Enriquez vs.

Sunlife Assurance, 41 Phil 269 (1920)

FACTS:

On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for
life annuity. Two (2) days later, he paid the sum of 6T to the company’s manager in its
Manila office and was given a receipt.
On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the
same date, the Manila office prepared a letter notifying Herrer that his application has
been accepted and this was placed in the ordinary channels of transmission, but as far
as known was never actually mailed and never received by Herrer. Herrer died on Dec.
20, 1917. The plaintiff as administrator of Herrer’s estate brought this action to recover
the 6T paid by the deceased.

ISSUES:

Whether or not the insurance contract was perfected.

HELD:

NO. The contract for life annuity was NOT perfected because it had NOT been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the
applicant. An acceptance of an offer of insurance NOT actually or constructively
communicated to the proposer does NOT make a contract of insurane, as the locus
poenitentiae is ended when an acceptance has passed beyond the control of the party.
Insular Life vs. Ebrado, 80 SCRA 181 (1977)

FACTS:

Buenaventura was married to Pascuala with whom he had six. Later on however, he

started living with Carponia although he was still legally married to Pascuala and had
not legally separated from her.

While living with Carponia, Buenaventura obtained an insurance policy from Insular Life
Assurance Co. with a rider for accidental death benefit and designated Carponia as the
revocable beneficiary, referring her therein as his wife. Barely more than a year after
obtaining the policy, Buenaventura died when he was hit by a falling branch of a tree.

Carponia filed a claim for the proceeds of the Policy as the designated beneficiary
therein, although she admits that she and the insured Buenaventura were merely living
as husband and wife without the benefit of marriage. Pascuala also filed her claim as
the widow of the deceased insured. She asserts that she is the one entitled to the
insurance proceeds, not the common-law wife, Carponia. In view of the conflicting
claims, Insular Life brought the matter to court interpleading both parties in the case.
The trial court ruled in favor of Pascuala.

ISSUE:

Can 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:

Yes. 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 from the premiums of the policy which the insured
pays out of liberality, the beneficiary will receive the proceeds or profits of said
insurance. As a consequence, the proscription in Article 739 of the new Civil Code
should equally operate in life insurance contracts. The mandate of Article 2012 cannot
be laid aside: any person who cannot receive a donation cannot be named as
beneficiary in the life insurance policy of the person who cannot make the donation.

Policy considerations and dictates of morality rightly justify the institution of a barrier
between common law spouses in regard to property relations since such relationship
ultimately encroaches upon the nuptial and filial rights of the legitimate family. 

A conviction for adultery or concubinage is not necessary. Article 739 itself provides that
the guilt of the donee may be proved by preponderance of evidence in the same
action. In this case, the common law relationship is already admitted by Carponia
herself in the stipula
Filipinas Life Assurance vs. Gonzalo P. Nava, GR L-2552, May 20, 1966

FACTS:

Nava took out 18 life insurances — 1 from Insular Life, and 17 from Filipinas Life
Assurance. The policies uniformly provide for loan clauses stating that Nava is entitled
to a policy loan, equal to or less than the policies’ cash surrender values, upon payment
of 3 full years of premium (without default). Nava completed 3 years of premium
payments to both insurers. Thus, he applied for a loan in accordance withe
aforementioned loan clause. However, the insurers refused to grant the same on the
ground that the regulation issued by the Insurance Commission on May 20, 1946
required insurance companies to withhold the payments on premiums made during the
Japanese occupation because the same shall be subject to future adjustments “as soon
as debtor-creditor relationship is established” and because of such process of
“withholding” Nava was not entitled to borrow any amount until such adjustment has
been made. On September 1948, Nava again reiterated his application, then citing the
SC’s decision in the case of Haw Pia v. China Banking Corporation establishing and
recognizing the relationship of debtor and creditor with respect to payments in fiat
currency made during the Japanese occupation on pre-war obligations. His loan
application remained unheeded.

