Digest Insurance Law 1

7/24/2019 Digest Insurance Law 1

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CASE DIGESTS-INSURANCE LAW

I. CONSTRUCTION OF INSURANCE CONTRACT

1) Calanoc vs Court of A!als "#$ %&'l (#) G.R. No. L-$11. D!c!*+!r 1, 1#

Doctrine: In case of ambiguity in an insurance contract covering accidental death, the Supreme Court held

that such terms shall be construed strictly against the insurer and liberally in favor of the insured inorder toeffect the purpose of indemnity.

Facts: Melencio Basilio, a atchman of the Manila !uto Supply, secured a life insurance policy from the

"hilippine !merican Insurance Company in the amount of "#,$$$ to hich as attached asupplemental

contract covering death by accident. %e later died from a gunshot ound on the occasionof a robbery

committed& subse'uently, his ido as paid "#,$$$ representing the face value of thepolicy. (he ido

demanded the payment of the additional sum of "#,$$$ representing the value of thesupplemental policy

hich the company refused because the deceased died by murder during therobbery and hile ma)ing an

arrest as an officer of the la hich ere e*pressly e*cluded in the contract. (he company+s contention

hich as upheld by the Court of !ppeals provides that the circumstances surrounding Basilio+s death as

caused by one of the ris)s e*cluded by the supplementary contract hich e*empts the company from

liability.

Issue:Is the "hilippine !merican ife Insurance Co. liable to the petitioner for the amount covered by

thesupplemental contract-

%eld:es. (he circumstances of Basilio+s death cannot be ta)en as purely intentional on the part of Basilio to

e*pose himself to the danger. (here is no proof that his death as the result of intentional)illing because

there is the possibility that the malefactor had fired the shot merely to scare aay the people around. In this

case, the company+s defense points out that Basilio+s is included among the ris)se*cluded in the

supplementary contract& hoever, the terms and phraseology of the e*ception clauseshould be clearly

e*pressed ithin the understanding of the insured. !rt. /011 of the 2e Civil Codeprovides that in case

ambiguity, uncertainty or obscurity in the interpretation of the terms of thecontract, it shall be construedagainst the party ho caused such obscurity. !pplying this to thesituation, the ambiguous or obscure terms in

the insurance policy are to be construed strictly against theinsurer and liberally in favor of the insured party.

(he reason is to ensure the protection of the insuredsince these insurance contracts are usually arranged and

employed by e*perts and legal advisers actinge*clusively in the interest of the insurance company. !s long

as insurance companies insist upon the useof ambiguous, intricate and technical provisions, hich conceal

their on intentions, the courts must, infairness to those ho purchase insurance, construe every ambiguity

in favor of the insured.

) /'a0tan vs. T&! Insular L'f! Assuranc! Co*an Lt2 "33 SCRA $) G.R. No. L-(#. 4arc& #

1#(

Biagtan as )illed as his house as being robbed. (he insurance company paid the basic amount of "3,$$$

but refused to pay the additional "3,$$$ under the accidental death benefit clause, on the ground that hisdeath as the result of in4uries intentionally inflicted by third parties and as not covered. (he trial court

ruled that there as no proof that the robbers intended to )ill Biagtan, or 4ust to scare him aay by thrusting

at him ith their )nives. (he Supreme Court held otherise, pointing out that there ere nine ounds in all.

(he e*ception in the accidental benefit clause does not spea) of the purpose 5 hether homicidal or not 5 of

a third party in causing the in4uries, but only of the fact that such in4uries have been intentionally inflicted.

2ine ounds inflicted ith bladed eapons at close range cannot be considered innocent insofar as intent is

concerned. (he manner of e*ecution of the crime permits no other conclusion.

Dissent: (he case of Calanoc is controlling. (he thrusts seemed to be a refle* action on the part of the

robbers upon being surprised by Biagtan. (he accidental death benefit clause carries several e*ceptions, ith

an ambiguous fifth paragraph saying that in4uries inflicted intentionally by a third party ere among the

e*ceptions. (he ambiguous clause conflicts ith all the other four e*ceptions and seemingly e*cept all other

in4uries, intentionally inflicted by a third party, regardless of any violation of la or provocation by theinsured, and defeat the very purpose of the policy of giving the insured double indemnity in case of

accidental death by e*ternal and violent means.


