Civil Code applied to insurance contracts

Vicente G. Henson, Jr. vs. UCPB General Insurance Co., Inc.

G.R. No. 223134, August 14, 2019

FACTS:

In 1999, National Arts Studio and Color Lab (NASCL) leased the right front portion of the ground floor and the entire second floor
of a building then owned by Henson and made renovations with the building's piping assembly.

Meanwhile, Copylandia Office Systems Corp. moved in to the ground floor. On May 9, 2006, a water leak occurred in the building
and damaged Copylandia's various equipment, causing injury to it. As the said equipment were insured with UCPB General
Insurance, Copylandia filed a claim and eventually settled on November 2, 2006. This resulted in respondent's subrogation to the
rights of Copylandia over all claims and demands arising from the said incident.

On May 20, 2010, respondent, as subrogee to Copylandia's rights, demanded from NASCL before the RTC, civil payment of the
aforesaid claim, but to no avail. Thus, it filed a complaint for damages before the RTC. Meanwhile, sometime in 2010, petitioner
transferred the ownership of the building to Citrinne Holdings, Inc. (CHI), where he is a stockholder and the President, who was later
impleaded in an Amended Complaint. CHI argued since respondent's cause of action is based on quasi-delict, it must be brought
within four (4) years from its accrual on May 9, 2006.

RTC ruled in respondent's favor ruling that its cause of action against the party-defendants, including petitioner, arose when it paid
Copylandia's insurance claim and became subrogated to the rights and claims of the latter in connection with the water leak damage
incident. Since respondent was merely enforcing its right of subrogation, the prescriptive period is ten (10) years based on an
obligation created by law reckoned from the date of Copylandia's indemnification, or on November 2, 2006. As such, respondent's
claim against petitioner has yet to prescribe when it sought to include the latter as party-defendant on April 21, 2014. CA affirmed.

ISSUE:

Is the respondent’s claim for damages based on quasi-delict, hence, has already prescribed?

HELD:

No. The RTC relied on Vector Shipping Corporation v. American Home Assurance Company, where the Court ruled that the insured’s
claim against the debtor is premised on the right of subrogration pursuant to Art. 2207 of the Civil Code and hence, an obligation
created by law. Hence, an insurer may file an action against the tortfeasor within ten (10) years from the time the insurer indemnifies
the insured.

However, the Court now abandons the ruling in Vector. Following the principles of subrogation, the subrogee-insurer only assumes
the rights of the subrogor-insured based on the latter's original obligation with the debtor. Subrogation's legal effects under

Article 2207 of the Civil Code are primarily between the subrogee-insurer and the subrogor-insured: by virtue of the former's
payment of indemnity to the latter, it is able to acquire, by operation of law, all rights of the subrogor insured against the debtor.
Hence, the rights of a subrogee cannot be superior to the rights possessed by a subrogor. The insurer only steps into the shoes of the
insured and therefore, for purposes of prescription, inherits only the remaining period within which the insured may file an action
against the wrongdoer.

Cognition Theory

Paz Lopez De Constantino v. Asia Life Insurance Company, 87 Phil 248, August 31, 1950

FACTS:

There were two cases consolidated here. First was that of Arcadio Constantino who acquired a life insurance from Asia Life Insurance
Company in September 1941. He paid the first premium which was good until September 1942. War broke out and he was not able to
pay the second and subsequent premiums. He died in 1944. His beneficiary was Paz Lopez De Constantino.

The second case was that of Tomas Ruiz who acquired his life insurance from Asia Life in August 1938. He has been paying his
premium religiously but due to the war, he was not able to pay his subsequent premiums in 1942. He died in 1945. His beneficiary
was Agustina Peralta.
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The beneficiaries from both insurance policies filed their respective claims when the war was over. They point out that the obligation
of the insured to pay premiums was excused (suspended) during the war owing to impossibility of performance, and that consequently
no unfavorable consequences should follow from such failure (New York Rule).

Asia Life argued that the nonpayment of premiums cancelled the insurance policy. An insurance contract is one in which time is
material and of the essence. Non-payment at the day involves absolute forfeiture if such be the terms of the contract (United States
Rule).

ISSUE:

Whether plaintiffs may not be able to recover from Asia Life despite their non-payment as a consequence of war.

HELD:

The Court adopted the United States Rule which states that the contract is not merely suspended, but is abrogated by reason of non-
payments is peculiarly of the essence of the contract. It additionally holds that it would be unjust to allow the insurer to retain the
reserve value of the policy, which is the excess of the premiums paid over the actual risk carried during the years when the policy had
been in force.

Since contracts of insurance are contracts of indemnity in which terms and conditions specified in the policy, the parties have a right
to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary.

The rate of premium is measured by the character of the risk assumed. The insurance company, for a comparatively small
consideration, undertakes to guarantee the insured against loss or damage, upon the terms and conditions agreed upon, and upon no
other, and when called upon to pay, in case of loss, the insurer, therefore, may justly insists upon a fulfillment of these terms. If the
insured cannot bring himself within the conditions of the policy, he is not entitled for the loss. The terms of the policy constitute
the measure of the insurer's liability, and in order to recover the insured must show himself within those terms; and if it appears that
the contract has been terminated by a violation, on the part of the insured, of its conditions, then there can be no right of recovery. The
compliance of the insured with the terms of the contract is a condition precedent to the right of recovery. Hence, all premium
payments are due in advance and any unpunctuality in making any such payment shall cause this policy to lapse.

Rafael Enriquez, as Administrator of The Estate of The Late Joaquin Ma. Herrer v. Sun Life Assurance Company Of Canada, G.R.
No. L-15895, November 29, 1920

FACTS:

This is an action made by the administrator of the estate of Joaquin Herrer of P6,000.00 paid by the deceased for a life annuity on the
ground that the contract for a life annuity had not been perfected.

Joaquin Herrer made an application with Sun Life for a life annuity. He paid the amount of P6,000.00 to the Manila manager who
gave him a "provisional" receipt "subject to medical examination and approval of the Company's Central Office."

The application was forwarded to the head office in Canada and the policy was issued on December 4, 1917 in Canada. Meanwhile,
on December 18, 1917, Herrer's attorney wrote to the Manila Office stating that Herrer wanted to withdraw his application to which
the office wrote a letter dated November 26, 1917 stating that the policy had already been issued. The letter was received by the
attorney on December 21, 1917. Herrer had died a day earlier on December 20, 1920.

The trial court ruled that the contract had been perfected, hence this appeal.

ISSUES:

1. Whether the policyholder had received notice of the acceptance of his policy

NO. The facts clearly show that Herrer was not informed of the acceptance of the policy before his death.

2. Whether the contract of life annuity was perfected.

The contract for a life annuity was not perfected where the acceptance of the application by the home office of the insurer never came

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to the knowledge of the applicant who died.

NO. The contract was not perfected. Art. 1262 provides that acceptance by letter does not bind the person making the offer except
from the time it came to his knowledge.

The pertinent fact is that according to the provisional receipt, the insurance company had to: 1) conduct a medical examination; 2) had
to obtain the head office's approval; and 3) somehow communicate such approval.

It is true that the letter notifying acceptance was deposited in the post office, but the fact of notification is a rebuttable presumption
and the facts clearly show that Herrer never received the notice of the acceptance before his death.

Construction of Insurance Contract

Contract of Adhesion

RIZAL SURETY AND INSURANCE CORP V CA, 336 SCRA 12

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 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 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 already existed 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 Article 1377 of the New Civil Code, the
doubt should be resolved against the Rizal Surety, whose lawyer or managers drafted the fire insurance policy under scrutiny.

MILAGROS P. ENRIQUEZ VS. THE MERCANTILE INSURANCE CO., INC., G.R. 210950 August 15, 2018

A surety bond remains effective until the action or proceeding is finally decided, resolved, or terminated, regardless of whether the
applicant fails to renew the bond. The applicant will be liable to the surety for any payment the surety makes on the bond, but only up
to the amount of this bond.

SUMMARY:

Enriquez file a complaint for Replevin against Asuten to recover her Toyota Hi-Ace. Enriquez applied for a replevin bond from
Mercantile Insurance (MI). Thus, MI issued a bond for P600k. The replevin case was dismissed without prejudice due to Enriquez’s
continued failure to present evidence. Enriquez failed to return the van to Asuten, so the RTC ordered MI to pay P600k to Asuten. MI

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complied with the RTC order and paid Asuten P600k. MI then filed a collection suit against Enriquez. RTC ruled in favor of MI and
this was affirmed by the CA.

FACTS:

Enriquez filed a Complaint for Replevin against Asuten before the RTC of Angeles City, Pampanga for the recovery of her Toyota Hi-
Ace van. Enriquez applied for a replevin bond from Mercantile Insurance and the latter issued Bond No. 138 for P600,000.00, which
had a period of 1 year.

RTC issued an Order dismissing the Complaint without prejudice due to Enriquez's continued failure to present evidence. The RTC
found that Enriquez surrendered the van to the BPI, San Fernando Branch but did not comply when ordered to return it to the sheriff
within 24 hours from receipt of the RTC Order.

She also did not comply with prior court orders to prove payment of her premiums on the replevin bond or to post a new bond. Thus,
the RTC declared Bond No. 138 forfeited. Mercantile Insurance was given 10 days to produce the van or to show cause why judgment
should not be rendered against it for the amount of the bond.

The RTC, in a hearing, found that Mercantile Insurance failed to produce the van, and that Bond No. 138 had already expired. In an
Order issued on the same day, the RTC directed Mercantile Insurance to pay Asuten the amount of P600,000.00. Mercantile Insurance
wrote to Enriquez requesting the remittance of P600,000.00 to be paid on the replevin bond.

Due to Enriquez's failure to remit the amount, Mercantile Insurance paid Asuten P600,000.00, in compliance with the RTC Order. It
was also constrained to file a collection suit against Enriquez with the RTC of Manila. Enriquez argued that she could not be held
liable since the replevin bond had already expired.

ISSUE:

Whether or not petitioner, Milagros P. Enriquez should be made liable for the amount of the bond paid by respondent, Mercantile
Insurance Company.

RULING:

Yes. Petitioner, Enriquez is made liable for the replevin bond because she failed to appeal its forfeiture.

Basic is the principle that a contract is law between the parties for as long as it is not contrary to law, morals, good customs, public
order, or public policy.

