Farinas Insurance Digewsts

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Philippine Health Care Providers v CIR G.R. No. 167330 June 12, 2008

J. Corona

Facts:The petitioner, a prepaid health-care organization offering benefits to its members. The CIR found that theorganization had a deficiency in the payment of the DST under Section 185 of the 1997 Tax Code which stipulatedits implementation:On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made orrenewed by any person, association or company or corporation transacting the business of accident, fidelity,employer's liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance(except life, marine, inland, and fire insurance) The CIR sent a demand for the payment of deficiency taxes, including surcharges and interest, for 1996-1997 in thetotal amount of P224,702,641.18.The petitioner protested to the CIR, but it didnt act on the appeal. Hence, the company had to go to the CTA. Thelatter declared judgment against them and reduced the taxes. It ordered them to pay 22 million pesos for deficiencyVAT for 1997 and 31 million deficiency VAT for 1996.CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to 1997.

Issues: WON a health care agreement in the nature of an insurance contract and therefore subject to the documentarystamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)

Held: Yes. Petition dismissed.

Ratio:The DST is levied on the exercise by persons of certain privileges conferred by law for the creation, revision, ortermination of specific legal relationships through the execution of specific instruments.The DST is an excise upon the privilege, opportunity, or facility offered at exchanges for the transaction of thebusiness. In particular, the DST under Section 185 of the 1997 Tax Code is imposed on the privilege of making orrenewing any policy of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature ofindemnity for loss, damage, or liability.Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue CrossHealthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-life insurancepolicy.

Its health care agreement is not a contract for the provision of medical services. Petitioner does not actually providemedical or hospital services but merely arranges for the sameIt is also incorrect to say that the health care agreement is not based on loss or damage because, under the saidagreement, petitioner assumes the liability and indemnifies its member for hospital, medical and related expenses(such as professional fees of physicians). The term "loss or damage" is broad enough to cover the monetary expenseor liability a member will incur in case of illness or injury.Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life insurance, which isprimarily a contract of indemnity.Similarly, the insurable interest of every member of petitioner's health care program in obtaining the health careagreement is his own health. Under the agreement, petitioner is bound to indemnify any member who incurshospital, medical or any other expense arising from sickness, injury or other stipulated contingency to the extentagreed upon under the contract.

Phil. American Life Insurance Company v. Ansaldo (1994)FACTS:

Ramon M. Paterno, Jr. sent a letter dated April 17, 1986 to Insurance Commissioner alleging certainproblems encountered by agents, supervisors, managers and public consumers of the Philippine AmericanLife Insurance Company (Philamlife)

During the hearing Ramon stated that the contract of agency is illegal

Philamlife through its president De los Reyes contended that the Insurance Commissioner as a quasi-judicial body cannot rule on the matter

ISSUE:1. W/N the Insurance Commissioner has the authority to regulate the business of insurance - YES


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The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to securea license because it was not engaged in the insurance business and that it was a P & I club. Pioneer was not requiredto obtain another license as insurance agent because Steamship Mutual was not engaged in the insurance business.The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate courtdistinguished between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneermerely acted as a collection agent of Steamship Mutual.Hence this petition by White Gold.

Issues:1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. Petition granted.

Ratio:White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress itsassertion, it cites the definition as an association composed of shipowners in general who band together for thespecific purpose of providing insurance cover on a mutual basis against liabilities incidental to shipowning that themembers incur in favor of third parties.They argued that Steamship Mutuals primary purpose is to solicit and provide protection and indemnity coverage

and for this purpose, it has engaged the services of Pioneer to act as its agent.Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in the insurance businessin the Philippines. It is merely an association of vessel owners who have come together to provide mutualprotection against liabilities incidental to shipowning.Is Steamship Mutual engaged in the insurance business?A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I

Club and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association

engaged in the marine insurance business.The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate ofauthority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicitinsurance and to collect payments in its behalf. Steamship Mutual even renewed its P & I Club cover until it wascancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through itsagent Pioneer, must secure a license from the Insurance Commission.

Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer orinsurance company is allowed to engage in the insurance business without a license or a certificate of authority fromthe Insurance Commission.2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by theInsurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate ofauthority issued by the same agency. However, a Certification from the Commission states that Pioneer does nothave a separate license to be an agent/broker of Steamship Mutual.Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agentfor Steamship Mutual. Section 299 of the Insurance Code clearly states:SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation or procurement ofapplications for insurance, or receive for services in obtaining insurance, any commission or other compensationfrom any insurance company doing business in the Philippines or any agent thereof, without first procuring a licenseso to act from the Commissioner.

Filipinas Cia de Seguros vs Christern 89 Phil 54Fact:On October 1, 1941, the respondent corporation, Christern Huenefeld and Co., Inc., after payment of correspondingpremium, obtained from the petitioner, Filipinas Cia de Seguros fire policy covering merchandise contained in abuilding located at Binondo, Manila. On February 27, 1942 or during the Japanese military occupation, the buildingand insured merchandise were burned. In due time the respondent submitted to the petitioner its claim under thepolicy. The petitioner refused to pay the claim on the ground that the policy in favor of the respondent that ceased tobe a force on the date the United States declared war against Germany, the respondent corporation (through


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organized under and by virtue of the laws of Philippines) being controlled by German subjects and the petitionerbeing a company under American jurisdiction when said policy was issued on October 1, 1941. The theory of thepetitioner is that the insured merchandise was burned after the policy issued in 1941 had ceased to be effectivebecause the outbreak of the war between United States and Germany on December 10, 1941, and that the paymentmade by the petitioner to the respondent corporation during the Japanese military occupation was under pressure.

Issue:W/N a public enemy can be insured.

Ruling:Since the majority of stockholders of the respondent corporation were German subjects, the respondent became anenemy of the state upon the outbreak of the war between US and Germany. The English and American cases reliedupon by the Court of Appeals lost in force upon the latest decision of the Supreme Court of US in which the controltest has adopted.Since World War I, the determination of enemy nationality of corporations has been discussed in many countries,belligerent and neutral. A corporation was subject to enemy legislation when it was controlled by enemies, namelymanaged under the influence of individuals or corporations themselves considered as enemies...The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides that "anyone except a publicenemy may be insured". It stands to reason that an insurance policy ceases to be allowable as soon as an insuredbecomes a public enemy.

The respondent having an enemy corporation on December 10, 1941, the insurance policy issued in its favor onOctober 1, 1941, by the petitioner had ceased to be valid and enforceable, and since the insured good were burnedduring the war, the respondent was not entitled to any indemnity under said policy from the petitioner. However,elementary rule of justice (in the absence of specific provisions in the Insurance Law) require that the premium paidby the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner.