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!pplying the rule of noscitus a sociis, the double indemnity policy covers the insured against accidental

death, hether caused by fault, negligence or intent of a third party hich is unforeseen and une*pected by

the insured. !ll the associated ords and concepts in the policy plainly e*clude the accidental death from the

coverage of the policy only here the in4uries are self6inflicted or attended by some proscribed act of the

insured or incurred in some e*pressly included calamity such as riot, ar or atomic e*plosion. Besides, to

other insurance companies hich also covered the insured paid the benefits.

5) F'n*an G!n!ral Assuranc! Cor. vs. Court of A!als "15 SCRA 3#5) G.R. No. 166#(6. S!t!*+!r 1##

F!C(S:

7"8etitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in applying

the principle of 9e*presso unius e*clusio alterius in a personal accident insurance policy since death

resulting from murder and;or assault are impliedly e*cluded in said insurance policy considering that the

cause of death of the insured as not accidental but rather a deliberate and intentional act of the assailant in

)illing the former as indicated by the location of the lone stab ound on the insured. (herefore, said death

as committed ith deliberate intent hich, by the very nature of a personal accident insurance policy,

cannot be indemnified.

ISShether or not death petitioner is correct that results from assault or murder deemed are not

included in the terms 9accident and 9accidental.

%=D: 2?. "etition for certiorari ith restraining order and preliminary in4unction as denied for lac) of

merit.

@!(I?: (he terms 9accident and 9accidental as used in insurance contracts have not ac'uired any

technical meaning, and are construed by the courts in their ordinary and common acceptation. (hus, the

terms have been ta)en to mean that hich happen by chance or fortuitously, ithout intention and design,

and hich is une*pected, unusual, and unforeseen. !n accident is an event that ta)es place ithout one+s

foresight or e*pectation A an event that proceeds from an un)non cause, or is an unusual effect of a

)non cause and, therefore, not e*pected.

7I8t is ell settled that contracts of insurance are to be construed liberally in favor of the insured and strictly

against the insurer. (hus ambiguity in the ords of an insurance contract should be interpreted in favor of its

beneficiary.

) 7!n't& Insuranc! Cororat'on vs. Court of A!als "1$ SCRA 5#$) G.R. No. $#,. 4a 13 1##6

Facts:

enith entered into an insurance contract, denominated as ='uipment Floater "olicy covering a Eato

Bachoe including its accessories and appurtenances thereof, from loss of damage. Complainant paid the

stipulated premiums therefore.

>ithin the period of effectivity of the policy, the to pieces of hydraulic heel gear pumps, hich are

considered appurtenances and;or parts attached to and;or installed in the Eato B!choe ere lost, stolenand;or illegally detached by un)non thieves or malefactors

Despite repeated assurances by enith+s soliciting agent, it refused and failed to settle and pay

complainant+s insurance claim.

Complainant see)s not only the payment of said insurance claim of 1$( plus legal interest, atty+s fees, and

litigation e*penses, but also the revocation or cancellation of the license of enith to do insurance business.

enith on the other hand contends that:

o Complainant is not the real party in interest since the policy carries ith it a designated loss payee, the

B! Finance Corp

o (he policy insures against loss or damage caused by fire and lightning, etc, hile theft or robbery is 2?(


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insured against in the policy, it not having been e*pressly mentioned

o oss nevertheless is e*cluded under the e*ception of 9infidelity e*clusion by the operator ho left it

unguarded, unattended and deserted hile entrusted to him, and for failure to give timely notice of loss

o Complainant and;or B! Finance is guilty of concealment and misrepresentation at the time they secured

the policy, because at the time it became operative, the complainant as 2?( yet the oner of the property

insured, the property still hot having been delivered to him, and B! finance had no insurable interest yet,henceforth, the contract of insurance as ?ID !B I2I(I? for lac) of insurable interest at the time the

insurance too) effect.

Issues and @esolutions:

G/H >hether or not the loss through theft or robbery claimed is ithin the coverage of the policy.

(he Insurance Commissioner, as reiterated by the SC, found for the complainant in this ise: >hile the

policy enumerated the ris)s covered, it does 2?(, hoever, in its e*press terms, limit compensability to that

stated in the enumeration. (he enumerated ris)s e*cluded did not include theft or robbery committed or

perpetrated by an unidentified culprit, hence the complainant+s claim for damages is compensable.

(he foregoing policy is supported by the long time honored doctrine of 9contra proferentem: hich provides

that: 9any ambiguity in the policy shall be resolved in favor of the insured and against the insurer. (his is

true because insurance contracts are essentially contracts of adhesion and applicants for insurance have no

choice but to accept the terms and conditions in the policy even if they are not in full accord thereith.

