WEEK 8
LIFE INSURANCE
Sec. 177. The surety is entitled to payment of the premium
as soon as the contract of suretyship or bond is perfected and
delivered to the obligor. No contract of suretyship or
bonding shall be valid and binding unless and until the
premium therefor has been paid, except where the obligee
has accepted the bond, in which case the bond becomes valid
and enforceable irrespective of whether or not the premium
has been paid by the obligor to the surety: Provided, That if
the contract of suretyship or bond is not accepted by, or filed
with the obligee, the surety shall collect only reasonable
amount, not exceeding fifty per centum of the premium due
thereon as service fee plus the cost of stamps or other taxes
imposed for the issuance of the contract or bond: Provided,
however, That if the non-acceptance of the bond be due to
the fault or negligence of the surety, no such service fee,
stamps or taxes shall be collected.
In the case of a continuing bond, the obligor shall pay the
subsequent annual premium as it falls due until the contract
of suretyship is cancelled by the obligee or by the
Commissioner or by a court of competent jurisdiction, as the
case may be. chanrobles virtual law library
Sec. 178. Pertinent provisions of the Civil Code of the
Philippines shall be applied in a suppletory character
whenever necessary in interpreting the provisions of a
contract of suretyship.
Title 5
Sec. 179. Life insurance is insurance on human lives and
insurance appertaining thereto or connected therewith.
Sec. 180. An insurance upon life may be made payable on the
death of the person, or on his surviving a specified period, or
otherwise contingently on the continuance or cessation of
life.
Every contract or pledge for the payment of endowments or
annuities shall be considered a life insurance contract for
purpose of this Code.
In the absence of a judicial guardian, the father, or in the
latter's absence or incapacity, the mother, or any minor, who
is an insured or a beneficiary under a contract of life, health
or accident insurance, may exercise, in behalf of said minor,
any right under the policy, without necessity of court
authority or the giving of a bond, where the interest of the
minor in the particular act involved does not exceed twenty
thousand pesos. Such right may include, but shall not be
limited to, obtaining a policy loan, surrendering the policy,
receiving the proceeds of the policy, and giving the minor's
consent to any transaction on the policy.
Sec. 180-A. The insurer in a life insurance contract shall be
liable in case of suicides only when it is committed after the
policy has been in force for a period of two years from the
date of its issue or of its last reinstatement, unless the policy
provides a shorter period: Provided, however, That suicide
committed in the state of insanity shall be compensable
regardless of the date of commission.
National Power Corporation v CA, GR L-43706, 14 November
1986
DOCTRINE: Insurance; Liability of surety bond; The 30- day
notice requirement in the surety bond as a condition to hold the
surety liable under the bond applies to the completion of the
work by the contractor, not when the contractor failed to
complete the construction work.—As correctly assessed by the
trial court, the evidence on record shows that as early as May 30,
1963, Philamgen was duly informed of the failure of its principal
to comply with its undertaking. In fact, said notice of failure was
also signed by its Assistant Vice President. On July 19, 1963,
when FEEI informed NPC that it was abandoning the
construction job, the latter forthwith informed Philamgen of the
fact on the same date. Moreover, on August 1, 1963, the fact that
Philamgen was seasonably notified, was even bolstered by its
request from NPC for information of the percentage completed
by the bond principal prior to the relinquishment of the job to
the latter and the reason for said relinquishment. (Record on
Appeal, pp. 193–195). The 30-day notice adverted to in the
surety bond applies to the completion of the work by the
contractor. This completion by the contractor never
materialized.
FACTS: On August 4, 1964, ECI being a successful bidder,
executed a contract in Manila with the National Waterworks and
Sewerage Authority (NAWASA) to furnish all the tools, labor,
equipment, and materials (not furnished by the owner) and to
construct the proposed 2nd Ipo-Bicti Tunnel at Norzaragay,
Bulacan within 800 calendar days. The tunnel would be passing
through the mountain, from the Ipo river, a part of Norzaragay
where the Ipo Dam of NPC is located. By September 1967, ECI
already completed the tunnel excavation work. All the
equipment not needed at the Bicti site were then transferred to
the Ipo site, where some projects were not yet completed. On
November 4, 1967, typhoon “Welming” hit Central Luzon,
passing through NCP’s Angat Hydro-electric project and Dam
at Ipo, Norzaragay, Bulacan. Due to the heavy downpour, the
water in the reservoir of the Angat Dam, was rising perilously at
the rate of 60 cm per hour. To prevent an overflow of water from
the dam since the water level has reached danger heights, the
NPC caused the opening of the spillway gates. ECI filed a case
against NPC. The trial court established the fact that due to the
negligent manner with which the spillway gates of the dam were
opened, an extraordinary large volume of water rushed out of the
gates, and hit the installations and constructions of ECI at the
Ipo Site, as a result, of which the latter's stockpile of materials
and supplies, camp facilities and permanent structures and
accessories were washed away, lost or destroyed. CA sustained
the factual findings of the trial court (“[NPC] knew of the
coming of the typhoon four days before it actually hit the project
area.") but modified the damages awarded. NPC assailed the CA
decision as being erroneous on the ground that the destruction
and loss of ECI's equipment and facilities were due to force
majeure. It argues that the rapid Insurance rise of the water level
in the reservoir of its Angat Dam due to heavy rains brought
about by the typhoon was an extraordinary occurrence that could
not have been foreseen.
ISSUE: WON the destruction and loss of the ECI's equipment is in business to make profit and charges a premium depending
and facilities were due to force majeure. upon the amount of guaranty and the risk involved. Second, the
corporate surety, like an insurance company, prepares the
RULING: No. NPC was undoubtedly negligent because it
instrument, which is a type of contract of adhesion, whereas the
opened the spillway gates of the Angat Dam only at the height
private surety usually does not prepare the note or bond which
of typhoon "Welming" when it knew very well that it was safer
he signs. Third, the obligation of the private surety is often
to have opened the same gradually and earlier, as it was also
assumed on the basis of the debtor’s representations and without
undeniable that NPC knew of the coming typhoon at least four
legal advice, while the corporate surety does not bind itself until
days before it actually struck. Even though the typhoon was an
a full investigation has been made. In the case of the corporate
act of God or force majeure, NPC cannot escape liability because
surety, the rule of strictissimi juris is not applicable, and courts
its negligence was the proximate cause of the loss and damage
apply the rules of interpretation appertaining to contracts of
(Nakpil and Sons).
insurance. - Nature of surety’s obligation on administrator’s
Leyson v Rizal Surety, GR No. L-21250, 31 March 1966 bond. —The nature of a surety’s obligation on an administrator’s
bond makes him privy to the proceedings against his principal.
