QUA CHEE GAN v LAW UNION ROCK

G.R. No. L-4611

DOCTRINE: Where the insurer, at the time of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on, would invalidate the contract from its very
inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with the
facts, and the insurer is stopped thereafter from asserting the breach of such conditions.

FACTS: Qua Chee Gan, a merchant of Albay, instituted this action in 1940, in the Court of First
Instance of said province, seeking to recover the proceeds of certain fire insurance policies
totalling P370,000, issued by the Law Union & Rock Insurance Co., Ltd., upon certain bodegas
and merchandise of the insured that were burned on June 21, 1940. The records of the original
case were destroyed during the liberation of the region, and were reconstituted in 1946. After a
trial that lasted several years, the Court of First Instance rendered a decision in favor of the
plaintiff. The plaintiff having submitted the corresponding fire claims, totalling P398,562.81 (but
reduced to the full amount of the insurance, P370,000), the Insurance Company resisted
payment, claiming violation of warranties and conditions, filing of fraudulent claims, and that the
fire had been deliberately caused by the insured or by other persons in connivance with him. In
its first assignment of error, the insurance company alleges that the trial Court should have held
that the policies were avoided for breach of warranty. It is argued that since the bodegas insured
had an external wall perimeter of 500 meters or 1,640 feet, the appellee should have 11 fire
hydrants in the compound, and that he actually had only 2, with a further pair nearby, belonging
to the municipality of Tabaco.

ISSUE: WON the plaintiff should be entitled to insurance.

HELD: Yes. We are in agreement with the trial Court that the appellant is barred by waiver (or
rather estoppel) to claim violation of the so-called fire hydrants warranty. The insurance
company was aware, even before the policies were issued, that in the premises insured there
were only two fire hydrants installed by Qua Chee Gan and two others nearby, owned by the
municipality of Tabaco, contrary to the requirements of the warranty in question. Such fact
appears from positive testimony for the insured that appellant's agents inspected the premises;
and the simple denials of appellant's representative (Jamiczon) cannot overcome that proof.
The contract of insurance is one of perfect good faith (uferrimal fidei) not for the insured alone,
but equally so for the insurer; in fact, it is mere so for the latter, since its dominant bargaining
position carries with it stricter responsibility.
PHILIPPINE HEALTH CARE PROVIDERS INC V CIR

G.R. No. 167330

DOCTRINE: (1) Health Maintenance Organizations (HMO) are not engaged in the insurance
business.

(2) A health care agreement is not an insurance contract contemplated under Sec. 185 of NIRC
of 1997.

FACTS: Petitioner is a domestic corporation whose primary purpose is to establish, maintain,

conduct and operate a prepaid group practice health care delivery system or a health
maintenance organization to take care of the sick and disabled persons enrolled in the health
care plan and to provide for the administrative, legal, and financial responsibilities of the
organization. Individuals enrolled in its health care programs pay an annual membership fee
and are entitled to various preventive, diagnostic and curative medical services provided by its
duly licensed physicians, specialists and other professional technical staff participating in the
group practice health delivery system at a hospital or clinic owned, operated or accredited by it.
On January 27, 2000, respondent CIR sent petitioner a formal demand letter and the
corresponding assessment notices demanding the payment of deficiency taxes, including
surcharges and interest, for the taxable years 1996 and 1997 in the total amount of
P224,702,641.18. The documentary stamp tax assessment (DST) was imposed on petitioners
health care agreement with the members of its health care program pursuant to Section 185 of
the 1997 Tax Code. Petitioner protested the assessment. Petitioner filed a petition for review in
the CTA seeking the cancellation of the deficiency VAT and DST assessments. The CTA partially
granted the petition. The Court denied the petition and affirmed the CAs decision. The Court
held that petitioners health care agreement during the pertinent period was in the nature of non-
life insurance which is a contract of indemnity.

ISSUE: WON petitioner is an insurance company

HELD: No. Sec. 2(2) of the Insurance Code enumerates what constitutes doing an insurance
business or transacting an insurance business:

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

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

c) doing any kind of business, including a reinsurance business, specifically recognized as

constituting the doing of an insurance business within the meaning of this Code;

d) doing or proposing to do any business in substance equivalent to any of the foregoing in a

manner designed to evade the provisions of this Code.

In the application of the provisions of this Code, the fact that no profit is derived from the making
of insurance contracts, agreements or transactions or that no separate or direct consideration is
received therefore, shall not be deemed conclusive to show that the making thereof does not
constitute the doing or transacting of an insurance business.

Various courts in the United States, whose jurisprudence has a persuasive effect on our
decisions, One test that they have applied is whether the assumption of risk and indemnification
of loss (which are elements of an insurance business) are the principal object and purpose of
the organization or whether they are merely incidental to its business. If these are the principal
objectives, the business is that of insurance. But if they are merely incidental and service is the
principal purpose, then the business is not insurance. Applying the principal object and purpose
test, here is significant American case law supporting the argument that a corporation (such as
an HMO, whether or not organized for profit), whose main object is to provide the members of a
group with health services, is not engaged in the insurance business. As an HMO, it is its
obligation to maintain the good health of its members. Accordingly, its health care programs are
designed to prevent or to minimize the possibility of any assumption of risk on its part. Thus, its
undertaking under its agreements is not to indemnify its members against any loss or damage
arising from a medical condition but, on the contrary, to provide the health and medical services
needed to prevent such loss or damage.
DIOSDADO C. TY vs FILIPINAS COMPAIA DE SEGUROS, et al

G.R. No. L-21821-22 and L-21824-27 May 31, 1966

DOCTRINE: We might add that the agreement contained in the insurance policies is the law
between the parties.

FACTS:

Ty was an employee of Broadway Cotton Factory at Grace Park, Caloocan City, working
as mechanic operator, with monthly salary of P185.00.

He took Personal Accident Policies from several insurance companies, among which are
herein respondents, on different dates, effective for 12 months.

During the effectivity of these policies, or on December 24, 1953, a fire broke out in the
factory and as Ty was trying to put out said fire with a fire extinguisher, a heavy object
fell upon his left hand.

Ty received treatment at the National Orthopedic Hospital from December 26, 1953 to
February 8, 1954 which injuries, the attending surgeon certified, would cause temporary
total disability of Ty's left hand.