A contract of insurance is, by default, a contract of adhesion. It is prepared by the insurance company and might contain terms and
conditions too vague for a layperson to understand. Hence, they are construed liberally in favor of the insured.

Under their Indemnity Agreement, petitioner held herself liable for any payment made by respondent by virtue of the replevin bond.
Petitioner contends that the Indemnity Agreement was a contract of adhesion since respondent made the extent of liability so
comprehensive and all-encompassing to the point of being ambiguous.

Respondent, however, does not seek to recover an amount which exceeds the amount of the bond or any "damages, payments,
advances, losses, costs, taxes, penalties, charges, attorney's fees and expenses of whatever kind and nature," all of which it could have
sought under the Indemnity Agreement. It only seeks to recover from petitioner the amount of the bond, or P600,000.00 paid to
Asuten pursuant to a lawful order of the RTC.

If there were any errors in the judgment of the RTC, petitioner could have appealed this. Petitioner, however, chose to let his Civil
Case lapse into finality. This case cannot now be used as a substitute for her lost appeal. It is clear from the antecedents that any losses
which petitioner has suffered were due to the consequences of her actions, or more accurately, her inactions. The civil case which she
filed, was dismissed due to her failure to prosecute. The RTC forfeited the replevin bond which she had filed because she refused to
return the property. She is now made liable for the replevin bond because she failed to appeal its forfeiture.

ALPHA INSURANCE AND SURETY CO. v. ARSENIA SONIA CASTOR, G.R. No. 198174, September 2, 2013

FACTS:

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Arsenia Sonia Castor (Castor) obtained a Motor Car Policy for her Toyota Revo DLX DSL with Alpha Insurance and Surety Co
(Alpha). The contract of insurance obligates the petitioner to pay the respondent the amount of P630,000 in case of loss or damage to
said vehicle during the period covered.

On April 16, 2007, respondent instructed her driver, Jose Joel Salazar Lanuza to bring the vehicle to nearby auto-shop for a tune up.
However, Lanuza no longer returned the motor vehicle and despite diligent efforts to locate the same, said efforts proved futile.
Resultantly, respondent promptly reported the incident to the police and concomitantly notified petitioner of the said loss and
demanded payment of the insurance proceeds.

Alpha, however, denied the demand of Castor claiming that they are not liable since the culprit who stole the vehicle is employed with
Castor. Under the Exceptions to Section III of the Policy, the Company shall not be liable for (4) any malicious damage caused by the
insured, any member of his family or by “A PERSON IN THE INSURED’S SERVICE”.

Castor filed a Complaint for Sum of Money with Damages against Alpha before the Regional Trial Court of Quezon City. The trial
court rendered its decision in favor of Castor which decision is affirmed in toto by the Court of Appeals. Hence, this Petition for
Review on Certiorari.

ISSUE:

Whether or not the loss of respondent’s vehicle is excluded under the insurance policy

HELD:

NO. The words “loss” and “damage” mean different things in common ordinary usage. The word “loss” refers to the act or fact of
losing, or failure to keep possession, while the word “damage” means deterioration or injury to property.

Therefore, petitioner cannot exclude the loss of Castor’s vehicle under the insurance policy under paragraph 4 of “Exceptions to
Section III”, since the same refers only to “malicious damage”, or more specifically, “injury” to the motor vehicle caused by a person
under the insured’s service. Paragraph 4 clearly does not contemplate “loss of property”.

A contract of insurance is a contract of adhesion. So, when the terms of the insurance contract contain limitations on liability,
courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation.

Thus, in Eternal Gardens Memorial Park Corporation vs. Philippine American Life Insurance Company, this Court ruled that 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.

FORTUNE MEDICARE v. DAVID ROBERT U. AMORIN, G.R. No. 195872, March 12, 2014

FACTS:

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Amorin was a cardholder/member of Fortune Medicare, Inc., a corporation engaged in providing health maintenance services to its
members.  The terms of Amorin’s medical coverage were provided in a Corporate Health Program Contract.

While on vacation in Honolulu, Hawaii, Amorin underwent an emergency surgery, specifically appendectomy, at the St. Francis
Medical Center, causing him to incur professional and hospitalization expenses of US$7,242.35 and US$1,777.79, respectively. 9K
dollars. (450k)

He attempted to recover from Fortune Care the full amount thereof upon his return to Manila, but the company merely approved a
reimbursement of P12,151.36, an amount that was based on the average cost of appendectomy, net of medicare deduction, if the
procedure were performed in an accredited hospital in Metro Manila.

Amorin received under protest the approved amount, but asked for its adjustment to cover the total amount of professional fees which
he had paid, and eighty percent (80%) of the approved standard charges based on “American standard”, considering that the
emergency procedure occurred in the U.S.A.

To support his claim, Amorin cited Section 3, Article V on Benefits and Coverages of the Health Care Contract, part of it states:

“Whether as an in-patient or out-patient, FortuneCare shall reimburse the total hospitalization cost including the professional fee
(based on the total approved charges) to a member who receives emergency care in a non-accredited hospital.  The above coverage
applies only to Emergency confinement within Philippine Territory.  However, if the emergency confinement occurs in a foreign
territory, Fortune Care will be obligated to reimburse or pay eighty (80%) percent of the approved standard charges which shall
cover the hospitalization costs and professional fees.”

ISSUE:

Whether or not Fortune Care is liable to pay the total amount of professional fees which Amorin had paid, and eighty percent (80%) of
the approved standard charges based on “American standard”

RULING:
Yes, Fortune Care is liable to the total amount of professional fees which Amorin had paid, and eighty percent (80%) of the approved
standard charges based on “American standard”.

The Supreme Court emphasized that for purposes of determining the liability of a health care provider to its members, jurisprudence
holds that a health care agreement is in the nature of non-life insurance, which is primarily a contract of indemnity. 

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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.
To aid in the interpretation of health care agreements, the Court laid down the following guidelines in Philamcare Health Systems v.
CA:

When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the
insurer from non-compliance with his obligation.  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.

Doing Business of Insurance (Mutual Insurance Companies)

REPUBLIC OF THE PHILIPPINES, Represented by the COMMISSIONER OF INTERNAL REVENUE vs. SUNLIFE
ASSURANCE COMPANY OF CANADA, G.R. No. 158085 October 14, 2005

Mutual life insurance companies that are bona fide cooperatives are entitled to exemption from the payment of taxes on life insurance
premiums and documentary stamps.

FACTS:

Sun Life is a mutual life insurance company organized under the laws of Canada. It is registered and authorized by the SEC and the
Insurance Commission to engage in the business in the Philippines as a mutual life insurance company. It made payments to the
Commissioner of Internal Revenue (CIR) P31.49M and P30M as premium tax and DST, respectively.

However, Sunlife subsequently filed an administrative claim for tax credits with the CIR on ground of alleged erroneous payment.
This is on the strength of the ruling of the SC in the case of CIR v. Insular Life holding that mutual life insurance companies are
purely cooperative companies and are exempt from the payment of premium tax and DST.

The CIR, among others, raised the following defenses: 1) failure of Sunlife to register with the Cooperative Development Authority
(CDA), 2) failure to prove that its ownership was vested to its member; 3) claimed that mutual life insurance companies earn profits
on account of it being subjected to regular corporated income tax under the 1997 Tax Code.

The CIR failed to act of the claim. The CTA ruled in favor of Sunlife. The CA upheld CTA’s ruling. The SC affirmed.

Is Sunlife a Cooperative?

HELD – YES.

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. The SC held that Sunlife squarely falls within this definition. First, it
is managed by its members. Second, it is operated with money collected from its members. Third, it is licensed for the mutual
protection of its members, not for the profit of anyone.

Test in determining insurance contract

WHITE GOLD MARINE SERVICES vs PIONEER INSURANCE, G.R. No. 154514, July 28, 2005
SUMMARY: White Gold procured a protection and indemnity coverage for its vessels from Bermuda through Pioneer. When White
Gold failed to fully pay its accounts, Bermuda refused to renew its coverage and later filed an action for sum of money against the
former to recover the latter’s unpaid balance. Meanwhile, White Gold filed a complaint against Pioneer and Bermuda for their alleged
lack if sufficient license.

The Insurance Commission and the Court of Appeals decided that Bermuda need not procure a license for it was not an insurance
business, rather a Protection and Indemnity Club. Furthermore, Pioneer is merely a collection agent, thus it does not need a separate
insurance license for that purpose.

Facts: 

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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[4] and 187[5]
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. It explained that Steamship Mutual was a Protection and Indemnity Club (P & I Club).
Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual
was not engaged in the insurance business. Moreover, Pioneer was already licensed, hence, a separate license solely as agent/broker of
Steamship Mutual was already superfluous.

Issues: 

Whether or not the contract entered into by the parties is an insurance contract.
Whether or not Pioneer is required to obtain a separate license as an insurance agent.

Held: 

Yes. 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.

PHILIPPINE HEALTH CARE PROVIDERS, INC. v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 167330, September
18, 2009

FACTS: 

Petitioner Philippine Health Care Providers, Inc. is a domestic corporation engaged in providing the medical services to individuals
who enter into health care agreements

Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and
curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the
group practice health delivery system at a hospital or clinic owned, operated or accredited by it.

On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent petitioner a formal demand 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. . . .

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.

ISSUE: 

WON THE PETITIONER IS ENGAGED IN INSURANCE BUSINESS.

HELD:

NO. The mere presence of risk would be insufficient to override the primary purpose of the business to provide medical services as
needed, with payment made directly to the provider of these services. In short, even if petitioner assumes the risk of paying the cost of
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these services even if significantly more than what the member has prepaid, it nevertheless cannot be considered as being engaged in
the insurance business.

By the same token, any indemnification resulting from the payment for services rendered in case of emergency by non-participating
health providers would still be incidental to petitioner’s purpose of providing and arranging for health care services and does not
transform it into an insurer. To fulfill its obligations to its members under the agreements, petitioner is required to set up a system and
the facilities for the delivery of such medical services. This indubitably shows that indemnification is not its sole object.

In fact, a substantial portion of petitioner’s services covers preventive and diagnostic medical services intended to keep members from
developing medical conditions or diseases. As an HMO, it is its obligation to maintain the good health of its members. Accordingly,
its health care programs are designed to prevent or to minimize the possibility of any assumption of risk on its part. Thus, its
undertaking under its agreements is not to indemnify its members against any loss or damage arising from a medical condition but, on
the contrary, to provide the health and medical services needed to prevent such loss or damage.