DOCTRINE: Suretyship; When bond may cover violations of As such he is bound and concluded, in the absence of collusion,
trust committed before its filing.—Although the bond (approved by a judgment against his principal, even though the surety was
by the court on June 27, 1952) does not specify the date when it not a party to the proceedings.
shall take effect, the fact is that both in its order requiring the
filing of increased bond and in its subsequent order approving it,
the court made it plain that the bond would answer “for the
FACTS: The Rizal Surety & Insurance Co. brings this appeal
faithful execution of his (administrator’s) trust as of the date of
from an order of the Court of First Instance of Manila which
his appointment.” Since the administrator was appointed on
declared it liable for P6,051.57 on its bond it had given in behalf
December 8, 1947, his bond must be understood to have taken
of Victorio L. Rodriguez. Rodriguez was the administrator of the
effect. - Construction.— A suretyship contained in a form
estate of Honofre Leyson. On December 27, 1951, the Manila
prepared by the surety must be construed against the surety and
Court of First Instance, in which the estate was at the time
in favor of the promisee. - Accommodation and compensated
pending settlement, ordered Rodriguez relieved of his trust after
sureties, distinguished. — Corporate surety differs significantly
finding him guilty of maladministration. As Rodriguez appealed
from an individual private surety. First, unlike the private surety,
the order of relief, the court, as a measure of “protection of this
the corporate surety signs for cash and not for friendship. The
estate,” required him to file an increased bond of P10.000 (which
private surety is regarded as someone doing a rather foolish act
then was P500 only) to answer for “the faithful execution of his
for praiseworthy motives; the corporate surety, to the contrary,
trust as of the date of his appointment.” Required to account for
the period June 27, 1951 to August 30, 1954, Rodriguez was
found short of P6,248.22. (The amount of shortage was later
found by final judgment of the Court of Appeals to be
P6,051.57.) Despite several deadlines given to him, Rodriguez
failed to pay the money in court, for which reason he was
ordered arrested and declared in contempt. On November 8,
1962, the Court, acting on motion of the new administratrix,
ordered the confiscation of Rodriguez’ bond for the satisfaction
of the amount of P6,051.57. It is from this order that the surety
company appeals. It is first of all contended that appellant cannot
be held liable on its bond because the defalcations, for which the
bond was ordered forfeited, were committed by the principal
before the bond was filed. The rule is invoked that a contract of
suretyship must be strictly construed and since the contract in
this case contains no provision making it expressly retroactive,
the point is made that the bond cannot cover violations of trust
by the administrator before the filing of that bond.
ISSUES:
1. WON is there any merit in the claim that the bond was
confiscated without giving the appellant a chance to be heard on
“the reality and reasonableness of the damages.”
2. WON the surety is liable to the extent of P6,051.57, which
amount was found due from the said former administrator.
RULING: No. the record shows that the surety was given an
opportunity to be heard. 2. Yes. It has already been held that the
nature of a surety’s obligation on an administrator’s bond, which
makes him privy to the proceedings against his principal, is such
that he is bound and concluded, in the absence of fraud or
collusion, by a judgment against his principal, even though the
surety was not a party to the proceedings.
Philippine Pryce Assurance v. CA, GR No. 107062, 21 February
1994 DOCTRINE: Insurance; Surety bonds; Where obligee has
accepted the surety bond, it becomes valid and enforceable
irrespective of whether or not the premium has been paid by the
obligor to the surety.—Finally, there is reason to believe that
petitioner does not really have a good defense. Petitioner hinges
its defense on two arguments, namely: a) that the checks issued
by its principal which were supposed to pay for the premiums,
bounced, hence there is no contract of surety to speak of; and 2)
that as early as 1986 and covering the time of the Surety Bond,
Interworld Assurance Company (now Phil. Pryce) was not yet
authorized by the Insurance Commission to issue such bonds.
The Insurance Code states that: “SECTION 177. The surety is
entitled to payment of the premium as soon as the contract of
suretyship or bond is perfected and delivered to the obligor. No
contract of suretyship or bonding shall be valid and binding
unless and until the premium therefor has been paid, except
where the obligee has accepted the bond, in which case the bond
becomes valid and enforceable irrespective of whether or not the
premium has been paid by the obligor to the surety. x x x”
(emphasis added) The above provision outrightly negates
petitioner’s first defense. In a desperate attempt to escape
liability, petitioner further asserts that the above provision is not
applicable because the respondent allegedly had not accepted the
surety bond, hence could not have delivered the goods to Sagum
Enterprises. This statement clearly intends to muddle the facts
as found by the trial court and which are on record.
FACTS: Petitioner, Interworld Assurance Corporation (now
Philippine Pryce Assurance Corporation), was sued for
collection of sum of money by respondent Gegroco, Inc. The
complaint alleged that Pryce issued two surety bonds in behalf
of its principal Sagum General Merchandise for P500,000.00
and P1,000,000.00 respectively. Pryce admitted having executed
the said bonds, but denied liability because allegedly 1) the
checks which were to pay for the premiums bounced and were
dishonored hence there is no contract to speak of between Pryce
and its supposed principal Sagum; and 2) the bonds were merely
to guarantee payment of its principal's obligation, thus, there is
a benefit of excussion (a right under Art. 2066 which only a
guarantor may invoke against the creditor wherein the guarantor
will point out to the creditor all the debtor’s properties in the
Philippines sufficient to cover amount of debt). After the issues
had been joined, the case was set for pre-trial conference. Pryce
failed to appear during the pre-trial that was reset 3 times
because of the non-appearance of Pryce and/or its counsel during
the scheduled pre-trials. He also failed to pay the docket fees for
the Third-Party Complaint it filed against his principal Sagum.
Pryce was considered as in default and respondent was allowed
to present evidence ex-parte. RTC ruled in favor of respondent
Gregoco. CA affirmed the RTC ruling.
ISSUE: Whether or not there was a contract of suretyship
between Pryce and its principal Sagum which makes Pryce
solidarily liable to Gregoco.
RULING: YES. The Supreme Court We did find any reversible
error in the conclusion reached by the court a quo. The Insurance
Code states that: Insurance Case Digests: Suretyship 3B; A.Y.
2018-2019 Page 5 of 8 Sec. 177. The surety is entitled to
payment of the premium as soon as the contract of suretyship or
bond is perfected and delivered to the obligor. No contract of
suretyship or bonding shall be valid and binding unless and until
the premium therefor has been paid, except where the obligee
has accepted the bond, in which case the bond becomes valid
and enforceable irrespective of whether or not the premium has
been paid by the obligor to the surety. . . The above provision
outrightly negates petitioner's first defense. In a desperate
attempt to escape liability, petitioner further asserts that the
above provision is not applicable because the respondent
allegedly had not accepted the surety bond, hence could not have
delivered the goods to Sagum Enterprises. This statement clearly
intends to muddle the facts as found by the trial court and which
are on record. Likewise attached to the record are exhibits
consisting of delivery invoices addressed to Sagum General
Merchandise proving that parts were purchased, delivered and
received. On the other hand, petitioner's defense that it did not
have authority to issue a Surety Bond when it did is an admission
of fraud committed against respondent. No person can claim
benefit from the wrong he himself committed. A representation
made is rendered conclusive upon the person making it and
cannot be denied or disproved as against the person relying
thereon. The petition has been dismissed for lack of merit.