G#H >hether or not the complainant as ith insurable interest therein hen the said policy contract as

procured.

(he complainant has insurable interest in the insured property at the time of the procurement of the insurance

policy. !s the CC provides, 9the contract of sale is perfected at the moment there is a meeting of minds upon

the thing hich is the ob4ect of the contract and upon the price, and Sec. /3 of the IC allos the insurance

of a mere contingent or e*pectant interest in anything if the same is founded on an actual right to the thing,

or upon any valid contract.!s this is the case, mere possession of an e'uitable title, li)e that pertaining to the buyer, gives rise to

insurable interest in the property in hich such title inheres. Furthermore, considering that enith+s agent

had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement, it

cannot no allege that complainant has no insurable interest on the property insured. enith is no

precluded by the e'uitable principle of estoppel from impugning and dishonoring the very insurance policy

contract it issued and the endorsement and increase in the coverage made through its duly authoried agent

) Sun Insuranc! Off'c! Lt2. vs. Court of A!als "11 SCRA 3) G.R. No. #5$5. 8ul 1( 1##

Feli* im Jr shot himself dead and the family tried to claim on the policy. (he insurer refused, saying that

hen he put a gun to his head, though thin)ing it as not loaded, he illfully e*posed himself to needless

peril and removed himself from the coverage of the insurance policy. (he family said that im had removed

the magaine before and fully believed that the gun as not loaded. !s such, it as an accident that shouldbe covered by the policy. (he court held that hile im as un'uestionably negligent, that should not

prevent his ido from recovering from the insurance policy he obtained precisely against accident. (here is

nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the

insured is shon to have contributed to his on accident.

,) 9'llacorta vs. Insuranc! Co**'ss'on "166 SCRA 3,() G.R. No. L-31(1.Octo+!r $ 1#$6

() 92a. 2! 4a0lana vs. Consolac'on "1 SCRA ,$) G.R. No. ,66,. Au0ust , 1##

F!C(S: ope Maglana met an accident hile driving a motorcycle oned by Bureau of Customs hich

resulted to his death. (he 4eep in hich his motorcycle collided as operated andoned by Destra4o. %is

ido filed an action for damages against Destra4o and !FISC?Insurance Corporation. (he @(C held

!FISC? to be secondarily liable for the aardeddamages. "etitioner asserted the loer court+s decision andprovided that the Insurance Codee*pressly provides that the insurer+s liability is direct and primary and or

4ointly and severallyith the operator of the vehicle.


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ISShether or not the insured is solidarily liable ith Destra4o.

%=D: 2o. (he liability of the inusred is primary and direct but not solidarily ith Destra4o.>here the

insurer directly insures liability, the liability accrues immediately upon theconcurrence of the in4ury or even

upon hich the liability depends and does not depend on therecovery of the 4udgment by the in4ured party

against the insured, (herefore, the insurer+sliability is direct and primary, but its liability is only up to the

e*tent of the amount insured.

$) %!rla Co*an'a 2! S!0uro Inc. v CA an2 L'* "6$ SCRA 3($) G.R. No. #,3. 4a ( 1##

Facts:(he im spouses opened a chattel mortgage and bought a Ford aser from Supercars for "hp 11,$$$ and

insured it ith "erla Compania de Seguros. (he vehicle as stolen hile =velyn im as driving it ith an

e*pired license. (he spouses re'uested for a moratorium on payments but this as denied by FC", the

assignee of rights over collection of the mortgage amount of the car. (he spouses also called on the insurance

company to pay the balance of the mortgage due to theft but this as denied by the company due to the

spouses+ violation of the !uthoried Driver clause stating Gdriving ith an e*pired license before being

carnappedH:

!ny of the folloing: GaH (he Insured GbH !ny person driving on the InsuredKs order, or ith his permission.

"rovided that the person driving is permitted, in accordance ith the licensing or other las or regulations, to

drive the Scheduled ehicle, or has been permitted and is not dis'ualified by order of a Court of a or by

reason of any enactment or regulation in that behalf.

Since the spouses didn+t pay the mortgage, FC" filed suit against them. (he trial court ruled in its favor

ordering spouses to pay. (he appellate court reversed their decision. FC" and "erla appealed to the SC.

