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What May Be Insured (Sections 3-5) It should be close to conniving at fraud upon the insured to allow the insurer to claim now as void the
III. Parties to the Contract (Sections 6-9) policies it issued to the insured, without warning him of the fatal defect, of which the insurer was
informed, and after it had misled the insured into believing that the policies were effective.
1. Qua CheGan vs. Law Union Rock, 98 Phil. 85

Facts: Accdg to American Jurisprudence: It is a well-settled rule that the insurer at the time of the issuance of
a policy has the knowledge of existing facts, which if insisted on, would invalidate the contract from its
> Qua Chee Gan, a merchant, owned 4 warehouses in Albay which were used for the storage or copra very inception, such knowledge constitutes a waiver of conditions in the contract inconsistent with
and hemp in which the appelle deals with exclusively. known facts, and the insurer is stopped thereafter from asserting the breach of such conditions. The
reason for the rule is: To allow a company to accept one’s money for a policy of insurance which it
> The warehouses together with the contents were insured with Law Union since 1937 and the loss knows to be void and of no effect, though it knows as it must that the insured believes it to be valid and
made payable to PNB as mortgagee of the hemp and copra. binding is so contrary to the dictates of honesty and fair dealing, as so closely related to positive fraud,
as to be abhorrent to fair-minded men. It would be to allow the company to treat the policy as valid long
> A fire of undetermined cause broke out in July 21, 1940 and lasted for almost 1 whole week.
enough to get the premium on it, and leave it at liberty to repudiate it the next moment.
> Bodegas 1, 3, and 4 including the merchandise stored were destroyed completely.

> Insured then informed insurer of the unfortunate event and submitted the corresponding fire claims,
Moreover, taking into account the well-known rule that ambiguities or obscurities must strictly be
which were later reduced to P370T.
interpreted against the party that cause them, the memorandum of warranty invoked by the insurer bars
> Insurer refused to pay claiming violations of the warranties and conditions, filing of fraudulent claims the latter from questioning the existence of the appliances called for, since its initial expression “the
and that the fire had been deliberately caused by the insured. undernoted appliances for the extinction of fire being kept on the premises insured hereby..” admits of
the interpretation as an admission of the existence of such appliances which insurer cannot now
> Insured filed an action before CFI which rendered a decision in favor of the insured. contradict, should the parole evidence apply.

(2) Whether or not the insured violated the hemp warranty provision against the storage of gasoline
Issues and Resolutions: since insured admitted there were 36 cans of gasoline in Bodega 2 which was a separate structure and
not affected by the fire.
(1) Whether or not the policies should be avoided for the reason that there was a breach of warranty.

It is well to note that gasoline is not specifically mentioned among the prohibited articles listed in the so-
Under the Memorandum of Warranty, there should be no less than 1 hydrant for each 150 feet of called hemp warranty. The clause relied upon by the insurer speaks of “oils”. Ordinarily, oils mean
external wall measurements of the compound, and since bodegas insured had an external wall per lubricants and not gasoline or kerosene. Here again, by reason of the exclusive control of the insurance
meter of 1640 feet, the insured should have 11 hydrants in the compound. But he only had 2. company over the terms of the contract, the ambiguity must be held strictly against the insurer and
liberally in favor of the insured, specially to avoid a forfeiture.

Even so, the insurer is barred by estoppel to claim violation of the fire hydrants warranty, because
knowing that the number of hydrants it demanded never existed from the very beginning, appellant Furthermore, the gasoline kept was only incidental to the insured’s business. It is a well settled rule that
nevertheless issued the policies subject to such warranty and received the corresponding premiums. keeping of inflammable oils in the premises though prohibited by the policy does NOT void it if such
The insurance company was aware, even before the policies were issued, that in the premises there keeping is incidental to the business. Also, the hemp warranty forbade the storage only in the building
were only 2 hydrants and 2 others were owned by the Municipality, contrary to the requirements of the to which the insurance applies, and/or in any building communicating therewith; and it is undisputed that
warranties in question. no gasoline was stored in the burnt bodegas and that Bodega No. 2 which was where the gasoline was
found stood isolated from the other bodegas.

2. Ty vs. Filipinas Compaña de Seguros, 17 SCRA 364

G.R. No. L-2294 May 25, 1951
Lessons Applicable: Disqualification: Public Enemy (Insurance) 3. Del Rosario vs. Equitable Insurance, 118 Phil. 349
 October 1, 1941: Christern Huenefeld and co., inc. (Christern), a company whose major Equitable’s insurance policy covered indemnities for bodily injuries and deaths, however, it never
stockholders are German, paid P1M and obtained a fire policy fromFilipinas Cia. de Seguros specificed an amount to be given in case of a person’s death by drowning. It specified amounts from
(Filipinas) 1,000 to 3,000 for other causes of death, however.
 December 10, 1941: U.S. declared a war against Germany Francisico del Rosario died from drowning after jumping from a sinking ship. The insurer, Equitable,
 February 27, 1942 (during the japanese occupation): the building and insured merchandise were agreed to pay Php 1,000 as the claim for an accident. His attorney, howvever, contended that he
burned amount should be greater under section 2, Php 1500. The issue was resolved in the Insurance
 their claimed from Filipinas and the salvage goods were auctioned for P92,650 who refused since Commison, where it was held that Section 1, under the provisions applied. (Php 1,000 as indemnity)
Christen was organized under the Philippine laws, it was under American jurisdiction which is an The lawyer still didin’t agree and instituted a suit. The trail court held that the company had the
enemy of the Germans discretion to pay from Php 1,000 to 3,000 for death by drowning since there was no fixed amount for
 April 9, 1943: The Director of Bureau of Financing ordered Filipinas to pay the P92,650 to Christen this type of death. The amended decision ordered the company to pay Php 2,000
and it did.
 Filipinas filed with the CFI the P92,650 paid to Christern Issue: What should the amount be?
 CA affirmed CFI: dismissed the action
Held: Judgment affirmed. Still 2,000.
 Filed a petition for certiorari
ISSUE: W/N Christern is a public enemy and therefore ceased to be insured
The interpretation of obscure stipulations in a contract should not favor the party who cause the
HELD: YES. Ordered to pay Filipinas P77,208.33, Philippine currency, less the amount of the premium,
“Ambigious terms in a policy are to be construed strictly against, the insurer, and liberally in favor of the
in Philippine currency, that should be returned by the Filipinas for the unexpired term of the policy in
insured for the payment of indemnity where forfeiture is involved. The company takes great care in the
question, beginning December 11, 1941
wording and has legal advisers who create the contracts to the benefit of the company.
 Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except
Trial court ruling are well considered because they are supported by doctrines on insurance resolving
a public enemy may be insured
cases against the party who caused the ambiguity in the wording of the contract’s terms. This was also
 Effect of war, generally. — All intercourse between citizens of belligerent powers which is due to the fact that the insured didn’t have much of a say in formulating the contract.
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; all acts of voluntary submission to it; or receiving its protection; 4. Misamis Lumber vs. Capital Insurance, 123 Phil. 1077
also all acts concerning the transmission of money or goods; and all contracts relating thereto are Facts:
thereby nullified. It further prohibits insurance upon trade with or by the enemy, upon the life or Misamis Lumber Company insured its Ford Falcon to Capital Insurance for P 14,000. One day, the car’s
lives of aliens engaged in service with the enemy; this for the reason that the subjects of one crank and flywheelbroke when it passed over a water hole in Aurora Boulevard. Misamis sent it to be
country cannot be permitted to lend their assistance to protect by insurance the commerce or repaired at the cost of 302 pesos. However, Capital did not want to pay the entire amount because the
property of belligerent, alien subjects, or to do anything detrimental too their country's interest. The repair limit in the contract stipulated up to 150 pesos only. Misamis filed suit.
purpose of war is to cripple the power and exhaust the resources of the enemy, and it is The lower court ruled against the insurance corporation because the company did not show that the
inconsistent that one country should destroy its enemy's property and repay in insurance the value cost was excessive. Also , the court ruled that absolving the company of the excess amount would
of what has been so destroyed, or that it should in such manner increase the resources of the make the contract one sided.
enemy, or render it aid, and the commencement of war determines, for like reasons, all trading
intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, Issue: Is the insurance company liable for more than the amount in the repair limit?
who compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are
public enemies Held: No. Insurance company only ordered to pay 150 pesos.
 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 Ratio:
and the contractual rights of the parties, so far as not vested. Paragraph 4, subpar a. of the insurance contract is clear and specific. It authorizes up to 150 pesos only
 However, elementary rules of justice (in the absence of specific provision in the Insurance Law) as a repair limit.
require that the premium paid by the respondent for the period covered by its policy from The lower court did not heed the express stipulation in the agreement. The policy specifically noted the
December 11, 1941, should be returned by the petitioner mechanics for repair in par. 2 and the limits of the liability in par 4. The company didn’t notify

the insurance provider before it did the repairs. Also, even if the contract is onerous, this doesn’t justify  Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the
its abrogation. earthquake shock coverage. Thus, the policy extended earthquake shock coverage to all of the
insured properties.
5. Verendia vs. CA, 217 SCRA 1993  RTC: Favored American Home - endorsement rider means that only the two swimming pools were
G.R. No. 75605 January 22, 1993 insured against earthquake shock
 CA: affirmed RTC
Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against Insurer (Insurance) ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools

FACTS: HELD: YES. Affirmed.

 Rafael (Rex) Verendia's residential building was insured with Fidelity and Surety Insurance  It is basic that all the provisions of the insurance policy should be examined and interpreted in
Company, Country Bankers Insurance and Development Insurance with Monte de Piedad & consonance with each other.
Savings Bank as beneficiary  All its parts are reflective of the true intent of the parties.
 December 28, 1980 early morning: the building was completely destroyed by fire  An insurance premium is the consideration paid an insurer for undertaking to indemnify the
 Fidelity refused the claim stating that there was a misrepresentation since the lessee was insured against a specified peril.
not Roberto Garcia but Marcelo Garcia  In the subject policy, no premium payments were made with regard to earthquake shock
 trial court: favored Fidelity coverage, except on the two swimming pools.
 CA: reversed
ISSUE: W/N there was false declaration which would forfeit his benefits under Section 13 of the policy
7. WhiteGold vs. Pioneer Insurance, GR. No 154514, July 28, 2005
 Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual
under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and
declaration be made or used in support thereof, or if any fraudulent means or devises are used by Acceptance. Pioneer also issued receipts. When White Gold failed to fully pay its accounts, Steamship
the Insured or anyone acting in his behalf to obtain any benefit under the policy" Mutual refused to renew the coverage.
 Robert Garcia then executed an affidavit before the National Intelligence and Security Authority Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover
(NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the the unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission
contract of lease was a complete forgery. claiming that Steamship Mutual and Pioneer violated provisions of the Insurance Code.
 Worse yet, by presenting a false lease contract, Verendia, reprehensibly disregarded the principle The Insurance Commission dismissed the complaint. It said that there was no need for Steamship
that insurance contracts are uberrimae fidae and demand the most abundant good faith 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.
6. Gulf Resorts vs. Phil. Charter Insurance Corp., GR. No 156167, May16, 2005 The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision,
G.R. No. 156167 May 16, 2005 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.
Lessons Applicable: Stipulations Cannot Be Segregated (Insurance) Hence this petition by White Gold.

FACTS: 1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
 Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance Company which 2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
includes loss or damage to shock to any of the property insured by this Policy occasioned by or
through or in consequence of earthquake Held: Yes. Petition granted.
 July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and
2 swimming pools in its Agoo Playa Resort were damaged Ratio:
 August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only afforded White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To
earthquake shock coverage to the two swimming pools of the resort buttress its assertion, it cites the definition 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.”
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 EFFECTIVE DATE OF BENEFIT.
together to provide mutual protection against liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business? The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan
A P & I Club is “a form of insurance against third party liability, where the third party is anyone other with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is
than the P & I Club and the members.” By definition then, Steamship Mutual as a P & I Club is a mutual not approved by the Company.
insurance association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite xx
certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together
the Philippines to solicit insurance and to collect payments in its behalf. Steamship Mutual even with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of
renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue all insured lot purchasers. Eternal complied by submitting a letter dated December 29, 1982, containing
doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the a list of insurable balances of its lot buyers for October 1982. One of those included in the list as “new
Insurance Commission. business” was a certain John Chuang. His balance of payments was 100K. on August 2, 1984, Chuang
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no died.
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
Eternal sent a letter dated to Philamlife, which served as an insurance claim for Chuang’s death.
business by virtue of the certificate of authority issued by the same agency. However, a Certification
Attached to the claim were certain documents. In reply, Philamlife wrote Eternal a letter requiring
from the Commission states that Pioneer does not have a separate license to be an agent/broker of
Eternal to submit the additional documents relative to its insurance claim for Chuang’s death. Eternal
Steamship Mutual.
transmitted the required documents through a letter which was received by Philamlife.
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 After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance
commission or other compensation from any insurance company doing business in the Philippines or claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000.
any agent thereof, without first procuring a license so to act from the Commissioner… In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim in a letter a portion of
which reads:

8. Eternal Gardens Memorial Park Corp. vs. Philam, GR. No. 166245, April 9, 2008
FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy
with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the 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 deceased was 59 years old when he entered into Contract #9558 and 9529 with Eternal Gardens
The relevant provisions of the policy are: Memorial Park in October 1982 for the total maximum insurable amount of P100,000.00 each. No
application for Group Insurance was submitted in our office prior to his death on August 2, 1984


Eternal filed a case with the RTC for a sum of money against Philamlife, which decided in favor of
xx Eternal, ordering Philamlife to pay the former 100K representing the proceeds of the policy.

CA reversed. Hence this petition. damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but
deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the “incontestability clause”
ISSUE: WON Philamlife should pay the 100K insurance proceeds under the Insurance Code does not apply.

HELD: petition granted. Held: No. Petition dismissed.

YES Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It
An examination of the provision of the POLICY under effective date of benefit, would show ambiguity contended that there was no indemnification unlike in insurance contracts. It supported this claim by
between its two sentences. The first sentence appears to state that the insurance coverage of the saying that it is a health maintenance organization covered by the DOH and not the Insurance
clients of Eternal already became effective upon contracting a loan with Eternal while the second Commission. Lastly, it claimed that the Incontestability clause didn’t apply because two-year and not
sentence appears to require Philamlife to approve the insurance contract before the same can become one-year effectivity periods were required.
effective. Section 2 (1) of the Insurance Code defines a contract of insurance as “an agreement whereby one
It must be remembered that an insurance contract is a contract of adhesion which must be construed undertakes for a consideration to indemnify another against loss, damage or liability arising from an
liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest unknown or contingent event.”
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care agreement was in the
nature of non-life insurance, which is primarily a contract of indemnity. The provider must pay for the
medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated
On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a that:
party’s purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot “that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime
purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by relative to any information acquired by him in his professional capacity upon any question affecting the
disapproving the insurance application. The second sentence of the Creditor Group Life Policy on the eligibility for health care coverage of the Proposed Members.”
Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of This meant that the petitioners required him to sign authorization to furnish reports about his medical
the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not condition. The contractalso authorized Philam to inquire directly to his medical history.
work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The Hence, the contention of concealment isn’t valid.
termination of the insurance contract by the insurer must be explicit and unambiguous. They can’t also invoke the “Invalidation of agreement” clause where failure of the insured to disclose
information was a grounds for revocation simply because the answer assailed by the company was the
heart condition question based on the insured’s opinion. He wasn’t a medical doctor, so he can’t
accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated
9. Philamcare Health Systems, Inc. V. Court Of Appeals AndJulitaTrinos G.R. No. 125678. to make further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
March 18, 2002. “Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the
Facts: extent agreed upon. In the end, the liability of the health care provider attaches once the member is
hospitalized for the disease or injury covered by the agreement or whenever he avails of
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he the covered benefits which he has prepaid.”
or his family members were treated to heart trouble, asthma, diabetes, etc. Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of
The application was approved for 1 year. He was also given hospitalization benefits and out-patient insurance.”
benefits. After the period expired, he was given an expanded coverage for Php 75,000. During the As to cancellation procedure- Cancellation requires certain conditions:
period, he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but 1. Prior notice of cancellation to insured;
the petitioner denied it saying that he concealed his medical history by answering no to the 2. Notice must be based on the occurrence after effective date of the policy of one or more of the
aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband grounds mentioned;
subsequently passed away. She filed a case in the trial court for the collection of the amount plus 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 For the purpose of determining what "doing an insurance business" means, we have to scrutinize the
request of insured, to furnish facts on which cancellation is based operations of the business as a whole. This is of course only prudent and appropriate, taking
None were fulfilled by the provider. into account laws applicable to those in the insurance business.
As to incontestability- The trial court said that “under the title Claim procedures of expenses, the Petitioner, as an HMO, is not part of the insurance industry. This is evident from the fact that it is not
defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the supervised by the Insurance Commission but by the Department of Health. In fact, in a letter dated
Agreement within which to contest the membershipof the patient if he had previous ailment of asthma, September 3, 2000, the Insurance Commissioner confirmed that petitioner is not engaged in the
and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. insurance business.
The periods having expired, the defense of concealment or misrepresentation no longer lie.” As to whether the business is covered by the DST, we can see that while the contract did contains all
the elements of an insurance contract, as stated in Sec 2., Par 1 of the Insurance Code, the primary
purpose of the company is to render service. The primary purpose of the parties in making the contract
10. Phil. Healthcare Insurance Providers vs. CIR, G.R. No. 167330, Sept. 18, 2009 may negate the existence of an insurance contract.
Facts: Also, 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
Philippine Health Care’s objectives were: in exchange for the hospital, medical and professional services rendered by the petitioner’s physician
"[t]o establish, maintain, conduct and operate a prepaid group practice health care delivery system or a or affiliated physician to him.
health maintenance organization to take care of the sick and disabled persons enrolled in the In other words, there is nothing in petitioner's agreements that gives rise to a monetary liability on the
health care plan and to provide for the administrative, legal, and financial responsibilities of the part of the member to any third party-provider of medical services which might in turn necessitate
organization.” indemnification from petitioner. The terms "indemnify" or "indemnity" presume that a liability or claim has
It lost the case in 2004 when it was made to pay over 100 million in VAT deficiencies. At the time the already been incurred. There is no indemnity precisely because the member merely avails of medical
MFR was filed, it was able to avail of tax amnesty under RA 9840 by paying 5 percent of the tax or 5 services to be paid or already paid in advance at a pre-agreed price under the agreements.
million pesos. Also, a member can take advantage of the bulk of the benefits anytime, e.g. laboratory services, x-ray,
Petitioner passed an MFR but the CA denied. Hence, this case. 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.
Issue: Petitioner is obliged to reimburse the member who receives care from a non-participating physician or
Was petitioner, as an HMO, engaged in the business of insurance during the pertinent taxable years, hospital. However, this is only a very minor part of the list of services available. The assumption of the
and was thus liable for DST? expense by petitioner is not confined to the happening of a contingency but includes incidents even in
the absence of illness or injury.
Held: No. Mfr granted. CIR must desist from collecting tax. Consequently, there is a need to distinguish prepaid service contracts (like those of petitioner) from the
usual insurance contracts.
Ratio: However, assuming that petitioner’s commitment to provide medical services to its members can be
Section 185 of the NIRC . Stamp tax on fidelity bonds and other insurance policies. – On all policies of construed as an acceptance of the risk that it will shell out more than the prepaid fees, it still will not
insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or qualify as an insurance contract because petitioner’s objective is to provide medical services at reduced
renewed by any person, association or company or corporation transacting the business of accident, cost, not to distribute risk like an insurer.
fidelity, employer’s liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other If it had been the intent of the legislature to impose DST on health care agreements, it could have done
branch of insurance (except life, marine, inland, and fire insurance). so in clear and categorical terms. It had many opportunities to do so. But it did not. The fact that the
Two requisites must concur before the DST can apply, namely: (1) the document must be a policy of NIRC contained no specific provision on the DST liability of health care agreements of HMOs at a time
insurance or an obligation in the nature of indemnity and (2) the maker should be transacting the they were already known as such, belies any legislative intent to impose it on them. As a matter of fact,
business of accident, fidelity, employer’s liability, plate, glass, steam boiler, burglar, elevator, automatic petitioner was assessed its DST liability only on January 27, 2000, after more than a decade in the
sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance). business as an HMO.
Under RA 7875, an HMO is "an entity that provides, offers or arranges for coverage of designated In view of petitioner’s availment of the benefits of [RA 9840], and without conceding the merits of this
health services needed by plan members for a fixed prepaid premium." case as discussed above, respondent concedes that such tax amnesty extinguishes the tax liabilities of
Various courts in the United States have determined that HMOs are not in the insurance business. One petitioner.
test that they have applied is whether the assumption of risk and indemnification of loss are the principal 21 Our Insurance Code was based on California and New York laws. When a statute has been adopted
object and purpose of the organization or whether they are merely incidental to its business. If these are from some other state or country and said statute has previously been construed by the courts of such
the principal objectives, the business is that of insurance. But if such is incidental and service is the state or country, the statute is deemed to have been adopted with the construction given.
principal purpose, then the business is not insurance.
Applying the "principal object and purpose test," there is significant American case law supporting the
argument that a corporation, whose main object is to provide the members of a group with health 11. Filipinas Compana De Seguros vs. Christern, Huenefeld and Co. Inc., GR. No L-2294, May 25,
services, is not engaged in the insurance business. 1951

FACTS:  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.
Christern, Huenefeld and Company, a German company, obtained a fire insurance policy from Filipinas  After the first premium, no further premiums were paid. The insured died on September 22, 1944.
Compañia for the merchandise contained in a building located in Binondo, Manila in the sum of  Asia Life Insurance Company, being an American Corp., had to close its branch office in Manila by
P100,000. Filipinas Compañia is an American controlled company. The building and the insured reason of the Japanese occupation, i.e. from January 2, 1942, until the year 1945.
merchandise were burned during the Japanese occupation. Christern filed its claim amounting to  Case 2:
P92,650.00 but Filipinas Compañia refused to pay alleging that Christern is a corporation whose  Spouses Tomas Ruiz and Agustina Peralta. Their premium were initially annually but
majority stockholders are Germans and that during the Japanese occupation, America declared war subsequently changed to quarterly. The last quarterly premium was delivered on on November
against Germany hence the insurance policy ceased to be effective because the insured has become 18, 1941 and it covered the period until January 31, 1942.
an enemy. Filipinas Compañia was eventually ordered to pay Christern as ordered by the Japanese  Upon the Japanese occupation, the insurer and insured were not able to deal with each other
government.  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.
ISSUE:  Plaintiffs: As beneficiaries, they are entitled to receive the proceeds of the policies minus all sums
due for premiums in arrears. The non-payment of the premiums was caused by the closing of
Asia's offices in Manila during the Japanese occupation and the impossible circumstances created
by war.
Whether or not Christern, Huenefeld and Co is entitled to receive the proceeds from the insurance
claim.  lower court: absolved Asia
ISSUE: W/N the insurers still have a right to claim.

HELD: HELD: YES. lower court affirmed.

 it would seem that pursuant to the express terms of the policy, non-payment of premium produces
its avoidance
NO. There is no question that majority of the stockholders of Christern were German subjects. This  Forfeitures of insurance policies are not favored, but courts cannot for that reason alone refuse to
being so, Christern became an enemy corporation upon the outbreak of the war between the United enforce an insurance contract according to its meaning.
States and Germany. The Philippine Insurance Law (Act No. 2427, as amended,) in Section 8, provides  Nevertheless, inasmuch as the non-payment of premium was the consequence of war, it should
that “anyone except a public enemy may be insured.” It stands to reason that an insurance policy be excused and should not cause the forfeiture of the policy
ceases to be allowable as soon as an insured becomes a public enemy.  3 Rules in case of war:
 Connecticut Rule
 2 elements in the consideration for which the annual premium is paid:
The respondent having become an enemy corporation on December 10, 1941, the insurance policy  mere protection for the year
issued in its favor on October 1, 1941, by the petitioner had ceased to be valid and enforceable, and  privilege of renewing the contract for each succeeding year by paying the premium for that year at
since the insured goods were burned after December 10, 1941, and during the war, the respondent was the time agreed upon
not entitled to any indemnity under said policy from the petitioner. However, elementary rules of justice  payment of premiums is a condition precedent, the non-performance would be illegal necessarily
(in the absence of specific provision in the Insurance Law) require that the premium paid by the defeats the right to renew the contract
respondent for the period covered by its policy from December 11, 1941, should be returned by the  New York Rule - greatly followed by a number of cases
petitioner  war between states in which the parties reside merely suspends the contracts of the life insurance,
and that, upon tender of all premiums due by the insured or his representatives after the war has
terminated, the contract revives and becomes fully operative
 United States Rule
 contract is not merely suspended, but is abrogated by reason of non-payments is peculiarly of the
12. Constantino vs. Asia Life Insurance Co., G.R. No. 1669, August 31, 1950 essence of the contract
FACTS:  it would be unjust to allow the insurer to retain the reserve value of the policy, which is the excess
of the premiums paid over the actual risk carried during the years when the policy had been in
 Case 1: force
 The business of insurance is founded on the law of average; that of life insurance eminently so of Appeals affirmed the trial court’s judgment, Grepalife was held liable to pay the proceeds of
 contract of insurance is sui generis insurance contract in favor of DBP, the indispensable party who was not joined in the suit.
 Whether the insured will continue it or not is optional with him. There being no obligation to pay for The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance,
the premium, they did not constitute a debt. the policy stating that: “In the event of the debtor’s death before his indebtedness with the Creditor
 It should be noted that the parties contracted not only for peacetime conditions but also for times [DBP] shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to
of war, because the policies contained provisions applicable expressly to wartime days. The the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies
logical inference, therefore, is that the parties contemplated uninterrupted operation of the contract designated by the debtor.” When DBP’s claim was denied, it collected the debt from the mortgagor and
even if armed conflict should ensue. took the necessary action of foreclosure on the residential lot of private respondent.
 the fundamental character of the undertaking to pay premiums and the high importance of the Gonzales vs. Yek Tong Lin- Insured, being the person with whom the contract was made, is primarily
defense of non-payment thereof, was specifically recognized the proper person to bring suit thereon. Insured may thus sue, although the policy is taken wholly or in
 adopt the United States Rule: first policy had no reserve value, and that the equitable values of the part for the benefit of another person named or unnamed, and although it is expressly made payable to
second had been practically returned to the insured in the form of loan and advance for premium 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 mortgagee’s interest is less than the full amount recoverable under the
13. Great Pacific Life Assurance Corp. vs. Court of Appeals, G.R. No. 113899, October 13, 1999 policy. 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.
Facts: And since a policy of insurance upon life or health may pass by transfer, will or succession to any
A contract of group life insurance was executed between petitioner Great Pacific and Development person, whether he has an insurable interest or not, and such person may recover it whatever the
Bank Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. insured might have recovered,[14] the widow of the decedent Dr. Leuterio may file the suit against the
Wilfredo Leuterio, a physician and a housing debtor of DBP, applied for membership in the group life insurer, Grepalife.
insurance plan. In an application form, Dr. Leuterio answered questions concerning his health condition 2. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body
as follows: of the decedent. The medical certificate stated that hypertension was “the possible cause of death.”
“7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure, cancer, Hence, the statement of the physician was properly considered by the trial court as hearsay.
diabetes, lung, kidney or stomach disorder or any other physical impairment? Contrary to appellant’s allegations, there was no sufficient proof that the insured had suffered from
8. Are you now, to the best of your knowledge, in good health?” hypertension. Aside from the statement of the insured’s widow who was not even sure if the medicines
Grepalife issued a coverage to the value of P86,200.00 pesos. taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced any witness
Dr. Leuterio died due to “massive cerebral hemorrhage.” DBP submitted a death claim to Grepalife. who could attest to Dr. Leuterio’s medical history.
Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy when he applied for an Appellant insurance company had failed to establish that there was concealment made by the insured,
insurance coverage. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hence, it cannot refuse payment of the claim.”
hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind
justified the denial of the claim. the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and
The widow, respondent Medarda V. Leuterio, filed against Grepalife. the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer.
