INSURANCE DIGESTS
185 of the NIRC provides
PHILIPPINE HEALTH CARE
PROVIDERS vs. CIR
Facts: Philippine Health Care Providers
provides health care for those enrolled in its
health care programs. Those who are paying
their annual membership fee are entitled to
medical services. The Commission of
Internal Revenue sent a demand letter to
Philippine Health demanding the payment of
deficiency taxes for two years in the amount
of about P220 million. A documentary
stamp tax (DST) assessment was also
imposed on Philippine Health.
Philippine Health protested the assessment
in a letter. However, the CIR did not act on
the protest. Hence, Philippine Health filed a
petition for review with the CTA seeking the
cancellation of the deficiency VAT and DST
assessments.
CTA: ordered the payment of VAT plus
surcharge and interest, while the DST
assessment was cancelled and set aside.
CIR appealed it to the CA insofar as the
DST assessment was cancelled, and it
claimed that the health care agreement of
Philippine Health was a contract of
insurance subject to DST.
CA: reversed the decision of the CTA, and
ordered the payment DST plus surcharge
and interest. It held that the health care
agreement was in the nature of a non-life
insurance contract subject to DST.
MR of Philippine Health was denied by
CA.
Issue: Whether Philippine Health shall be
ordered to pay Documentary Stamp Tax
(DST)
Held: No. Sec.
that documentary stamp tax shall be
collected on all policies of insurance or
obligations of the nature of indemnity for
loss or damage. However, Philippine Health
Care Providers is not engaged in the
insurance business. It is a Health
Maintenance Organization (HMO). An
HMO is an entity providing health services
for a fixed prepaid premium.
An HMO does not indemnify its members
for any loss or damage arising from a
medical condition, but it provides health and
medical services.
Moreover, an HMO is not supervised by the
Insurance Commission, but by the DOH.
Likewise, the Insurance Commissioner
confirmed that Philippine Health is not
engaged in the insurance business.
A health care agreement is not an insurance
contract contemplated under section 185 of
the NIRC.
Furthermore, the NIRC contained no
specific provision on the DST liability of
health care agreements of HMOs at the time
there were already known as such.
As a matter of fact, Petitioner Philippine
Health was only assessed its DST liability
after more than a decade in the business as
an HMO.
EL ORIENTE vs. JUAN POSADAS
Facts: El oriente procured a life insurance
policy for its manager, A. Velhagen, who
had more than 35 years of experience in the
manufacture of cigars. El oriente designated
itself as the sole beneficiary of the insurance
policy. It charged the premiums of the
policy as expenses of the business, and
deducted them from its gross incomes as
reported in its annual income tax returns.
The deductions were allowed by Posadas, as
the acting Collector of Internal Revenue,
provided that El Oriente shows that the
premiums were expenses in the operation of
the business. Upon the death of Velhagen, El
oriente received all the proceeds of the
insurance policy.
Collector of IR: Assessed the sum of about
P3,000 as income tax on the proceeds of the
insurance policy, despite El Oriente
claiming exemption under the Income Tax
Law.
Trial Court: Affirmed the assessment of the
CIR, and held that the proceeds of the
insurance policy are taxable as income.
Issue: Whether the proceeds of life
insurance policies paid to corporate
beneficiaries are taxable as income.
Held: No. Considering the uncertainty of
Philippine law, and the lack of express
legislative intention to tax the proceeds of
life insurance policies paid to corporate
beneficiaries, the Court deem it reasonable
to hold the such proceeds not taxable
income.
MALAYAN INSURANCE vs.
PHILIPPINES FIRST INSURANCE
Facts: Wyeth Philippines and Reputable
Forwarder Services executed a contract
whereby Reputable shall transport the
products of Wyeth to its customers and
dealers. Wyeth procured Marine Policy from
Philippines First Insurance to insure the
products of Wyeth while being transported.
Wyeth executed its annual contract of
carriage with Reputable. However, the
contract was not signed by Wyeth’s
representatives but signed by Reputable’s
representatives. The same contract was
executed annually. Under the contract,
Reputable shall be liable for the loss, and
damage of the goods due to any and all
causes including theft, robbery, and other
force majeure while the products are in
transit. The contract of carriage also required
Reputable to secure an insurance on
Wyeth’s goods. Thus, Reputable signed a
Special Risk Insurance Policy (SR Policy)
with Malayan.