Nava then brought an action before the CFI for the rescission of the policies and the
refund of the premiums paid.

The CFI rescinded the insurance contracts and ordered Filipinas and Insular to pay the
amounts paid as premium. The CA affirmed. The SC affirmed.

ISSUE: Did the insurers violation the loan clause in the insurance policies entitling Nava
to their rescission, on the strength of the ruling in the Haw Pia case?

HELD:

YES.
The aforestated regulation issued by the Insurance Commissioner has already lost its
legal effect and value when on April 9, 1948 our Supreme Court rendered its decision in
the Haw Pia case wherein it was declared, among others, that all payments made in fiat
currency during the Japanese occupation in relation with any contractual obligation
(debtor-creditor relationship) executed before the war were valid to all intents and
purposes.

The insurers content that the Haw Pia ruling finds no application in the valuation of
premium payments in Japanese military notes during the war on life insurance policies
because the insured is by no means a debtor of the insurer and vice versa.

The SC held that a life insurance policy involves a contractual obligation where the
insured is obligated to pay premiums of the insurer, otherwise the policy will lapse. And
for such purposes, the insured is deemed to be a debtor of the insurer. In other words,
insurance policies are in the nature of a contractual obligation within the meaning of the
civil law.

Given such, according to the Haw Pia case, the payments made by Nava should be
considered as valid payments. This leaves the insurers no excuse to refuse granting
him as policy loans requested.

Furthermore, the regulation of the Insurance Commissioner invoked by the insurers was
of doubtful validity in relation to its effect to suspend the effectivity of a provision
embodied in a valid insurance policy. In such case, it would partake the nature of an
impairment of the obligations of contracts in violation of the Constitutional provision.

For violation of the loan clause by the insurer, the insured is entitled to rescind the
subject policies. Basis: Sec. 69 of the Insurance Act – “[t]he violation of a material
warranty, or other material provision of a policy, on the part of either party thereto,
entitles the other to rescind.”
 White Gold Marine Services vs. Pioneer Insurance, GR No. 154514, 28 July 2005

FACTS:
White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity
coverage for its vessels from The Steamship Mutual Underwriting Association
(Bermuda) Limited (Steamship Mutual) through Pioneer Insurance and Surety
Corporation (Pioneer). Subsequently, White Gold was issued a Certificate of Entry and
Acceptance.  Pioneer also issued receipts evidencing payments for the coverage. When
White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the
coverage.

Steamship Mutual thereafter filed a case against White Gold for collection of sum of
money to recover the latter’s unpaid balance. White Gold on the other hand, filed a
complaint before the Insurance Commission claiming that Steamship Mutual violated
Sections 186  and 187  of the Insurance Code, while Pioneer violated Sections
299,  300  and 301  in relation to Sections 302 and 303, thereof.
The Insurance Commission dismissed the complaint. It said that there was no need for
Steamship Mutual to secure a license because it was not engaged in the insurance
business.

Steamship Mutual contend that although Steamship Mutual is a Protection and

Indemnity Club (P & I Club) it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to
provide mutual protection against liabilities incidental to shipowning.

ISSUE:
Whether or not Steamship Mutual, a P & I Club, engaged in the insurance business in
the Philippines

HELD:
Yes. A P & I Club is “a form of insurance against third party liability, where the third
party is anyone other than the P & I Club and the members.”   By definition then,
Steamship Mutual as a P & I Club is a mutual insurance association engaged in the
marine insurance business.

The 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.   Section 99  of the Insurance
Code enumerates the coverage of marine insurance.