AFP General Insurance vs Molina, GR No. 151133, 30 June
2008 DOCTRINE: Contracts; Suretyship; Bonds; A surety
bond, once accepted by the obligee becomes valid and
enforceable, irrespective of whether or not the premium has been
paid by the obligor.—The Insurance Code supports the private
respondents’ arguments. The petitioner’s reliance on Sections 64
and 77 of the Insurance Code is misplaced. The said provisions
refer to insurance contracts in general. The instant case pertains
to a surety bond; thus, the applicable provision of the Insurance
Code is Section 177, which specifically governs suretyship. It
provides that a surety bond, once accepted by the obligee
becomes valid and enforceable, irrespective of whether or not
the premium has been paid by the obligor. The private
respondents, the obligees here, accepted the bond posted by
Radon Security and issued by the petitioner. Hence, the bond is
both valid and enforceable. A verbis legis non est recedendum
(from the language of the law there must be no departure).
FACTS: The private respondents are the complainants in a case
for illegal dismissal, docketed as NLRC NCR Case No. 02-
00672-90, filed against Radon Security & Allied Services
Agency and/or Raquel Aquias and Ever Emporium, Inc. In his
Decision dated August 20, 1996, the Labor Arbiter ruled that the
private respondents were illegally dismissed and ordered Radon
Security to pay them separation pay, backwages, and other
monetary claims. Radon Security appealed the Labor Arbiter’s
decision to public respondent NLRC and posted a supersedeas
bond, issued by herein petitioner AFPGIC as surety. On April 6,
1998, the NLRC affirmed with modification the decision of the
Labor Arbiter. The NLRC found the herein private respondents
constructively dismissed and ordered Radon Security to pay
them their separation pay, in lieu of reinstatement with
backwages, as well as their monetary benefits limited to three
years, plus attorney’s fees equivalent to 10% of the entire
amount, with Radon Security and Ever Emporium, Inc. adjudged
jointly and severally liable. Radon Security duly moved for
reconsideration, but this was denied by the NLRC in its
Resolution dated June 22, 1998. Radon Security then filed a
Petition for Certiorari docketed as G.R. No. 134891 with this
Court, but we dismissed this petition in our Resolution of August
31, 1998. In dismissing the appeal of AFPGIC, the NLRC
pointed out that AFPGIC’s theory that the bond cannot anymore
be proceeded against for failure of Radon Security to pay the
premium is untenable, considering that the bond is effective until
the finality of the decision. The NLRC stressed that a contrary
ruling would allow respondents to simply stop paying the
premium to frustrate satisfaction of the money judgment.
AFPGIC then moved for reconsideration, but the NLRC denied
the motion in its Resolution dated February 29, 2000. AFPGIC
then filed a special civil action for certiorari, docketed as CA-
G.R. SP No. 58763, with the Court of Appeals, on the ground
that the NLRC committed a grave abuse of discretion in
affirming the Order dated March 30, 1999 of the Labor Arbiter.
ISSUE: WON the Court of Appeals seriously erred in sustaining
the public respondent NLRC although the latter gravely abused
its discretion when it arbitrarily ignored the fact that subject
appeal bond was already cancelled for non-payment of premium
and thus it could not be subject of execution or garnishment.
RULING: The filing of a cash or surety bond is a jurisdictional
requirement in an appeal involving monetary award, and the
bond shall be in effect until the final disposition of the case. A
surety bond, once accepted by the obligee (the employee to
whom money benefits were due), becomes valid and
enforceable, irrespective of whether or not the premiums thereon
have been paid by the obligor (the employer liable for payment).
Capital Insurance v. Ronquillo Trading, GR No. L-36488, 25
July 1983
DOCTRINE: Insurance; Suretyship; Termination of contract of
surety discharges the liability of the principal to pay premiums
despite pendency of a lawsuit to enforce said liability that
accrued during the contract’s stipulated lifetime.—Obviously,
the duration of the bond is for “every twelve (12) months or
fraction thereof, while this bond or any renewal or substitution
is in effect.” Since the appellees opted not to renew the contract
they cannot be obliged to pay the premiums. More specifically,
where a contract of surety is terminated under its terms, the
liability of the principal for premiums after such Insurance Case
Digests: Suretyship 3B; A.Y. 2018-2019 Page 7 of 8 termination
ceases notwithstanding the pendency of a lawsuit to enforce a
liability that accrued during its stipulated lifetime.
FACTS: Capital Surety and Insurance Co., Inc., thru its general
agent, executed and issued a surety bond in the amount of
$14,800.00 or its peso equivalent in behalf of Ronquillo Trading
and in favor of S.S. Eurygenes, its master, and/or its agents,
Delgado Shipping Agencies. The bond was a guarantee for any
additional freight which may be determined to be due on a cargo
of 258 surplus army vehicles consigned from Pusan, Korea to
the Ronquillo Trading on board the S.S. Eurygenes and booked
on said vessel by the Philippine Merchants Steamship Company,
Inc. In consideration for the issuance by the appellant of the
aforesaid surety bond the appellees executed an indemnity
agreement whereby among other things, they jointly and
severally promised to pay the appellant the sum of P1,827.00 in
advance as premium and documentary stamps for each period of
twelve months while the surety bond was in effect. On April 30,
1963 or about five (5) days before the expiration of the liability
on the bond, P.D. Marchessini and Co., Ltd. and Delgado
Shipping Agencies, Inc., filed a case in the Court of First
Instance of Manila against the Philippine Merchants Steamship
Co., Inc., Jose L. Bautista, doing business under the name and
style of "Ronquillo Trading", and the herein appellant Capital
Insurance & Surety Co., Inc. for the sum of $14,800.00 or its
equivalent in Philippine currency, for the loss they allegedly
suffered as a direct consequence of the failure of the defendants
to load the stipulated quantity of 406 U.S. surplus army vehicles.
The appellant was made party defendant because of the bond it
posted in behalf of the appellees. Upon the expiration of the 12
months life of the bond, the appellant made a formal demand for
the payment of the renewal premiums and cost of documentary
stamps for another year in the amount of P1,827.00. The
appellees refused to pay, contending that the liability of the
appellant under the surety bond accrued during the period of
twelve months the said bond was originally in force and before
its expiration and that the defendants-appellees were under no
obligation to renew the surety bond. The appellant, therefore,
filed a complaint to recover the sum of P1,827.00 against the
appellees in the City Court of Manila wherein said court
rendered judgment absolving the appellees from the complaint.
The appellant appealed the judgment to the Court of First
Instance of Manila where the decision of the city court was
affirmed and the complaint dismissed. Its motion for
reconsideration having been denied, appellant filed the instant
appeal.
ISSUE: Whether or not a surety's liability under the bond has
accrued, during the period of twelve months the bond was
originally in force and before its expiration and that herein
appellees were under no obligation to pay the premiums and
costs of documentary stamps for the succeeding period it was in
effect.
RULING: Yes, The bond was given to secure payment by
appellees of such additional freight as would already be due on
the cargo when it actually arrived in Manila. The bond was not
executed to secure obligation or liability which was still to arise
after its twelve month life. While it was true that the lower court
held that the bond was still in effect after its expiry date, the
effectivity was not due to a renewal made by the appellees but
because the surety bond provided that "the liability of the surety
will not expire if, as in this case, it was notified of an existing
obligation thereunder". The meaning of the bond's still being in
effect was that, the suit on the bond instituted by the obligees
prior to the expiration of the "liability" thereunder was only for
the purpose of enforcing that liability and amounted to notice to
appellant of an already existing or accrued liability so as not to
let that liability lapse or expire and thereby bar enforcement. It
must be noted that in the surety bond it was stipulated that the
"liability of surety on this bond would expire on May 5, 1963
and said bond would be cancelled 15 days after its expiration,
unless surety was notified of any existing obligations
thereunder." Under this stipulation the bond expired on the
stated date and the phrase "unless surety was notified of any
existing obligations thereunder" refers to obligations incurred
during the term of the bond. Under the Indemnity Agreement,
the appellees "agreed to pay the COMPANY the sum of ONE
THOUSAND EIGHT HUNDRED ONLY (P1,800.00) Pesos,
Philippine Currency, in advance as premium thereof for every
twelve (12) months or fraction thereof, while this bond or any
renewal or substitution thereof was in effect." Obviously, the
duration of the bond was for "every twelve (12) months or
fraction thereof, while this bond or any renewal or substitution
was in effect." Since the appellees opted not to renew the
contract they cannot be obliged to pay the premiums. More
specifically, where a contract of surety is terminated under its
terms, the liability of the principal for premiums after such
termination ceases notwithstanding the pendency of a lawsuit to
enforce a liability that accrued during its stipulated lifetime. The
appeal was dismissed for lack of merit. The decision of the court
a quo was affirmed.
VII. LIFE INSURANCE
Sec. 181. 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
upon it whatever the insured might have recovered.
Sec. 182. Notice to an insurer of a transfer or bequest thereof
is not necessary to preserve the validity of a policy of
insurance upon life or health, unless thereby expressly
required.
Sec. 183. Unless the interest of a person insured is susceptible
of exact pecuniary measurement, the measure of indemnity
under a policy of insurance upon life or health is the sum
fixed in the policy.
Chapter III
THE BUSINESS OF INSURANCE
Title 1 Sec. 186. No person, partnership, or association of persons
INSURANCE COMPANIES, ORGANIZATION, shall transact any insurance business in the Philippines
CAPITALIZATION AND AUTHORIZATION except as agent of a person or corporation authorized to do
the business of insurance in the Philippines, unless possessed
Sec. 184. For purposes of this Code, the
of the capital and assets required of an insurance
term "insurer" or "insurance company" shall include all
corporation doing the same kind of business in the
individuals, partnerships, associations, or corporations,
Philippines and invested in the same manner; nor unless the
including government-owned or controlled corporations or
Commissioner shall have granted to him or them a
entities, engaged as principals in the insurance business,
certificate to the effect that he or they have complied with all
excepting mutual benefit associations. Unless the context
the provisions of law which an insurance corporation doing
otherwise requires, the terms shall also include professional
business in the Philippines is required to observe.
reinsurers defined in section two hundred eighty. "Domestic
company" shall include companies formed, organized or Every person, partnership, or association receiving any such
existing under the laws of the Philippines. "Foreign certificate of authority shall be subject to the insurance laws
company" when used without limitation shall include of the Philippines and to the jurisdiction and supervision of
companies formed, organized, or existing under any laws the Commissioner in the same manner as if an insurance
other than those of the Philippines. corporation authorized by the laws of the Philippines to
engage in the business of insurance specified in the
Sec. 185. Corporations formed or organized to save any
certificate.
person or persons or other corporations harmless from loss,
damage, or liability arising from any unknown or future or
contingent event, or to indemnify or to compensate any
Sec. 233. Any insurance company issuing variable contracts
person or persons or other corporations for any such loss,
pursuant to this Code may in its discretion issue contracts
damage, or liability, or to guarantee the performance of or
providing a combination of fixed amount and variable
compliance with contractual obligations or the payment of
amount of benefits and for option lump-sum payment of
debt of others shall be known as "insurance corporations".
benefits.
The provisions of the Corporation Law shall apply to all
VIII. OTHER PROVISIONS
insurance corporations now or hereafter engaged in business
in the Philippines insofar as they do not conflict with the A. CLAIM SETTLEMENT
provisions of this chapter.
Title 13
SUSPENSION OR REVOCATION OF AUTHORITY
Sec. 247. If the Commissioner is of the opinion upon
examination of other evidence that any domestic or foreign
insurance company is in an unsound condition, or that it has
failed to comply with the provisions of law or regulations
obligatory upon it, or that its condition or method of business
is such as to render its proceedings hazardous to the public
or to its policyholders, or that its paid-up capital stock, in the
case of a domestic stock company, or its available cash assets,
in the case of a domestic mutual company, or its security
deposits, in the case of a foreign company, is impaired or
deficient, or that the margin of solvency required of such
company is deficient, the Commissioner is authorized to
suspend or revoke all certificates of authority granted to
such insurance company, its officers and agents, and no new
business shall thereafter be done by such company or for
such company by its agent in the Philippines while such
suspension, revocation or disability continues or until its
authority to do business is restored by the Commissioner.
Before restoring such authority, the Commissioner shall
require the company concerned to submit to him a business
plan showing the company's estimated receipts and
disbursements, as well as the basis therefor, for the next
succeeding three years. (As amended by Presidential Decree
No. 1455).
Title 14
APPOINTMENT OF CONSERVATOR
Sec. 248. If at any time before, or after, the suspension or
revocation of the certificate of authority of an insurance
company as provided in the preceding title, the
Commissioner finds that such company is in a state of
continuing inability or unwillingness to maintain a condition
of solvency or liquidity deemed adequate to protect the
interest of policy holders and creditors, he may appoint a
conservator to take charge the assets, liabilities, and the
management of such company, collect all moneys and debts
due said company and exercise all powers necessary to
preserve the assets of said company, reorganize the
management thereof, and restore its viability. The said
conservator shall have the power to overrule or revoke the
actions of the previous management and board of directors
of the said company, any provision of law, or of the articles
of incorporation or by-laws of the company, to the contrary
notwithstanding, and such other powers as the
Commissioner shall deem necessary.
The conservator may be another insurance company doing
business in the Philippines, by officer or officers of such
company, or any other competent and qualified person, firm
or corporation. The remuneration of the conservator and
other expenses attendant to the conservation shall be borne
by the insurance company concerned.
The conservator shall not be subject to any action, claim or
demand by, or liability to, any person in respect of anything
done or omitted to be done in good faith in the exercise, or in
connection with the exercise, of the powers conferred on the
conservator.