San Miguel Brewery v. Law Union Rock Insurance Company - Insurance Proceeds

40 PHIL 674

Facts:

> On Jan. 12, 1918, Dunn mortgaged a parcel of land to SMB to secure a debt of 10T.> Mortgage contract stated that Dunn was to have the property insured at his own expense, authorizing SMB to

choose the insurers and to receive the proceeds thereof and retain so much of the proceeds as would cover themortgage debt.> Dunn likewise authorized SMB to take out the insurance policy for him.> Brias, SMBs general manager, approached Law Union for insurance to the extent of 15T upon the property. Inthe application, Brias stated that SMBs interest in the property was merely that of a mortgagee. > Law Union, not wanting to issue a policy for the entire amount, issued one for P7,500 and procured anotherpolicy of equal amount from Filipinas Cia de Seguros. Both policies were issued in the name of SMB only andcontained no reference to any other interests in the propty. Both policies required assignments to be approved andnoted on the policy.> Premiums were paid by SMB and charged to Dunn. A year later, the policies were renewed.> In 1917, Dunn sold the property to Harding, but no assignment of the policies was made to the latter.> Property was destroyed by fire. SMB filed an action in court to recover on the policies. Harding was made adefendant because by virtue of the sale, he became the owner of the property, although the policies were issued in

SMBs name.> SMB sought to recover the proceeds to the extent of its mortgage credit with the balance to go to Harding.> Insurance Companies contended that they were not liable to Harding because their liability under the policies waslimited to the insurable interests of SMB only.> SMB eventually reached a settlement with the insurance companies and was paid the balance of its mortgagecredit. Harding was left to fend for himself. Trial court ruled against Harding. Hence the appeal.

Issue:

Whether or not the insurance companies are liable to Harding for the balance of the proceeds of the 2 policies.


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Held:

NOPE.Under the Insurance Act, the measure of insurable interest in the property is the extent to which the insured might bedaminified by the loss or injury thereof. Also it is provided in the IA that the insurance shall be applied exclusivelyto the proper interest of the person in whose name it is made. Undoubtedly, SMB as the mortgagee of the property,had an insurable interest therein; but it could NOT, an any event, recover upon the two policies an amount in excessof its mortgage credit.

By virtue of the Insurance Act, neither Dunn nor Harding could have recovered from the two policies. With respectto Harding, when he acquired the property, no change or assignment of the policies had been undertaken. Thepolicies might have been worded differently so as to protect the owner, but this was not done.

Saura Import Export Co. v. Philippine International Surety - Cancellation of Policy

118 PHIL 150

Facts:

> On Dec. 26, 1952, Saura mortgaged to PNB its registered parcel of land in Davao to secure the payment of apromissory note of P27T.> A building of strong materials which was also owned by Saura, was erected on the parcel of land and the

building had always been covered by insurance even before the execution of the mortgage contract.> Pursuant to the mortgage agreement which required Saura to insure the building and its contents, it obtained a fireinsurance for P29T from PISC for a period of 1 year starting Oct. 2, 1954.> The mortgage also required Saura to endorse the insurance policy to PNB. The memo stated:Loss if any, payableto PNG as their interest may appear, subject to the terms, conditions and warranties of this policy. > The policy was delivered to PNB by Saura.> On Oct. 15, 1954, barely 13 days after the issuance of the fire insurance, PISC canceled the same, effective as ofthe date of issue. Notice of the cancellation was sent to PNB in writing and was received by the bank on Nov. 8,1954.> On Apr. 6, 1955, the building and its contents worth P4,685 were burned. On April 11, 1985, Saura filed a claimwith PISC and mortgagee bank.> Upon presentation of notice of loss with PNB, Saura learned for the first time that the policy had been previouslycanceled by PISC, when Sauras folder in the banks file was opened and the notice of the cancellation by PISC was

found.

Issue:

Whether or not there was proper cancellation of the policy?

Held:

NO.The policy in question does NOT provide for the notice of cancellation, its form or period. The Insurance Law doesnot likewise provide for such notice. This being the case, it devolves upon the Court to apply the generally acceptedprinciples of insurance, regarding cancellation of the insurance policy by the insurer.

Actual notice of cancellation in a clear and unequivocal manner, preferably in writing should be given by the insurer

to the insuredso that the latter might be given an opportunity to obtain other insurance for his own protection. Thenotice should be personal to the insurer and not to and/or through any unauthorized person by the policy. Both thePSIC and the PNB failed, wittingly or unwittingly to notify Saura of the cancellation made.

The insurer contends that it gave notice to PNB as mortgagee of the property and that was already substantialcompliance with its duty to notify the insured of the cancellation of the policy. But notice to the bank, as far asSaura herein is concerned, is not effective notice. PISC is then ordered to pay Saura P29T, the amount involved inthe policy subject matter of this case.Grepalife v. CA - Real Party In Interest


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316 SCRA 677

Facts:

> A contract of group life insurance was executed between Grepalife and DBP. Grepalife agreed to insure the livesof eligible housing loan mortgagors of DBP.> Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group lifeinsurance plan.> In an application form, Dr. Leuterio answered questions concerning his health stating that he is in good health andhas never consulted a physician for or a heart condition, high blood pressure, cancer, diabetes, lung, kidney orstomach disorder or any other physical impairment.> Grepalife issued the insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtednessamounting to eighty-six thousand, two hundred (P86,200.00) pesos.> Dr. Leuterio died due to "massive cerebral hemorrhage." Consequently, DBP submitted a death claim toGrepalife.> Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an insurancecoverage and insisted that Dr. Leuterio did not disclose that he had been suffering from hypertension, which causedhis death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim.> The widow of the late Dr. Leuterio, filed a complaint against Grepalife for "Specific Performance with Damages."During the trial, Dr. Hernando Mejia, who issued the death certificate, was called to testify. Dr. Mejias findings,based partly from the information given by the widow, stated that Dr. Leuterio complained of headaches presumablydue to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence, other

causes were not ruled out.> RTC ruled in favor of widow and against Grepalife. Grepalife appealed contending that the wife was not theproper party in interest to file the suit, since it is DBP who insured the life of Dr. Leuterio.

Issue:

Whether or not the widow is the real party in interest, (not DBP) and has legal standing to file the suit.

Held:

YES.Grepalife alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in interest, hencethe trial court acquired no jurisdiction over the case. It argues that when the Court of Appeals affirmed the trialcourts judgment, Grepalife was held liable to pay the proceeds of insurance contract in favor of DBP, the

indispensable party who was not joined in the suit.

To resolve the issue, we must consider the insurable interest in mortgaged properties and the parties to this type ofcontract. The rationale of a group insurance policy of mortgagors, otherwise known as the "mortgage redemptioninsurance," is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, ithas to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during thesubsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of themortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation.

In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death; themortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness.Consequently, where the mortgagor pays the insurance premium under the group insurance policy, making the losspayable to the mortgagee, the insurance is on the mortgagors interest, and the mortgagor continues to be a party to

the contract. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such loss-

payable clause does not make the mortgagee a party to the contract.

The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policystating that: "In the event of the debtors death before his indebtedness with the Creditor [DBP] shall have beenfully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum

assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor."When DBP submitted theinsurance claim against petitioner, the latter denied payment thereof, interposing the defense of concealmentcommitted by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action offoreclosure on the residential lot of private respondent


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And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whetherhe has an insurable interest or not, and such person may recover it whatever the insured might have recovered, 14the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

As to the question of whether there was concealment, CA held as affirmed by the SC that contrary to Grepalifes allegations, there was no sufficient proof that the insured had suffered from hypertension. Aside from the statementof the insureds widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, the

appellant had not proven nor produced any witness who could attest to Dr. Leuterios medical history.

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 establishsuch defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failedto clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insuranceGercio v. Sun Life - Insurance Beneficiary

48 PHIL 53

Facts:

> Sunlife issued a life insurance policy to Gercio, the former agreeing to insure the life of Gercio for 2T to be paidto him on Feb. 1, 1930 or if he should die before said date, then to his wife Andrea, should she survive him;otherwise to the executor, administrator of Gercio.