The insurance companies refused to pay his claim for compensation under the policies
by reason of the said disability of his left hand.
On appeal to the Court of First Instance by the insurance companies, the cases were
dismissed on the ground that under the uniform terms of the insurance policies, partial
disability of the insured caused by loss of either hand to be compensable, the loss must
result in the amputation of that hand. Hence, these appeals by the insured.
Ty based his claim for indemnity under the provision of the insurance contract. ("any
Bodily Injury which is effected by x x x accidental means, and which shall not prove fatal
but shall result, x x x in Total or Partial Disability of the Insured, the Company shall pay x
x x either hand 650.00)
Appellant contends that to be entitled to indemnification under the foregoing provision, it
is enough that the insured is disabled to such an extent that he cannot substantially
perform all acts or duties of the kind necessary in the prosecution of his business.
It is argued that what is compensable is the disability and not the amputation of the
hand. The definition of what constitutes loss of hand, placed in the contract, according to
appellant, consequently, makes the provision ambiguous and calls for the interpretation
thereof by this Court.

ISSUE: WON the Insurance companies must indemnify Ty under the insurance policies.
RULING: No. The Court cannot go beyond the clear and express conditions of the insurance
policies, all of which definite partial disability as loss of either hand by amputation through the
bones of the wrist. There was no such amputation in the case at bar. All that was found by the
trial court, which is not disputed on appeal, was that the physical injuries "caused temporary
total disability of plaintiff's left hand." Note that the disability of plaintiff's hand was merely
temporary.

As the terms of the policies are clear, express and specific that only amputation of the left hand
should be considered as a loss thereof, an interpretation that would include the mere fracture or
other temporary disability not covered by the policies would certainly be unwarranted.
FILIPINAS COMPAIA DE SEGUROS vs CHRISTERN, HUENEFELD and CO., INC.

G.R. No. L-2294 May 25, 1951

DOCTRINE: An insurance policy ceases to be allowable as soon as an insured becomes a

public enemy.

FACTS:

On October 1, 1941, Christern Huenefeld, & Co., Inc., obtained from the petitioner
,Filipinas Cia. de Seguros, fire policy in the sum of P1000,000, covering merchandise
contained in a building located at No. 711 Roman Street, Binondo Manila.
During the Japanese military occupation, the building and insured merchandise were
burned.
The salvage goods were sold at public auction and, after deducting their value, the total
loss suffered by the respondent was fixed at P92,650.
The petitioner refused to pay the claim on the ground that the policy in favor of the
respondent that ceased to be a force on the date the United States declared war against
Germany, the respondent corporation (through organized under and by virtue of the laws
of Philippines) being controlled by German subjects and the petitioner being a company
under American jurisdiction when said policy was issued on October 1, 1941.
The theory of the petitioner is that the insured merchandise were burned up after the
policy issued in 1941 in favor of the respondent corporation has ceased to be effective
because of the outbreak of the war between the United States and Germany on
December 10, 1941, and that the payment made by the petitioner to the respondent
corporation during the Japanese military occupation was under pressure.

ISSUE: Whether or not Filipinas is liable to Christern, Huenfeld & Co.

RULING: NO. There is no question that majority of the stockholders of the respondent
corporation were German subjects. This being so, we have to rule that said respondent became
an enemy corporation upon the outbreak of the war between the United States and Germany.

The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone
except a public enemy may be insured."

Effect of war, generally. All intercourse between citizens of belligerent powers which is
inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes
all negotiations, commerce, or trading with the enemy; x x x It further prohibits insurance
upon trade with or by the enemy, upon the life or lives of aliens engaged in service with the
 enemy; this for the reason that the subjects of one country cannot be permitted to lend their
assistance to protect by insurance the commerce or property of belligerent, alien subjects,
or to do anything detrimental too their country's interest.

In the case of an ordinary fire policy, which grants insurance only from year, or for some
other specified term it is plain that when the parties become alien enemies, the contractual
tie is broken and the contractual rights of the parties, so far as not vested. lost. (Vance, the
Law on Insurance, Sec. 44, p. 112.)

The respondent having become an enemy corporation on December 10, 1941, the insurance
policy issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had
ceased to be valid and enforcible, and since the insured goods were burned after December 10,
1941, and during the war, the respondent was not entitled to any indemnity under said policy
from the petitioner.

However, the petitioner will be entitled to recover only the equivalent, in actual Philippines
currency of P92,650 paid on April 19, 1943, in accordance with the rate fixed in the Ballantyne
scale.

Wherefore, respondent corporation is ordered to pay to the petitioner the sum of P77,208.33,
Philippine currency, less the amount of the premium, in Philippine currency
DEL ROSARIO vs EQUITABLE INS. & CASUALTY CO., INC.

L-16216 JUNE 29 1963

Doctrine: Ambiguity in terms and conditions of a life accident policy is resolved against
the insurer.

Facts:

Defendant Equitable Insurance and Casualty Co., Inc. issued Personal Accident Policy
no. 7136 on the life of Francisco del Rosario (son of Simeon, the plaintiff-appellee)
bindinf itself to pay Php 1000 to Php 3000 as an indemnity for the death of the insured.
On Feb 24 1957, the insured Francisco del Rosario drowned in the waters of Jolo while
on board of a motor launch together with 33 others, including his beneficiary in the policy
(Remedios Jayme). They were forced to jump off said launch due to a fire.
Being the sole heir, Simeon del Rosario (father of the insured) filed a clain for payment
with Equitable Insurance and Casualty Co., Inc. and in which Equitable paid the sum of
Php 1000 pursuant to Sec. 1 of Part 1 of the policy.
Atty. Vicente Francisco wrote to Equitable acknowledging receipt by his clinet (Simeon)
of Php 1000 but informing said company that said amount was not the correct one
claiming that the amount payable under the policy is Php 1500 under the provision of
Sec. 2 Part 1 of the policy.
After being referred to the Insurance Commissioner, he opined that the liability of the
company was only Php 1000 pursuant to Sec. 1 Part 1 of the policy so the company
refused to pay more than Php 1000.
In a subsequent letter, Atty. Vicente Francisco asked for Php 3000 which the company
has refused to pay. Hence, a complaint for recovery of Php 2000 more was instituted
with the CFI of Rizal, praying for a further sum of Php 10 000 as attorneys fees,
expenses of litigation and costs.
Equitable Insurance & Casualty Inc., Co. presented a Motion to Dismiss alleging that the
demand or claim had already been released. Plaintiff opposed and pleadings were
subsequently filed.
The TRIAL COURT deferred the action on motion to dismiss until termination of the case
appearing thereof that the ground was not indubitable.
Trial court reconsiders and sets aside its decision dated July 21 1958 and hereby
renders judgment ordering Equitable to pay Simeon the sum of Php 2000 and to pay
costs.
The case was elevated to the Court of Appeals

Issue:
How much should the indemnity be?