MEDICARD PHILIPPINES, INC., vs. CIR, G.R. No. 222743 April 5, 2017

FACTS:

MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and medical insurance coverage to its clients.
Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and
curative medical services provided by duly licensed physicians, specialists and other professional technical staff participating in the
group practice health delivery system at a hospital or clinic owned, operated or accredited by it. 

Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT Returns, the CIR informed
MEDICARD and issued a Letter Notice (LN). Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against
MEDICARD for deficiency VAT. A Memorandum was likewise issued recommending the issuance of a Formal Assessment Notice
(FAN) against MEDICARD. 

According to the CIR, the taxable base of HMOs for VAT purposes is its gross receipts without any deduction under Section 4.108.3
(k) of Revenue Regulations (RR) No. 16-2005. The CIR argued that since MEDICARD does not actually provide medical and/or
hospital services, but merely arranges for the same, its services are not VAT exempt. 

ISSUE:
Whether HMO & Insurance companies are the same and should be similarly taxed.

[Note: Insurance and reinsurance commissions are subject to VAT (RR 16- 2005)] – basis of CIR

RULING:
NO. The petition is meritorious.

The absence of an LOA violated MEDICARD’s right to due process (skipped; not insurance-related)

The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross
receipts for VAT purposes

The CTA en banc overlooked that the definition of gross receipts under RR No. 16-2005 merely presumed that the amount received
by an HMO as membership fee is the HMO’s compensation for their services.

In the proceedings below, the nature of MEDICARD’s business and the extent of the services it rendered are not seriously disputed.
As an HMO, MEDICARD primarily acts as an intermediary between the purchaser of healthcare services (its members) and the
healthcare providers (the doctors, hospitals and clinics) for a fee.

MEDICARD members can either avail of medical services from MEDICARD’s accredited healthcare providers or directly from
MEDICARD. In the former, MEDICARD members obviously knew that beyond the agreement to pre-arrange the healthcare needs of
its members, MEDICARD would not actually be providing the actual healthcare service. Thus, based on industry practice,
MEDICARD informs its would-be member beforehand that 80% of the amount would be earmarked for medical utilization and only
the remaining 20% comprises its service fee. In the latter case, MEDICARD’s sale of its services is exempt from VAT under Section
109 (G).

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 MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU), vs. MITSUBISHI MOTORS
PHILIPPINES CORPORATION, G.R. No. 175773, June 17, 2013

FACTS:

The Collective Bargaining Agreement (CBA) of the parties provides that the company shoulder the hospitalization expenses of the
dependents of covered employees with certain limitations and restrictions. Accordingly, covered employees pay part of the
hospitalization insurance premium through monthly salary deduction while the company, upon hospitalization of the covered
employees’ dependents, shall pay the hospitalization expenses incurred.

The conflict arose when a portion of the hospitalization expenses of the covered employees’ dependents were paid/shouldered by the
dependent’s own health insurance. On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida), Hermie Juan
Oabel (Oabel) and Jocelyn Martin (Martin), filed claims for reimbursement of hospitalization expenses of their dependents, however,
MMPC paid only a portion of their hospitalization insurance claims and not the full amount. MMPC only paid for the amounts not
covered by other insurance companies and those covered by official receipts.

The union insists that the covered employees are entitled to the whole and undiminished amount of said hospital expenses, which
should not be reduced by the amounts paid by the insurance companies.

MMPC denied the claims contending that double insurance would result if the said employees would receive from the company the
full amount of hospitalization expenses despite having already received payment of portions thereof from other health insurance
providers, and that employees should not be allowed to profit from their dependent’s loss.

Unable to resolve the problem themselves, MMPSEU referred the dispute to the National Conciliation and Mediation Board and
requested for preventive mediation.

ISSUE:

Whether or not the employee may claim the full amount of a no-fault insurance despite partial payment of their separate health
insurance providers.

ANSWER: The MMPSEU relies on the collateral source rule, however, it only applies in order to place the responsibility for losses on
the party causing them. Thus, it finds no application to cases involving no-fault insurances under which the insured is indemnified for
losses by insurance companies. Here, it is clear that MMPC is a no-fault insurer.

Moreover, the condition that payment should be direct to the hospital and doctor implies that MMPC is only liable to pay medical
expenses actually shouldered by the employees’ dependents. It follows that MMPC’s liability is limited, that is, it does not include the
amounts paid by other health insurance providers

Elements of Insurance

PHILAMCARE vs. CA, GR 125678

FACTS:

Respondent Julita Trinos’ deceased husband, Ernani Trinos applied for a health care coverage with petitioner Philamcare Health
Systems, Inc. In the standard application form, he answered NO to the following 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?

The application was approved and extended for 13 months, until June 1, 1990.

During the period of the coverage, Ernani suffered a heart attack resulting in confinement for a month at the Manila Medical Center
(MMC). While her husband was in the hospital, respondent tried to claim the benefits under the health care agreement. However,
petitioner denied her claim saying that the Health Care Agreement was void on the ground that there was a concealment regarding
Ernani’s medical history.

After his discharge, Ernani was brought again at the Chinese General Hospital where he died. Julita then filed an action for damages
against Philamcare including its President Dr. Benito Reverente. RTC ruled in favour of Julita, and this was affirmed by the CA
except that it deleted awards for damages and absolved Dr. Reverente.
10
ISSUE:

Whether or not the agreement is a contract of indemnity.

RULING:

Yes. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. The insurable
interest of respondent’s husband in obtaining the health care agreement was his own health.

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.

Elements of an Insurance Contract

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. An insurance contract exists where
the following elements concur:
(a) The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the happening of the designated peril;
(c) The insurer assumes the risk;
(d) Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar
risk; and
(e) In consideration of the insurer’s promise, the insured pays a premium.

GULF RESORTS, INC. v. PHILIPPINE CHARTER INSURANCE CORPORATION, GR No. 156167, May 16, 2005

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:

Whether Gulf can claim for its properties aside from the 2 swimming pools

HELD:

No. 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.

Section 2(1) 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
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.

11
 FILIPINO MERCHANTS INSURANCE CO., INC. vs. COURT OF APPEALS and CHOA TIEK SENG, 179 SCRA 638, G.R. No.
85141, November 28, 1989

FACTS:

As the consignee of goods in transit under the terms C&F Manila, Choa Tiek Seng insured a cargo of fishmeal from Bangkok to
Manila against all risks under a policy from Filipino Merchants.

Arriving from SS Bougainville, the cargo came in bad condition.

Choa Tiek Seng filed a claim with Filipno Merchants Insurance to recover the amount of P51,000. The insurance company denied the
claim, prompting Chia Tiek Seng to file an action before the RTC.

The RTC, and subsequently the Court of Appeals, ruled in favor of Choa Tiek Seng. Hence, the instant petition.

ISSUE:

Whether Choa Tiek Seng has an insurable interest in the cargo. - YES.

Whether the arrival of the cargo in bad condition was covered by the "against all risks" clause of the insurance policy? - YES.

HELD:

Insurable interest is every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured. Anyone has an insurable interest in property who derives a benefit
from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the
property.

Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arise.

In the instant case, Choa Tiek Seng’s interest over the goods is based on a perfected contract of sale, which vests in him an equitable
title even before delivery of the objects of the sale.

Moreover, the Supreme Court held that the “all risks” nature of the insurance contract at hand does not need the claimant to show
“some fortuity,” “casualty” or “accidental cause” in order to recover their loss. The terms accident and accidental do not acquire any
technical meaning hence are interpreted as all damages/losses suffered by the insured except when: first, the loss or damage was
caused by delay, and second, the loss or damage was caused by inherent defect of the thing insured.

Generally, the burden of proof belongs to the insured, but under an all risks policy, the burden is not on the insured to prove the
precise cause of the damage. In these cases, the insured merely has the initial burden of proving that the cargo was in good condition
and then subsequently damaged; thereafter burden of proof shifts to the insurer to show that the loss falls under the exceptions to the
coverage.

ANG KA YU v PHOENIX ASSURANCE CO. LTD. 1 CAR 704, September 28, 1961

Facts:

Ang Ka Yu had a piece of property in his possession. He insured it with Phoenix. The property was lost, so Ang Ka Yu sought to
claim the proceeds.

Phoenix denied liability on the ground that Ang was not the owner but a mere possessor and as such, had no insurable interest over the
property.

Issue:

Whether or not a mere possessor has insurable interest over the property.

Held:
12
Yes. A person having a mere right or possession of property may insure it to its full value and in his own name, even when he is not
responsible for its safekeeping. The reason is that even if a person is NOT interested in the safety and preservation of material in his
possession because they belong to 3rd parties, said person still has insurable interest, because he stands either to benefit from their
continued existence or to be prejudiced by their destruction.

UCPB GENERAL, INSURANCE CO., INC., PETITIONER, VS. ASGARD CORRUGATED BOX MANUFACTURING
CORPORATION, RESPONDENT., G.R. No. 244407, January 26, 2021

Vicente Ong Lim Sing, Jr. vs. FEB Leasing & Finance Corp., G.R. No. 168115, June 8, 2007

Facts: 

On March 9, 1995, FEB Leasing and Finance Corporation (FEB) entered into a lease of equipment and motor vehicles with JVL Food
Products (JVL). On the same date, Vicente Ong Lim Sing, Jr. (Lim) executed an Individual Guaranty Agreement with FEB to
guarantee the prompt and faithful performance of the terms and conditions of the aforesaid lease agreement.

Corresponding Lease Schedules with Delivery and Acceptance Certificates over the equipment and motor vehicles formed part of the
agreement. Under the contract, JVL was obliged to pay FEB an aggregate gross monthly rental of One Hundred Seventy Thousand
Four Hundred Ninety-Four Pesos (P 170,494.00).  

JVL defaulted in the payment of the monthly rentals. As of July 31, 2000, the amount in arrears, including penalty charges and
insurance premiums, amounted to Three Million Four Hundred Fourteen Thousand Four Hundred Sixty Eight and 75/100 Pesos
(P3,414,468.75). On August 23, 2000, FEB sent a letter to JVL demanding payment of the said amount. However, JVL failed to pay.

Issue: 

Whether or not JVL as the lessee have an insurable interest over the leased items.

Held: 

Yes. The stipulation in Section 14 of the lease contract, that the equipment shall be insured at the cost and expense of the lessee
against loss, damage, or destruction from fire, theft, accident, or other insurable risk for the full term of the lease, is a binding and
valid stipulation.