The trial court rendered a decision in favor of respondent widow and against Grepalife. The Court 3. A life insurance policy is a valued policy. Unless the interest of a person insured is susceptible of
of Appeals sustained the trial court’s decision. exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health
is the sum fixed in the policy. The mortgagor paid the premium according to the coverage of his
Issues: insurance.
1. Whether the Court of Appeals erred in holding petitioner liable to DBP as beneficiary in a group life In the event of the debtor’s death before his indebtedness with the creditor shall have been fully paid,
insurance contract from a complaint filed by the widow of the decedent/mortgagor? an amount to pay the outstanding indebtedness shall first be paid to the creditor.
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio concealed that he had DBP foreclosed one of the deceased person’s lots to satisfy the mortgage. Hence, the insurance
hypertension, which would vitiate the insurance contract? proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries.
3. Whether the Court of Appeals erred in holding Grepalife liable in the amount of eighty six thousand,
two hundred (P86,200.00) pesos without proof of the actual outstanding mortgage payable by the
mortgagor to DBP. 14. Geagonia v. CA, G.R. No. 114427 February 6, 1995
Held: No to all three. Petition dismissed.
Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The
Ratio: 1 year policy and covered thestock trading of dry goods.
1. Petitioner alleges that the complaint was instituted by the widow of Dr. Leuterio, not the real party in The policy noted the requirement that
interest, hence the trial court acquired no jurisdiction over the case. It argues that when the Court
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in
which may subsequently be effected, covering any of the property or properties consisting of stocks in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property
trade, goods in process and/or inventories only hereby insured, and unless notice be given and the owner obtains insurance policies from two or more insurers in a total amount that exceeds the
particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to property's value, the insured may have an inducement to destroy the property for the purpose of
Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or collecting the insurance. The public as well as the insurer is interested in preventing a situation in which
damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition a fire would be profitable to the insured.
shall not apply when the total insurance or insurances in force at the time of the loss or damage is not
more than P200,000.00." PALILEO V COSIO 1995
The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied
because the petitioner’s stocks were covered by two other fire insurance policies for Php 200,000 FACTS:
issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of
Condition 3 of the policy.  Cherie Palileo (debtor-mortgagor) filed a complaint against Beatriz Cosio (creditor-mortgagee)
Geagonia then filed a complaint against the private respondent in the Insurance Commission for the praying that their transaction be one of a loan with an equitable mortgage to secure the payment
recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the of the loan. The original counsel of Cosio Atty. Guerrero being appointed Undersecretary of
existence of the other two policies. But, he said that he had no knowledge of the provision in the private Foreign Affairs so she forgot the date of the trial and she was substituted.
respondent's policy requiring him to inform it of the prior policies and this requirement was not  it is a loan of P12,000 secured by a "Conditional Sale of Residential Building" with right to
mentioned to him by the private respondent's agent. repurchase. After the execution of the contract, Cosio insured in her name the building
The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge with Associated Insurance & Surety Co. against fire.
of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing  The building was partly destroyed by fire so she claimed an indemnity of P13,107
Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu  Palileo demanded that the amount of insurance proceeds be credited to her loan
Tesing Textile, as his creditor, had insurable interest on the stocks.  RTC: it is a loan with equitable mortgage so the insurance proceeds should be credited to the loan
The Insurance Commission then ordered the respondent company to pay complainant the sum of and refund the overpayment.
P100,000.00 with interest and attorney’s fees. ISSUE: W/N Cosio as mortgagee is entitled to the insurance proceeds for her own benefit
CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the
existence of the two other policies issued by the PFIC.
HELD: YES. Modify. collection of insurance proceeds shall not be deemed to have compensated the
Issues: obligation of the Palileo to Cosio, but bars the Cosio from claiming its payment from the Palileo; and
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance Cosio shall pay to Palileo P810 representing the overpayment made by Palileo by way of interest on the
and thereby violated Condition 3 of the policy. loan.
2. WON he is prohibited from recovering
 When the the mortgagee may insure his interest in the property independently of the mortgagor ,
upon the destruction of the property the insurance money paid to the mortgagee will not inure to
Held: Yes. No. Petition Granted
the benefit of the mortgagor, and the amount due under the mortgage debt remains unchanged.
The mortgagee, however, is not allowed to retain his claim against the mortgagor, but it passes by
subrogation to the insurer, to the extent of the insurance money paid
1. The court agreed with the CA that the petitioner knew of the prior policies issued by the PFIC. His
letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to
 It is true that there are authorities which hold that "If a mortgagee procures insurance on his
separate interest at his own expense and for his own benefit, without any agreement with the
the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a
mortgagor with respect thereto, the mortgagor has no interest in the policy, and is not entitled to
written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior
have the insurance proceeds applied in reduction of the mortgage debt" But these authorities
policies since these policies were not new or original.
merely represent the minority view
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of
insurance policies should be construed most strictly against those for whose benefits they are inserted,
and most favorably toward those against whom they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and
must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only
to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00
of the total policies obtained.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance
in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to
assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to