Relatedly, a mutual insurance company is a cooperative enterprise where the

members are both the insurer and insured. In it, the members all contribute, by a
system of premiums or assessments, to the creation of a fund from which all losses and
liabilities are paid, and where the profits are divided among themselves, in proportion to
their interest.  Additionally, mutual insurance associations, or clubs, provide three types
of coverage, namely, protection and indemnity, war risks, and defense costs.
Steamship Mutual Underwriting vs Sulpicio Lines, GR 196072, Sept. 20, 2017

FACTS: Steamship was a Bermuda-based Protection and Indemnity Club, managed

outside London, England. - It insures its members-shipowners against "third party risks
and liabilities" for claims arising from (a) death or injury to passengers; (b) loss or
damage to cargoes; and (c) loss or damage from collisions. Sulpicio insured its fleet of
inter-island vessels with Steamship.
One (1) of these vessels was the M/V Princess of the World, evidenced by a Certificate
of Entry and Acceptance issued by Steamship [the certificate incorporated by reference
an arbitration agreement set forth in its Club Rules] July 7, 2005, M/V Princess of the
World was gutted by fire while on voyage from Iloilo to Zamboanga City, resulting in
total loss of its cargoes.
Sulpicio claimed indemnity from Steamship. Steamship denied the claim and
subsequently rescinded the insurance coverage ( on the ground that "Sulpicio was
grossly negligent in conducting its business regarding safety, maintaining the
seaworthiness of its vessels as well as proper training of its crew.") Court History:
Sulpicio filed a Complaint with the RTC of Makati City. Steamship filed its MtD and/or to
Refer Case to Arbitration pursuant to RA No. 9285, or the ADR Act of 2004, and to Rule
4716 of the 2005/2006 Club Rules, which supposedly provided for arbitration in London
of disputes between Steamship and its members. The other defendants filed separate
MtD.

RTC Makati: denied the motions to dismiss. held that "arbitration [did] not appear to be
the most prudent action, . . . considering that the other defendants . . . ha[d] already
filed their [respective] [a]nswers." CA (thru Rule 65): dismissed the petition. Found no
grave abuse of discretion on the part of the RTC in denying Steamship's MtD and/or to
Refer Case to Arbitration or any convincing evidence to show that a valid arbitration
agreement existed between the parties. SC( Steamship filed Petition for Review). [Side
issue, not that important in relation ra sa contempt case: At the same time Sulpicio filed
a Petition for Indirect Contempt: Without Sulpicio's knowledge or consent, Steamship
initiated and "concluded" an arbitration proceeding which Steamship was the victor. [[it
settled its judgment liability of P4,121,600.00 in Civil Case entitled Verna Unabia v.
Sulpicio Lines, However, the actual amount reimbursed by Steamship was not
P4,121,600.00, equivalent to US$96,958.47, but only US$27,387.48.35 Steamship
deducted US$69,570.99, which allegedly represented Sulpicio's share in the arbitration
costs for the arbitration in London]]
ISSUE: Whether or not there is a valid and binding arbitration agreement between the
parties.
HELD:
Note: The agreement entered into by the parties is more than an insurance contract, not
only does Sulpicio obtain insurance coverage but also becomes a member. Sulpicio's
acceptance of the Certificate of Entry and Acceptance manifests its acquiescence to all
its provisions. There is no showing in the records or in Sulpicio's contentions that it
objected to any of the terms in this Certificate. Its acceptance, likewise, operated as an
acceptance of the entire provisions of the Club Rules.(When a contract is embodied in
two (2) or more writings, the writings of the parties should be read and interpreted
together in such a way as to render their intention effective.)
SC made reference to CA’s ruling: The Court of Appeals ruled that the arbitration
agreement in the 2005/2006 Club Rules is not valid because it was not signed by the
parties. In domestic arbitration, the formal requirements of an arbitration agreement are
that it must "be in writing and subscribed by the party sought to be charged, or by his
lawful agent." In international commercial arbitration, it is likewise required that the
arbitration agreement must be in writing. An arbitration agreement is in writing if it is
contained (1) in a document signed by the parties, (2) in an exchange of letters, telex,
telegrams or other means of telecommunication which provide a record of the
agreement, or (3) in an exchange of statements of claim and defense in which the
existence of an agreement is alleged by a party and not denied by another. The
reference in a contract to a document containing an arbitration clause constitutes an
arbitration agreement provided that the contract is in writing and the reference is such
as to make that clause part of the contract. -A contract may be encompassed in several
instruments even though every instrument is not signed by the parties, since it is
sufficient if the unsigned instruments are clearly identified or referred to and made part
of the signed instrument or instruments. Thus, an arbitration agreement that was not
embodied in the main agreement but set forth in another document is binding upon the
parties, where the document was incorporated by reference to the main agreement. The
arbitration agreement contained in the Club Rules, which in turn was referred to in the
Certificate of Entry and Acceptance, is binding upon Sulpicio even though there was no
specific stipulation on dispute resolution in this Certificate. The dispute between Sulpicio
Lines, Inc. and Steamship Mutual Underwriting (Bermuda) Limited is referred to
arbitration in London in accordance with Rule 47 of the 2005/2006 Club Rules.
Rizal Surety and Insurance Co. vs CA, GR 112360, July 18, 2000