Petitioner, as a lessee, has an insurable interest in the equipment and motor vehicles leased. Section 17 of the Insurance Code provides
that the measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof. It
cannot be denied that JVL will be directly damnified in case of loss, damage, or destruction of any of the properties leased.

It has also been held that the test of insurable interest in property is whether the assured has a right, title or interest therein that he will
be benefited by its preservation and continued existence or suffer a direct pecuniary loss from its destruction or injury by the peril
insured against.

Rizal Commercial Banking Corporation vs. CA, 289 SCRA 292 (1998)

FACTS:

When GOYU & Sons, Inc. (GOYU) obtained a credit facility from Rizal Commercial Banking Corporation (RCBC) it executed a
mortgage contract in favor of the bank and stipulated that GOYU will insure all the subject properties with an insurance company
approved by the bank and to endorse and deliver the policies to the bank.

GOYU, through Alchester Insurance, Agency, Inc., took insurance policies from Malayan Insurance Company, Inc. (MICO), sister
company of RCBC, and endorsed them in favor of RCBC. Copies of the endorsements were sent and received by GOYU, RCBC and
MICO.

When GOYU’s factory buildings were gutted by fire, GOYU and RCBC filed separate claims with MICO but were both denied
because the policies were either attached or claimed by other creditors. GOYU then filed a complaint for specific performance and
damages disowning the endorsements or lack of authority of Alchester to prepare and issue said endorsements in favor of RCBC.
13
The trial court rendered judgment ordering, among others, MICO to pay fire loss claim of GOYU while ordering MICO and RCBC to
pay damages. GOYU was ordered to pay its loan obligations with RCBC with interests. On appeal, the Court of Appeals sustained the
findings of the trial court with respect to MICO and RCBC’s liabilities. Hence, this recourse.

ISSUE:

Whether or not RCBC, as mortgagee, has any right over the insurance policies taken by GOYU, the mortgagor, in case of the
occurrence of loss.

HELD:

Yes. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such
that each one of them may insure the same property for his own sole benefit.

There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it
appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by
their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity. CDcaSA

ARMANDO GEAGONIA v. CA and COUNTRY BANKERS INSURANCE CORP., G.R. No. 114427, February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year policy and covered
thestock trading of dry goods. The policy noted the requirement that "3. The insured shall give notice to the Company of any
insurance or insurances already effected, or which may subsequently be effected, covering any of the property or properties consisting
of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such
insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of
the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however,
that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than
P200,000.00."

The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s stocks
were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's denial was the
petitioner's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against the private respondent in the
Insurance Commission for the recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the
existence of the other two policies.

But, he said that he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies
and this requirement was not mentioned to him by the private respondent's agent. The Insurance Commission found that the petitioner
14
did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it
was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as
his creditor, had insurable interest on the stocks. The Insurance Commission then ordered the respondent company to pay complainant
the sum of P100,000.00 with interest and attorney’s fees. CA reversed the decision of the Insurance Commission because it found that
the petitioner knew of the existence of the two other policies issued by the PFIC.

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby violated Condition
3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:

1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the
private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which
the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know
about the prior policies since these policies were not new or original.

SPOUSES CHA vs. CA, G.R. No. 124520. August 18, 1997

FACTS: 

Petitioner-spouses, as lessees, entered into a lease contract with private respondent CKS Development Corporation (CKS), as lessor.
One of the stipulations of the one (1) year lease contract states:

18. x x x. The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or
space in the leased premises without first obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the
insurance thereof without the consent of the LESSOR then the policy is deemed assigned and transferred to the LESSOR for its own
benefit;

Notwithstanding the above stipulation in the lease contract, the  spouses insured against loss by fire their merchandise inside the
leased premises for 500K with the United Insurance Co., Inc. (United) without the written consent of private respondents CKS.

On the day that the lease contract was to expire, fire broke out inside the leased premises.

When CKS learned of the insurance earlier procured by the spouses (without its consent), it wrote the United a demand letter asking
that the proceeds of the insurance contract (between the Cha spouses and United) be paid directly to CKS, based on its lease contract
with Cha spouses.

United refused to pay CKS. Hence, the latter filed a complaint against the spouses and United.
The RTC rendered a decision ordering United to pay CKS . the CA affirmed the trial court decision. MR denied, hence this petition

ISSUE: 

WON the aforequoted paragraph 18 of the lease contract entered into between CKS and the spouses is valid insofar as it provides that
any fire insurance policy obtained by the spouses is deemed assigned or transferred to the CKS if said policy is obtained without the
prior written of the latter.

HELD:

NO; the provision is void, as against public policy

It is basic in the law on contracts that the stipulations contained in a contract cannot be contrary to law, morals, good customs, public
order or public policy.

Sec. 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable
interest in the property insured.

15
A non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their merchandise is primarily a contract
of indemnity. Insurable interest in the property insured must exist at the time the insurance takes effect and at the time the loss occurs.
The basis of such requirement of insurable interest in property insured is based on sound public policy: to prevent a person from
taking out an insurance policy on property upon which he has no insurable interest and collecting the proceeds of said policy in case of
loss of the property. In such a case, the contract of insurance is a mere wager which is void under Section 25 of the Insurance Code,
which provides:

SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person insured has or has not any
interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of
gaming or wagering, is void.

In the present case, it cannot be denied that CKS has no insurable interest in the goods and merchandise inside the leased premises
under the provisions of Section 17 of the Insurance Code which provide.

Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss of injury
thereof.”

United) cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interest in the
property insured

The liability of the spouses to CKS for violating their lease contract in that Cha spouses obtained a fire insurance policy over their
own merchandise, without the consent of CKS, is a separate and distinct issue which we do not resolve in this case.

I. Perfection of Insurance Contract

 Great Pacific vs CA, 89 SCRA 543

FACTS:

On March 4, 1957 respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company for
twenty-year endowment policy for ₱50,000.00 on the life of his one-year old Helen Go.

Upon payment of the insurance premium, a binding deposit receipt was issued to Hing by the branch manager
of the insurer in Cebu.

On May 28, 1957, the child died of influenza with complication of broncho pneumonia.

ISSUE:

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

HELD:

No. The provisions printed on the Binding Receipt show that the binding deposit receipt is intended to be
merely a provisional or temporary insurance contract and only upon compliance of the conditions. Since Pacific
Life disapproved the insurance application of Hing, the binding deposit receipt in question had never become in
force at any time.

 DEVELOPMENT BANK OF THE PHILIPPINES v. COURT OF APPEALS and the ESTATE

OF THE LATE JUAN B. DANS, G.R. No. L-109937

FACTS:

16
Dans applied for a loan with the DBP. A loan, in the reduced amount of P300,000.00, was approved by DBP.
Mr. Dans was advised by DBP to obtain a mortgage redemption insurance at DBP MRI pool. The insurance of
Mr. 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.

Mr. Dans died of cardiac arrest. DBP MRI notified DBP was not eligible for the coverage of insurance for he
was beyond the maximum age of 60. The wife, Candida, filed a complaint to the against DBP and DBP MRI
pool for ‘Collection of Sum of Money with Damages’.

Issue: Whether or not DBP should be held liable.

Held:

YES. 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. 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.

Eternal Gardens Memorial Park v. PhilAm Life, G.R. No. 166245, April 9, 2008

Philamlife entered into an agreement denominated as Creditor Group Life Policy with Eternal Gradens. This
insured the latter with respect to buyers of burial lots, 18-65 y.o., on installment. Insurance coverage is based
on the outstanding balances of buyers.

As required by Philamlife, Eternal Gardens submitted to the former the following: list of lot purchasers, copy of
application of each purchaser, outstanding balance of each. One of the lot purchasers, John Huang, died.
Thus, Eternal Gardens sent Philamlife a letter as insurance claim. It also submitted other pertinent documents
(death certificate, ID, etc.). Philamlife demanded additional requirements which Eternal complied with.
However, one year after such submission by Eternal, Philamlife still did not reply. Instead, upon demand by
Eternal, Philamlife denied the claim on ground of non-submission of the application.

Eternal Gardens filed a case before the RTC for a sum of money against Philamlife.

Whether there is a valid insurance coverage, notwithstanding Philamlife’s lack of approval?

HELD – YES.

The policy indicated the following for the 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.

The seeming ambiguity in the above stated must be resolved against Philamlife.

 Filipinas Cia de Seguros vs Christern, 89 Phil 54

Christern Huenefeld Corporation bought a fire insurance policy from Filipinas Compania de Seguros to cover
merchandise contained in a building. During the Japanese military occupation, this same merchandise and the
building were burned, so Huenefeld filed a claim under the policy.

Filipinas Compania refused to pay, alleging that the policy had ceased to be in force when the US declared war
against Germany. Filipinas Compania contended that Huenefeld, although organized and created under

17
Philippine laws, is a German subject, and hence, a public enemy, since majority of its stockholders are
Germans. On the other hand, Filipinas Compania is under American jurisdiction.

ISSUE: W/N Christern Huenefeld is a German subject because majority of its stockholders are under German
jurisdiction, despite the fact that it was organized and created under Philippine laws

HELD: YES. The Supreme Court held that Christern Huenefeld is an enemy corporation since majority of its
stockholders are German subjects. The two American cases relied up by the Court of Appeals have lost their
force in view of a newer case where the control test was adopted.

The Philippine Insurance Law provides that anyone, except a public enemy, may be insured. It stands to
reason that an insurance policy ceases to be allowable as soon as the insured becomes a public enemy. Since
Christern Huenefeld became a public enemy on Dec. 10, 1941, then the policy has ceased to be enforcible and
therefore Huenefeld is not entitled to indemnity. However, elementary rules of justice require that the premium
paid from Dec. 11, 1941 should be returned.

a. Beneficiaries

 Francisco Del Val, et al. vs. Andres Del Val, G.R. No. L-9374 February 16, 1915

FACTS:

The Plaintiffs and defendant are brothers and sisters, the only heirs at law and next of kin of Gregorio
Nacianceno del Val, who died in Manila on August 4, 1910, intestate.

During the lifetime of the deceased he took out insurance on his life for ₱ 40,000.00 and made it payable to the
defendant as the sole beneficiary.

Plaintiffs contend that the amount of the insurance policy belonged to the estate of the deceased and not to the
defendant.