> The policy did not include any provision reserving to Gercio the right to change the beneficiary.> The wife was convicted of adultery and a decree of divorce was issued.> Gercio notified Sunlife that he had revoked his donation in favor of Andrea and that he had designated his presentwife Adela as his beneficiary.> Sunlife refused to change the beneficiary.

Issue:

Whether or not Gercio may change the beneficiary in the policy.

Held:

NO.If the policy contains no provision authorizing a change of beneficiary without the beneficiarys consent, the insured

cannot make such change. It is held that a life insurance policy of a husband made payable to his wife as a

beneficiary is the separate property of the beneficiary and beyond the control of the husband. (NOTE: this case isbased on the old rule under the Insurance Act)

Court also held that the designation of a beneficiary that is originally valid does NOT render it invalid dut to asubsequent cessation of the interests between the beneficiary and insured.Philamcare vs. ca

Facts:

> Ernani Trinos, applied for a health care coverage with Philamcare. In the standard application form, he answeredNO to the following question: Have you or any of your family members ever consulted or been treated for highblood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details)> The application was approved for a period of one year from March 1, 1988 to March 1, 1989. He was a issuedHealth Care Agreement, and under such, he was entitled to avail of hospitalization benefits, whether ordinary oremergency, listed therein. He was also entitled to avail of "out-patient benefits" such as annual physical

examinations, preventive health care and other out-patient services.> Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1,1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a maximum sum ofP75,000.00 per disability.> During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center(MMC) for one month beginning March 9, 1990.> While her husband was in the hospital, Julita tried to claim the benefits under the health care agreement.However, Philamcare denied her claim saying that the Health Care Agreement was void.> According to Philamcare, there was concealment regarding Ernani's medical history.


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Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive,diabetic and asthmatic, contrary to his answer in the application form.

> Julita had no choice but to pay the hospitalization expenses herself, amounting to about P76,000.00> After her husband was discharged from the MMC, he was attended by a physical therapist at home. Later, he wasadmitted at the Chinese General Hospital (CGH). Due to financial difficulties, Julita brought her husband homeagain. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Julita was constrained to bring

him back to the CGH where he died on the same day.> Julita instituted, an action for damages against Philamcare. She asked for reimbursement of her expenses plusmoral damages and attorney's fees. RTC decided in favor of Julita. Ca affirmed.

Issues and Resolutions:

Philamcare brought the instant petition for review, raising the primary argument that a health care agreement is not

an insurance contract; hence the "incontestability clause" under the Insurance Code Title 6, Sec. 48 does not apply.

SC held that in the case at bar, the insurable interest of respondent's husband in obtaining the health care agreementwas his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contractof indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or otherstipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

Under the title Claim procedures of expenses, Philamcare. had 12 mos from the date of issuance of the Agreement

within which to contest the membership of the patient if he had previous ailment of asthma, and six months from theissuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, thedefense of concealment or misrepresentation no longer lie.Petitioner argues that respondent's husband concealed a material fact in his application. It appears that in the

application for health coverage, petitioners required respondent's husband to sign an express authorization for any

person, organization or entity that has any record or knowledge of his health to furnish any and all information

relative to any hospitalization, consultation, treatment or any other medical advice or examination.

Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads:Failure to disclose or misrepresentation of any material information by the member in the application or medical

examination, whether intentional or unintentional, shall automatically invalidate the Agreement from the very

beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. An undisclosed or

misrepresented information is deemed material if its revelation would have resulted in the declination of the

applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for.

The answer assailed by petitioner was in response to the question relating to the medical history of the applicant.This largely depends on opinion rather than fact, especially coming from respondent's husband who was not amedical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intentto deceive will not avoid a policy even though they are untrue. Thus,(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not

avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of

premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of

the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is

obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is

fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be

actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the

intent to deceive the insurer is obvious and amounts to actual fraud.The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and theduty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In anycase, with or without the authority to investigate, petitioner is liable for claims made under the contract. Havingassumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. Inthe end, the liability of the health care provider attaches once the member is hospitalized for the disease or injurycovered by the agreement or whenever he avails of the covered benefits which he has prepaid.Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract ofinsurance." The right to rescind should be exercised previous to the commencement of an action on the contract. In


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beneficiaries of the life insurance policies of the persons with whom they committed adultery or concubinage. Ifthe SC used only Sec. 53, it would have gone against Art. 739 and 2012.Philamlife v. Pineda - Life Insurance

175 SCRA 416

Facts:

> On Jan. 15 1963, Dimayuga processed an ordinary life insurance policy from Philamlife and designated his wifeand children as irrevocable beneficiaries.> On Feb. 22, 1980, Dimayuga filed a petition in court to amend the designation of the beneficiaries in his policyfrom irrevocable to revocable.> Lower Court granted the petition.

Issue:

Whether or not the court erred in granting Dimayugas petition.

Held:

YES.Under the Insurance Act, the beneficiary designated in a life insurance contract cannot be changed without theconsent of the beneficiary because he has a vested interest in the policy. The policy contract states that thedesignation of the beneficiaries is irrevocable. Therefore, based on the said provision of the contract, not to mentionthe law then applicable, it is only with the consent of all the beneficiaries that any change or amendment in the poicy

may be legally and validly effected. The contract between the parties is the law binding on them. (This case rule isno longer controlling under the Insurance Code.)

Vicente Ong Lim Sing, Jr. v. Feb Leasing and Finance Corp.

GR no. 168115

June 8, 2007

Nachura, J.

FACTS

FEB Leasing and Finance Corp entered into a lease agreement of equipment and motor vehicles with JVLFood Products. Vicente Ong Lim Sing, Jr. executed an Individual Guarantee Agreement with FEB regarding faithful

compliance with the terms of the lease agreement.

JVL defaulted on its obligation. By 2000, the arrears of JVL amounted to P3,414,468.75. Due to thecontinuous nonpayment despite numerous demands, FEB filed a complaint for sum of money, damages, andreplevin against JVL and Lim. JVL and Lim argued before the court that the lease contract was actually a sale oninstallment basis. They further argued that the contract was a contract of adhesion. The trial court rendered a rulingIn favor of Lim and JVL.

The trial court, through logic, ruled that Lim cannot be a mere lessee because of he had an insurable interestover the items. 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 directpecuniary loss from its destruction or injury by the peril insured against. If Lim and JVL were to be regarded as onlya lessee, logically the lessor who asserts ownership will be the one directly benefited or injured and therefore the

lessee is not supposed to be the assured as he has no insurable interest.

FEB appealed the decision before the Court of Appeals. The appellate court rendered judgment in favor ofFEB. It reversed the earlier decision of the RTC of Manila and ordered Lim and JVL to pay FEB the amount dueplus damages. Unsatisfied with the decision, JVL and Lim appealed the case before the Supreme Court.

ISSUE

Whether or not a lease agreement was executed by JVL and FEB.


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RULING

The Supreme Court dismissed the petition of Lim and affirmed the decision of the Court of Appeals.According to the Court, the agreement was indeed a financial lease agreement and not a sale by installment basis.