FACTS:

Rizal Surety & Insurance Company issued a fire insurance policy in favor of
Transworld Knitting Mills, Inc. The subject policy stated that Rizal Surety is
“responsible in case of loss whilst 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 xxx.” The policy also described therein the four-span building covered
by the same.

On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its four-
span building and partly gutting the left and right sections thereof. A two-storey building
(behind said four-span building) was also destroyed by the fire.

ISSUE:

Whether or not 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:

Both the trial court and the CA found that the so-called “annex” as not an annex building
but an integral and inseparable part 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.”
Fortune Insurance and Surety Co. vs. CA, GR 115278, May 23, 1995

FACTS:
Producers Bank had a Money, Security, and Payroll Robbery policy with Fortune
Insurance and Surety Co., Inc. The policy states that the insurer shall not be liable for:
“any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the
Insured whether acting alone or in conjunction with others.” Producers then allegedly
lost a sum of P725k during a robbery of its armored vehicle while it was in transit to
transfer the money from Pasay to Makati. The vehicle was driven by one Magalong
(assigned by PRC Management Systems). The security guard, Atiga, was assigned by
Unicorn Security Services, Inc. The driver and the security guard, along with others,
were charged with highway robbery. The criminal case was still pending as of writing of
this decision. Producers filed a claim Fortune. Fortune denied on the ground that the
robbery was due to the acts of Producers’ own employees, thus an excluded loss under
the general exceptions in the policy.

Producers filed a case against Fortune for the recovery of the insurance proceeds.

The trial court ruled in favor of Producers Bank. The CA affirmed. The lower courts
found that both Magalong and Atiga were not employees of the Bank. The SC reversed.

ISSUE:

Was Fortune Insurance liable under the Money, Security, and

Payroll Robbery policy it issued to Producers Bank or was the
recovery thereunder is precluded under the general exceptions
clause thereof?

HELD – RECOVERY PRECLUDED. FORTUNE NOT LIABLE.

On the applicable law. The Court said that theft or robbery insurance policy, as with
the case at bar, is a form of casualty insurance governed by Sec. 174 of the Insurance
Code. The Court also noted that the Code contains no provisions specifically applicable
to casualty insurance. Thus, this shall be governed by the general provisions applicable
to all types of insurance.

On the usual exceptions in robbery and theft policies. The numerous restrictions in

the robbery and theft policies were intended to reduce the moral hazard. It was noted
that in these types of insurance, the opportunity to defraud the insurer is so great (e.g.
through conspiracy, etc.). Usually, losses occasioned on the acts of the persons under
the insured’s service and employment, are excepted risks. The purpose of the exception
is to guard against liability should the theft be committed by one having unrestricted
access to the property. “Service” and “employment” in this case are to be understood in
their ordinary sense.