Issues:

/.>as there grave abuse of discretion on the part of the appellate court in holding that private respondents

did not violate the insurance contract because the authoried driver clause is not applicable to the L(heftL

clause of said Contract-

#. >hether or not the loss of the collateral e*empted the debtor from his admitted obligations under the

promissory note particularly the payment of interest, litigation e*penses and attorneyKs fees.

%eld: 2o, 2o. "etition dismissed.

@atio:

/. (he car as insured against a malicious act such as theft. (herefore the 9(heft clause in the contract

should apply and not the authoried driver clause. (he ris) against accident is different from the ris) against

theft.

(he appellate court stated: (he Lauthoried driver clauseL in a typical insurance policy is in contemplation or

anticipation of accident in the legal sense in hich it should be understood, and not in contemplation or

anticipation of an event such as theft. (he distinction A often seied upon by insurance companies in

resisting claims from their assureds A beteen death occurring as a result of accident and death occurring as

a result of intent may, by analogy, apply to the case at bar.

(here as no connection beteen valid possession of a license and the loss of a vehicle. @uling in a different

ay ould render the policy a sham because the company can then easily cite restrictions not applicable to

the claim.#. (he Supreme Court stated:

9(he chattel mortgage constituted over the automobile is merely an accessory contract to the promissory

note. Being the principal contract, the promissory note is unaffected by hatever befalls the sub4ect matter of

the accessory contract. (herefore, the unpaid balance on the promissory note should be paid, and not 4ust the

installments due and payable before the automobile as carnapped, as erronously held by the Court of

!ppeals.

(he court, hoever, construed the insurance, chattel mortgage, and promissory note as interrelated contracts,

hence eliminating the payment of interests, litigation e*penses, and attorney+s fees stated in the promissory

note. (he promissory note re'uired securing a chattel mortage hich in turn re'uired opening an insurance

contract. (he insurance as made as an accessory to the principal contract, ma)ing sure that the value in the

promissory note ill be paid even if the car as lost. (he insurance company promised to pay FC" for loss

or damage of the property.C! didn+t err in re'uiring "erla to pay the spouses, but the spouses must pay FC" for the balance in the note.


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#) G!a0on'a v Court of A!als "31 SCRA 15) G.R. No. 1133(. F!+ruar , 1##

16) Fortun! Insuranc! : Sur!t Co. Inc. v Court of A!als "33 SCRA 56$) G.R. No. 11($ 4a 5

1##

Facts: ?n June #, /N1, "roducer+s Ban) of the "hilippines+ armored vehicle as robbed, in transit, of

seven hundred tenty6five thousand pesos G"hp 1#3,$$$.$$H that it as transferring from its branch in "asay

to its main branch in Ma)ati. (o mitigate their loss, they claim the amount from their insurer, namely Fortune

Insurance and Surety Co..

Fortune Insurance, hoever, assails that the general e*emption clause in the Casualty Insurance coverage

had a general e*emption clause, to it:

O=2=@! =PC="(I?2S

(he company shall not be liable under this policy in respect of

*** *** ***

GbH any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee,

partner, director, trustee or authoried representative of the Insured hether acting alone or in con4unction

ith others. . . .

!nd, since the driver GMagalongH and security guard G!tigaH of the armored vehicle ere charged ith three

others as liable for the robbery, Fortune denies "roducer+s Ban) of its insurance claim.

(he trial court and the court appeals ruled in favor of recovery, hence, the case at bar.

Issue: >hether recovery is precluded under the general e*emption clause.

%eld: es, recovery is precluded under the general e*emption clause.

%osoever vieed, "roducers entrusted the three ith the specific duty to safely transfer the money to itshead office, ith !lampay to be responsible for its custody in transit& Magalong to drive the armored vehicle

hich ould carry the money& and !tiga to provide the needed security for the money, the vehicle, and his

to other companions. In short, for these particular tas)s, the three acted as agents of "roducers. !

LrepresentativeL is defined as one ho represents or stands in the place of another& one ho represents others

or another in a special capacity, as an agent, and is interchangeable ith Lagent.L #0

In vie of the foregoing, Fortune is e*empt from liability under the general e*ceptions clause of the

insurance policy.

11) E2'llon v 4an'la /an;!rs L'f! "11( SCRA 1$() G.R. No. L-5366. S!t!*+!r 56 1#$

1) %!rla Co*an'a vs CA an2 Caas "1$ SCRA (31) G.R. No. ($$,6. 4a $ 1##6

F!C(S: Cayas as the registered oner of a Mada bus hich as insured ith petitioner "=@!C?M"!2I! D= S=O


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In this petition for revie on certiorari, petitioner see)s to limit its liability only to the payment made by

private respondent to "erea and only up to the amount of "/#,$$$.$$. It altogether denies liability for the

payments made by private respondents to the other 0 in4ured passengers totaling "/#,$$$.$$.