ISSUE:

Whether the proceeds belonged exclusively to the designated son and not to the estate of the insured.

HELD:

Yes. When a life insurance policy is made payable to one of the heirs of the person whose life is insured, the
proceeds of the policy or the death of the insured belong exclusively to the beneficiary and not to the estate of
the person whose life was insured; and such proceeds are his individual property and not the property of the
heirs of the person whose life was insured.

 HEIRS OF LORETO C. MARAMAG vs. EVA MARAMAG et.al G.R. No. 181132, June 5,
2009

FACTS:
Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag

18
Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and his concubine
Eva de Guzman Maramag, also suspected in the killing of Loreto and his illegitimate children are claiming for
his insurance.
Vicenta alleges that Eva is disqualified from claiming

Whether or not illegitimate children can be beneficiaries in an insurance contract.

RULING:

Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy. Pursuant thereto, it is obvious that the only persons entitled
to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if the insured
is already deceased, upon the maturation of the policy.The exception to this rule is a situation
where the insurance contract was intended to benefit third persons who are not parties to the same
in the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and
claim from the insurer.

II. Policy
a. Cover Notes
 PACIFIC TIMBER EXPORT CORPORATION V. THE HONORABLE COURT OF
APPEALS and WORKMEN'S INSURANCE COMPANY, INC., G.R. No. L-38613
February 25, 1982
Facts:
> On March 13, 1963, Pacific secured temporary insurance from the Workemen’s Insurance Co. for its
exportation of logs to Japan. Workmen issued on said date Cover Note 1010 insuring said cargo.

> The regular marine policies were issued by the company in favor of Pacific on Apr 2, 1963. The 2 marine
policies bore the number 53H01032 and 53H01033.

> After the issuance of the cover note but BEFORE the issuance of the 2 policies, some of the logs intended
to be exported were lost due to a typhoon.

> Pacific filed its claim with the company, but the latter refused, contending that said loss may not be
considered as covered under the cover note because such became null and void by virtue of the issuance of
the marine policies.

Issue:
Whether or not the cover not was without consideration, thus null and void.

Held:
It was with consideration.

The fact that no separate premium was paid on the cover note before the loss was insured against occurred
does not militate against the validity of Pacific’s contention, for no such premium could have been paid, since
by the nature of the cover note, it did not contain, as all cover notes do not contain, particulars of the shipment
that would serve as basis for the computation of the premiums. As a logical consequence, no separate
premiums are required to be paid on a cover note.

If the note is to be treated as a separate policy instead of integrating it to the regular policies subsequently
issued, its purpose would be meaningless for it is in a real sense a contract, not a mere application.

b. Reinstatement of Policy

19
  VIOLETA R. LALICAN vs.THE INSULAR LIFE ASSURANCE COMPANY LIMITED, AS
REPRESENTED BY THE PRESIDENT VICENTE R. AVILON, G.R. No. 183526, August
25, 2009

During his lifetime, Eulogio Lalican applied for an insurance policy with Insular Life through one of its agents,
Josephine Malaluan. He designated Violeta as his primary beneficiary. Eulogio was able to pay the first several
premiums due on the policy. However, he failed to pay the subsequent premium even after the lapse of the 31-
day grace period. This resulted in the lapse of the insurance policy as stipulated in the policy contract itself.

Eulogio filed an application for the reinstatement . WHICH was denied/

Eulogio went to Malaluan’s house to submit another application for reinstatement.

As Malaluan was away, her husband received the second application. On the very same day, Eulogio died.
Without knowing about Eulogio’s death, Malaluan forwarded to Insular Life the second application. However,
Insular later found out about Eulogio’s death so it no longer acted upon the application.

Issue: Was Eulogio able to reinstate the lapsed policy prior to his death?

Held: No.

The SC ruled in the negative. The policy contract specifically provided for the conditions for the reinstatement
of the policy. These conditions include: (1) that the policy shall not be deemed reinstated until approved and (2)
any payment made in connection with such an application shall only be deemed deposit and shall not bind
Insular Life until the application is approved. Here, Eulogio’s death prevented full compliance with the
conditions contained in the contract, which he voluntarily signed.

c. Double Insurance
 MALAYAN INSURANCE CO. v. PHILIPPINES FIRST INSURANCE CO., GR No.
184300, 2012-07-11

FACTS
• Wyeth contracted a contract of carriage with Republic, a common carrier for the transport of its goods
and product.
• Wyeth insured the goods with Philippine First , while Republic insured the same goods with Malayan
insurance
• During transit, certain goods were lost due to hijacking of 10 armed men.
• Philippine first paid the proceeds to Wyeth, subrogating the rights of wyeth to Philippine first which filed
a claim against Republic and Malayan as a 3rd party defendant.
• Republic and Malayan refused the claim of Philippine first. Malayan contended that there was double
insurance and that the first insurer, Philippine First, should bear all the loss.

ISSUE ID THERE DI?

In the case at bar though the 2 insurance policy, one by Philippine first and one by Malayan were issued over
the same subject matter covering the same peril, it was issued to 2 different persons and to 2 different interest.
Philippine first insured wyeth over its own goods
Malayan insured republic over the latters insurable interest over the safety of the goods which could become
the basis for liability in case of loss or damage.

III. Premium

20
  LOYOLA LIFE PLANS INCORPORATED (NOW LOYOLA PLANS CONSOLIDATED
INC.) AND ANGELITA D. LUMIQUED, VS. ATR PROFESSIONAL LIFE ASSURANCE
CORPORATION (NOW ASIAN LIFE AND GENERAL ASSURANCE CORPORATION),
G.R. No. 228402, August 26, 2020
FACTS:
1. Loyola Life Plans, Inc. is a company engaged in the business of insuring the lives of
its plan holders through its Timeplans (pension contracts) and Lifeplans (memorial
service contracts), which are covered by insurance benefits provided by several
insurance companies, such as the ATR Professional Life Assurance Corporation.
2. Loyola applied with ATR for a Group Creditors Life Insurance plan, with Group
Yearly Renewable Term Life and Accidental Death Benefit as supplementary benefits.
3. On April 28, 2000, Dwight purchased a Timeplan from Loyola payable in 120
monthly installments for P5,040.00 per month.
● For the 1st monthly premium, Dwight issued two checks and cash payment.
● Simultaneous with the payment, Dwight executed a Timeplan Application for
which Timeplan Contract was issued.
4. Loyola deposited the checks BUT the cash payment was deposited only on May 2.
5. On May 1, Dwight died due to multiple stab wounds.
6. Angelita filed a claim to recover the proceeds of the insurance benefits.
7. ATR denied the claim on the ground that Dwight did not complete the monthly
premium payment prior to his death because the cash payment was only deposited on
May 2, 2000. Because the down payment was not fully paid on its due date, April 28,
2000, ATR contended that the policy is not valid and binding.

ISSUE: WON an insurance contract was perfected between Dwight and ATR on April 28,
2000 when Dwight paid Loyola's agent, Gumiran, cash and two checks, thus entitling his
heirs to the proceeds of the policy following his death on May 1, 2000. [YES]

RULING: Dwight timely paid the initial monthly premium for the Timeplan on April 28,
2000 to Loyola who is an agent of ATR. Hence, an insurance contract was perfected.

 PHILAM INSURANCE CO., INC., NOW CHARTIS PHILIPPINES INSURANCE, INC.,

PETITIONER, VS. PARC CHATEAU CONDOMINIUM UNIT OWNERS ASSOCIATION,
INC., AND/OR EDUARDO B. COLET, RESPONDENTS., G.R. No. 201116, March 04,
2019

Petitioner submitted a proposal to respondent to cover fire and comprehensive general liability insurance of its
condominium building, Parc Chateau Condominium.

Respondent Colet informed PhilaM to provide the insurance requirements of the condominium.

After petitioner appraised the condominium, it issued Fire and Lightning Insurance Policy valued for P900
million and Comprehensive General Liability Insurance Policy for P1 million. The parties negotiated for a 90-
day payment term of the insurance premium.

Parc Association's board of directors found the terms unacceptable and did not pursue the transaction. Parc
Association verbally informed Philam, through its insurance agent, of the board's decision. Since no premiums

21
were paid, Philam made oral and written demands upon Parc Association, who refused to do so alleging that
the insurance agent had been informed of its decision not to take up the insurance coverage.

Philam filed a complaint against Parc Association and Colet for the recovery of unpaid premiums.

Whether or not there was a valid insurance contract between the parties.

The petition is denied. there is no perfected insurance contract, because of the absence of one of the
elements, that is, payment of premium. As a consequence, Philam cannot collect P363,215.21 unpaid
premiums of void insurance policies.

 PEDRO ARCE v. THE CAPITAL INSURANCE & SURETY CO., INC. G.R. No. L-28501,
September 30, 1982

FACTS

The Petitioner (insured) is the owner of a residential house in Tondo, Manila, which had been insured with the
respondent insurance company since 1961. In November 1965, the respondent sent to the petitioner a
Renewal Certificate to cover the period from December 5, 1965 to December 5,1966 and requested payment
of the corresponding premium. Anticipating that the premium could not be paid on time, the petitioner asked for
an extension which was granted by the respondent. After the lapse of the requested extension, petitioner still
failed to pay the premium.

Thereafter, the house of the petitioner was totally destroyed by fire. Upon petitioner’s presentation of claim for
indemnity, he was told that no indemnity was due because the premium was not paid.

Nonetheless the respondent tendered a check for P300.00 as financial aid which was received by his
daughter. The petitioner sued the respondent for indemnity. The trial court held the respondent liable to
indemnify the petitioner on the ground that since the Insurance company could have demanded payment of the
premium, mutuality of obligation required that it should be liable on the policy. Hence, this appeal by the
respondent on question of law.

ISSUE

Whether or not the petitioners are entitled to claim from their policy despite non-payment of their premium.

RATIO

No. The parties in this case had stipulated that notwithstanding anything to the contrary contained in the policy,
the insurance will be deemed valid and binding upon the Company only when the premium and documentary
stamps therefor have actually been paid in full and duly acknowledged in an official receipt signed by an
authorized official/representative of the Company.

 UCPB GENERAL INSURANCE CO., INC. v. MASAGANA TELAMART, INC., G.R. No.
137172, April 4, 2001

22
Facts: Insurer issued 5 fire insurance policies covering various properties of the Insured (covering the period
May 22, 1991-May 22, 1992). Before the expiration of the policy (March 1992), Insurer evaluated the policy
and decided not to renew them. Thus, Insurer issued a notice of non-renewal to Insured’s broker Zuellig (on
April 1992).