The Court also ruled that the lessee, herein petitioner, had an insurable interest in the items even if he wasonly a lessee. Section 17 of the Insurance Code provides that the measure of an insurable interest in property is theextent to which the insured might be damnified by loss or injury thereof. It cannot be denied that JVL will bedirectly damnified in case of loss, damage, or destruction of any of the properties leased.Traders Insurance and Surety Co. v. Golangco- Insurance Proceeds

95 PHIL 826

Facts:

> A decision was rendred in Civil Case No. 6306 granting Golangco the right to collect rentals from a building inSta. Cruz, Manila.> Golangco then sought fire insurance from Traders. Before the policy was issued, Golangco made a full and clearexposal of his interests in the premises, i.e. that he was not the owner.> The fire policy that defendant issued covered only all of Golangcos interest in the premises and his right tocollect the rentals.> The building burned down in a fire and Golangco sought to collect from Traders. Traders denied any liability onthe ground that since Golangco was not the owner of the premises then he had no insurable interest in the same and

consequently, he could not collect the insurance proceeds.

Issue:

Whether or not plaintiff can claim the insurance proceeds.

Held.

YES.Both at the time of the issuance of the policy and at the time of the fire, plaintiff Golangco was in legal possession ofthe premises, collecting rentals from its occupant. It seems plain that if the premises were destroyed as they were,by fire, Golangco would be, as he was, directly damnified thereby; and hence he had an insurable interest therein.Lampano v. Jose (1915)

FACTS:

Mariano R. Barretto, constructed a house for Placida A. Jose sold the house to Antonina Lampano for P6,000The house was destroyed by fire during which Lampano still owed Jose P2,000 as evidenced by a promissory

note. Jose also owed Barretto P2,000 for the construction.After the completion of the house and before it was destroyed, Mariano R. Barretto took out an insurance policy

upon it in his own name, with the consent of Placida A. Jose, for the sum of P4,000. After its destruction, hecollected P3,600 from the insurance company, having paid in premiums the sum of P301.50

Lampano filed a complaint against Barreto and Jose alleging that Jose in a verbal agreement told her that thepolicy will be delivered to her so she should collected P3,600 from each of them

RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the P2,000Barreto alone appealed

ISSUE: W/N Barreto had insurable interest in the house and could insure it for his it for his own protection

HELD: YES. reversed and Barretto is absolved

Where different persons have different interests in the same property, the insurance taken by one in his own rightand in his own interest does not in any way insure to the benefit of another

A contract of insurance made for the insurer's (insured) indemnity only, as where there is no agreement, expressor implied, that it shall be for the benefit of a third person, does not attach to or run with the title to the insuredproperty on a transfer thereof personal as between the insurer and the insured.

Barretto had an insurable interest in the house. He construed the building, furnishing all the materials andsupplies, and insured it after it had been completed


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Lopez v. Del Rosario

44 PHIL 98

Facts:

> Benita Del Rosario is the owner of a bonded warehouse in Manila where copra and other merchandise aredeposited.> Among those who had copra deposited in the warehouse was Froilan Lopez, the owner of 14 warehouse receiptswith a declared value of P107,990.40 in his name.> Del Rosario secured insurance on the warehouse and its contents with 5 different insurance companies in theamount of P404,800.> All policies were in the name of Del Rosario, except for one (with Natl Insurance Co.) for 40T, in favor ofCompania Copra de Tayabas.> The warehouse and its contents were destroyed by fire. When Bayne, a fire loss adjuster, failed to effect asettlement between the Insurance companies and Del Rosario, the latter authorized Atty. Fisher to negotiate with theCompanies.> An agreement was reached to submit the matter to arbitration. The claims by different people who had storedcopra in the warehouse were settled with the exception of Friolan Lopez.> A case was filed in CFI by Lopez. The court awarded him the sum of P88,492.21 with legal interest.

Issue:

Whether or not Del Rosario acted as the agent of Lopez in taking out the insurance on the contents of the warehouseor whether she acted as the reinsurer of the copra.

Held:

She acted as the agent of Lopez.The agency can be deduced from the warehouse receipts, the insurance policies and the circumstances surroundingthe transaction. Under any aspect, Del Rosario is liable. The law is that a policy effected by a bailee and coveringby its terms in his own property and property held in trust, inures, in the event of loss, equally and proportionately tothe benefit of all owners of the property insured. Even if one secured insurance covering his own goods and goodsstored with him, and even if the owner of the stored goods did not request or know the insurance, and did not ratifyit before the payment of the loss, it has been held by a reputable court that the warehouseman is liable to the ownerof such stored goods for his share.

In a case of contributing policies, adjustments of loss made by an expert or by a board of arbitrators may besubmitted to the court NOT as evidence of the facts stated therein, or as obligatory, but for the purpose of assistingthe court in calculating the amount of liability.

Sharuff & Co. v. Baloise Fire Insurance Co. (1937)

FACTS:

Salomon Sharruf and Elias Eskenazi were doing business under the firm name of Sharruf & Co. They insuredtheir stocks with aloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co. raising it toP40,000. Elias Eskenazi having paid the corresponding premiums

Soon they changed the name of their partnership to Sharruf & EskenaziSeptember 22, 1933: A fire ensued at their building at Muelle de la Industria street where petroleum was spilt

lasting 27 minutesSharruf & Co. claimed 40 cases when only 10 or 11 partly burned and scorched cases were found

RTC: ordered Baloise Fire Insurance Co., Sun Insurance Office Ltd., and Springfield Insurance Co., to pay thepartners Salomon Sharruf and Elias Eskenazi P40,000 plus 8% interest

ISSUE: W/N Sharruf & Eskenazi has juridical personality and insurable interest

HELD: YES. Reversd. Insurance companies are absolved.

It does not appear that in changing the title of the partnership they had the intention of defrauding the insurancecompanies


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policy thus rightfully belong to the spouses Nilo Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United)cannot be compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has no insurable interestin the property insured.Tai Tong v Insurance G.R. No. L-55397 February 29, 1988

J. Gancayco

Facts:Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the paymentof the loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. ArsenioChua, representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-IndemnityCorporation for P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof)Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent ZenithInsurance Corporation. On July 16, 1975, another Fire Insurance was procured from respondent Philippine BritishAssurance Company, covering the same building for P50,000.00 and the contents thereof for P70,000.00.The building and the contents were totally razed by fire.Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance,Phil. British Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding shares of the loss.Complainants were paid the following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by ZenithInsurance Corporation, and P5,936.57 by S.S.S. Group of Accredited Insurers Demand was made from respondentTravellers Multi-Indemnity for its share in the loss but the same was refused. Hence, complainants demanded from

the other three (3) respondents the balance of each share in the loss in the amount o f P30,894.31 (P5,732.79-ZenithInsurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but the same was refused, hence, this action.In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on the ground thatthe claim of the complainants had already been waived, extinguished or paid. Both companies set up counterclaim inthe total amount of P 91,546.79.SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the balance had beenpaid in the amount in full.Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire Policy, coveringthe furniture and building of complainants was secured by a certain Arsenio Chua and that the premium due on thefire policy was paid by Arsenio Chua.Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire Insurance Policyissued by respondent Travellers Multi-Indemnity.As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that

the insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, for its own interestonly as mortgagee of the insured property and thus complainant as mortgagors of the insured property have no rightof action against the respondent. It likewise dismissed petitioner's complaint in intervention in the following words:From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewisedenied hence, the present petition.

Issue: WON Tai Tong had insurable interest

Held: Yes. Petition granted.