In one occasion, 1,000 boxes of Promil
infant formula of Wyeth is to be delivered
by Reputable to Mercury Drug Libis.
However, the truck containing the goods
were hijacked by armored men. The truck
was recovered without its cargo.
Philippine First paid Wyeth indemnity, and
it demanded reimbursement from Reputable.
However, Reputable ignored the demand.
Consequently, Philippines First instituted an
action for sum of money against Reputable.
Reputable claimed that it is a private carrier.
It also claimed that it cannot be made liable
since the contract was not signed by
Wyeths’ representative and the cause of the
loss was force majeure.
Subsequently, Reputable impleaded
Malayan, but Malayan argued that the SR
policy does not cover loss or damage to
property.
RTC: Found Reputable liable to Philippines
First for the amount of indemnity it paid to
Wyeth. Malayan is liable to Reputable to the
extent of the policy coverage.
CA: Sustained RTC decision. MR denied.
Issues:
1) Whether Reputable is a private carrier;
2) Whether Reputable is strictly bound by
the stipulations in its contract of carriage
with Wyeth, such that it should be liable for
any risk of loss or damage, for any cause
whatsoever, including that due to theft or
robbery and other force majeure;
3) Whether the RTC and CA erred in
rendering "nugatory" Section 5 and Section
12 of the SR Policy; and
4) Whether Reputable should be held
solidarily liable with Malayan for the
amount of P998,000.00 due to Philippines
First.
Held:
1) Reputable is a private carrier.
A private carrier is one which carry goods
not for the general public. In contrast
common carriers, are person, or corporations
which offer their services to the public for
transporting passengers or goods.
2) Reputable is bound by the terms of the
contract of carriage.
Reputable's liability is fully governed by the
stipulations of the contract of carriage,
including it liability for the loss of the goods
due to any and all causes, including theft,
robbery, or force majeure.
3) Section 5 and Section 12 of the SR
Policy shall not be declared nugatory.
Section 5 merely limits the liability of
Malayan up to the excess of the amount that
was not covered by the other insurance
policy. On the other hand, Section 12 is an
over insurance clause which provides that
Malayan shall not be liable to contribute
more than it ratable proportion on the loss or
damage. Moreover, there is no double
insurance since the Philippine First provides
equitable interest over the goods of Wyeth,
while Malayan provides insurance over the
safety goods being transported by
Reputable. Thus, the two entities covers
distinct insurable interests.
The requisites in
order for double insurance to arise are as
follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril
insured against.
4) Reputable is not solidarily liable with
Malayan.
There is solidary liability only when the
obligation expressly states so.
GEAGONIA vs. CA and COUNTRY
BANKERS INSURANCE
CORPORATION
Facts: Geagonia is the owner of Norman’s
Mart, located in the public market of a town
in Agusan del Sur. Geagonia obtained a fire
insurance policy for P100,000 from Country
Bankers Insurance Corporation (CBIC). The
policy contained a certain condition, named
Condition 3, which provides that the insured
shall give notice to CBIC regarding
insurances already effected over the same
properties insured by CBIC. Failure to notify
CBIC of such, will render the benefits of the
policy forfeited. However, the said
condition shall not apply when the loss or
damage is not more than P200,000.
In once occasion, a fire broke out at the
public market where the store of Geagonia
was located. The stocks-in-trade of
Geagonia were completely destroyed. He
filed his insurance claim with CBIC.
However, CBIC denied the claim, arguing
that the stocks-in-trade were also covered by
two insurance policies secured by Geagonia
from Cebu Branch of the Philippines First
Insurance Co. (PFIC). Geagonia then filed a
complaint against CBIC with the Insurance
Commission for the recovery of P100,000 as
provided by his fire insurance policy. Even
though admitting that he obtained two
insurance policies from FPIC, Geagonia
claims that he was not informed about
Condition 3.
Insurance Commission (IC): Geagonia
did not violate Condition 3 since he had no
knowledge of the two fire insurance policies
from PFIC. MR Denied.
CA: Reversed the IC since it found that
Geagonia knew the existence of the two
other policies from FPIC.
Issue: Whether Geagonia can claim against
CBIC.
Held: Yes. While it is clear that Geagonia
knew of the policies from FPIC, since he
renewed these insurance policies, Condition
3 only applies to double insurance.
However, in this case, there is no double
insurance, since the policies of PFIC do not
cover the same interest as that of the policy
of CBIC.