After the expiration of the policy (or on June 13, 2012), fire razed Insured’s property covered by 3 policies. A
month later, Insured presented 5 checks to the Insurer’s cashier as payment for the renewal of the policy (from
May 1192-May 1993), however, no notice of loss was ever filed by Insured. Insurer refused to pay on the
ground that the policies had already expired and were not renewed, and that the fire occurred before payment
of the premium (for renewal).

Issue:
Whether the fire insurance policies had expired on May 1992 or had been extended or renewed by an implied
credit arrangement (even though actual tender of payment was made after the occurrence of the fire).

Held: No, the insurance policies had not been renewed.

An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void.

The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and
consider the policy binding before actual payment.

Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the
fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable
time after occurrence of the fire.

 JAIME T. GAISANO v. EVELOPMENT INSURANCE AND SURETY CORPORATION,

G.R. No. 190702, February 27, 2017

Issue:

Whether there is a binding insurance contract between petitioner and respondent.

None. The court denied the petition. insurance contracts requires a cause or consideration. The consideration
is the premium, which must be paid at the time and in the way and manner specified in the policy. If not so
paid, the policy will lapse and be forfeited by its own terms.

23
For it cannot be disputed that premium is the elixir vitae of the insurance business because by law
the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence,
the imperative need for its prompt payment and full satisfaction. 

The law, however, limits the parties' autonomy as to when payment of premium may be made for the contract
to take effect. The general rule in insurance laws is that unless the premium is paid, the insurance policy is not
valid and binding.

 Government Service Insurance System vs. Prudential Guarantee and Assurance, Inc,
G.R. No. 176982, November 20, 2013

filed a complaint for collection of a sum of money against GSIS when GSIS failed to settle the 4th and last
installment on the insurance premium with PGAI. In its Answer, GSIS did not specifically deny the allegations
of PGAI.

PGAI filed a Motion for Judgment on the Pleadings averring that GSIS essentially admitted the material
allegations of the complaint, such as the: existence of the MOA between NEA and GSIS; existence of the
reinsurance binder between GSIS and PGAI; remittance by GSIS to PGAI of the first three quarterly
reinsurance premiums; and failure/refusal of GSIS to remit the fourth and last reinsurance premium.

ISSUE: WON PGAI is entitled to the payment of the fourth and last reinsurance premium by GSIS

yes. We hold that the subject policies are valid even if the premiums were paid on installments. The records
clearly show that petitioner and private respondent intended subject insurance policies to be binding and
effective notwithstanding the staggered payment of the premiums.

 PHILIPPINE PRYCE ASSURANCE CORPORATION v. COURT OF APPEALS, et al,

230 SCRA 164 / G.R. No. 107062, February 21, 1994

FACTS:

Petitioner, Interworld Assurance Corporation was the butt of the complaint for collection of sum of money by
Gregoco, Inc. before the RTC of Makati Branch 138. The complaint alleged that petitioner issued two surety
bonds in behalf of its principal Sagum General Merchandise for five hundred thousand pesos (₱500,000.00)
and one million pesos (₱1,000,000.00) respectively.

In its Answer, petitioner admitted having executed the said bonds, but denied liability because allegedly 1) the
checks which were to pay for the premiums bounced and were dishonored hence there is no contract to speak
of between petitioner and its supposed principal; and 2) that the bonds were merely to guarantee payment of
its principal obligation, thus, excussion is necessary.

ISSUE:

Whether or not there is a valid contract of surety between Philippine Pryce and Sagum despite, the bouncing of
check, supposed to pay for the premium.

24
HELD:

Yes. Finally, there is reason to believe that petitioner does not really have a good defense. Petitioner hinges its
defense on two arguments, namely: a) that the checks issued by its principal which were supposed to pay for
the premiums, bounced, hence there is no contract of surety to speak of; and 2) that as early as 1986 and
covering the time of the Surety Bond, Interworld Assurance Company (now Phil. Pryce) was not yet authorized
by the Insurance Commission to issue such bonds.

IV. Recission of Contract

 THE INSULAR ASSURANCE CO. LTD. v. THE HEIRS OF JOSE H. ALVAREZ, GR NO.
207526, October 03, 2018

FACTS:
            On June 18, 1997, Alvarez applied for and was granted a housing loan by
UnionBank in the amount of P648,000.00. This loan was secured by a promissory note, a
real estate mortgage over the lot,and a mortgage redemption insurance taken on the life of
Alvarez with UnionBank as beneficiary.
            Alvarez passed away on April 17, 1998. In May 1998, UnionBank filed with Insular
Life a death claim under Alvarez’s name pursuant to the Group Mortgage Redemption
Insurance.
            Insular Life denied the claim after determining that Alvarez was not eligible for
coverage as he was supposedly more than 60 years old at the time of his loan’s approval.
            Relying on Alvarez’s Health Statement Form where he wrote “1942” as his birth year,
Insular Life rescind the Group Mortgage Redemption Insurance obtained by Union Bank on
Alvarez’s life.
ISSUE:
Whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant the
rescission of the Group Mortgage Redemption Insurance obtained by Union Bank on
Alvarez’s life
RULING:
            The court ruled in the negative.
            The Insurance Code dispenses with proof of fraudulent intent in cases of rescission
due to concealment, but not so in cases of rescission due to false representations. When an
abundance of available documentary evidence can be referenced to demonstrate a design
to defraud, presenting a singular document with an erroneous entry does not qualify as clear
and convincing proof of fraudulent intent.
            Assuming that the aforesaid answer given by the insured is false, as claimed by the
appellant, Sec. 27 of the Insurance Law, nevertheless requires that fraudulent intent on the
part of the insured be established to entitle the insurer to rescind the contract. And as
correctly observed by the lower court, “misrepresentation” as a defense of the insurer to
avoid liability is an ‘affirmative’ defense. The duty to establish such a defense by satisfactory
and convincing evidence rests upon the defendant.
            Here, as pointed out by the CA, Insular Life, failed to establish this defense. It only
relied on Alvarez’s Health Statement Form where he wrote “1942” as his birth year. This
form alone was insufficient to prove that he fraudulently intended to misrepresent his age
because aside from this, Alvarez had to fill out an application for insurance. This application

25
 would have supported the conclusion that he consistently wrote “1942” in all the documents
that he had submitted to Union Bank. However, the records made no reference to this
document.
            Petitioners Union Bank of the Philippines and The Insular Life Assurance Co., Ltd.
are ordered to comply with the insurance undertaking under Mortgage Redemption
Insurance Policy.

 SUN LIFE OF CANADA (PHILIPPINES), INC., v. MA. DAISY'S. SIBYA, JESUS MANUEL S.
SIBYA III, JAIME LUIS S. SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS
SIBYA, JR., GR No. 211212, June 08, 2016

In his Application for Insurance with Sun Life Atty. Jesus Sibya indicated that in “1987, he had
undergone lithotripsy due to kidney stone at NKI, discharged after 3 days, no recurrence as claimed."
 
On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application. On May 11, 2001, Atty. Jesus
Jr. died as a result of a gunshot wound.

Sun Life denied the insurance claim by the wife, on grounds that Atty. Jesus Jr. did not disclose his
previous medical treatment at the NKI which suggested that the insured was in "renal failure" and at
a high risk medical condition, a fact which had it known, it would not have issued the insurance
policy.

Respondents averred that Atty. Jesus Jr. was in good faith and even authorized Sun Life to inquire
further into his medical history. Sun Life filed a Complaint for Rescission before the RTC and prayed
for judicial confirmation of the rescission of Atty. Jesus Jr.'s insurance policy.

ISSUE:
Whether or not there was concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance application with
Sun Life –No.

As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical treatment for kidney ailment.
Moreover, he executed an authorization in favor of Sun Life to conduct investigation in reference with his medical
history.

It also appears that Atty. Jesus Jr. also signed the Authorization, which gave Sun Life the opportunity to obtain
information on the facts disclosed by Atty. Jesus Jr. in his insurance application. Given the express language of the
Authorization, it cannot be said that Atty. Jesus Jr. concealed his medical history since Sun Life had the means of
ascertaining Atty. Jesus Jr.'s medical record.

 MANULIFE PHILIPPINES, INC. v. HERMENEGILDA YBAÑEZ, GR No 204736, November

28, 2016

FACTS:

Manulife instituted a Complaint for Rescission against Respondent and the BPI Family Savings Bank (BPI
Family) which was later on dismissed. It alleged in the complaint that two insurance policies were void due to
concealment or misrepresentation of material facts in Gumersindo Ybanez’s applications for life insurance.

Insured died when the policies where only in force for 1 year and 3 months, and four months, respectively.
Respondent, widow of insured, filed a Death Claim. Manulife conducted an investigation into insured's death,
26
in view of the entries in the death Certificate. Manulife concluded that the insured misrepresented or concealed
material facts at the time the policies were applied for and denied the death claims and refunded the
premiums.

Whether Manulife's Complaint for rescission is dismissible for failure to prove concealment on the part of the
insured.

Yes.

The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing evidence rests upon the insurer."  For failure of
Manulife to prove intent to defraud on the part of the insured, it cannot validly sue for rescission of insurance
contracts.

 MANILA BANKERS LIFE INSURANCE CORPORATION v. CRESENCIA P. ABAN, G.R. No.

175666, July 29, 2013

Facts: 

On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers designating respondent Cresencia P.
Aban (Aban), her niece, as her beneficiary. Petitioner issued the policy in Sotero’s favor on August 30, 1993, after the requisite
medical examination and payment of the insurance premium.

On April 10, 1996, when the insurance policy had been in force for more than two years and seven months, Sotero died.

Respondent filed a claim for the insurance proceeds. Petitioner denied respondent’s claim on April 16, 1997 and refunded the
premiums paid on the policy as the policy was obtained by fraud, concealment and/or misrepresentation

ISSUE:

Whether or not Manila Bankers Life Insurance Corporation can still rescind the insurance contract

RULING:

No, Manila Bankers Life Insurance Corporation can no longer rescind the insurance contract.

Incontestability clause provides that an insurer is given two years from the effectivity of a life insurance contract and while
the insured is alive to discover or prove that the policy is void ab initio or is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies
within the period, the insurer must make good on the policy, even though the policy was obtained by fraud, concealment,
or misrepresentation. 