The conservator appointed shall report and be responsible
to the Commissioner until such time as the Commissioner is
satisfied that the insurance company can continue to operate
on its own and the conservatorship shall likewise be
terminated should be Commissioner, on the basis of the insurance company shall be determined by the
report of the conservator or of his own findings, determine Commissioner and shall be paid out of the assets of such
that the continuance in business of the insurance company company.
would be hazardous to policy holders and creditors, in which
If the Commissioner shall determine and confirm within the
case the provisions of Title 15 shall apply.
said period that the insurance company is solvent, as defined
Title 15 hereunder, or cannot resume business with safety to its
PROCEEDINGS UPON INSOLVENCY policyholders and creditors, he shall, if the public interest
requires, order its liquidation, indicate the manner of its
Sec. 249. Whenever, upon examination or other evidence, it
liquidation and approve a liquidation plan and implement it
shall be disclosed that the condition of any insurance
immediately. The Commissioner shall designate a competent
company doing business in the Philippines is one of
and qualified person as liquidator who shall take over the
insolvency, or that its continuance in business would be
functions of the receiver previously designated and, with all
hazardous to its policyholders and creditors, the
convenient speed, reinsure all its outstanding policies,
Commissioner shall forthwith order the company to cease
convert the assets of the insurance company to cash, or sell,
and desist from transacting business in the Philippines and
assign or otherwise dispose of the same to the policyholders,
shall designate a receiver to immediately take charge of its
creditors and other parties for the purpose of settling the
assets and liabilities, as expeditiously as possible collect and
liabilities or paying the debts of such company and he may,
gather all the assets and administer the same for the benefit
in the name of the company, institute such actions as may be
of its policyholders and creditors, and exercise all the powers
necessary in the appropriate Court to collect and recover
necessary for these purposes including, but not limited to,
accounts and assets of the insurance company, and to do
bringing suits and foreclosing mortgages in the name of the
such other acts as may be necessary to complete the
insurance company.
liquidation as ordered by the Commissioner.
The Commissioner shall thereupon determine within thirty
The provisions of any law to the contrary notwithstanding,
days whether the insurance company may be reorganized or
the actions of the Commissioner under this Section shall be
otherwise placed in such condition so that it may be
final and executory, and can be set aside by the Court upon
permitted to resume business with safety to its policyholders
petition by the company and only if there is convincing proof
and creditors and shall prescribe the conditions under which
that the action is plainly arbitrary and made in bad faith.
such resumption of business shall take place as well as the
The Commissioner, through the Solicitor General, shall then
time for fulfillment of such conditions. In such case, the
file the corresponding answer reciting the proceeding taken
expenses and fees in the collection and administration of the
and praying the assistance of the Court in the liquidation of
the company. No restraining order or injunction shall be
issued by the Court enjoining the Commissioner from
implementing his actions under this Section, unless there is
convincing proof that the action of the Commissioner is
plainly arbitrary and made in bad faith and the petitioner or
plaintiff files with the Clerk or Judge of the Court in which
the action is pending a bond executed in favor of the
Commissioner in an amount to be fixed by the Court. The
restraining order or injunction shall be refused or, if
granted, shall be dissolved upon filing by the Commissioner,
if he so desires, of a bond in an amount twice the amount of
the bond of the petitioner or plaintiff conditioned that it will
pay the damages which the petition or plaintiff may suffer
by the refusal or the dissolution of the injunction. The
provisions of Rule 58 of the New Rules of Court insofar as
they are applicable shall govern the issuance and dissolution
of the restraining order or injunction contemplated in this
Section.
All proceedings under this Title shall be given preference in
the Courts. The Commissioner shall not be required to pay
any fee to any public officer for filing, recording, or in any
manner authenticating any paper or instrument relating to
the proceedings.
As used in this Title, the term "Insolvency" shall mean the
inability of an insurance company to pay its lawful
obligations as they fall due in the usual and ordinary course
of business as may be shown by its failure to maintain the
margin of solvency required under Section 194 of this
Code. (As amended by Presidential Decree No. 1141 and
further amended by Presidential Decree No. 1455).
Sec. 250. In case of liquidation of an insurance company,
after payment of the cost of the proceedings, including
reasonable expenses and fees incurred in the liquidation to
be allowed by the Court, the Commissioner shall pay all
allowed claims against such company, under order of the
Court, in accordance with their legal priority.
Sec. 251. The receiver or the liquidator, as the case may be,
designated under the provisions of this title shall not be
subject to any action, claim or demand by, or liability to, any
person in respect of anything done or omitted to be done in
good faith in the exercise, or in connection with the exercise,
of the powers conferred on such receiver or liquidator.
G.R. No. 85624 June 5, 1989
CATHAY INSURANCE CO., INC., EMPIRE INSURANCE
CO., UNION INSURANCE SOCIETY OF CANTON, LTD.,
PARAMOUNT INSURANCE CORP., PHILIPPINE
BRITISH INSURANCE CO., & PHILIPPINE FIRST
INSURANCE CO., petitioners,
vs.
HON. COURT OF APPEALS & EMILIA CHAN
LUGAY, respondents.
FACTS:
Eight (8) years after Emilia Chan Lugay's Cebu Filipina Press
was destroyed by fire in broad daylight, she is still waiting to
collect the proceeds of seven (7) fire policies which the
petitioners sold to her.
The petitioners are the six (6) insurance companies that issued
fire insurance policies for the total sum of P4,000,000 to the
Cebu Filipino Press of Cebu City, as follows:
1. Cathay Insurance Company for P1,000,000 under Fire
Insurance Policy No. F-31056 dated June 10, 1981 renewing
Policy No. F27942 (Exh-B-5), covering the period from June 20,
1981 to June 20, 1982 (Exh-B);
2. Empire Insurance Company for P500,000 under Fire
Insurance Policy No. YASCO/F-1101 dated March 7, 1981,
renewing Policy No. F-1095 (Exh. C-5), covering the period
from March 19, 1981 to March 19, 1982 (Exh. C);
3. Union Insurance Society of Canton, Ltd, for P500,000 under
Fire Insurance Policy No. NU-0530 dated May 5, 1981,
renewing Policy No. MU-223903 (Exh. D-5), covering the
period from May 21, 1981 to May 21, 1982 (Exh. D);
4. Paramount Insurance Corp. for P500,000 under Fire Insurance
Policy No. 25311 dated July 1, 1981, covering the period from
July 15, 1981 to July 15, 1982 (Exh. E);
5. Philippine British Insurance Company for P500,000 under
Fire Insurance Policy No. PB-107861 dated July 6, 1981,
renewing Policy No. PB-933 11 (Exh. F-5), covering the period
from July 10, 1981 to July 10, 1982 (Exh. F).
6. Philippine British Insurance Company for P500,000 under
another Fire Insurance Policy No. PB-107848 dated July 1,
1981, renewing Policy No. PB-102653 (Exh G-5), covering the
period from July 5, 1981 to July 5, 1982 (Exh. G); and
7. Philippine First Insurance Company for P500,000 under Fire
Insurance Policy No. CEB-G-0515 dated January 28, 1981,
covering the period from February 15, 1981 to February 15,
1982 (Exh. H). (p. 76, Rollo.)
The fire policies described the insured property as "stocks of
printing materials, papers and general merchandise usual to the
Assured's trade" (p. 53, Rollo) stored in a one-storey building of
strong materials housing the Cebu Filipina Press located at
UNNO Pres. Quirino cor. Don V. Sotto Sts., Mabolo, Cebu City.
The co-insurers were indicated in each of the policies. All,
except one policy (Paramount's), were renewals of earlier
policies issued for the same property.
On December 18, 1981, at around ten o'clock in the morning, the
Cebu Filipina Press was razed by electrical fire together with all
the stocks and merchandise stored in the premises.
On January 15, 1982, Mrs. Lugay, owner and operator of the
printing press, submitted sworn Statements of Loss Formal
Claims to the insurers, through their djusters. She claimed a total
loss of P4,595,00.
She submitted proofs of loss required by the adjusters. After
nearly ten (10) months of wating for the insurers to pay his
claim, she sued to collect on December 15, 1982. The insurance
companies denied liability, alleging violation of certain
conditions of the policy, misdeclaration, and even arson which
was not seriously pressed for, come the pre-trial, the petitioners
offered to pay 50% of her claim, but she insisted in full recovery.
After the trial on the merits, the court rendered judgment in her
favor, as follows:
... directing payment by Cathay Insurance Company, Inc., the
amount of P1,000,000, by Empire the amount of P5,000,000.00,
by Insurance Society of Canton Limited the amount
P5,000,000.00, by Paramount Insurance Company, the amount
P5,000,000.00, by Philippine British Insurance Company Inc.,
the amount of P5,000,000.00 by Philippine First Insurance
Company, Inc., the amount of P5,000,000.00; for all the
defendants jointly and severaly to pay P48,000.00 representing
expenses of the plaintiff, and a separate amount of 20% of the
P4,000,000.00 representing fees of councel; and interests at the
rate of twice the ceiling being prescribe by the Monetary Board
starting from the time when the case was filed; and finally, with
costs. (Decision Court of Appeal, pp. 1-3.) (p. 77, Rollo.)
On appeal to the Court of Appeals, the decision was affirmed in
toto (pp. 52-67, Rollo). Hence, this petition for review under
Rule 45 of the Rules of Court wherein the petitioners allege that
the Court of Appeals erred:
1. in holding that the private respondent's cause of action had
already acrued when the complaint was filed on December 15,
1982 and in not holding that the action is premature;
2. in finding that sufficient proofs of loss had been presented by
the private respondent;
3. in not holding that the private respondent's claim for loss was
infrated;
4. in awarding damages to the private respondent in the form of
interests equivalent to double the interest ceiling set by the
Monetary Board despite absence of a finding of unreasonable
withholding or refusal to pay the claim; and
5. in awarding exorbitant attorney's fees.
It is plain to see that all these grounds of the petition for review
present factual issues which, in view of the provision in Section
2, Rule 45 of the Rules of Court that "only questions of law may
be raised" this Court may not inquire into by conducting a
tedious reassessment of the "maze of testimonial and
documentary evidence" (p. 57, Rollo) of the parties. Referring
to the evidence presented at the trial of this case, the Court of
Appeals said:
We are impressed indeed with the patience, diligence and
perseverance of the trial judge in wading through the
voluminous documents, making an exhaustive examination and
detailed evaluation of the evidence, and thus emerging from the
maze of testimonial and documentary evidence with accuracy of
perception in determining the merits of the respective claims of
the litigants. Accordingly, We are constrained to honor and
stamp our imprimatur to the findings of fact and conclusions of
the trial court since, admittedly, it was in a better position than
We are to examine the real evidence, as well as to observe the
demeanor of the witnesses while testifying in the case (Chase vs.
Buencamino, Sr., 136 SCRA 365). (p. 57, Rollo.)
The finding of the trial court and the Court of Appeals that the
insured's cause of action had already accrued before she filed her
complaint is supported by Section 243 of the Insurance Code
which fixes a maximum period of 90 days after receipt of the
proofs of loss by the insurer for the latter to pay the insured s
claim.
Sec. 243. The amount of any loss or damage for which an insurer
may be liable, under any policy other than the insurance policy,
shall be paid within thirty days after proof of loss is received by
the insurer and ascertainment of the loss or damage is made
either by agreement between the insured and the insurer or by
arbitration; but if such ascertainiment is not had or made
within sixty days after such receipt by the insurer of the proof of
loss, then the loss or damage shall be paid within ninety days
after such receipt. ... (Insurance Code.)
As the fire which destroyed the Cebu Filipina Press occurred on
December 19, 1981 and the proofs of loss were submitted from
January 15, 1982 through June 21, 1982 in compliance with the
adjusters' numerous requests for various documents, payment
should have been made within 90 days thereafter, or on or before
September 21, 1982. Hence, when the assured file her complaint
on December 15, 1982, her cause of action had a ready accrued.
There is no merit in the petitioners' contention that the proof of
loss were insufficient because respondent Emilia Chan Luga
failed to comply with the adjuster's request for the submission of
her bank statements. Condition No. 13 of the insurance policy
on proofs of loss, provides:
13. The insured shall give immediate written notice to th
company of any loss, protect the property from further damage,
forth with separate the damaged and undamaged personal
property, put it in the best possible order, furnish a complete
inventory of the destroyed damaged and undamaged property,
showing in detail quantities, costs, actual cash value and the
amount of loss claimed; AN WITHIN SIXTY DAYS AFTER
THE LOSS, UNLESS SUCH TIME IS EXTENDED IN
WRITING BY THE COMPANY, THE INSURED SHALL
RENDER TO THE COMPANY A PROOF OF LOSS signed
and sworn to by the insured, stating the knowledge and belief of
th insured as to the following: the time and origin of the loss, the
interest of the insured and of all others in the property, the actual
cash value of each item thereof and the amount of loss thereto,
all encumbrances thereon, all other contracts of insurance,
whether valid or not covering any of said property, any changes
in the title, use, occupation, location, possession or exposures of
said property since the issuing of this policy, by whom and for
what purpose any buildings herein described and the several
parts thereof were occupied at the time of the loss and whether
or not they stood on leased ground, and shall furnish a copy of
all the descriptions and schedules in all policies and, if required,
verified plans and specifications of any building, fixtures or
machine destroyed or damaged. The insured as often as may be
reasonable required shall exhibit to any person designated by the
Company all that remains of any property therein described, and
submit to examination under oath by any person named by the
Company, and subscribe the same; as often as may be reasonably
required, shall produce for examination all books of account,
bills, invoices, and other vouchers, or certified copies thereof if
originals be lost. At such reasonable time and place as may be
designated by the Company or its representative, and shall
permit extracts and copies thereof to be made.
No claim under this policy shall be payable unless the terms of
this condition have been complied with. (pp. 55-56, Rollo.)
Condition No. 13, as the Court of Appeals observed, does not
require the insured to produce her bank statements. Therefore,
the insured was not obligated to produce them and the insurers
had no right to ask for them. Condition No. 13 was prepared by
the insurers themselves, hence, it "should be taken most
strongly" (p. 58, Rollo) against them.
The Court of Appeals found that the insured "fully complied
with the requirements of Condition No. 13" (p. 58, Rollo). The
adjuster's demand for the assured's bank statements (which
under the law on the secrecy of bank deposits, she need not
disclose) would add more requirements to Condition No. 13 of
the insurance contract, and, as pointed out by the Appellate
Court, "would amount to giving the insurers limitless latitude in
making unreasonable demands if only to evade and avoid
liability" (p. 58, Rollo).
Nor was the claim inflated. Both the trial court and the Court of
Appeals noted that the proofs were ample and "more than
enough ... for defendants (insurers) to do a just assessment
supporting the 1981 fire claim for an amount exceeding four
million pesos" (p. 60, Rollo).
The trial court's award (which was affirmed by the Court of
Appeals) of double interest on the private respondent's claim is
lawful and justified under Sections 243 and 244 of the Insurance
Code which provide:
Sec. 243. ... Refusal or failure to pay the loss or damage within
the time prescribed herein will entitle the assured to collect
interest on the proceeds of the policy for the duration of the delay
at the rate of twice the ceiling prescribed by the Monetary
Board, ...
Sec. 244. In case of any litigation for the enforcement of any
policy or contract of insurance, it shall be the duty of the
Commissioner or the Court, as the case may be, to make a
finding as to whether the payment of the claim of the insured has
been unreasonably denied or withheld; and in the affirmative
case, the insurance company shall be adjudged to pay damages
which shall consist attorney's fees and other expenses incurred
by the insured person by reason of such unreasonable denial or
withholding of payment plus interest of twice the ceiling
prescribed by the Monetary Board of the amount of claim due
the insured, ... (Emphasis supplied; p. 66, Rollo.)
Section 243 of the Insurance Code is in fact embodied in
provision No. 29 of the policies issued by the petitioners to th
private respondents (p. 82, Rollo).
The petitioners' contention that the charging of double interest
was improper because no unreasonable delay in the processing
of the fire claim was proven, is refuted by the trial court' explicit
finding that "there was a delay that was not reasonable in
processing the claim and doing payments" (p. 81, Rollo). Under
Section 244, a prima facieevidence of unreasonable delay in
payment of the claim is created by the failure of the insurer to
pay the claim within the time fixed in both Section 242 and 243
of the Insurance Code.
As provided in Section 244 also, by reason of the delay and
consequent filing of this suit by the insured, the insurers "shall
be adjudged to pay damages which shall consist of attorney's
fees and other expenses incurred by the insured." In view of the
not insubstantial value of the private respondent's claims and the
considerable time and effort expended by them and their counsel
in prosecuting these claims for the past eight (8) years, We hold
that attorney's fees were properly awarded to the private
respondents. However, an award equivalent to (10%) percent of
the proceeds of the policies would be more reasonable than the
20% awarded by the trial court and th Appellate Court.
ZENITH INSURANCE CORPORATION vs.CA and
FERNANDEZ G.R. No. 85296 May 14, 1990
FACTS: On January 25, 1983, private respondent Lawrence
Fernandez insured with the insurer his car for "own damage".
The car figured in an accident and suffered actual damages in
the amount of P3,640.00. The insurer offered to pay the claim of
Fernandez pursuant to the terms and conditions of the contract
which, the private respondent rejected. After allegedly being
given a run around by Zenith for two (2) months, Fernandez filed
a complaint with the Regional Trial Court for sum of money and
damages resulting from the refusal of Zenith to pay the amount
claimed. Aside from actual damages and interests, Fernandez
also prayed for moral damages in the amount of P10,000.00,
exemplary damages of P5,000.00, attorney's fees of P3,000.00
and litigation expenses of P3,000.00.
On June 4, 1986, a decision was rendered by the trial court
ordered the insurance company to pay the insured the damage
incurred plus interest at the rate of twice the prevailing interest
rates, moral damages (20,000, that is twice the amount the
insured prayed for), exemplary damages, attorney's fees,
litigation expenses and costs. The CA affiremed the decision of
the trial court.
ISSUE: Whether the insurer is liable to the insured for moral and
exemplary damages as ordered by the trial court
HELD:
The decision of the lower court is modified to which, the moral
damages is reduced to 10,000 and the award of exemplary
damages is deleted
In case of unreasonable delay in the payment of the proceeds of
an insurance policy, the damages that may be awarded are: 1)
attorney's fees; 2) other expenses incurred by the insured person
by reason of such unreasonable denial or withholding of
payment; 3) interest at twice the ceiling prescribed by the
Monetary Board of the amount of the claim due the injured; and
4) the amount of the claim. (Insurance Code Sec. 244)
In awarding moral damages in case of breach of contract, there
must be a showing that the breach was wanton and deliberately
injurious or the one responsible acted fraudently or in bad
faith.The act of petitioner of delaying payment for two months
cannot be considered as so wanton or malevolent to justify an
award of P20,000.00 as moral damages, taking into
consideration the actual damage. The reason for petitioner's
failure to indemnify private respondent within the two-month
period was that the parties could not come to an agreement as
regards the amount of the actual damage on the car.

On the other hand, exemplary or corrective damages are
imposed by way of example or correction for the public good
(Art. 2229, NCC). In the case of Noda v. Cruz-Arnaldo, G.R.
No. 57322, June 22,1987; 151 SCRA 227, exemplary damages
were not awarded as the insurance company had not acted in
wanton, oppressive or malevolent manner. The same is true in
the case at bar.
B. MUTUALIZATION
Sec. 268. Every payment for the acquisition of any shares of
the capital stock of such insurer, the purchase price of which
is not fixed by such plan, shall be subject to the prior
approval of the Commissioner. Neither such plan, nor any
such payment, may be approved by the Commissioner unless
he finds that the rights and interests of the insurer, its
policyholders, and shareholders are protected.
G.R. No. 158085 October 14, 20015
REPUBLIC OF THE PHILIPPINES, represented by the CIR,
petitioner, vs. SUNLIFE ASSURANCE COMPANY OF
CANADA, respondent.
Topic: Mutualization
Facts:
Sun life is a mutual life insurance company organized under the
laws of Canada, but is authorized by the SEC to engage business
in the Philippines.
Sun Life filed with the CIR its insurance premium tax and
paid such tax, as well as its documentary stamp tax (DST).
CTA rendered a decision in Insular Life Assurance v. CIR,
which held that mutual life insurance companies are purely
cooperative companies and are exempt from payment of
premium tax and DST. Hence, Sun Life filed a claim for tax
credit with the CIR, as it has erroneously paid such taxes.
Since CIR failed to act on such claim, and the period to file a
claim is slowly expiring, Sun Life filed with the CTA a pet.
for review, praying for the issuance of a tax credit certificate.
Sun Life argue that it was a mutual life insurance company,
vested with the characteristics of a cooperative company.
Primarily, the management and affairs of Sun Life were
conducted by its members; second, it is operated with money
collected from its members; and lastly, it has for its purpose the
mutual protection of its members, and not for profit or gain.
CIR filed its answer, arguing that Sun Life does not fall within
such exemption of a cooperative company under Sec. 121 (now
Sec. 123) of the Tax Code.
CTA ruled in favor of Sun Life, holding that it was a mutual life
insurance company; hence, it was a cooperative company. Being
such, it is entitled to the same interpretation of the Court in
earlier cases, exempting such companies.
CA affirmed the ruling of CTA.
Hence, this petition for review by the CIR, arguing that Sun Life
was not a cooperative company since it was for profit; and that
Sun Life must first be registered with the Cooperative
Development Authority before being considered a cooperative
company.
Issue: W/N Sun Life is a cooperative company, exempt from
payment from payment of premium tax and DST.
Held: Yes. Sun Life is a cooperative company.
Sun Life is a cooperative company under the Law
The Tax Code defines a cooperative as an association
“conducted by the members thereof with the money collected
from among themselves and solely for their own protection and
not for profits.” Without a doubt, Sun Life is a cooperative
company.
[Doctrine] First, it is managed by its members. A stock
insurance company doing business in the Philippines may
“alter its organization and transform itself into a mutual
insurance company.” Sun Life has been mutualized or
converted to a nonstock mutual life insurance corporation
pursuant to Sec. 266 (probably now Sec. 268) of the Insurance
Code. In its by-laws, ownership has been vested in its
members who are entitled to one vote, and elect from among
themselves the board of trustees.
Second, it is operated with money collected from its
members. The members constitute “both insurer and insured”
who “contribute by a system of premiums to the creation of a
fund from which all losses and liabilities are paid.
Third, it is licensed for the mutual protection of the
members, and not for the profit of anyone. Such members are
responsible for the payment of all its losses. Verily, a mutual life
insurance company is a cooperative that promotes the welfare of
its own members. It does not operate for profits, but for mutual
benefit of its members. They receive their insurance at cost,
while reasonable properly guarding and maintaining stability
and solvency of the company. Economic benefits filter to the
members. (see notes for extra info)
Just because Sun Life is registered as a non-stock corporation,
the company can no longer make any profits. Earning profits is
merely its secondary purpose. It may engage in business activity
for profit, as long as it would not change its nature as a non-
profit entity.
The distinguishing feature of a cooperative enterprise is the
mutuality of cooperation among its member-policyholders
united for that purpose. So long as respondent meets this
essential feature, it does not even have to use and carry the
name of a cooperative to operate its mutual life insurance
business.
(not so relevant) Registration with the Cooperative
Development Authority is not required
The Tax Code does not require such registration with the CDA
in order to enjoy such exemption from premium tax and DST.
Also, the Cooperative Code do not apply. The Cooperative Code
was created for the registration of small producers and
consumers to form a business enterprise they themselves
controlled. These cooperatives included barrios, federations, etc.
Obviously, Sun Life does not fall under such classes.
Also, when the current Cooperative Code was enacted, all
existing cooperatives were required to be registered. However,
Sun Life was not required to be registered. Not even the
Insurance Code requires registration.
Having determined that Sun Life is a cooperative that does
not have to be registered with the CDA, Sun Life is entitled
to the exemption from both premium taxes and DST. And
having been seasonably filed and amply substantiated, a tax
credit certificate must be granted to Sun Life.
WHEREFORE, petition is DENIED.
C. INSURANCE AGENT AND BROKER
INSURANCE AGENT
Sec. 307. Any provision of existing laws to the contrary
notwithstanding, no person shall, within the Philippines, sell
or offer for sale a variable contract or do or perform any act
or thing in the sale, negotiation, making or consummating of
any variable contract other than for himself unless such
person shall have a valid and current license from the
Commissioner authorizing such person to act as a variable
contract agent. No such license shall be issued unless and
until the Commissioner is satisfied, after examination that
such person is by training, knowledge, ability and character
qualified to act as such agent. Any such license may be
withdrawn and cancelled by the Commissioner after notice
and hearing, if he shall find that the holder thereof does not
then have the qualifications required for the issuance of such
license.
Sec. 308. It shall be unlawful for any person, company or
corporation in the Philippines to act as general agent of any
insurance company unless he is empowered by a written
power of attorney duly executed by such insurance
company, and registered with the Commissioner to receive
notices, summons and legal processes for and in behalf of the
insurance company concerned in connection with actions or
other legal proceedings against said insurance company. It
shall be the duty of said general agent to notify the
Commissioner of his post office address in the Philippines,
or any change thereof. Notices, summons, or processes of any
kind sent by registered mail to the last registered address of
such general agent of the company concerned or to the
Commissioner shall be sufficient service and deemed as if
served on the insurance company itself.
Sec. 309. Except as otherwise provided by law or treaty, it
shall be unlawful for any person, partnership, association or
corporation in the Philippines, for himself or itself, or for
some other person, partnership, association or corporation,
either to procure, receive or forward applications of
insurance in, or to issue or to deliver or accept policies or
contracts of insurance of or for, any insurance company or
companies not authorized to transact business in the
Philippines, covering risks, life or nonlife, situated in the
Philippines; and any such person, partnership, association
or corporation violating the provisions of this section shall
be deemed guilty of a penal offense, and upon conviction
thereof, shall for each such offense be punished by a fine of
ten thousand pesos, or imprisonment of six months, or both
at the discretion of the court: Provided, That the provisions
of this section shall not apply to reinsurance.
INSURANCE BROKER
Sec. 310. Except as provided in the next succeeding title, no
person shall act as reinsurance broker in the Philippines
unless he is authorized as such by the Commissioner.
A reinsurance broker is one who, for compensation, not
being a duly authorized agent, employee or officer of an
insurer in which any reinsurance is effected, act or aids in
any manner in negotiating contracts of reinsurance, or
placing risks of effecting reinsurance, for any insurance
company authorized to do business in the Philippines.
Sec. 311. Upon application and payment of the
corresponding fee hereinafter prescribed, and the filing of
two errors and omissions (professional liability or
professional indemnity) policies hereinafter described, a
person may, if found qualified, be issued a license to act as
reinsurance broker by the Commissioner. No such license
shall be valid after the thirtieth day of June of the year
following its issuance unless it is renewed.
D. ADJUSTERS
Sec. 332. Every adjuster shall keep his or its books, records,
reports, accounts, and vouchers in such manner that the
Commissioner or his duly authorized representatives may
readily verify the quarterly reports of the said adjuster and
ascertain whether the said adjuster has complied with the
provisions of law or regulations obligatory upon him or
whether the method of doing business of the said adjuster
has been fair, just and honest.
ACTUARY
Sec. 344. Rating organization shall be subject to examination
by the Commissioner, as often as he may deem such
examination expedient, pursuant to the provisions of this
Code applicable to the examination of insurance companies.
He shall cause such an examination of each rating
organization to be made at least once in every five years.
E. BANCASSURAN
Sec. 375. The Commissioner shall furnish the Land
Transportation Commissioner with a list of insurance
companies authorized to issue the policy of insurance or
surety bond required by this chapter. (As amended by
Presidential Decree No. 1814).
Sec. 376. The Land Transportation Commission shall not
allow the registration or renewal of registration of any motor
vehicle without first requiring from the land transportation
operator or motor vehicle owner concerned the presentation
and filing of a substantiating documentation in a form
approved by the Commissioner evidencing that the policy of
insurance or guaranty in cash or surety bond required by
this chapter is in effect. (As amended by Presidential Decree
No. 1455).
Sec. 377. Every land transportation operator and every
owner of a motor vehicle shall, before applying for the
registration or renewal of registration of any motor vehicle,
at his option, either secure an insurance policy or surety
bond issued by any insurance company authorized by the
Commissioner or make a cash deposit in such amount as
herein required as limit of liability for purposes specified in
section three hundred seventy-four.