Ruling:

The CFI ruled that:

On the face of the policy itself, death by drowning is a ground for recovery apart from the bodily
injury because death by bodily injury is covered by Part I of the policy while death by drowning
is covered by Part VI thereof. But while the policy mentions specific amounts that may be
recovered for death and for bodily injury, yet, there is no specific amount mentioned in the policy
for death thru drowning although the latter is, under Part VI of the policy, a ground for recovery
thereunder. Since Equitable has bound itself to pay P1000.00 to P3,000.00 as indemnity for the
death of the insured but the policy does not positively state any definite amount that may be
recovered in case of death by drowning, there is an ambiguity in this respect in the policy, which
ambiguity must be interpreted in favor of the insured and strictly against the insurer so as to
allow greater indemnity. Thus, del Rosario is entitled toPhp3000. Since Equitable has already
paid Php1000, as balance of Php2000 remains to be paid.

SC upheld the ruling of the CFI for it is supported by the generally accepted principles of
insurance, which enunciate that where there is an ambiguity with respect to the terms and
conditions of the policy, the same will be resolved against the responsible thereof.

It should be recalled in this connection, that generally ,the insured, has little, if any, participation
in the preparation of the policy, together with the drafting of its terms and Conditions. The
interpretation of obscure stipulations in a contract should not favor the party INSURANCE LAW
CASE DIGESTS who cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the
insurance company
CONSTANTINO VS ASIA LIFE INSURANCE CO.

L-1669 August 31 1950

Doctrine:

Facts:
Case 1:

The life of Arcadio Constantino was insured with Asia Life Insurance Company (Asia) for
a term of 20 years with Paz Lopez de Constantino as beneficiary. The first premium
covered the period up to September 26, 1942.
After the first premium, no further premiums were paid. The Constantino died on
September 22, 1944.
Asia Life Insurance Company, being an American Corp., had to close its branch office in
Manila by reason of the Japanese occupation

Case 2:
Spouses Tomas Ruiz and Agustina Peraltas premium were initially annually but
subsequently changed to quarterly. The last quarterly premium was delivered
on November 18, 1941 and it covered the period until January 31, 1942.
Upon the Japanese occupation, the Asia Life and the insured were not able to deal with
each other
Because the insured had borrowed on the policy P234.00 in January, 1941, the cash
surrender value of the policy was sufficient to maintain the policy in force only up to
September 7, 1942.
Tomas Ruiz died on February 16, 1945 with Agustina Peralta as beneficiary. Her
demand for payment was refused on the ground of non-payment of the premiums.

Both policies contained this provision: All premiums are due in advance and any
unpunctuality in making such payment shall cause this policy to lapse unless and
except as kept in force by the grace period condition.

Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to
receive the proceeds of the policies less all sums due for premiums in arrears. They
also allege that non-payment of the premiums were caused by the closing of ALICs
 offices during the war and the impossible circumstances by the war, therefore, they
should be excused and the policies should not be forfeited
Lower court: absolved Asia

ISSUE:
May a beneficiary in a life insurance policy recover the amount thereof although the insured died
after repeatedly failing to pay the stipulated premiums, such failure being caused by war?

RULING:

NO.

Due to the express terms of the policy, non-payment of the premium produces its avoidance. In
Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had not
been paid within the time fixed; since by its express terms, non-payment of any premium when
due or within the 31 day grace period ipso fact caused the policy to lapse. When the life
insurance policy provides that non-payment of premiums will cause its forfeiture, war
does NOT excuse non-payment and does not avoid forfeiture. Essentially, the reason why
punctual payments are important is that the insurer calculates on the basis of the prompt
payments.

It should be noted that the parties contracted not only as to peace time conditions but also as to
war-time conditions since the policies contained provisions applicable expressly to wartime
days. The logical inference therefore is that the parties contemplated the uninterrupted
operation of the contract even if armed conflict should ensue.

Moreover, since act 2427, Philippine law on insurance and the Civil Code) are mostly based
from the Civil Code of California, An intention to supplement our laws with the prevailing
principles of the US arises. Thus, Prof. Vance of Yaled declares that the United States Rule
must be followed, where the contract is not merely suspended but is abrogated by reason of
non-payment of premiums since the time of payments is peculiar to the essence of the contract.
Forfeiture for non-payment is necessary to protect said business from embarrassment otherwise
confusion would abound. And that delinquency cannot be tolerated nor redeemed except at the
option of the company. Lastly parties contracted both for peace and war times since the policies
contained also wartime days. It follows that the parties contemplated uninterrupted operation of
the contract even if armed conflict ensues.

The annual premium is not a debt, nor is it an obligation which the insurer can maintain an
action against the insured; nor its settlement governed by the rules on payment of debts. A
contract of insurance is sui generis. This means though the insured may hold the insurer to the
contract by the fulfillment of the condition, the latter has no power or right to compel the insured
to maintain the contract relation longer than the insured may desire. It is optional upon the
insured.

Misamis Lumber Corp. vs Capital Insurance and Surety Co., Inc.

G.R. No. L-21380; May 20, 1966

Ponente: Reyes, J.B.L., J.

Doctrine: The literal meaning of this stipulation (Insurance policy) must control, it being the
actual contract, expressly and plainly provided for in the policy. The insurance contract may be
rather onerous ("one-sided", as the lower court put it), but that in itself does not justify the
abrogation of its express terms, terms which the insured accepted or adhered to and which is
the law between the contracting parties.

Facts:

Plaintiff Misamis Lumber, formerly Lanao Timber Mills, Inc., insured its Ford Falcon
motor car for P14,000 with defendant Capital Insurance.
Insurance Policy provides: a) The Insurer may, at its option, pay in cash or repair,
replace, or reinstate the vehicle or any of its parts; b) The authorized repair limit is P150.
In the evening of November 25, 1961, and while the insurance policy was in force, said
car, while traveling along Aurora Blvd., passed over a water hole which the driver did not
see because an oncoming car did not dim its light.
The crankcase and flywheel housing of the car broke when it hit a hollow block lying
alongside the hole.
At the instance of Misamis, the car was towed and repaired by Morosi Motors at a total
cost of P302.27.
Misamis made a report of the accident to Capital Insurance but the latter, admitting its
liability only for P150, refused to pay the total cost so a suit was filed.
Lower court did not exonerate the said appellant for the excess because, according to it,
the company's absolution would render the insurance contract one-sided and that the
said insurer had not shown that the cost of repairs in the sum of P302.27 is
unreasonable, excessive or padded, nor had it shown that it could have undertaken the
repairs itself at less expense.

Issue/s: WON Capital Insurance is liable for more than P150.

Held: No.
 The insurance policy stipulated that if the insured authorizes the repair, the liability of the
insurer, is limited to P150.00. The literal meaning of this stipulation must control, it being
the actual contract, expressly and plainly provided for in the policy.
The lower court's recourse to legal hermeneutics is not called for because paragraph 4
of the policy is clear and specific and leaves no room for interpretation. The
interpretation given is even unjustified because it opposes what was specifically
stipulated.
Thus, it will be observed that the policy drew out not only the limits of the insurer's
liability but also the mechanics that the insured had to follow to be entitled to full
indemnity of repairs. The option to undertake the repairs is accorded to the insurance
company per paragraph 2. The said company was deprived of the option because the
insured took it upon itself to have the repairs made, and only notified the insurer when
the repairs were done. As a consequence, paragraph 4, which limits the company's
liability to P150.00, applies.
The insurance contract may be rather onerous ("one-sided", as the lower court put it),
but that in itself does not justify the abrogation of its express terms, terms which the
insured accepted or adhered to and which is the law between the contracting parties.
Finally, to require the insurer to prove that the cost of the repairs ordered by the insured
is unreasonable, as the appealed decision does, when the insurer was not given an
opportunity to inspect and assess the damage before the repairs were made, strikes Us
as contrary to elementary justice and equity.
Great Pacific Life Assurance Corp. vs CA and Leuterio

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

Ponente: Quisumbing, J.

Doctrine:

Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any judgment
he may obtain.
Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the
assured, but he designedly and intentionally withholds the same. The fraudulent intent
on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative
defense and the duty to establish such defense by satisfactory and convincing evidence
rests upon the insurer.

Facts:

A contract of group life insurance was executed between petitioner GrePaLife and
Development Bank of Phil wherein GrePaLife agreed to insure the lives of eligible
housing loan mortgagors of DBP.
In November 1983, Dr. Leuterio, physician and housing debtor of DBP applied for
membership in the insurance plan. In the application form, he stated that he is in good
health and he never had, nor consulted, a physician for any disorder or physical
impairment.
4 days after, GrePaLife issued a certificate as insurance coverage, to the extent of his
DBP mortgage indebtedness amounting to P86,200.
In August 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Thus, DBP
submitted a death claim to GrePaLife which was denied by the latter, alleging that Dr.
Leuterio was not physically healthy when he applied for insurance. It was insisted that
Dr. Leuterio did not disclose that he was suffering from hypertension which caused his
death.
Respondent Leuterio, wife of deceased Dr., filed a suit against petitioner.
During trial, Dr. Mejia, the one who issued the death certificate, testified and stated that
Dr. Leuterio complained of headaches presumably due to high blood pressure. Such
 inference was not conclusive because Dr. Leuterio was not autopsied.
Lower court ruled in favor of the widow.

Issue/s:

WON the widow is a real party in interest.

WON there is concealment on the deceased's part, warranting annulment of the
insurance contract.

Held:

The rationale of a group insurance policy of mortgagors, otherwise known as the

mortgage redemption insurance, is a device for the protection of both the mortgagee
and the mortgagor. On the part of the mortgagee, it has to enter into such form of
contract so that in the event of the unexpected demise of the mortgagor during the
subsistence of the mortgage contract, the proceeds from such insurance will be applied
to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from
paying the obligation. On the part of the mortgagor, in the event of death, the mortgage
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 loss payable 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. Insured, being the person with whom the contract was made, is primarily the
proper person to bring suit thereon. * * * Subject to some exceptions, insured may thus
sue, although the policy is taken wholly or in part for the benefit of another person
named or unnamed, and although it is expressly made payable to another as his interest
may appear or otherwise. * * * Although a policy issued to a mortgagor is taken out for
the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue
thereon in his own name, especially where the mortgagees interest is less than the full
amount recoverable under the policy, * * *And in volume 33, page 82, of the same work,
we read the following:
Insured may be regarded as the real party in interest, although he has assigned the
policy for the purpose of collection, or has assigned as collateral security any judgment
he may obtain. And since a policy of insurance upon life or health may pass by transfer,
will or succession to any person, whether he has an insurable interest or not, and such
person may recover it whatever the insured might have recovered, the widow of the
decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the
assured, but he designedly and intentionally withholds the same. In this case, petitioner
merely relied on the medical findings of Dr. Mejia which were not conclusive since no
autopsy was conducted. Appellant insurance company had failed to establish that there
was concealment made by the insured, hence, it cannot refuse payment of the claim.
The fraudulent intent on the part of the insured must be established to entitle the insurer
to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is
 an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to
clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds
of the insurance.

GULF RESORTS vs. PHILIPPINE CHARTER INSURANCE CORP.

G.R. No. 156167

16 May 2005

Facts: Gulf Resorts is the owner of the Plaza Resort situated at Agoo, La Union and had its
properties in said resort insured originally with the American Home Assurance Company
(AHAC). In the first 4 policies issued, the risks of loss from earthquake shock was extended only
to petitioners two swimming pools. Gulf Resorts agreed to insure with Phil Charter the
properties covered by the AHAC policy provided that the policy wording and rates in said policy
be copied in the policy to be issued by Phil Charter. Phil Charter issued Policy No. 31944 to Gulf
Resorts covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total
premium of P45,159.92. the break-down of premiums shows that Gulf Resorts paid only
P393.00 as premium against earthquake shock (ES). In Policy No. 31944 issued by defendant,
the shock endorsement provided that In consideration of the payment by the insured to the
company of the sum included additional premium the Company agrees, notwithstanding what is
stated in the printed conditions of this policy due to the contrary, that this insurance covers loss
or damage to shock to any of the property insured by this Policy occasioned by or through or in
consequence of earthquake (Exhs. "1-D", "2-D", "3-A", "4-B", "5-A", "6-D" and "7-C"). In Exhibit
"7-C" the word "included" above the underlined portion was deleted. On July 16, 1990 an
earthquake struck Central Luzon and Northern Luzon and plaintiffs properties covered by Policy
No. 31944 issued by defendant, including the two swimming pools in its Agoo Playa Resort
were damaged.

Petitioner advised respondent that it would be making a claim under its Insurance Policy 31944
for damages on its properties. Respondent denied petitioners claim on the ground that its
insurance policy only afforded earthquake shock coverage to the two swimming pools of the
resort. The trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that
petitioner paid only a premium of P393.00 against the peril of earthquake shock, the same
premium it had paid against earthquake shock only on the two swimming pools in all the policies
issued by AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by Gulf Resorts
and does not extend to all properties damaged therein

Held: Yes. All the provisions and riders taken and interpreted together, indubitably show the
intention of the parties to extend earthquake shock coverage to the two swimming pools only.
An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril. In fire, casualty and marine insurance, the premium becomes
a debt as soon as the risk attaches. In the subject policy, no premium payments were made with
regard to earthquake shock coverage except on the two swimming pools. There is no mention
of any premium payable for the other resort properties with regard to earthquake shock. This is
consistent with the history of petitioners insurance policies with AHAC.
PALILEO VS. COSIO

97 Phil 919

28 November 1955

Facts: On December 18, 1951, Palileo obtained from Cosio a loan of P12,000. To secure
payment, Cosio required Palileo to sign a document known as conditional sale of residential
building, purporting to convey to Cosio, with a right to repurchase (on the part of Palileo), a two-
story building of strong materials belonging to Palileo.

After execution of the document, Cosio insured the building against fire with Associated
Insurance & Surety Co. (Associated) for P15,000. The insurance policy was issued in the name
of Cosio.

The building was partly destroyed by fire and after proper demand, Cosio was able to collect
from the insurance company an indemnity of P13,107.

Palileo demanded from Cosio that she be credited with the necessary amount to pay her
obligation out of the insurance proceeds, but Cosio refused to do so.

Trial Court found that the debt had an unpaid balance of P12,000. It declared the obligation of
Palileo to Cosio fully compensated by virtue of the proceeds collected by Cosio and further held
that the excess of P1,107 (13,107 12,000) be refunded to Palileo

Issue: Whether or not the trial court was justified in considering the obligation of Palileo fully
compensated by the insurance amount that Cosio was able to collect from Associated, and
whether or not the trial court was correct in requiring Cosio to refund the excess of P1,107 to
Palileo.

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.

The lower court erred in declaring that the proceeds of the insurance taken out by Cosio on the
property insured to the benefit of Palileo and in ordering the former to deliver to the latter, the
difference between the indebtedness and the amount of insurance received by Cosio. In the
light of this ruling, the correct solution would be that the proceeds of the Insurance be delivered
to Cosio, but her claim against Palileo should be considered assigned to the insurance company
who is deemed subrogated to the rights of Cosio to the extent of the money paid as indemnity.
WHITE GOLD MARINE SERVICES, INC. vs PIONEER INSURANCE AND SURETY
CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION
(BERMUDA) LTD.

QUISUMBING, J G.R. No. 154514. July 28, 2005

DOCTRINES:

1) Since a contract of insurance involves public interest, regulation by the State is

necessary. Thus, no insurer or insurance company is allowed to engage in the
insurance business without a license or a certificate of authority from the Insurance
Commission.

2) The test to determine if a contract is an insurance contract or not, depends on the

nature of the promise, the act required to be performed, and the exact nature of the
agreement in the light of the occurrence, contingency, or circumstances under which
the performance becomes requisite. It is not by what it is called.

3) Although Pioneer is already licensed as an insurance company, it needs a separate

license to act as insurance agent for Steamship Mutual under Section 299

FACTS:

1. Petitioner White Gold Marine Services, Inc. owns several shipping vessels.

2. Respondent Steamship Mutual Underwriting Association, Ltd. (based in Bermuda) is a

Protection and Indemnity Club (P&I Club) which is an association composed of shipowners
in general who band together for the specific purpose of providing insurance cover on a
mutual basis against liabilities incidental to shipowning that the members incur in favor of
third parties.

3. White Gold, through Pioneer Insurance (agent of Steamship Mutual here), procured a
protection and indemnity coverage from Steamship Mutual. Steamship Mutual does not
have authority from the Insurance Commission to conduct insurance business in the
Philippines but its collection agent here (Pioneer Insurance) has been licensed to conduct
insurance business.

4. Later, Steamship Mutual filed a case for collection of sum of money against White Gold due
to the latters failure to pay its balance with the former(premiums). White Gold averred that
Steamship Mutual has no license [hence it cannot collect]. Nor can it collect through
Pioneer Insurance because, though Pioneer Insurance is licensed as an insurance
company, it is not licensed to be an insurance broker/agent.
5. Steamship Mutual insisted it is not conducting insurance business here and is merely a
protection and indemnity club. The Insurance Commission as well as the Court of Appeals
ruled against White Gold.

DECISION OF LOWER COURTS:

(1) Insurance Commissioner: Dismissed the complaint. There was no violation of the
Insurance Code and the respondents do not need license as insurer and insurance agent/broker
because it was not engaged in the insurance business. It explained that Steamship Mutual was
a Protection and Indemnity Club (P & I Club). Moreover, Pioneer was already licensed, hence, a
separate license solely as agent/broker of Steamship Mutual was already superfluous.
(2) CA: affirmed Insurance Commissioner.

ISSUES:
(1) Whether or not Respondent 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?

RULING:
(1) Yes. To continue doing business here, Steamship Mutual or through its agent 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 or insurance company is allowed
to engage in the insurance business without a license or a certificate of authority from the
Insurance Commission. The parties admit that Steamship Mutual is a P & I Club. Steamship
Mutual admits it does not have a license to do business in the Philippines although Pioneer is its
resident agent. This relationship is reflected in the certifications issued by the Insurance
Commission.

It cites the definition of a P & I Club in Hyopsung Maritime Co., Ltd. v. Court of Appeals as an
association composed of shipowners in general who band together for the specific purpose of
providing insurance cover on a mutual basis against liabilities incidental to shipowning that the
members incur in favor of third parties. The test to determine if a contract is an insurance
contract or not, depends on the nature of the promise, the act required to be performed, and the
exact nature of the agreement in the light of the occurrence, contingency, or circumstances
under which the performance becomes requisite. It is not by what it is called.

Relatedly, a mutual insurance company is a cooperative enterprise where the members are both
the insurer and insured. In it, the members all contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses and liabilities are paid, and where
the profits are divided among themselves, in proportion to their interest. Additionally, mutual
insurance associations, or clubs, provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs. 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.

(2) Yes. Although Pioneer is already licensed as an insurance company, it needs a separate
license to act as insurance agent for 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 of applications for insurance, or receive for services in obtaining
insurance, any commission or other compensation from any insurance company doing business
in the Philippines or any agent thereof, without first procuring a license so to act from the
Commissioner, which must be renewed annually on the first day of January, or within six months
thereafter.

PHILIPPINE HEALTH CARE PROVIDERS, INC., vs CIR

CORONA, J. G.R. No. 167330 September 18, 2009

DOCTRINES (found in Aquino book)

(1)Even if a contract contains all the elements of an insurance contract, if its primary purpose is
the rendering of service, it is not a contract of insurance.
(2)The terms "indemnify" or "indemnity" presuppose that a liability or claim has already been
incurred.
(3) Although risk is a primary element of an insurance contract, it is not necessarily true that risk
alone is sufficient to establish it.
(4) Insurance risk, also known as actuarial risk, is the risk that the cost of insurance claims
might be higher than the premiums paid. The amount of premium is calculated on the basis
of assumptions made relative to the insured.

FACTS

Petitioner Philippine Health Care Providers, Inc. is a domestic corporation whose

primary purpose is "[t]o establish, maintain, conduct and operate a prepaid group
practice health care delivery system or a health maintenance organization to take care of
the sick and disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization."

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

Commissioner of Internal Revenue (CIR) sent petitioner a formal demand letter and the
corresponding assessment notices demanding the payment of deficiency taxes,
including surcharges and interest, for the taxable years 1996 and 1997 in the total
amount of P224,702,641.18.
 Petitioner protested the assessment.

CIR did not act on the protest, petitioner filed a petition for review in the Court of Tax
Appeals (CTA) seeking the cancellation of the deficiency Value Added Tax (VAT) and
Documentary stamp taxes (DST) assessments.

CTA: PARTIALLY GRANTED and ordered Petitioner to pay the VAT but DST
assessment CANCELLED AND SET ASIDE

In turn, respondent CIR appealed the decision of the CTA and argued health care
agreement was a contract of insurance subject to DST under Section 185 of the
1997 Tax Code

CA: health care agreement was in the nature of a non-life insurance contract subject to
DST.

ISSUES

Whether or not petitioner, as a Health Maintainance Organization, engaged in the business of

insurance during the pertinent taxable years of 1996 and 1997.

RULING
1. No. The Supreme Court reversed the decision of the CA and ruled that there was no
insurance contract. The Petitioner was not liable to pay Deficieny DST since was
never any legislative intent to impose the same on HMOs behind Sec 185 of the Tax
Code.

Under Section 2 (2) of PD 1460 (otherwise known as the Insurance Code) enumerates what
constitutes "doing an insurance business" or "transacting an insurance business:

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

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

c) doing any kind of business, including a reinsurance business, specifically recognized as

constituting the doing of an insurance business within the meaning of this Code;

d) doing or proposing to do any business in substance equivalent to any of the foregoing in

a manner designed to evade the provisions of this Code.

First. In our jurisdiction, a commentator of our insurance laws has pointed out that, even if a
contract contains all the elements of an insurance contract, if its primary purpose is the
rendering of service, it is not a contract of insurance:

It does not necessarily follow however, that a contract containing all the four elements
mentioned above would be an insurance contract. The primary purpose of the parties in
making the contract may negate the existence of an insurance contract.
Second. Not all the necessary elements of a contract of insurance are present in
petitioners agreements. To begin with, there is no loss, damage or liability on the part of
the member that should be indemnified by petitioner as an HMO. Under the agreement, the
member pays petitioner a predetermined consideration in exchange for the hospital, medical
and professional services rendered by the petitioners physician or affiliated physician to him. In
case of availment by a member of the benefits under the agreement, petitioner does not
reimburse or indemnify the member as the latter does not pay any third party. Instead, it is the
petitioner who pays the participating physicians and other health care providers for the services
rendered at pre-agreed rates. The member does not make any such payment.

There is nothing in petitioner's agreements that gives rise to a monetary liability on the part
of the member to any third party-provider of medical services which might in turn necessitate
indemnification from petitioner. The terms "indemnify" or "indemnity" presuppose that a
liability or claim has already been incurred. There is no indemnity precisely because the
member merely avails of medical services to be paid or already paid in advance at a pre-
agreed price under the agreements.

Third. According to the agreement, a member can take advantage of the bulk of the benefits
anytime, e.g. laboratory services, x-ray, routine annual physical examination and consultations,
vaccine administration as well as family planning counseling, even in the absence of any peril,
loss or damage on his or her part.

Fourth. In case of emergency, petitioner is obliged to reimburse the member who receives care
from a non-participating physician or hospital. However, this is only a very minor part of the list
of services available. The assumption of the expense by petitioner is not confined to the
happening of a contingency but includes incidents even in the absence of illness or injury.

Fifth. Although risk is a primary element of an insurance contract, it is not necessarily true that
risk alone is sufficient to establish it. Almost anyone who undertakes a contractual obligation
always bears a certain degree of financial risk. Consequently, there is a need to distinguish
prepaid service contracts (like those of petitioner) from the usual insurance contracts.

Indeed, petitioner, as an HMO, undertakes a business risk when it offers to provide health
services: the risk that it might fail to earn a reasonable return on its investment. But it is not the
risk of the type peculiar only to insurance companies. Insurance risk, also known as actuarial
risk, is the risk that the cost of insurance claims might be higher than the premiums paid. The
amount of premium is calculated on the basis of assumptions made relative to the insured.

However, assuming that petitioners commitment to provide medical services to its members
can be construed as an acceptance of the risk that it will shell out more than the prepaid fees, it
still will not qualify as an insurance contract because petitioners objective is to provide
medical services at reduced cost, not to distribute risk like an insurer.
ETERNAL GARDES MEMORIAL PARK CORPORATION vs THE PHILIPPINE AMERICAN
LIFE INSURANCE COMPANY
G.R. No. 16645 April 9, 2008

Doctrines
1. It must be remembered that an insurance is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer to safeguard the latters
interest.
2. The mere inaction of the insurer on the insurance application must not work to prejudice
the insured; it cannot be interpreted as a termination of the insurance contract.
3. Insurance contracts are imbued with public interest that must be considered whenever
the rights and obligations of the insurer and the insured are to be delineated (Rationale:
Insurance contracts are wholly prepared by the insurer with vast amounts of experience in the
industry purposefully used to its advantage)
4. Minor inconsistencies are to triial to affect the credibility of witnesses and these may
even sere to strengthen their credibility as these negate any suspicion that the testimonies have
been rehearsed (People v Paredes).