 Thelma vda. de Canilang v. Court of Appeals, G.R. No. 92492, June 17, 1993

Jaime Canilang applied for a “non-medical” insurance policy with respondent Great Pacific Life Assurance
Company naming his wife, Thelma Canilang as his beneficiary. But he did not disclose the fact that he was
diagnosed as suffering from sinus tachycardia and that he has consulted a doctor twice. Jaime was issued an
ordinary life insurance policy. Jaime died of “congestive heart failure”, “anemia”, and “chronic anemia”.

27
Petitioner filed a claim with Great Pacific which the insurer denied upon the ground that the insured had
concealed material information from it. Hence, Thelma filed a complaint against Great Pacific with the
Insurance Commission for recovery of the insurance proceeds.

Whether Jaime committed material concealment in his medical declaration.

Yes. This concealment of fact is considered material as it has probable and reasonable influence upon the
insurer Great Pacific’s risk assessment and decision as to whether to accept the insurance application or not.
Jaime’s diagnosis, as well as the medication prescribed for its treatment, were linked to heart diseases. As
held by CA, and cited by SC, such information could have been very material to the insurer in determining the
action to be taken on Canilang’s application for life insurance.

Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the
facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the
proposed contract, or in making his inquiries.”

 THE INSULAR LIFE ASSURANCE COMPANY, LTD, v. PAZ Y. KHU, FELIPE Y. KHU, JR.,
and FREDERICK Y. KHU, G.R. No. 195176, April 18, 2016

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. 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 an additional premium of [P]5.00 a year per thousand of insurance, effective effective June
22,1999.

On September 22, 2001, Felipe then died due to several illnesses including type 2 diabetes and live cirrhosis. Felipe’s
beneficiaries filed with Insular Life a claim for benefit under the reinstated policy which 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.

Whether Felipe’s reinstated life insurance policy is already incontestable at the time of his death

Yes. The date of last reinstatement mentioned in Insurance Code pertains to the date that the insurer approved’ the application
for reinstatement.

the parties differ as to when the reinstatement was actually approved. Insular Life claims that it approved the
reinstatement on December 27, 1999. On the other hand, respondents contend that it was on June 22, 1999 that
the reinstatement took effect. 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,

 MA. LOURDES FLORENDO v. PHILAM PLANS INC., PERLA ABCEDE, CELESTE

ABCEDE, G.R. No. 186983 February 22, 2012

FACTS:

Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans, Inc. Manuel signed
the application and left to Perla the task of supplying the information needed in the application. Respondent Ma. Celeste
Abcede, Perla’s daughter, signed the application as sales counselor.

28
Philam Plans issued Pension Plan Agreement to Manuel, with petitioner, his wife, as beneficiary. Eleven months later,
Manuel died of blood poisoning. Subsequently petitioner filed a claim for the payment of the benefits but Philam Plans
declined her claim prompting her to file the an action against the pension plan company.

ISSUE:

Whether or petition could claim benefits despite her husband concealed the true condition of his health.

RULING:

No. The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. Since Manuel
died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her husband’s
pension plan.

 MALAYAN INSURANCE CO., INC. v. PAP CO., LTD, G.R. No. 200784, August 7, 2013,
716 PHIL 155-171

whether or not Malayan should be held liable under the insurance contract

No. Evidently, by the clear and express condition in the renewal policy, the removal of the insured property to any
building or place required the consent of Malayan. Any transfer effected by the insured, without the insurer's consent,
would free the latter from any liability as the alteration of the location increased the risk of loss.

The Court has found nothing that would show that Malayan was duly notified of the transfer of the insured properties.
PAP clearly committed concealment, misrepresentation and a breach of a material warranty which entitles the injured
party to rescind a contract of insurance."

 GREAT PACIFIC LIFE ASSURANCE CORP. v. COURT OF APPEALS AND MEDARDA V.

LEUTERIO, G.R. No. 113899 October 13, 1999

FACTS:

29
Petitioner Grepalife executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife
agreed to insure the lives of eligible housing loan mortgagors of DBP.

One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered that he does not have any heart
conditions and that he is in good health to the best of his knowledge. However, after about a year, Dr. Leuterio died due to “massive
cerebral hemorrhage.”

When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been
suffering from hypertension, which caused his death andsuch non-disclosure constituted concealment that justified the denial of the
claim.

WON there was concealment as to justify Grepalife’s non-payment of the insurance proceeds

No, there was no sufficient proof that the insured had suffered from hypertension. The insurer failed to
establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim.

 Pioneer Insurance and Surety Corporation v. Oliva Yap, G.R. No. L-36232 December 19,
1974

Yap took out a Fire Insurance Policy with Pioneer for her two-storey store building. The policy requires Yap to
give Pioneer notice of co-insurers covering the same subject matter AND that failure to give such notice shall
lead to the forfeiture of the proceeds under the policy.

At the time of issuance of policy Yap had a P20k fire insurance with Great American Insurance Co., this was
noted in the policy with Pioneer as co-insurance. A subsequent endorsement on the policy indicated Northwest
Insurance as a co-insurer. Yap furthermore took out another insurance from Federal Insurance Co. Inc. A fire
then broke on Yap’s store. She filed a claim with Pioneer but the latter denied on ground of breach of condition
on the policy.

Should Pioneer be absolved from liability on Fire Insurance on account of any violation by Yap of the co-insurance clause therein?
HELD – YES.

By the plain terms of the policy, other insurance without the consent of petitioner would void the contract. The purpose of said Other
Insurance Clauses in the insurance policies was to reduce moral hazard, that is, to prevent over-insurance and thus avert the
perpetration of fraud. These conditions partake the nature, and must be deemed to be a warranty.

30
BAR 2022 INSURANCE QUESTIONS
1. Samson Manufacturing, Inc. insured its own goods with Delilah Insurance for Php 2,000,000.00. The same
goods were insured by Alibaba Shipping Co. with Assured Corp. for the same amount pursuant to its contract of
carriage with Samson Manufacturing, Inc. Both policies warranted that no other insurance exists, and in case
another insurance does exist, such would not void either policy, but in no case should the claim exceed the total
amount of Php 2,000,000.00 at the time of loss. Is this a case of double insurance? Explain briefly. (5 points)

No, it is not a case of double insurance.

Double insurance exists when the same person is insured by several insurers separately in respect to the same
subject or interest.

Here, Samson Manufacturing, Inc. and Alibaba Shipping Co. can both insure the goods as they have different
insurable interest therein. Samson has an insurable interest on the goods as the owner thereof, while Alibaba as
the shipper or courier of the goods. The claim also does not exceed Php 2,000,000.00.
Hence, there is no double insurance in this case.

2. [This item has two questions.] Muviel obtained a life insurance policy from X Insurance Corp. Muviel
underwent a medical examination and was certified as qualified to be insured. Unknown to X Insurance Corp.,
Muviel had a mild stroke some years earlier. The insurance policy expressly provided that any
misrepresentation in the questionnaire filled up by Muviel for the issuance of the policy would render the policy
null, void and of no effect.

(a) If Muviel dies within the two-year period from the time of issuance of the policy, will the beneficiaries of
Muviel be entitled to claim the proceeds of the life insurance policy? Explain briefly.

Yes, the beneficiaries of Muviel can claim the proceeds.

An insurer is given two years from the effectivity of a life insurance contract and while the insured is alive to
discover or prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. 

31
Here, it cannot be said that Muviel misrepresented his condition as he was certified after a medical examination
to be insured. X Insurance Corp. had the means of ascertaining Muviel’s condition and medical records.
Further, the insurer, X Insurance Corp., can only rescind the contract by reason of misrepresentation within the
two-year period or while the insured, Muviel, is still living.

Hence, the beneficiaries of Muviel are entitled to claim the proceeds of the life insurance policy.

(b) Should Muviel die after the two-year period, will your answer be the same? Explain briefly. (5 points)
Yes. If the insured dies after the two-year contestability period, the insurer is bound to make good its obligation under the policy,
regardless of the presence or lack of concealment or misrepresentation.

FINALS
Co-insurance

General Insurance and Surety Corporation vs. Ng Hua, G.R. No. L-14373

Facts:

In 1952, General issued issued a fire policy to Ng Hua to cover the contents of the Central Pomade Factory owned by him.

There was a provision in the policy that should there be any insurance already effected or to be subsequently procured, the insured
shall give notice to the insurer.

Ng Hua declared that there was none. The very next day, the building and the goods stored therein burned.

Subsequently, the claim of Ng Hua for the proceeds was denied by General since it discovered that Ng Hua had obtained an insurance
from General Indemnity for the same goods and for the same period of time.

Issue:

Whether General Insurance can refuse to pay the proceeds.

Held:

Yes. Violation of the statement which is to be considered a warranty entitles the insurer to rescind the contract of insurance. Such
misrepresentation is fatal.

Re-insurance

A contract of reinsurance is one by which an insurer (the “direct insurer” or “cedant”) procures a third person (the “reinsurer”) to
insure him against loss or liability by reason of such original insurance. It is a separate and distinct arrangement from the original
contract of insurance, whose contracted risk is insured in the reinsurance agreement. The reinsurer’s contractual relationship is with
the direct insurer, not the original insured, and the latter has no interest in and is generally not privy to the contract of reinsurance. Put
simply, reinsurance is the “insurance of an insurance.”

COMMUNICATION AND INFORMATION SYSTEMS CORPORATION v. MARK SENSING AUSTRALIA PTY. LTD.,
MARK SENSING PHILIPPINES, INC. AND OFELIA B. CAJIGAL, G.R. No. 192159, January 25, 2017
32
FACTS:

MS APL and CISC entered into a MOA where CISC was appointed as the exclusive agent of MS APL to PCSO. The recent
agreement referred to in the MOA is the thermal paper and bet slip supply contract (the Supply Contract) between the Philippine
Charity Sweepstakes Office (PCSO), MSAPL, and three other suppliers, namely Lamco Paper Products Company, Inc. (Lamco
Paper), Consolidated Paper Products, Inc. (Consolidated Paper) and Trojan Computer Forms Manufacturing Corporation (Trojan
Computer Forms).

MS APL agreed to pay CISC a commission of 24.5% of future sales to PCSO.