HEIRS OF MARAMAG v. MARAMAG
Facts: Loreto Maramag procured life
insurance from Insular Life and Grepa Life.
He designated Eva, his concubine, and
illegitimate children as beneficiaries. The
legitimate wife and legitimate children of
Loreto seeks to disqualify Eva as beneficiary
since allegedly she is responsible for the
death of Loreto. Thus, they pray that the
share of Eva should be forfeited in favor.
Moreover, the legitimate wife and children
claim that the shares of the illegitimate
children shall be lessened to only one-half of
the legitime of the legitimate children.
Issue: Whether the members of the
legitimate family are entitled to the proceeds
of the insurance for the concubine.
Held: No. Although petitioners are the
legitimate heirs of Loreto, they were not
named as beneficiaries in the insurance
policies issued by Insular and Grepalife.
Insurance contracts are governed by special
laws like the Insurance Code. Sec. 53 of the
Insurance Code provides that the only
persons entitled to claim the insurance
proceeds are only either the insure, if still
alive, or the beneficiary, if the insured is
already deceased. 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. The
legitimate wife and family do not fall under
the exception.
The disqualification and revocation of Eva
as beneficiary does not affect the validity of
the designation of the illegitimate children
as beneficiaries. Moreover, the shares of Eva
shall be awarded to the illegitimate children.
It is only in cases where the insured has not
designated any beneficiary, 23 or when the
designated beneficiary is disqualified by law
to receive the proceeds, 24 that the insurance
policy proceeds shall redound to the benefit
of the estate of the insured.
MULTI-WARE MANUFACTURING vs.
CIBELES INSRURANCE
Facts: Multi-ware, a manufacturer of plastic
products, took a fire insurance policy from
Western Guaranty Corporation in the
amount of P10M. The properties insured
were machinery and equipment stored in
PTA Compound, Valenzuela. Multi-ware
secured another fire insurance policy but this
time from Cibeles Insurance for P7M
covering the machinery and equipment of
Multi-Ware in PTA Compound.
Subsequently, it also obtained a fire
insurance policy from Prudential Guarantee
covering the same machinery and
equipment.
In one occasion, a fire broke out in the PTA
Compound causing damage and loss on the
proeprties of Multi-Ware. Hence, it filed
insurance claims with Western Guaranty,
and Cibeles Insurance. But their claims were
denied for violation of Policy Condition No.
3. Policy Condition No. 3 provides that the
insured shall give notice to the Company
regarding any insurance effected on the
same properties covered by the insurance of
the Company. Failure to do so, will cause
the forfeiture of the benefits provided by the
insurance policy. Then, Multi-Ware filed
civil action against the insurance companies.
RTC: The benefits under the insurance
policies are forfeited due to violation of
Policy Condition No.3.
CA: Sustained the RTC.
Issue: Whether petitioner violated Policy
Condition No. 3.
Held: Yes. It is apparent that Policy
Condition No. 3, or the "other insurance
clause," was violated since petitioner failed
to notify the insurers of the fire insurance
policies it procured from the different
insurers covering the same subject and
interest. Since the policy procured by
petitioner from Cibeles Insurance covered
the same subject and interest as that covered
by the policies issued by Western Guaranty
and Prudential Guarantee, the existence of
other insurance policies referred to under
Policy Condition No. 3 is undeniable. The
non-disclosure of these policies to the
insurers was fatal to petitioner's right to
recover on the insurance policies.
SUNLIFE ASSURANCE COMPANY vs.
CA and SPS. BACANI
Facts: Robert Bacani procured a life
insurance for himself. The insurance is
valued at P100,000 with double indemnity
incase of accidental death. The designated
beneficiary was his mother, Bernarda.
Bacani died in a plane crash. Bernarda
claimed the benefits of the insurance from
Sunlife. But Sunlife rejected the claim and
informed Bernrada that Robert did not
disclose material facts relevant to the
issuance of the policy, rendering the
insurance voidable. Sun Life claimed that
Robert did not disclose that he was
diagnosed with renal failure, two weeks
prior to his application for life insurance.
Bernarda filed an action for specific
performance against Sun Life.
RTC: Ordered Sun Life to pay Bernarda the
amount of P100,000, and the Accidental
Death Benefit of P100,000. The trial court
concluded that the facts concealed by the
insured were made in good faith that they
need not be disclosed. Moreover, his health
history was immaterial since the insurance
policy was "non-medical."