ISS


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Decision: !isporna ac'uitted

@uling:

Sect /N of the I.C., par / states that 92o insurance company doing business ith the "hilippine Islands nor l

any agent thereof shall pay any commission or other compensation to any person for services in obtaining

ne insurance unless such person shall have first procured from the Insurance Commissioner a certificate of

authority to act as an agent of such company as herein after provided.2o person shall act as agent, sub6agent, or bro)er in the solicitation of procurement of applications for

insurance ithout obtaining a certificate from the Insurance Commissioner.

"ar# !ny person ho for C?M"=2S!(I?2 solicits or obtains insurance for any for any insurance compna

or offers or assumes to act in the negotiating of such insurance shall be an insurance agent in the intent of

this section and shall thereby become liable to all liabilities to hich an insurance agent is sub4ect.

"ar 0 3$$ pseo fine for person or company violating the provisions of the section.

(he court held that the /st par prohibited a person to act as agent ithout certificate of authority from the

commissioner

In the #nd par, the definition of an insurance agent is stipulated

(he third paragraph provided the penalty for violating the /st # rules

(he appellate court said that the petitioner as penalied under the/st paragraph and not the /nd. (he fact

that she didn+t receive compensation asn+t an e*cuse for her ac'uittal because she as actually punished

separately under sec / because she did not have a certificate of authority as under par /.

(he SC held that the definition of an insurance agent as made by C! to be limited to paragraph # and not

applicable to the /st paragraph.

(he appellate court said that a person as an insurance agent under par # if she solicits insurance for

compensation, but in the /st paragraph, there as no necessity that a person solicits an insurance

compensation in order to be called an agent.

(he SC said that this as a reversible error.

(he C! said that !isporna didn+t receive compensation.

(he SC said that the definition of an insurance agent as found in the #nd par of Sec /N Gchec) the laH

(he definition in the #nd paragraph 'ualified the definition of an agent used in the /st and third paragraphs.

D?C(@I2=: (he court held that legislative intent must be ascertained from the consideration of the statuteas a hole. (he ords shouldn+t be studied in isolated e*planations but the hole and every part of the

statute must be considered in fi*ing the meaning of any of its parts in order to pronounce the harmonious

hole.

2oscitur a sociis provides that here a particular ord or phrase in a statement is ambiguous in itself, the

true meaning may be made clear in the company it is fi*ed in. In applying this, the court held that the

definition of an insurance agent in the #nd paragraph as applicable in the /st paragraph.

(o receive compensation be the agent is an essential element for violation of the /st paragraph.

(he appellate court said that she didn+t receive compensation by the receipt of compensation asn+t an

essential element for violation of the /st paragraph.

(he SC said that this vie asn+t correct oing to the !merican insurance las hich 'ualified

compensation as a 'ualifying factor in penaliing unauthoried persons ho solicited insurance G(e*as code

and snyder+s laH13) W&'t! Gol2 4ar'n! S!rv'c!s Inc vs %'on!!r Insuranc! an2 Sur!t Cororat'on "3,3 SCRA 33$)

G.R. No. 1313. 8ul $ 66

Facts: "etitioner >hite Oold bought a protection and indemnity coverage for its ships from Steamship

Mutual through @espondent "ioneer. Certificates and receipts thus ere given. %oever, "etitioner failed to

fulfill its payments thus Steamship refused to rene its coverage. Steamship then filed for collection against

"etitioner for recovery of unpaid balance. (hereafter, "etitioner also filed a complaint against Steamship and

@espondent before the Insurance Commission for violations G/NR,/N1 for Steamship and #,0$$,0$/ in

relation to 0$# and 0$0 for @espondentH of the Insurance Code6license re'uirements as an Insurance

company for the former and as insurance agent for the latter. Said commission dismissed the complaint

hich decision as affirmed by the C!.

Issue: >hether or not Steamship Mutual is a "rotection and Indemnity Club engaged in the insurancebusiness in the "hilippines


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%eld: Steamship Mutual as a " I Club is a mutual insurance company engaged in the marine insurance

business.

!n insurance contract is a contract of indemnity. (his means that one party underta)es for a consideration to

indemnify another party against loss, damage, or liability arising from an un)non or contingent event.

>hile to determine if a contract is an insurance contract e can loo) at the nature of the promise, the act to

be performed, e*act nature of the agreement in vie of the entire occurrence, contingency or circumstance

here the performance is mandated. (he label is not controlling. >hile under Section #G#H of the InsuranceCode the phrase 9doing an insurance business constitutes the folloing: /H ma)ing or proposing to ma)e, as

insurer, any insurance contract& #H ma)ing or proposing to ma)e, as surety, any contract of suretyship as a

vocation and not as merely incidental to any other legitimate business or activity of the surety& 0H doing any

)ind of business, including a reinsurance business, specifically recognied as constituting the doing of an

insurance business ithin the meaning of this code& H doing or proposing to do any business in substance to

any of the foregoing in a manner designed to evade the provision of this code.

(a)ing all of these in to consideration, Steamship Mutual engaged in marine insurance business undertoo) to

indemnify "etitioner >hite Oold against marine losses as enumerated under sec. of the Insurance Code. It

is immaterial hether profit is derived from ma)ing insurance contract and that no separate or direct

consideration is received since these does not preclude the e*istence of an insurance business.

2?(=S: TMutual Insurance company6 cooperative enterprise here the members are both the insurer and

insured.

T"rotection and Indemnity Club6 a form of insurance against third party liability here the third party is

anyone other than the " I Club and its members.

1) R!u+l'c vs Sunl'f! Assuranc! "3(5 SCRA 1#) G.R. No. 1$6$ Octo+!r 13 66.

1,) %&'la*car!

his family members ere treated to heart trouble, asthma, diabetes, etc.

(he application as approved for / year. %e as also given hospitaliation benefits and out6patient benefits.!fter the period e*pired, he as given an e*panded coverage for "hp 13,$$$. During the period, he suffered

from heart attac) and as confined at MMC. (he ife tried to claim the benefits but the petitioner denied it

saying that he concealed his medical history by ansering no to the aforementioned 'uestion. She had to pay

for the hospital bills amounting to 1R,$$$. %er husband subse'uently passed aay. She filed a case in the

trial court for the collection of the amount plus damages. She as aarded 1R,$$$ for the bills and $,$$$

for damages. (he C! affirmed but deleted aards for damages. %ence, this appeal.

Issue: >?2 a health care agreement is not an insurance contract& hence the 9incontestability clause under

the Insurance Code does not apply.

%eld: 2o. "etition dismissed.

@atio:

"etitioner claimed that it granted benefits only hen the insured is alive during the one6year duration. It

contended that there as no indemnification unli)e in insurance contracts. It supported this claim by saying

that it is a health maintenance organiation covered by the D?% and not the Insurance Commission. astly,

it claimed that the Incontestability clause didn+t apply because to6year and not one6year effectivity periods

ere re'uired.

Section # G/H of the Insurance Code defines a contract of insurance as 9an agreement hereby one underta)es

for a consideration to indemnify another against loss, damage or liability arising from an un)non or

contingent event.

Section 0 states: every person has an insurable interest in the life and health:

G/H of himself, of his spouse and of his children.

In this case, the husband+s health as the insurable interest. (he health care agreement as in the nature ofnon6life insurance, hich is primarily a contract of indemnity. (he provider must pay for the medical

e*penses resulting from sic)ness or in4ury.


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>hile petitioner contended that the husband concealed materialfact of his sic)ness, the contract stated that:

9that any physician is, by these presents, e*pressly authoried to disclose or give testimony at anytime

relative to any information ac'uired by him in his professional capacity upon any 'uestion affecting the

eligibility for health care coverage of the "roposed Members.

(his meant that the petitioners re'uired him to sign authoriation to furnish reports about his medical

condition. (he contract also authoried "hilam to in'uire directly to his medical history.

%ence, the contention of concealment isn+t valid.

(hey can+t also invo)e the 9Invalidation of agreement clause here failure of the insured to discloseinformation as a grounds for revocation simply because the anser assailed by the company as the heart

condition 'uestion based on the insured+s opinion. %e asn+t a medical doctor, so he can+t accurately gauge

his condition.

%enric) v Fire6 9in such case the insurer is not 4ustified in relying upon such statement, but is obligated to

ma)e further in'uiry.

Fraudulent intent must be proven to rescind the contract. (his as incumbent upon the provider.

9%aving assumed a responsibility under the agreement, petitioner is bound to anser the same to the e*tent

agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalied for

the disease or in4ury covered by the agreement or henever he avails of the covered benefits hich he has

prepaid.

Section #1 of the Insurance Code6 9a concealment entitles the in4ured party to rescind a contract of

insurance.

!s to cancellation procedure6 Cancellation re'uires certain conditions:

/. "rior notice of cancellation to insured&

#. 2otice must be based on the occurrence after effective date of the policy of one or more of the grounds

mentioned&

0. Must be in riting, mailed or delivered to the insured at the address shon in the policy&

. Must state the grounds relied upon provided in Section R of the Insurance Code and upon re'uest of

insured, to furnish facts on hich cancellation is based

2one ere fulfilled by the provider.

!s to incontestability6 (he trial court said that 9under the title Claim procedures of e*penses, the defendant

"hilamcare %ealth Systems Inc. had telve months from the date of issuance of the !greement ithin hich

to contest the membership of the patient if he had previous ailment of asthma, and si* months from theissuance of the agreement if the patient as sic) of diabetes or hypertension. (he periods having e*pired, the

defense of concealment or misrepresentation no longer lie.

1() Co**'ss'on!r of Int!rnal R!v!nu! vs L'ncoln %&'l''n! L'f! Insuranc! Co "5(# SCRA 35) G.R.

No. 11#1(,. 4arc& 1# 66

F!C(S:

incoln "hilippine ife Insurance Co., Inc., Gno Jardine6CM! ife Insurance Company, Inc.H issued a

special )ind of life insurance policy )non as the LJunior =state Builder "olicyL ith a distinguishing

feature. It had a Lautomatic increase clauseL upon attainment of a certain age by the insured.

Commissioner of Internal @evenue issued deficiency documentary stamps ta* assessment for the year /N

pertaining to the amount in the automatic increase clause

incoln 'uestioned the deficiency assessmentsCourt of (a* !ppeals: found no valid basis and cancelled it

C!: affirmed C(!

CI@ claims that Lautomatic increase clauseL in the sub4ect insurance policy is separate

ISS;2 the Lautomatic increase clauseL should not be ta*ed ith the main policy

%=D: 2?. C! set aside

Section , (itle I of the Insurance Code defines an insurance policy as the ritten instrument in hich a

contract of insurance is set forth

Section 3$ of the same Code provides that the policy, hich is re'uired to be in printed form, may contain

any ord, phrase, clause, mar), sign, symbol, signature, number, or ord necessary to complete the contract

of insurance.any rider, clause, arranty or endorsement pasted or attached to the policy is considered part of such policy

or contract of insurance


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Section /10 that the payment of documentary stamp ta*es is done at the time the act is done or transaction

had and the ta* base for the computation of documentary stamp ta*es on life insurance policies under Section

/N0 is the amount fi*ed in policy, unless the interest of a person insured is susceptible of e*act pecuniary

measurement

the amount fi*ed in the policy is the figure ritten on its face and hatever increases ill ta)e effect in the

future by reason of the Lautomatic increase clauseL embodied in the policy ithout the need of another

contract

the amount insured by the policy at the time of its issuance necessarily included the additional sum coveredby the automatic increase clause because it as already determinable at the time the transaction as entered

into and formed part of the policy

to claim that the increase in the amount insured Gby virtue of the automatic increase clause incorporated into

the policy at the time of issuanceH should not be included in the computation of the documentary stamp ta*es

due on the policy ould be a clear evasion of the la re'uiring that the ta* be computed on the basis of the

amount insured by the policy

1$) R!u+l'c vs D!l 4ont! 4otors "63 SCRA 5) G.R. No. 1,#,.Octo+!r # 66,

Facts:

ilfran iner lost in a case against Del Monte Motors. (hey ere made to pay // million pesos for service

contracts ith Del Monte, and such as sourced from the counterbond posted by ilfran. CISC? issued the

counterbond. CISC? opposed but as rebuffed. (he @(C released a motion for e*ecution commanding the

sheriff to levy the amount on the property of CISC?. (o completely satisfy the amount, the Insurance

Commissioner as also commanded to ithdra the security deposit filed by CISC? ith the Commission

according to Sec #$0 of the Insurance Code.

Insurance Commissioner Malinis as ordered by the @(C to ithdra the security bond of CISC? for the

payment of the insurance indemnity on by Del Monte Motor against ilfran iner, the insured.

Malinis didn+t obey the order, so the respondent moved to cite him in contempt of Court. (he @(C ruled

against Malinis because he didn+t have legal basis.