Ratio:Respondent advanced an affirmative defense of lack of insurable interest on the part of the petitioner that before theoccurrence of the peril insured against, the Palomos had already paid their credit due the petitioner. However, they

were never able to prove that Tai had a lack of insurable interest. Hence, the decision must be adverse against them.However respondent Insurance Commission absolved respondent insurance company from liability on the basis ofthe certification issued by the then Court of First Instance of Davao, Branch II, that in a certain civil action againstthe Palomos, Arsenio Lopez Chua stands as the complainant and not Tai Tong Chuache.From said evidence respondent commission inferred that the credit extended by petitioner to the Palomos secured bythe insured property must have been paid. These findings was based upon a mere inference.The record of the case shows that the petitioner to support its claim for the insurance proceeds offered as evidencethe contract of mortgage which has not been cancelled nor released. It has been held in a long line of cases that whenthe creditor is in possession of the document of credit, he need not prove non-payment for it is presumed. Thevalidity of the insurance policy taken by petitioner was not assailed by private respondent. Moreover, petitioner's


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Whether or not the Songcos can claim the insurance proceeds despite the fact that the vehicle concerned was an

owner and not a common carrier.

Held:

Yes.The company is estopped from asserting that the vehicle was not covered. After it had led Federico Songco tobelieve that he could qualify under the common carrier liability insurance policy, and to enter into a contract ofinsurance paying the premiums due, it could not thereafter be permitted to change its stand to the detriment of theheirs of the insured. It knew all along that Frederico owned a private vehicle. Its agent Sambat twice exerted theutmost pressure on the insured, a man of scant education, and the company did not object to this.

Insular Life v. Feliciano - Concealment

73 PHIL 201

Facts:

> Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents.> It appears that during that time, Evaristo was already suffering from tuberculosis. Such fact appeared during themedical exam, but the examiner and the companys agent ignored it. > After that, Evaristo was made to sign an application form and thereafter the blank spaces were filled by themedical examiner and the agent making it appear that Evaristo was a fit subject of insurance. (Evaristo could notread and understand English)> When Evaristo died, Insular life refused to pay the proceeds because of concealment.

Issue:

Whether or not Insular Life was bound by their agents acts.

Held:

Yes.The insurance business has grown so vast and lucrative within the past century. Nowadays, even people of modestmeans enter into insurance contracts. Agents who solicit contracts are paid large commissions on the policiessecured by them. They act as general representatives of insurance companies.

IN the case at bar, the true state of health of the insured was concealed by the agents of the insurer. The insurersmedical examiner approved the application knowing fully well that the applicant was sick. The situation is one inwhich of two innocent parties must bear a loss for his reliance upon a third person. In this case, it is the one who

drafted and accepted the policy and consummated the contract. It seems reasonable that as between the two of them,the one who employed and gave character to the third person as its agent should be the one to bear the loss. Hence,Insular is liable to the beneficiaries.

Insular life v. Feliciano

74 PHIL 4681

Facts:

Insular life filed a motion for reconsideration of the decision in the preceding case.

Issue: WON Insular Life was bound by their agents acts.

Held: NOThere was collusion between Evaristo and the agent and the medical examiner in making it appear that Evaristo

was a fit subject for insurance. When Evaristo authorized them to write the answers for him, he made them his ownagents for that purpose and he was responsible for their acts in that connection.

If they falsified the answers for him, he could not evade liability for the falsification. He was not supposed tosign the application in blank. He knew that his answers would be the basis for the policy, and was required with hissignature to vouch for their truth. The judgment rendered therefore in the preceding case is thus reversed, andInsular Life is absolved from liability.

Sun Life v. CA - Concealment in Insurance


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Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. His statementtherefore was made in good faith. Asian should have made an inquiry as to the illness and operation of Kwongwhen it appeared on the face of the application that a question appeared to be imperfectly answered. Asians failureto inquire constituted a waiver of the imperfection in the answer.Harding v. Commercial Union Assurance Company- Willful Misstatement

38 PHIL 464

Facts:

> Henry Harding bought a car for 2T in 1915. He then gave the car to his wife Mrs. Harding.> While Mrs. Harding was having the car repaired at the Luneta Garage (Luneta was an agent of Smith Bell andCo., which in turn is Commercial Unions agent), the latter induced Mrs. Harding to insure the care withCommercial.> Mrs. Harding agreed, and Smith Bell sent an agent to Luneta Garage, who together with the manager of LUneta,appraised the car and declared that its present value was P3T. This amt was written in the proposal form which Mrs.Harding signed.> Subsequently, the car was damaged by fire. Commercial refused to pay because the cars present value was only2.8T and not 3T.

Issue:

Whether or not Commercial is liable.

Held:Commercial is liable.Where it appears that the proposal form, while signed by the insured was made out by the person authorized tosolicit the insurance (Luneta and Smith Bell) the facts stated in the proposal, even if incorrect, will not be regardedas warranted by the insured, in the absence of willful misstatement. Under such circumstances, the proposal is to beregarded as the act of the insurer.Saturnino v. Philamlife - False Representation

7 SCRA 316

Facts:

> 2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving complete removalof the right breast, including the pectoral muscles and the glands, found in the right armpit.> Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her application forinsurance.

> She stated therein that she did not have, nor had she ever had, among others listed in the application, cancer orother tumors; that she had not consulted any physician, undergone any operation or suffered any injury within thepreceding 5 years.> She also stated that she had never been treated for, nor did she ever have any illness or disease peculiar to her sex,particularly of the breast, ovaries, uterus and menstrual disorders.> The application also recited that the declarations of Saturnino constituted a further basis for the issuance of thepolicy.

Issue:

Whether or not the insured made such false representation of material facts as to avoid the policy.

Held:

YES.There can be no dispute that the information given by her in the application for insurance was false, namely, that shenever had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5years.

The question to determine is: Are the facts then falsely represented material? The Insurance Law provides thatmateriality 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 proposed contract, or making hisinquiries.


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The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for, which does away with the usual requirement of medical examinationbefore the policy is issued. The contention is without merit. If anything, the waiver of medical examination renderseven more material the information required of the applicant concerning previous condition of health and diseasessuffered, for such information necessarily constitutes an important factor which the insurer takes into considerationin deciding whether to issue the policy or not.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself didnot know, since her doctor never told her, that the disease for which she had been operated on was cancer. In thefirst place, concealment of the fact of the operation itself was fraudulent, as there could not have been any mistakeabout it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In thisjurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the contract ofinsurance, concealment being defined as negligence to communicate that which a party knows and ought tocommunicate. The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives theinsurer into accepting the risk, or accepting it at a rate of premium agreed upon. The insurer, relying upon the beliefthat the insured will disclose every material fact within his actual or presumed knowledge, is misled into a belief thatthe circumstances withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that itdoes not exist.

Edillon v. Manila Bankers Life Insurance Corp. - Concealment

117 SCRA 187

Facts:

> In Apr. 1969, Carmen Lapuz applied for insurance with Manila Bankers. In the application she stated the date ofher birth as July 11, 1904 (around 64 yrs old). The policy was thereafter issued.> Subsequently, in May 1969, Carmen died of a car accident. Her sister, as beneficiary claimed the proceeds of theinsurance.> Manila Bankers refused to pay because the certificate of insurance contained a provision excluding its liability topay claims to persons under 16 or over 60.

