issued at Montreal

 December 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the company
stating that Herrer desired to withdraw his application

 December 19, 1917: local office replied to Mr. Torres, stating that the policy had been issued,
and called attention to the notification of November 26, 1917

 December 21, 1917 morning: received by Mr. Torres

 December 20, 1917: Mr. Herrer died

 Rafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer filed to recover
from Sun Life Assurance Company of Canada through its office in Manila for a life annuity

 RTC: favored Sun Life Insurance

ISSUE: W/N Mr. Herrera received notice of acceptance of his application thereby perfecting his life
annuity

HELD: NO. Judgment is reversed, and the Enriquez shall have and recover from the Sun Life the sum of
P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in
either instance. So ordered.

Civil Code

Art. 1319 (formerly Art.1262)

Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to have been entered into in the place where the
offer was made.

 not perfected because it has not been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant