INSURANCE DIGEST – ATTY.

YAMAMOTO
WHITE GOLD MARINE SERVICES VS. PIONEER
FACTS:
White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual through Pioneer Insurance and
Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts. When White Gold
failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the unpaid balance. White
Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual and Pioneer violated
provisions of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because
it was not engaged in the insurance business and that it was a P & I club. Pioneer was not required to 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 court distinguished between
P & I Clubs vis-à-vis conventional insurance. The appellate court also held that Pioneer merely 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.

White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To buttress its assertion, it cites the
definition as “an association composed of ship owners in general who band together for the specific purpose of providing insurance
cover on a mutual basis against liabilities incidental to ship owning that the members incur in favor of third parties.”
They argued that Steamship Mutual’s 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 business in the
Philippines. It is merely an association of vessel owners who have come together to provide mutual protection against liabilities
incidental to ship owning.
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 of authority mandated by
Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its
behalf. Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, 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.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same
agency. However, a Certification from the Commission states that Pioneer does not have 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
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.

PHILAMCARE HEALTH SYSTEMS, INC. V. CA

DOCTRINE
 A health care agreement is in the nature of non-life insurance, w/c is primarily a contract of indemnity.
 Where matters of opinion are called for, answers made in good faith & w/o intent to deceive will not avoid a policy even though
they are untrue.
 Although 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.
 Concealment as a defense for the health care provided or insurer to avoid liability is an affirmative defense & the duty to establish
such defense by satisfactory & convincing evidence rests upon the provider or insurer; the liability of the health care provider
INSURANCE DIGEST – ATTY. YAMAMOTO
attaches once the member is hospitalized fro the disease or injury covered by the agreement or whenever he avails of the covered
benefits w/c he has prepaid.
 The right to rescind should be exercised previous to the commencement of an action on the contract.
 The rule that by reason of the exclusive control of the insurance company over the terms & phraseology of the insurance contract,
ambiguity must be strictly interpreted against the insurer & liberally in favour of the insured, especially to avoid forfeiture, is
equally applicable to Health Care Agreements.
 Since a health care agreement is in the nature of a contract of indemnity, payment should be made to the party who incurred the
expenses.

FACTS: In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health Systems, Inc. He was asked if he was
ever treated for high blood, heart trouble, diabetes, cancer, liver disease, asthma, or peptic ulcer; he answered no. His application was
approved and it was effective for one year. His coverage was subsequently renewed twice for one year each. While the coverage was
still in force in 1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the hospitalization amounted to
P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for the latter to pay the hospitalization cost. Philamcare
refused to pay as it alleged that Ernani failed to disclose the fact that he was diabetic, hypertensive, and asthmatic. Julita ended up
paying the hospital expenses. Ernani eventually died. In July 1990, Julita sued Philamcare for damages. Philamcare alleged that the
health coverage is not an insurance contract; that the concealment made by Ernani voided the agreement.

ISSUE: Whether or not Philamcare can avoid the health coverage agreement.

HELD: No. The health coverage agreement (health care agreement) entered upon by Ernani with Philamcare is a non-life insurance
contract and is covered by the Insurance Law. It is primarily a contract of indemnity. Once the member incurs hospital, medical or any
other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent
agreed upon under the contract. There is no concealment on the part of Ernani. He answered the question with good faith. He was not
a medical doctor hence his statement in answering the question asked of him when he was applying is an opinion rather than a fact.
Answers made in good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken the necessary steps to void the health coverage agreement
prior to the filing of the suit by Julita. Philamcare never gave notice to Julita of the fact that they are voiding the agreement. Therefore,
Philamcare should pay the expenses paid by Julita.

FORTUNE INSURANCE V. CA
DOCTRINE
 In burglary, robbery & theft insurance, the opportunity to defraud the insurer is so great that insurers have found it necessary to
fill up their policies w/ countless restrictions.
 It is settled that the terms of the policy constitute the measure of the insurer’s liability. In the absence of statutory prohibition to
the contrary, insurance companies have the same rights as individuals to limit their liability & to impose whatever conditions they
deem best upon their obligations not inconsistent w/ public policy

FACTS:
Producers Bank’s money was stolen while it was being transported from Pasay to Makati. The people guarding the money were
charged with the theft. The bank filed a claim for the amount of Php 725,000, and such was refused by the insurance corporation due
to the stipulation:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in report of
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee, partner, director, trustee or
authorized representative of the Insured whether acting alone or in conjunction with others. . . .
In the trial court, the bank claimed that the suspects were not any of the above mentioned. They won the case. The appellate
court affirmed on the basis that the bank had no power to hire or dismiss the guard and could only ask for replacements from the
security agency.

ISSUE: Whether or not the guards fall under the general exceptions clause of the insurance policy and thus absolved the insurance
company from liability?

HELD: Yes to both. Petition granted.

The insurance agency contended that the guards automatically became the authorized representatives of the bank when they
cited International Timber Corp. vs. NLRC where a contractor is a "labor-only" contractor in the sense that there is an employer-
employee relationship between the owner of the project and the employees of the "labor-only" contractor.
They cited Art. 106. Of the Labor Code which said:
Contractor or subcontractor. — There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited
INSURANCE DIGEST – ATTY. YAMAMOTO
and placed by such persons are performing activities which are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent ofthe employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly employed by him.
The bank asserted that the guards were not its employees since it had nothing to do with their selection and engagement, the payment
of their wages, their dismissal, and the control of their conduct.
They cited a case where an employee-employer relationship was governed by (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct.
The case was governed by Article 174 of the Insurance Code where it stated that casualty insurance awarded an amount to loss cause
by accident or mishap.
“The term "employee," should be read as a person who qualifies as such as generally and universally understood, or jurisprudentially
established in the light of the four standards in the determination of the employer-employee relationship, or as statutorily declared
even in a limited sense as in the case of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who supplied them to the employer.”
But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to safely transfer the money to its head
office, thus, they were representatives. According to the court, “a ‘representative’ is defined as one who represents or stands in the
place of another; one who represents others or another in a special capacity, as an agent, and is interchangeable with ‘agent.’”

ENRIQUEZ VS. SUNLIFE

DOCTRINE
 That the contract for a life annuity was not perfected because it had not been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant.
 An acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract.
Only the mailing of acceptance completes the contract of insurance, as the locus penitentiae is ended when the acceptance has
passed by the control of the party.

FACTS: Plaintiff is estate administrator for late Joaquin Herrer. Herrer has pending application with defendant Sun Life Assurance
Co (sun Life) evidenced by a provisional receipt. The provisional receipt reads payment of Php6, 000 for life annuity received 26
September 1917. The application was received by Sun Life head office a month after.

04 December 1917, the policy was issued in Montreal. A petition for withdrawal of application was filed by Herrer’s lawyer 18
December 1917. Herrer died 20 December. A letter from Sun Life was received 21 December stating policy was issued and reminds
the party of a notification of acceptance of the application dated 26 November.

Plaintiff testified that he had found no letter of notification from the Sun Life.

Lower Court decides in favor of respondent. Appeal was taken.

ISSUE: Whether or not the there has been a valid offer and acceptance??

HELD: None. The Civil Code provides that the acceptance made by letter binds the person making the offer only from the date it has
came to its knowledge. The contract of life annuity was not perfected. There was no satisfactory evidence that the
applicationacceptance came to the knowledge of Herrer.

Article 16 of the civil code provides that any deficiency in the special law shall be supplied by the Code. The Insurance Code does not
provide for law on the principle of acceptance, thus the Civil Code shall govern.

Article 1262 provides that consent is shown by concurrence of offer and acceptance with the thing and the consideration to the
contract. The acceptance by letter shall not bind the person making the offer except from the time It came to his knowledge.

American Courts held that acceptance of offer not actually communicated does not complete the contract but the mailing of the
acceptance. Locus Poenitrntiae is ended when acceptance has passed beyond party’s control.

Furthermore, the provisional receipt provides for conditions before a contract is deemed final. 1. Medical examination. 2. Approval
byhead office of the application. 3. the company communicates approval to the applicant.

In the case, there was no letter of notification. No evidence of knowledge. Judgment reversed. Php6000 with interest is to be returned.

GREAT PACIFIC LIFE ASS. CO. V. CA

INSURANCE DIGEST – ATTY. YAMAMOTO
DOCTRINE
 The binding receipt in question is merely an acknowledgement, on behalf of the company, that the latter’s branch office had
received from the applicant the insurance premium & had accepted the application subject for processing by the insurance
company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is “insurable on
standard rates.” Since Pacific life disapproved the insurance application of Hing, the binding deposit receipt in question had never
become in force at any time.

FACTS: On 14 March 1957, Ngo Hing filed an application with the Great Pacific Life Assurance Company fora 20-year endowment
policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go.Ngo Hing supplied the essential data which
Lapulapu D. Mondragon, Branch Manager of the Pacific Life inCebu City wrote on the corresponding form in his own handwriting .
Mondragon finally type-wrote the data on the application form which was signed by Ngo Hing. The latter paid the annual premium,
the sum ofP1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly
authorized agent of Pacific Life. Upon the payment of the insurance premium, the binding deposit receipt was issued to Ngo Hing.
Likewise, Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of
the insurance application. Then on 30 April 1957, Mondragon received a letter from Pacific Life disapproving the insurance
application. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below 7
years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the
Juvenile Non-Medical Declaration be sent to the Company. The non-acceptance of the insurance plan by Pacific Life was allegedly
not communicated by Mondragon to Ngo Hing. Instead, on 6 May 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment life insurance on the ground that Pacific Life is the only insurance company
not selling the 20- year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese,
were asking for such coverage. It was when things were in such state that on 28 May 1957 Helen Go died of influenza with
complication of broncho-pneumonia. Thereupon, Ngo Hing sought the payment of the proceeds of the insurance, but having failed in
his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu, which rendered a decision against
Pacific Life and Mondragon, orderig them to solidarily pay Ngo Hing the amount of P50,000.00 with interest at 6% from the date of
the filing of the complaint, and the sum of P10,000.00 as attorney's fees plus costs of suits. On appeal, the Court of Appeals set aside
the appealed decision of the Court of First Instance of Cebu, and absolved Pacific Life and Mondragon from liability on the insurance
policy, but ordered the reimbursement to Ngo Hing the amount of P1,077.75, without interest. On reconsideration, however, the
appellate court affirmed in toto the decision of the Court of First Instance of Cebu, ordering Pacific Life and Mondragon jointly and
severally to pay Ngo Hing. Two petitions for certiorari by way of appeal were filed by Pacific Life and Mondragon. The petitons were
consolidated by the Supreme Court in a resolution dated 29 April 1970.

ISSUE: Whether or not the binding deposit receipt constituted a temporary contract of the life insurance in question, and thus negate
the claim that the insurance contract was perfected.

HELD: YES. The provisions printed on the binding deposit receipt show that the binding deposit receipt is intended to be merely a
provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the company shall be
satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a
policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the
deposit shall be refunded; and (3) that if the applicant is not insurable according to the standard rates, and the company disapproves
the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant.
Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf
of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application
subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or
not the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of Ngo Hing, the binding
deposit receipt in question had never become in force at any time. Upon this premise, the binding deposit receipt is, manifestly, merely
conditional and does not insure outright. Where an agreement is made between the applicant and the agent, no liability shall attach
until the principal approves the risk and a receipt is given by the agent. The acceptance is merely conditional, and is subordinated to
the act of the company in approving or rejecting the application. Thus, in life insurance, a "binding slip" or "binding receipt" does not
insure by itself. It bears repeating that through the intra-company communication of 30 April 1957, Pacific Life disapproved the
insurance application in question on the ground that it is not offering the 20-year endowment insurance policy to children less than 7
years of age. What it offered instead is another plan known as the Juvenile Triple Action, which Ngo Hing failed to accept. In the
absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-year endowment life insurance in the amount of
P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the above quoted conditions stated in the
disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit
paid by Ngo Hing shall have to be refunded by Pacific Life.