Issue:

Whether or not the policy is void considering that the insured was over 60 when she applied.

Held:

NO.The age of Carmen was not concealed to the insurance company. Her application form indicated her trueage. Despite such information, Manila Bankers accepted the premium and issued the policy. It had all the time toprocess the application and notice the applicants age. If it failed to act, it was because Manila Bankers was willingto waive such disqualifications or it simply overlooked such fact. It is therefore estopped from disclaiming anyliability.Philamcare v. CA- Health Care Agreement

379 SCRA 356 (2002)

Facts:

> Ernani Trinos, applied for a health care coverage with Philamcare. 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 highblood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details)> The application was approved for a period of one year from March 1, 1988 to March 1, 1989. He was a issuedHealth Care Agreement, and under such, he was entitled to avail of hospitalization benefits, whether ordinary oremergency, listed therein. He was also entitled to avail of "out-patient benefits" such as annual physicalexaminations, preventive health care and other out-patient services.> Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1,1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a maximum sum ofP75,000.00 per disability.


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> During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center(MMC) for one month beginning March 9, 1990.> While her husband was in the hospital, Julita tried to claim the benefits under the health care agreement.However, Philamcare denied her claim saying that the Health Care Agreement was void.> According to Philamcare, there was concealment regarding Ernani's medical history.

Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was hypertensive,

diabetic and asthmatic, contrary to his answer in the application form.> Julita had no choice but to pay the hospitalization expenses herself, amounting to about P76,000.00> After her husband was discharged from the MMC, he was attended by a physical therapist at home. Later, he wasadmitted at the Chinese General Hospital (CGH). Due to financial difficulties, Julita brought her husband homeagain. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Julita was constrained to bringhim back to the CGH where he died on the same day.> Julita instituted, an action for damages against Philamcare. She asked for reimbursement of her expenses plusmoral damages and attorney's fees. RTC decided in favor of Julita. CA affirmed.

Issues and Resolutions:

Philamcare brought the instant petition for review, raising the primary argument that a health care agreement is not

an insurance contract; hence the "incontestability clause" under the Insurance Code Title 6, Sec. 48 does not apply.

SC held that in the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement

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

Under the title Claim procedures of expenses, Philamcare. had 12 mos from the date of issuance of the Agreementwithin which to contest the membership of the patient if he had previous ailment of asthma, and six months from theissuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, thedefense of concealment or misrepresentation no longer lie.Petitioner argues that respondent's husband concealed a material fact in his application. It appears that in the

application for health coverage, petitioners required respondent's husband to sign an express authorization for any

person, organization or entity that has any record or knowledge of his health to furnish any and all information

relative to any hospitalization, consultation, treatment or any other medical advice or examination.

Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads:Failure to disclose or misrepresentation of any material information by the member in the application or medical

examination, whether intentional or unintentional, shall automatically invalidate the Agreement from the very

beginning and liability of Philamcare shall be limited to return of all Membership Fees paid. An undisclosed or

misrepresented information is deemed material if its revelation would have resulted in the declination of the

applicant by Philamcare or the assessment of a higher Membership Fee for the benefit or benefits applied for.

The answer assailed by petitioner was in response to the question relating to the medical history of the applicant.This largely depends on opinion rather than fact, especially coming from respondent's husband who was not amedical doctor. Where matters of opinion or judgment are called for, answers made in good faith and without intentto deceive will not avoid a policy even though they are untrue. Thus,(A)lthough false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not

avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of

premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously ofthe foregoing character, since in such case the insurer is not justified in relying upon such statement, but is

obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is

fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be

actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the

intent to deceive the insurer is obvious and amounts to actual fraud.

The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and theduty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In anycase, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having


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assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. Inthe end, the liability of the health care provider attaches once the member is hospitalized for the disease or injurycovered by the agreement or whenever he avails of the covered benefits which he has prepaid.Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract ofinsurance." The right to rescind should be exercised previous to the commencement of an action on the contract. Inthis case, no rescission was made. Besides, the cancellation of health care agreements as in insurance policiesrequire the concurrence of the following conditions:

1. Prior notice of cancellation to insured;2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds

mentioned;3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of

insured, to furnish facts on which cancellation is based.

None of the above pre-conditions was fulfilled in this case. When the terms of insurance contract contain limitationson liability, courts should construe them in such a way as to preclude the insurer from non-compliance with hisobligation. Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against theparty which prepared the contractthe insurer. By reason of the exclusive control of the insurance company overthe terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer andliberally in favor of the insured, especially to avoid forfeiture. This is equally applicable to Health Care

Agreements. The phraseology used in medical or hospital service contracts, such as the one at bar, must be liberallyconstrued in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the constructionconferring coverage is to be adopted, and exclusionary clauses of doubtful import should be strictly construedagainst the provider.

Soliman v. US Life- Rescind Contract of Insurance

104 PHIL 1046

Facts:

> US Life issued a 20 yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario, each ofthem being the beneficiary of the other.> In Mar. 1949, the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that the31-day grace period has already expired, and they were furnished at the same time long-form health certificates forthe reinstatement of the policies.> In Apr 1949, they submitted the certificates and paid the premiums.

> In Jan. 1950, Rosario died of acute dilation of the heart, and thereafter, Patricio filed a claim for the proceeds ofthe insurance.> US life denied the claim and filed for the rescission of the contract on the ground that the certificates failed todisclose that Rosario had been suffering from bronchial asthma for 3 years prior to their submission.

Issue:

Whether or not the contract can still be rescinded.

Held:

Yes.The insurer is once again given two years from the date of reinstatement to investigate into the veracity of the factsrepresented by the insured in the application for reinstatement. When US life sought to rescind the contract on the

ground of concealment/misrepresentation, two years had not yet elapsed. Hence, the contract can still be rescinded.Enriquez v. SunLife- Insurance Policy41 PHIL 269

Facts:

> On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life annuity.> 2 days later, he paid the sum of 6T to the companys anager in its Manila office and was given a receipt.> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same date, the Manilaoffice prepared a letter notifying Herrer that his application has been accepted and this was placed in the ordinarychannels of transmission, but as far as known was never actually mailed and never received by Herrer.


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> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrers estate brought this action to recover the6T paid by the deceased.

Issue:

Whether or not the insurance contract was perfected.

Held:

NO.The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that the acceptanceof the application ever came to the knowledge of the applicant. An acceptance of an offer of insurance NOTactually or constructively communicated to the proposer does NOT make a contract of insurane, as the locuspoenitentiae is ended when an acceptance has passed beyond the control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is given to the insurancecompany, and if after a certain period of time the insured is stil living, he is entitled to regular smaller amounts forthe rest of his life. Examples of Life annuity are pensions. Life Insurance on the other hand, the insured during theperiod of the coverage makes small regular payments and upon his death, the insurer pays a big amount to hisbeneficiaries.Perez v. CA- Perfection of the Contract of Insurance

323 SCRA 613 (2000)Facts:

> Primitivo Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20,000.00.> In October 1987, an agent of Lifeman, Rodolfo Lalog, visited Perez in Quezon and convinced him to apply foradditional insurance coverage of P50,000.00, to avail of the ongoing promotional discount of P400.00 if thepremium were paid annually.> Primitivo B. Perez accomplished an application form for the additional insurance coverage. Virginia A. Perez,his wife, paid P2,075.00 to Lalog. The receipt issued by Lalog indicated the amount received was a "deposit."> Unfortunately, Lalog lost the application form accomplished by Perez and so on October 28, 1987, he asked thelatter to fill up another application form. On November 1, 1987, Perez was made to undergo the required medicalexamination, which he passed.> Lalog forwarded the application for additional insurance of Perez, together with all its supporting papers, to theoffice of BF Lifeman Insurance Corporationn in Quezon which office was supposed to forward the papers to the

Manila office.> On November 25, 1987, Perez died while he was riding a banca which capsized during a storm.> At the time of his death, his application papers for the additional insurance were still with the Quezon office.Lalog testified that when he went to follow up the papers, he found them still in the Quezon office and so hepersonally brought the papers to the Manila office of BF Lifeman Insurance Corporation. It was only on November27, 1987 that said papers were received in Manila.> Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved theapplication and issued the corresponding policy for the P50,000.00 on December 2, 1987> Virginia went to Manila to claim the benefits under the insurance policies of the deceased. She was paidP40,000.00 under the first insurance policy for P20,000.00 (double indemnity in case of accident) but the insurancecompany refused to pay the claim under the additional policy coverage of P50,000.00, the proceeds of whichamount to P150,000.00 in view of a triple indemnity rider on the insurance policy.> In its letter of January 29, 1988 to Virginia A. Perez, the insurance company maintained that the insurance for

P50,000.00 had not been perfected at the time of the death of Primitivo Perez. Consequently, the insurance companyrefunded the amount of P2,075.00 which Virginia Perez had paid> Lifeman filed for the rescission and the declaration of nullity. Perez, on the other hand, averred that the deceasedhad fulfilled all his prestations under the contract and all the elements of a valid contract are present.> RTC ruled in favor of Perez. CA reversed.

Issue:

Whether or not there was a perfected additional insurance contract.

Held:


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The contract was not perfected.Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for losson a specified subject by specified perils. A contract, on the other hand, is a meeting of the minds between twopersons whereby one binds himself, with respect to the other to give something or to render some service.

Consent must be manifested by the meeting of the offer and the acceptance upon the thing and the cause which areto constitute the contract. The offer must be certain and the acceptance absolute. When Primitivo filed an applicationfor insurance, paid P2,075.00 and submitted the results of his medical examination, his application was subject tothe acceptance of private respondent BF Lifeman Insurance Corporation. The perfection of the contract of insurancebetween the deceased and respondent corporation was further conditioned upon compliance with the followingrequisites stated in the application form:"there shall be no contract of insurance unless and until a policy is issued on this application and that the said

policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in

person while I/We, am/are in good health."The assent of private respondent BF Lifeman Insurance Corporation therefore was not given when it merelyreceived the application form and all the requisite supporting papers of the applicant. Its assent was given when itissues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicantpays the premium and receives and accepts the policy while he is in good health that the contract of insurance isdeemed to have been perfected.

It is not disputed, however, that when Primitivo died on November 25, 1987, his application papers for additionalinsurance coverage were still with the branch office of respondent corporation in Gumaca and it was only two dayslater, or on November 27, 1987, when Lalog personally delivered the application papers to the head office inManila. Consequently, there was absolutely no way the acceptance of the application could have beencommunicated to the applicant for the latter to accept inasmuch as the applicant at the time was already dead.

CIR v. Lincoln Phil Life - Automatic Increase Clause

379 SCRA 423 (2002)

Facts:

> In the years prior to 1984, Lincoln issued a special kind of life insurance policy known as the "Junior EstateBuilder Policy," the distinguishing feature of which is a clause providing for an automatic increase in the amount oflife insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. Theclause was to take effect in the year 1984.> Documentary stamp taxes due on the policy were paid to the petitioner only on the initial sum assured.

> Subsequently, petitioner issued deficiency documentary stamps tax assessment for the year 1984, correspondingto the amount of automatic increase of the sum assured on the policy issued by respondent.> Lincoln questioned the deficiency assessments and sought their cancellation in a petition filed in the Court of TaxAppeals. CTA found no basis for the assessment. CA affirmed.

Issue:

Whether or not the automatic increase of the sum assured on the policy is taxable.

Held:

YES.CIR claims that the "automatic increase clause" in the subject insurance policy is separate and distinct from the mainagreement and involves another transaction; and that, while no new policy was issued, the original policy wasessentially re-issued when the additional obligation was assumed upon the effectivity of this "automatic increase

clause" in 1984; hence, a deficiency assessment based on the additional insurance not covered in the main policy isin order. The SC agreed with this contention.

The subject insurance policy at the time it was issued contained an "automatic increase clause." Although the clausewas to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the"junior estate builder policy" called the "automatic increase clause" already formed part and parcel of the insurancecontract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that tookeffect in 1984 when the assured reached a certain age.


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> The car was then insured with State Insurance Company and the policy delivered to Mora.> During the effectivity of the insurance contract, the car figured in an accident. The company then assigned theaccident to an insurance appraiser for investigation and appraisal of the damage.> Mora without the knowledge and consent of HS Reyes, authorized Bonifacio Bros to fix the car, using materialssupplied by the Ayala Auto Parts Company.> For the cost of Labor and materials, Mora was billed P2,102.73. The bill was sent to the insurers appraiser. Theinsurance company drew a check in the amount of the insurance proceeds and entrusted the check to its appraiser fordelivery to the proper party.> The car was delivered to Mora without the consent of HS Reyes, and without payment to Bonifacio Bros andAyala.> Upon the theory that the insurance proceeds should be directly paid to them, Bonifacio and Ayala filed acomplaint against Mora and the insurer with the municipal court for the collection of P2,102.73.> The insurance company filed its answer with a counterclaim for interpleader, requiring Bonifacio and HS Reyesto interplead in order to determine who has a better right to the proceeds.

Issue:

Whether or not there is privity of contract between Bonficacio and Ayala on one hand and State Insurance on theother.

Held:

NONE.It is fundamental that contracts take effect only between the parties thereto, except in some specific instanceprovided by law where the contract contains some stipulation in favor of a third person. Such stipulation is knownas a stipulation pour autrui; or a provision in favor of a third person not a party to the contract.

Under this doctrine, a third person is ed to avail himself of a benefit granted to him by the terms of the contract,provided that the contracting parties have clearly and deliberately conferred a favor upon suchperson. Consequently, a third person NOT a party to the contract has NO action against the aprties thereto, andcannot generally demand the enforcement of the same.

The question of whether a third person has an enforceable interest in a contract must be settled by determiningwhether the contracting parties intended to tender him such an interest by deliberately inserting terms in theiragreement with the avowed purpose of conferring favor upon such third person. IN this connection, this court has

laid down the rule that the fairest test to determine whether the interest of a 3rd

person in a contract is a stipulationpour autrui or merely an incidental interest, is to rely upon the intention of the parties as disclosed by their contract.

In the instant case the insurance contract does not contain any words or clauses to disclose an intent to give anybenefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contractomitted such stipulation, which is a circumstance that supports the said conclusion. On the other hand, the "losspayable" clause of the insurance policy stipulates that "Loss, if any, is payable to H.S. Reyes, Inc." indicating that itwas only the H.S. Reyes, Inc. which they intended to benefit.

A policy of insurance is a distinct and independent contract between the insured and insurer, and third persons haveno right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust,expressed or implied, by the insured and third person. In this case, no contract of trust, express or implied. In thiscase, no contract of trust, expressed or implied exists. We, therefore, agree with the trial court that no cause of action

exists in favor of the appellants in so far as the proceeds of insurance are concerned. The appellant's claim, if at all,is merely equitable in nature and must be made effective through Enrique Mora who entered into a contract with theBonifacio Bros Inc. This conclusion is deducible not only from the principle governing the operation and effect ofinsurance contracts in general, but is clearly covered by the express provisions of section 50 of the Insurance Act(now Sec. 53).

The policy in question has been so framed that "Loss, if any, is payable to H. S. Reyes, Inc." which unmistakablyshows the intention of the parties.Coquia v. Fieldmens Insurance

26 SCRA 172


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GR: 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.

EX: situation where the insurance contract was intended to benefit third persons who are not parties to the samein the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and claim from theinsurer

It is only in cases where the insured has not designated any beneficiary, or when the designated beneficiary isdisqualified by law to receive the proceeds, that the insurance policy proceeds shall redound to the benefit of theestate of the insured

Development Insurance v IAC G.R. No. 71360 July 16, 1986Facts:A fire occurred in the building of Philippine Union. It sued for recovery of damages from the petitioner on the basisof an insurance contract between them. The petitioner failed to answer on time despite the numerous extensions itasked for. It was declared in default by the trial court. A judgment of default was subsequently rendered on thestrength of the evidence given by the private respondent, which was allowed damages. The petitioner moved to liftthe order of default. Its motion was denied. It went to the appellate court, which affirmed the decision of the trialcourt. Hence this appeal.

Issue: Was Philippine Union required to jointly indemnify the building?

Held: No. Petition dismissed.

Ratio:The policy insured the private respondent's building against fire for P2,500,000.00.The petitioner argued that the respondent must share the difference between that amount and the face value of thepolicy and the loss sustained for 5.8 million under Condition 17 of the policy.The building was insured at P2,500,000.00 by agreement of the insurer and the insured.The agreement is known as an open policy and is subject to the express condition that:In the event of loss, whether total or partial, it is understood that the amount of the loss shall be subject to appraisal

and the liability of the company, if established, shall be limited to the actual loss, subject to the applicable terms,conditions, warranties and clauses of this Policy, and in no case shall exceed the amount of the policy. Section 60 of the Insurance Code defines an open policy is one in which the value of the thing insured is not agreedupon but is left to be ascertained in case of loss." This means that the actual loss, as determined, will represent thetotal indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value

of the policy.The actual loss has been ascertained in this case. Hence, applying the open policy clause as expressly agreed upon,the private respondent is entitled to indemnity in the total amount of P508,867.00.The refusal of its vice-president to receive the private respondent's complaint was the first indication of thepetitioner's intention to prolong this case and postpone the discharge of its obligation to the private respondent underthis agreement. They still evaded payment for 5 years.

ACCFA v. Alpha Insurance | Reyes, J.July 29, 1968|

NATURE

Petition for review on certiorari

FACTS- To guarantee the Asingan Farmers' Cooperative Marketing Association, Inc. (FACOMA) against loss on accountof personal dishonesty, amounting to larceny/estafa of its Secretary-Treasurer, Ladines, appellee Alpha Insurance &Surety Company had issued, on 14 February 1958, its bond with Ladines as principal and the appellee as solidarysurety. On the same date, the Asingan FACOMA assigned its rights to the appellant, Agricultural Credit Cooperativeand Financing Administration (ACCFA) with approval of the principal and the surety.- During the effectivity of the bond, Ladines converted and misappropriated, to his personal benefit, some of theFACOMA funds, of which a part belonged to the ACCFA. Upon discovery of the loss, ACCFA immediatelynotified in writing the survey company on 10 October 1958, and presented the proof of loss within the period fixedin the bond; but despite repeated demands the surety company refused and failed to pay. ACCFA filed suit against


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appellee on 30 May 1960.- Defendant Alpha Insurance & Surety Co., Inc., (now appellee) moved to dismiss the complaint as it was filed morethan one year after plaintiff made claim for loss, contrary to the eighth condition of the bond- At first, the Court of First Instance denied dismissal; but, upon reconsideration, the court reversed its originalstand, and dismissed the complaint on the ground that the action was filed beyond the contractual limitation period.Hence, this appeal.

ISSUES & ARGUMENTS

WON the provision of a fidelity bond that no action shall be had or maintained thereon unless commenced withinone year from the making of a claim for the loss upon which the action is based, is valid, in view of Section 61-A ofthe Insurance Act invalidating stipulations limiting the time for commencing an action thereon to less than one yearfrom the time the cause of action accrues? NO

RATIONALE

-A fidelity bond is, in the nature of a contract of insurance against loss from misconduct, and is governed by thesame principles of interpretation. Consequently, the condition of the bond in question, limiting the period forbringing action is subject to the provisions of Section 61-A of the Insurance Act (No. 2427), as amended by Act4101 of the pre-Commonwealth Philippine Legislature, prescribing that:

SEC. 61-A: A condition, stipulation or agreement in any policy of insurance, limiting the time for commencing anaction thereunder to a period of less than one year from the time when the cause of action accrues is void.

- Since a "cause of action" requires, as essential elements, not only a legal right of the plaintiff and a correlativeobligation of the defendant but also "an act or omission of the defendant in violation of said legal right," the causeof action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty (inthis case, to pay the amount of the bond).-The year for instituting action in court must be reckoned from the time of appellee's refusal to comply with itsbond. It cant be counted from the creditor's filing of the claim of loss, for that does not import that the surety

company will refuse to pay.-In so far, therefore, as condition eight of the bond requires action to be filed within one year from the filing of theclaim for loss, such stipulation contradicts the public policy expressed in Section 61-A of the Philippine InsuranceAct.- Condition eight of the bond, therefore, is null and void, and the appellant is not bound to comply with itsprovisions. The discouraging of unnecessary litigation must be deemed a rule of public policy, considering theunrelieved congestion in the courts.

-As a consequence, the action may be brought within the statutory period of limitation for written contracts(New Civil Code, Article 1144).

SPS. ANG (Paulo & Sally) v. Fulton Fire Insurance Co.PAULO ANG and SALLY C. ANG, plaintiffs-

appellees,

FACTS:On September 9, 1953, Fulton Fire Insurance Company issued a Fire policy in favor of P. & S DepartmentStore (Sally C. Ang) over stocks of general merchandise,consisting principally of dry goods, which were containedin a building occupiedby the Sps. at Laoag, Ilocos Norte. The premium is P500.00 annually. The insurance wasissued for one year, but the same was renewed for another year on September 31, 1954. 3 months after, the storecontaining the goods insured was destroyed by fire. The Sps. then first claim form together with all the necessarypapers relating, which was denied on April 6, 1956. It should also be noted that on January 13, 1955, Paulo Ang and10 others were charged for arson but was acquitted.Spouses Ang instituted this action against the Fulton Fire

Insurance Company andthe Paramount Surety and Insurance Company, Inc. to recover from them the facevalue of afire insurance policy issued in plaintiffs' favor covering a store owned and operated by them in Laoag, Ilocos Norte.Fulton Fire Insurance Companyalleged that the loss by the fire was not accidental and was occasioned by the willful

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Farinas Insurance Digewsts