On whether Magalong and Atiga were Producers’ employees, given that they were
merely supplied by agencies. The Court held that Magalong and Atiga may be
considered employees of Producers. This is under the assumption that the contract of
Producers with the providers of concerned manpower were “labor-only.” And under the
Labor Code, employees under labor-only contract are considered employees of the
party employing them and not of the party who supplied them to the employer, the
former merely acting as an agent for the latter.

However, the Court noted that there was still lack of evidence as to the real nature of
the contract between producers and its suppliers of manpower, since the parties merely
entered into stipulation without submitting additional evidence other than the insurance
policy. Nevertheless, the Court held that even if Magalong and Atiga were not to be
considered employees of Producers, then may still be deemed its authorized
representatives for purposes of transferring the money in question. For the said
particular task, the subject employees acted as agents of Producers.
 Eternal Gardens Memorial vs. Philamlife, GR No. 166245, April 9, 2008

Facts:
Respondent Philamlife entered into an agreement denominated as Creditor Group Life
Policy with petitioner. Under the policy, the clients of Eternal who purchased burial lots
from it on installment basis would be insured by Philamlife. Among those insured was
John Chuang who died with a balance of payments pf PhP100,000.00. More than a
year after complying with the required documents, Philamlife had not furnished Eternal
with any reply to the latter’s insurance claim. This prompted Eternal to demand from
Philamlife the payment of the claim for PhP 100,000 on April 25, 1986. Only then did
Philamlife respond that the deceased was not covered by the Policy.
The RTC said that since the contract is a group life insurance, once proof of death is
submitted, payment must follow. The CA ruled that the non-accomplishment of the
submitted application form violated Section 26 of the Insurance Code. Thus, the CA
concluded, there being no application form, Chuang was not covered by Philamlifes
insurance.
Issue: May the inaction of the insurer on the insurance application be considered
approval of the application?
Ruling:
Yes. As earlier stated, Philamlife and Eternal entered into an agreement denominated
as Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is
provided that:

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.
An examination of the above provision would show ambiguity between its two
sentences. A contract of insurance, being a contract of adhesion, par excellence, any
ambiguity therein should be resolved against the insurer. 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.
 The Insular Life vs. Khu, GR 195176, April 18, 2016
FACTS:
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with
Insular Life.However, Felipe’s policy lapsed on June 23, 1999 due to non-payment of
the premium covering the period from June 22, 1999 to June 23, 2000.
On September 7, 1999, Felipe applied for the reinstatement of his policy which was
approved by Insular life. Consequently, a Letter of Acceptance and an Endorsement
was issued.
A part of the Letter of Acceptance states that: “[xx] Accept the imposition of an
extra/additional extra premium of [P]5.00 a year per thousand of insurance; effective
June 22,1999”; while a part of the Endorsement states: “This certifies that as agreed to
by the Insured, the reinstatement of this policy has been approved by the Company on
the understanding that the following changes are made on the policy effective June 22,
1999”.
On September 22, 2001, Felipe died due to several illnesses including type 2 diabetes
and live cirrhosis. On October 5, 2001, Felipe’s beneficiaries filed with Insular Life a
claim for benefit under the reinstated policy. This claim was denied. Instead, Insular Life
advised Felipe’s beneficiaries that it had decided to rescind the reinstated policy on the
grounds of concealment and misrepresentation by Felipe because the latter, apparently,
did not disclose his illness.
Trial ensued. Both the Trial Court and the Court of Appeals ruled in favor of Felipe’s
beneficiaries.
Now in this present petition, Insular Life prays for the reversal of the CA decision
arguing that respondents should not be allowed to recover on the reinstated insurance
policy because the two-year contestability period had not yet lapsed inasmuch as the
insurance policy was reinstated only on December 27, 1999, whereas Felipe died on
September 22, 2001.
In defense, respondents maintain that the phrase “effective June 22, 1999” found in
both the Letter of Acceptance and in the Endorsement is unclear whether it refers to the
subject of the sentence, i.e., the “reinstatement of this policy” or to the subsequent
phrase “changes are made on the policy;” that granting that there was any obscurity or
ambiguity in the insurance policy, the same, should be laid at the door of Insular Life as
it was this insurance company that prepared the necessary documents that make up the
same.