Facts:
Philippine American Life Insurance Company entered into an agreement denominated
as Creditor Group Life Policy with Eternal Gardens Memorial Park Corporation.
Under this policy, clients of Eternal who purchased burial lots from it on installment basis
would be insured by Philamlife. The amount of insurance coverage depended upon the
existing balance of the purchased burial lots.
The Life Insurance coverage of any Lot Purchaser at any time shall be the amount of the
unpaid balance of his loan (including arrears up to but not exceeding 2 months) as
reported by the Assured to the Company or the sum of P100,000 whichever is smaller.
Such benefit shall be paid to the Assured if the Lot Purchaser dies while insured under
the Policy.
Eternal was required under the policy to submit to Philamlife a list of all new lot
purchasers together with a copy of the application of each purchaser, and the amounts
 of the respective unpaid balances of all insured lot purchasers. Eternal complied and
submitted such.
One of those included in the list was a certain JOHN CHUANG. His balance of payments
was P100,000. On August 2, 1984, Chuang died.
Eternal sent a letter to Philamlife which served as an insurance claim for Chuangs death
including necessary documents. In reply, Philamlife wrote Eternal requiring further
documents relative to the insurance claim of Chuangs death, and Eternal submitted the
additional documents.
After more than a year, Philamlife had not furnished Eternal with the latters insurance
claim. This prompted Eternal to demand from Philamlife the payment of the claim for
P100,000.
In response to Eternals demand, Philamlife denied Eternals insurance claim, a portion
of which reads: Since to application had been submitted by the Insured/Assured, prior
to his death, for our approval but was submitted instead on November 15, 1984, after his
death, Mr. Chuang was not covered under the policy.
Eternal filed a case before the Makati RTC for a sum of money against Philamlife. The
RTC decided in favor of Eternal.
On appeal, the CA reversed the decision of the RTC.

ISSUES:
1. WON the application was not duly submitted to Philamlife before the death of Chuang
2. WON there was a valid insurance coverage

HELD:
1. The application was duly submitted to Philamlife before the death of Chuang. The
evidence on record supports Eternals position.
The letter dated December 29, 1982, which Philamlife stamped as received, states that
the insurance forms for the attached list of burial lot buyers were attached to the letter.
Such stamp of receipt has the effect of acknowledging receipt of the letter together with
the attach,ents. Such receipt is an admission by Philamlife against its own interest. The
burden of evidence has shifted to Philamlife, which must prove that the letter did not
contain Chuangs insurance application. However, Philamlife failed to do so.
Minor inconsistencies are to triial to affect the credibility of witnesses and these may
even sere to strengthen their credibility as these negate any suspicion that the
testimonies have been rehearsed (People v Paredes).
The test is whether the respective versions corroborate and substantially coincide with
each other so as to make a consistent and coherent whole (Merencillo v People)

2. There was a valid insurance coverage. Philamlife assumed the risk of loss without
approving the application.
An examination of the insurance contract would show ambiguity between sentences. It
must be remembered that an insurance contract is a contract of adhesion which must be
construed liberally in favor of the insured and strictly against the insurer in order to
safeguard the latters interest.
By reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against the
insurer and liberally in favor of the insured, especially to avoid forfeiture.
The seemingly conflicting provisions must be harmonized to mean that upon a partys
purchase of a memorial lot on installment from Eternal, an insurance contract covering
 the lot purchaser is created and the same is effective, valid and binding until terminated
by Philamlife by disapproving the application.
The mere inaction of the insurer on the insurance application must not work to the
prejudice of the insured, it cannot be interpreted as a termination of the insurance
contract. The termination of the insurance contract must be explicit and unambiguous.

FILIPINASS DE COMPANIA DE SEGUROS v CHRISTERN, HUENEFELD & CO., INC.

NO. L-22994, May 25, 1951

Doctrines:
1. Termination of Policy of Public Enemy: As the Philippine Insurance Law (Act. No. 2427 as
amended) in its section 8, provides that anyone except a public enemy may be insured, an
insurance policy ceases to be allowable as soon as an insured becomes a public enemy.
2. Return of Premiums upon termination of policy by reason of war: Where an insurance policy
ceases to be effective by reason of war, which has made the insured an enemy, the premiums
paid for the period covered by the policy from the date war is declared, should be returned.

*Doctrines not connected to Insurance*

3. The nationality of a private corporation is determined by the character or citizenship of its
controlling stockholders.
4. Where majority of the stockholders of a corporation were German subjects, the corporation
became an enemy corporation upon the outbreak of war between the United States and
Germany.

FACTS:
On Oct 1, 1941, Christern, Huenefeld & Co., Inc., after payment of corresponding
premium, obtained from Filipinas de Compania de Seguros, fire policy No. 29333 in the
sum of P100,000 covering merchandise contained in a building located in Roman Street,
Binondo, Manila.
On Feb 27, 1942 or during the Japanese military occupation, the building and insured
merchandiser were burned. In due time CHCI submitted to FCS its claim under the
policy. The salvaged goods were sold at public auction and after deducting their value,
the total loss suffered by the respondent was fixed at P92, 650.
The petitioner FCS refused to pay the claim on the ground that the policy in favor of
CHCI had ceased from the date the US declared war against Germany, the respondent
 corporation being controlled by German subjects and the petitioner being a company
under American jurisdiction when said policy as issued.
The petitioner FCS still paid the respondent the sum P92, 650 in pursuance of the order
of the Director of Bureau and Financing, Phil. Executive Commission.
The present action was filed in the CFI Manila for the purpose of recovering the sum of
P92, 650, the theory of the petitioner FCS being that the insured merchandise were
burned after the insurance policy had ceased to be effective due to the outbreak of the
war, and that the payment made by petitioner to respondent during the Japanese military
occupation was made under pressure.
After trial, CFI Manila dismissed the action dismissed without pronouncement as to
costs. The CA affirmed the CFI without pronouncement as to costs.

ISSUE:
1. WON the insurance policy became null and void upon the declaration of war between
US and Germany.

HELD:
1. The insurance policy became null and void upon the declaration of war between US and
Germany.
There is no question that the majority of the stockholders of the respondent corporation
were German subjects. The nationality of a private corporation is determined by the
character or citizenship of its controlling stockholders.
The Philippine Insurance Law (Act No. 2427, as amended), in Section 8, provides that
anyone except a public enemy may be insured. It stands to reason that an insurance
policy ceases to be allowable as soon as an insured becomes a public enemy.