After initially complying with its obligation under the MOA, MSAPL stopped remitting commissions to CISC during the second
quarter of 2004. As a result of MSAPL's refusal to pay, CISC filed a complaint before the RTC in Quezon City for specific
performance against MSAPL, Mark Sensing Philippines, Inc. Atty. Ofelia Cajigal, and PCSO. CISC prayed that private respondents
be ordered to comply with its obligations under the MOA. It also asked the RTC to issue a writ of preliminary mandatory injunction
and/or writ of attachment.

RTC granted CISC's application for issuance of a writ of preliminary attachment.

CISC posted a bond in the amount of P113,197,309.10 through Plaridel Surety and Insurance Company in favor of MSAPL then
MSAPL filed a motion to determine the sufficiency of the bond because of questions regarding the financial capacity of Plaridel. But
before the RTC could act on this motion, MSAPL, apparently getting hold of Plaridel's latest financial statements, moved to recall and
set aside the approval of the attachment bond on the ground that Plaridel had no capacity to underwrite the bond pursuant to Section
215 of the old Insurance Code because its net worth was only P214,820,566.00 and could therefore only underwrite up to
P42,964,113.20.

RTC denied MSAPL's motion, finding that although Plaridel cannot underwrite the bond by itself, the amount covered by the
attachment bond "was likewise re¬insured to sixteen other insurance companies." However, "for the best interest of both parties," the
RTC ordered Plaridel to submit proof that the amount of P95,819,770.91 was reinsured. Plaridel submitted its compliance attaching
therein the reinsurance contracts. MSAPL, MSPI and Atty. Ofelia Cajigal filed a petition for certiorari .

CA held that the RTC exceeded its authority when it "ordered the issuance of the writ [of preliminary attachment] despite a dearth of
evidence to clearly establish [CISC's] entitlement thereto, let alone the latter's failure to comply with all requirements therefor."
Noting that the posting of the attachment bond is a jurisdictional requirement, the CA concluded that since Plaridel's capacity for
single risk coverage is limited to 20% of its net worth, or P57,866,599.80, the RTC "should have set aside the second writ outright for
non-compliance with Sections 3 and 4 of Rule 57." Hence this petition,

ISSUE:

Whether courts may approve an attachment bond which has been reinsured as to the excess of the issuer's statutory retention limit?

RULING:

NO, Section 215 of the old Insurance Code, the law in force at the time Plaridel issued the attachment bond, limits the amount of risk
that insurance companies can retain to a maximum of 20% of its net worth. However, in computing the retention limit, risks that have
been ceded to authorized reinsurers are ipso jure deducted. In mathematical terms, the amount of retained risk is computed by
deducting ceded/reinsured risk from insurable risk. If the resulting amount is below 20% of the insurer's net worth, then the retention
limit is not breached. In this case, both the RTC and CA determined that, based on Plaridel's financial statement that was attached to
its certificate of authority issued by the Insurance Commission, its net worth is P289,332,999.00. Plaridel's retention limit is therefore
P57,866,599.80, which is below the Pl13,197,309.10 face value of the attachment bond. However, it only retained an insurable risk of
P17,377,938.19 because the remaining amount of P98,819,770.91 was ceded to 16 other insurance companies. Thus, the risk retained
by Plaridel is actually P40 Million below its maximum retention limit. Therefore, the approval of the attachment bond by the RTC was
in order.

In cancelling Plaridel's insurance bond, the CA also found that because the reinsurance contracts were issued in favor of Plaridel, and
not MSAPL, these failed to comply with the requirement of Section 4, Rule 57 of the Rules of Court requiring the bond to be executed
to the adverse party. This led the CA to conclude that "the bond has been improperly and insufficiently posted." We reverse the CA
and so hold that the reinsurance contracts were correctly issued in favor of Plaridel. A contract of reinsurance is one by which an
insurer (the "direct insurer" or "cedant") procures a third person (the "reinsurer") to insure him against loss or liability by reason of
such original insurance. It is a separate and distinct arrangement from the original contract of insurance, whose contracted risk is
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insured in the reinsurance agreement. The reinsurer's contractual relationship is with the direct insurer, not the original insured, and the
latter has no interest in and is generally not privy to the contract of reinsurance.

Put simply, reinsurance is the "insurance of an insurance." By its nature, reinsurance contracts are issued in favor of the direct insurer
because the subject of such contracts is the direct insurer's risk-in this case, Plaridel's contingent liability to MSAPL and not the risk
assumed under the original policy.

The requirement under Section 4, Rule 57 of the Rules of Court that the applicant's bond be executed to the adverse party necessarily
pertains only to the attachment bond itself and not to any underlying reinsurance contract. With or without reinsurance, the obligation
of the surety to the party against whom the writ of attachment is issued remains the same.

Claims; Notice and proof of loss

INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES, INC., PETITIONER, V. COUNTRY BANKERS

INSURANCE CORPORATION, RESPONDENT. G.R. No. 194126, October 17, 2018

Finman General Assurance Corporation vs. Court of Appeals and Usiphil Incorporated, G.R. No. 138737 July 12, 2001

Finman General is solidarily liable. Under Section 176 of the Insurance Code, as amended, the liability of a surety in a surety bond
(Finman) is joint and several with the principal obligor (Pan Pacific).

FACTS

Pan Pacific Overseas is a recruitment agency which offers jobs abroad duly registered with the POEA.

Finman General is acting as Pan Pacific’s surety (as required by POEA rules and Art. 31 of the Labor Code). Pan Pacific was
sued by William Inocencio and 3 others for alleged violation of Article 32 and 34 of the Labor Code. Inocencio alleged that Pan
Pacific charged and collected fees but failed to provide employment abroad.
POEA ruled in favor of Inocencio et al and had impleaded Finman (upon request of Inocencio) in the complaint as well (Pan Pacific
changed business address without prior notice to POEA). The Labor Secretary affirmed POEA’s ruling.

Finman General asserts that it should not be impleaded in the case because it is not a party to the contract between Pan Pacific and
Inocencio et al.

ISSUE

Whether or not Finman General is solidarily liable in the case at bar

RULING

YES. Since Pan Pacific had thoughtfully refrained from notifying the POEA of its new address and from responding to the complaints,
petitioner Finman may well be regarded as an indispensable party to the proceedings before the POEA. Whether Finman was an
indispensable or merely a proper party to the proceedings, the SC held that the POEA could properly implead it as party respondent
either upon the request of Inocencio et al or motu propio. Such is the situation under the Revised Rules of Court.

Finman General is solidarily liable. Under Section 176 of the Insurance Code, as amended, the liability of a surety in a surety bond
(Finman) is joint and several with the principal obligor (Pan Pacific). Further, Article 31 of the Labor Code provides:

Art. 31. Bonds. — All applicants for license or authority shall post such cash and surety bonds as determined by the Secretary of
Labor to guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms and, conditions of
employment as appropriate. xxx
The Secretary of Labor shall have the exclusive power to determine, decide, order or direct payment from, or application of, the cash
and surety bond for any claim or injury covered and guaranteed by the bonds.

Prescriptions of Claims
34
 INTEGRATED MICRO ELECTRONICS, INC., VS. STANDARD INSURANCE CO., INC., G.R. No. 210302, August 27,
2020

SUMMIT GUARANTY & INSURANCE COMPANY v. ARNALDO, 158 SCRA 332, February 29, 1988

V. Subrogation
 KEIHIN-EVERETT FORWARDING CO v. TOKIO MARINE MALAYAN INSURANCE CO.,
G.R. No. 212107, January 28, 2019
 PAN MALAYAN INSURANCE CORPORATION vs. COURT OF APPEALS, ERLINDA
FABIE AND HER UNKNOWN DRIVER, 184 SCRA 54, April 3, 1990
 EQUITABLE INSURANCE CORPORATION v. TRANSMODAL INTERNATIONAL, INC.,
G.R. No. 223592, August 7, 2017

VI. Kinds of Insurance

a. Marine Insurance
 2100 CUSTOMS BROKERS, INC., VS. PHILAM INSURANCE COMPANY [NOW AIG
PHILIPPINES INSURANCE INC.], G.R. No. 223377, June 10, 2020, DECEMBER 1, 2020
 ISABELA ROQUE, doing busines under the name and style of Isabela Roque Timber
Enterprises and ONG CHIONG v. HON. INTERMEDIATE APPELATE COURT and
PIONEER INSURANCE AND SURETY CORPORATION, G.R. No. L-66935 November 11,
1985
 LA RAZON SOCIAL "GO TIAOCO Y HERMANOS vs. UNION INSURANCE SOCIETY OF
CANTON, LTD., G.R. No. 13983 September 1, 1919
 Caltex, Inc. vs. Sulpicio Lines, 315 SCRA 709/GR No. 131166, September 30, 1999
 Delsan Tranport Lines, Inc., vs CA and American Home Assurance Corporation, G.R. No.
127897 November 15, 2001

b. Fire Insurance
 Development Insurance Corporation vs. Intermediate Appellate Court, 143 SCRA 62
June 16, 1986
 NOEL F. MANANKIL, LIBERATO P LAUS, GLORIA C. MAGTOTO, EVANGELINE G.
TEJADA, ALIZAIDO F. PARAS AND PHILIP JOSE B. PANLILIO, VS. COMMISSION
ON AUDIT, G.R. No. 217342, October 13, 2020

c. Motor Vehicle Insurance

 First Integrated Bonding & Insurance Co., Inc. vs. Hernando, et. Al, G.R. No. L-51221,
July 31, 1991
 Giungon v Del Monte, 20 SCRA 1043
 Shafer v. Hon. Judge, RTC of Olongapo City, G.R. No. 78848, November 14, 1988
 Traveller’s Insurance and Surety Corp. vs. CA and Vicente Mendoza, GR 82036, May
22. 1997

Theft Clause; Authorized Driver’s Clause

 JEWEL VILLACORTA VS. THE INSURANCE COMMISSION AND EMPIRE
INSURANCE COMPANY, G.R. No. L-54171, October 28, 1980

35
  AGAPITO GUTIERREZ vs. CAPITAL INSURANCE & SURETY CO., INC., G.R. No.
L-26827, June 29, 1984
 CCC INSURANCE CORPORATION vs. CA and CARLOS F. ROBES, G.R. No. L-
25920 January 30, 1970
 FCP CREDIT CORPORATION, vs.CA, HERMINIO LIM and EVELYN LIM G.R. No.
96493 (May 7, 1992)
 Paramount Insurance v. Remondeulaz, G.R. No. 173773, November 28, 2012

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