CA: Affirmed RTC. It held that the health
history of Robert is irrelevant since the he
waived the medical examination prior to the
issuance of the insurance policy. MR RTC: Also found no material
denied. misrepresentation on the part of Kwong
Nam.
Issue: Whether Bernarda can claim the
insurance benefits. Asian Crusader alleges that Kwong Nam
declared that a tumor associated with his
Held: No. Section 26 of the Insurance Code
stomach ulcer was taken out. However, his
is explicit in requiring a party to a contract
doctor confirmed that Kwong Nam was
of insurance to communicate to the other, in
diagnosed with peptic ulcer. Thus, Asian
good faith, all facts within his knowledge
Crusader claims that Kwon Nam made a
which are material to the contract.
material concealment.
Moreover, the waiver of a medical
Issue: Whether Asian Crusader was
examination renders even more material the
deceived or misled.
information required of the applicant.
Held: No. The claim of Kwong Nam that he
It is well settled that the insured need not die
was suffering from stomach ulcer was made
of the disease he had failed to disclose to the
in good faith. It was made without
insurer. It is sufficient that his non-
knowledge of its incorrectness, and without
disclosure misled the insurer in forming his
deliberate intent to mislead Asian Crusader,
estimates of the risks of the proposed
despite its incorrectness from the viewpoint
insurance policy or in making inquiries.
of a medical expert.
Hence, Sun Life properly exercised its right
The Insurance Law provides that where, a
to rescind the contract of insurance by
question appears to be not answered at all or
reason of the concealment employed by the
to be imperfectly answered, and the insurers
insured.
issue a policy without any further inquiry,
NG GAN ZEE vs. ASIAN CRUSADER they waive the imperfection of the answer
LIFE ASSURANCE and render the omission to answer more
fully immaterial.
Facts: Kwong Nam secured a life insurance
from Asian Crusader, with his wife, Ng Gan The fact of the matter is that the defendant
Zee as the beneficiary. Kwong Nam died of was too eager to accept the application and
cancer of the liver. Hence, Zee claimed the receive the insured's premium. It would be
insurance benefit. However, Asian Crusader inequitable now to allow the defendant to
denied the claim on the ground that the avoid liability under the circumstances."
answers of Kwong Nam in his application
PALILEO vs. COSIO
for life insurance were untrue. The matter
was brought to the Insurance Commissioner. Facts: Plaintiff obtained from defendant a
loan in the sum of P12,000.
Insurance Commissioner: Found no
material concealment on the part of Kwong
Nam, hence, Zee shall be paid the full face
To secure the payment of the aforesaid loan,
value of the policy.
defendant required plaintiff to sign a
document known as “Conditional Sale of
Residential Building”, purporting to convey
to defendant, with right to repurchase, a two-
story building of strong materials belonging
to plaintiff. This document did not express
the true intention of the parties which was
merely to place said property as security for
the payment of the loan.
mortgagee may insure his interest in the
property independently of the mortgagor. In
that event, upon the destruction of the
property the insurance money paid to the
mortgagee will not inure to the benefit of the
mortgagor, and the amount due under the
mortgage debt remains unchanged. The
mortgagee, however, is not allowed to retain
his claim against the mortgagor, but it passes
by subrogation to the insurer, to the extent of
the insurance money paid.”

After the execution of the aforesaid

document, defendant insured the building
against fire for the sum of P15,000, the
insurance policy having been issued in the
name of defendant. The building was partly
destroyed by fire and, after proper demand,
defendant collected from the insurance
company an indemnity of P13,107.00.
Plaintiff demanded from defendant that she
be credited with the necessary amount to pay
her obligation out of the insurance proceeds
but defendant refused to do so.

Issue: Whether a mortgagor is entitled to the

insurance proceeds of the mortgaged
property independently insured by the
mortgagee? What is the effect of the
insurance?

Held: NO. The rule is that “where a

mortgagee, independently of the mortgagor,
insures the mortgaged property in his own
name and for his own interest, he is entitled
to the insurance proceeds in case of loss, but
in such case, he is not allowed to retain his
claim against the mortgagor, but is passed
by subrogation to the insurer to the extent of
the money paid.” (Vance on Insurance, 2d
ed., p. 654) Or, stated in another way, “the