ISSUE:
Whether or not Felipe’s reinstated life insurance policy is already incontestable at the
time of his death?

HELD:
Yes,Felipe’s reinstated life insurance policy is already incontestable at the time of his
death.
The Insurance Code pertinently provides that:
Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by
any provision of this chapter, such right must be exercised previous to the
commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of two years from the date of
its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab
initio or is rescissible by reason of the fraudulent concealment or misrepresentation of
the insured or his agent.
The date of last reinstatement mentioned in Section 48 of the Insurance Code pertains
to the date that the insurer approved’ the application for reinstatement.
In this case, however, the parties differ as to when the reinstatement was actually
approved. Insular Life claims that it approved the reinstatement only on December 27,
1999. On the other hand, respondents contend that it was on June 22, 1999 that the
reinstatement took effect.
In light of the ambiguity in the insurance documents to this case, this Court adopts the
interpretation favorable to the insured in determining the date when the reinstatement
was approved. It must be remembered that an insurance contract is a contract of
adhesion which must be construed liberally in favor of the insured and strictly against
the insurer in order to safeguard the latter’s interest.
Hence, the Court agreed that the reinstatement took place on June 22, 1999, thus, the
two-year contestability period had lapsed even before Felipe’s death. With that, the
court ruled that Felipe’s reinstated life insurance policy is already incontestable at the
time of his death.
 Verendia vs. CA, GR 75605, Jan. 22, 1993
Facts:
Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-
18876 effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex)
Verendia's residential in the amount of P385,000.00. Designated as beneficiary was the
Monte de Piedad & Savings Bank.
Verendia also insured the same building with two other companies, namely, The
Country Bankers Insurance for P56,000.00 and The Development Insurance for
P400,000.00.
While the three fire insurance policies were in force, the insured property was
completely destroyed by fire.
Fidelity appraised the damage amounting to 385,000 when it was accordingly informed
of the loss. Despite demands, Fidelity refused payment under its policy, thus prompting
Verendia to file a complaint for the recovery of 385,000
Fidelity, averred that the policy was avoided by reason of over-insurance, that Verendia
maliciously represented that the building at the time of the fire was leased under a
contract executed on June 25, 1980 to a certain Roberto Garcia, when actually it was a
Marcelo Garcia who was the lessee.
 Philamlife Health Systems vs CA, GR 125678, March 18, 2002

FACTS:

Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc.
To the question ‘Have you or any of your family members ever consulted or been
treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or
peptic ulcer?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage was approved for a
period of one year from March 1, 1988 to March 1, 1989. The agreement was however
extended yearly until June 1, 1990 which increased the amount of coverage to a
maximum sum of P75,000 per disability.
During the period of said coverage, Ernani suffered a heart attack and was confined at
the Manila Medical Center (MMC) for one month. While in the hospital, his wife Julita
tried to claim the benefits under the health care agreement. However, the Philamcare
denied her claim alleging that the agreement was void because Ernani concealed his
medical history. Doctors at the MMC allegedly discovered at the time of Ernani’s
confinement that he was hypertensive, diabetic and asthmatic, contrary to his answer in
the application form. Thus, Julita paid for all the hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese General Hospital. Due to financial
difficulties, however, respondent brought her husband home again. In the morning of
April 13, 1990, Ernani had fever and was feeling very weak. Respondent was
constrained to bring him back to the Chinese General Hospital where he died on the
same day.

Julita filed an action for damages and reimbursement of her expenses plus moral
damages attorney’s fees against Philamcare and its president, Dr. Benito Reverente .
The Regional Trial court or Manila rendered 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: Whether or not the health care agreement is not an insurance contract

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

The health care agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity.

Verendia v. Court of Appeals, G.R. No. 75605, January 22, 1993