*** EFFECT OF WAR, GENERALLY: All intercourse between citizens of belligerent

powers is inconsistent with a state of war is prohibited by the law of nations. Such
prohibition includes all negotiations, commerce or trading with the enemy; all acts which
will increase, or tend to increase, its income or resources It further prohibits insurance
upon trade with or by the enemy, and upon the life or lives of aliens engaged in service
with the enemy; this is for the reason that the subjects of one country cannot be
permitted to lend assistance to protect by insurance the commerce or property of
belligerent, alien subjects. Or to do anything detrimental to their countrys interest. The
purpose of war is to cripple the power and exhaust the resources of the enemy, and it is
inconsistent that one country should destroy its enemys property and repay in
insurances the value of what has been so destroyed. Or that is should in such a manner
increase the resources of the enemy, or render it aid.

The respondent having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941 issued by petitioner had ceased
to be valid and enforceable, and since the insured goods were burned after December
10, 1941, and during the war, the respondent was not entitled to any indemnity under
said policy from the petitioner.
However, the elementary rules of justice require that the premium paid by the
respondent for the period covered by its policy from December 11. 1941 should be
returned to petitioner.
There can be no doubt that the Director of Bureau of Financing, in ordering FCS to pay
the claim to respondent, merely obeyed the instructions of the Japanese Military
 Administration, under pressure. Petitioner FCS is entitled to recover what was paid to
respondent.
Respondent corporation is ordered to pay the sum to FCS less the amount of the
premium.

Philamcare Health Systems, Inc. v Court of Appeals

Facts:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care
coverage with petitioner Philamcare Health Systems, Inc. He answered no to a question posed
by petitioner asking him if he or his family members were treated for heart diseases, asthma,
diabetes, etc . And inquired any other medical history pertaining to those said diseases. His
application was granted. But during the time of the coverage, Ernani suffered a heart attack.
Respondent Julita, tried to claim the benefits provided by petitioner, but the latter did not so
because the former concealed his medical history by answering no to the questioned asked
before. Thus, Julita was the one to pay the P76,000 amount of medical bills. She filed a
complaint before the RTC and was granted a reimbursement of the amount plus damages. The
CA affirmed the decision but excluded the damages. Thus this petition by petitioner. Petitioner
argues that the agreement grants living benefits, such as medical check-ups and hospitalization
which a member may immediately enjoy so long as he is alive upon effectivity of the agreement
until its expiration one-year thereafter. Petitioner also points out that only medical and
hospitalization benefits are given under the agreement without any indemnification, unlike in an
insurance contract where the insured is indemnified for his loss. Moreover, since Health Care
Agreements are only for a period of one year, as compared to insurance contracts which last
longer,[7] petitioner argues that the incontestability clause does not apply, as the same requires
an effectivity period of at least two years. Petitioner further argues that it is not an insurance
company, which is governed by the Insurance Commission, but a Health Maintenance
Organization under the authority of the Department of Health.

Issue:

Whether or not the health care agreement is not an insurance contract

Held:

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement

whereby one undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. An insurance contract exists where the
following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses
among a large group of persons bearing a similar risk; and
5. In consideration of the insurers promise, the insured pays a premium.
Section 3 of the Insurance Code states that any contingent or unknown event, whether past
or future, which may damnify a person having an insurable interest against him, may be insured
against. Every person has an insurable interest in the life and health of himself. Section 10
provides:

Every person has an insurable interest in the life and health:

(1) of himself, of his spouse and of his children;

(2) of any person on whom he depends wholly or in part for education or support, or in
whom he has a pecuniary interest;

(3) of any person under a legal obligation to him for the payment of money, respecting
property or service, of which death or illness might delay or prevent the
performance; and

(4) of any person upon whose life any estate or interest vested in him depends.

In the case at bar, the insurable interest of respondents husband in obtaining the health
care agreement was his own health. The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.[9] Once the member incurs hospital,
medical or any other expense arising from sickness, injury or other stipulated contingent, the
health care provider must pay for the same to the extent agreed upon under the contract.
Del Rosario v Equitable Ins. & Casualty Co., Inc.

Facts:

Defendant-appellant Equitable Insurance and Casualty Co., Inc., issued Personal Accident
Policy No. 7136 on the life of Francisco del Rosario, alias Paquito Bolero, son of herein plaintiff-
appellee, binding itself to pay the sum of P1,000.00 to P3,000.00, as indemnity for the death of
the insured. Thereafter, the insured Francisco del Rosario, alias Paquito Bolero, while on board
the motor launch "ISLAMA" together with 33 others, including his beneficiary in the Policy,
Remedios Jayme, were forced to jump off said launch on account of fire which broke out on said
vessel, resulting in the death of drowning, of the insured and beneficiary in the waters of Jolo.
Simeon del Rosario, father of the insured, and as the sole heir, filed a claim for payment with
defendant company, and subsequently defendant company paid to him (plaintiff) the sum of
P1,000.00, pursuant to the policy. Atty. Vicente J. Francisco, wrote defendant company
acknowledging receipt by his client (plaintiff herein), of the P1,000.00, but informing said
company that said amount was not the correct one. He claimed that it was P 1,500 but then
increased it to P3, 000 pursuant to the accident policy. Both parties agree that indemnity must
be paid. But the defendant appellanmt claims that it has already paid the indemnity while the
other asserts that it is not the correct amount.

Issue:

Whether the herein Defendant-appellant Equitable Insurance and casualty Co., Inc., should pay
P3,000 instead of P1,000

Held:
We believe that under the proven facts and circumstances, the findings and conclusions of the
trial court, are well taken, for they are supported by the generally accepted principles or rulings
on insurance, which enunciate that where there is an ambiguity with respect to the terms
and conditions of the policy, the same will be resolved against the one responsible
thereof. It should be recalled in this connection, that generally, the insured, has little, if any,
participation in the preparation of the policy, together with the drafting of its terms and
Conditions. The interpretation of obscure stipulations in a contract should not favor the
party who cause the obscurity (Art. 1377, N.C.C.), which, in the case at bar, is the insurance
company.

. . . . And so it has been generally held that the "terms in an insurance policy, which are
ambiguous, equivocal or uncertain . . . are to be construed strictly against, the insurer,
and liberally in favor of the insured so as to effect the dominant purpose of indemnity or
payment to the insured, especially where a forfeiture is involved," (29 Am. Jur. 181) and
the reason for this rule is that the "insured usually has no voice in the selection or arrangement
of the words employed and that the language of the contract is selected with great care and
deliberation by expert and legal advisers employed by, and acting exclusively in the interest of,
the insurance company"

Where two interpretations, equally fair, of languages used in an insurance policy may be
made, that which allows the greater indemnity will prevail. Thus the Insurance company
shall pay P3,000.