Issues:

/. >hether or not the security deposit held by the Insurance Commissioner pursuant to Section #$0 of the

Insurance Code may be levied or garnished in favor of only one insured.

#. >hether or not the Insurance Commissioner has poer to ithhold the release of the security deposit.

%eld: 2o. es. "etition granted.

@atio:

/. Sec #$06 2o 4udgment creditor or other claimant shall have the right to levy upon any of the securities of

the insurer held on deposit pursuant to the re'uirement of the Commissioner.

(he court also claimed that the security deposit shall be G/H anserable for all the obligations of the

depositing insurer under its insurance contracts& G#H at all times free from any liens or encumbrance& and G0H

e*empt from levy by any claimant.

9(o allo the garnishment of that deposit ould impair the fund by decreasing it to less than the percentage

of paid6up capital that the la re'uires to be maintained. Further, this move ould create, in favor of

respondent, a preference of credit over the other policy holders and beneficiaries.9!lso, the securities are held as a contingency fund to anser for the claims against the insurance company

by all its policy holders and their beneficiaries. (his step is ta)en in the event that the company becomes

insolvent or otherise unable to satisfy the claims against it. (hus, a single claimant may not lay sta)e on the

securities to the e*clusion of all others. (he other parties may have their on claims against the insurance

company under other insurance contracts it has entered into.

#. (he Insurance Code has vested the ?ffice of the Insurance Commission ith both regulatory and

ad4udicatory authority over insurance matters.


11/15

rulings, or for otherise conducting business in an unsafe or unsound manner.

Included here is the duty to hold security deposits under Secs // and #$# of the Code for the benefit of

policy holders. Sec /#, on the other hand, states:

9the securities deposited as aforesaid shall be returned upon the companyKs ma)ing application therefor and

proving to the satisfaction of the Commissioner that it has no further liability under any of its policies in the

"hilippines.

%e has been given great discretion to regulate the business to protect the public. !lso 9!n implied trust is

created by the la for the benefit of all claimants under subsisting insurance contracts issued by theinsurance company. %e believed that the security deposit as e*empt from e*ecution to protect the policy

holders.

II. %ERFECTION OF CONTRACT

1#) Enr'=u!> vs Sun L'f! Assuranc! Co. of Cana2a "631 %&'l ,#) G.R. No. 1$#. Nov!*+!r # 1#6

Facts: "laintiff is estate administrator for late Joa'uin %errer. %errer has pending application ith defendant

Sun ife !ssurance Co Gsun ifeH evidenced by a provisional receipt. (he provisional receipt reads payment

of "hpR, $$$ for life annuity received #R September //1. (he application as received by Sun ife head

office a month after.

$ December //1, the policy as issued in Montreal. ! petition for ithdraal of application as filed by

%errer+s layer /N December //1. %errer died #$ December. ! letter from Sun ife as received #/

December stating policy as issued and reminds the party of a notification of acceptance of the application

dated #R 2ovember.

"laintiff testified that he had found no letter of notification from the Sun ife.

oer Court decides in favor of respondent. !ppeal as ta)en.

Issue: >hether or not the there has been a valid offer and acceptance--

%eld: 2one. (he Civil Code provides that the acceptance made by letter binds the person ma)ing the offeronly from the date it has came to its )noledge. (he contract of life annuity as not perfected. (here as no

satisfactory evidence that the application acceptance came to the )noledge of %errer.

!rticle /R of the civil code provides that any deficiency in the special la shall be supplied by the Code. (he

Insurance Code does not provide for la on the principle of acceptance, thus the Civil Code shall govern.

!rticle /#R# provides that consent is shon by concurrence of offer and acceptance ith the thing and the

consideration to the contract. (he acceptance by letter shall not bind the person ma)ing the offer e*cept from

the time It came to his )noledge.

!merican Courts held that acceptance of offer not actually communicated does not complete the contract but

the mailing of the acceptance. ocus "oenitrntiae is ended hen acceptance has passed beyond party+scontrol.

Furthermore, the provisional receipt provides for conditions before a contract is deemed final. /. Medical

e*amination. #. !pproval by head office of the application. 0. the company communicates approval to the

applicant.

In the case, there as no letter of notification. 2o evidence of )noledge. Judgment reversed. "hpR$$$ ith

interest is to be returned.

6) Gr!at %ac'f'c L'f! Assuranc! Co vs CA "$# SCRA 35). G.R. No. L-51$3. Ar'l 56 1#(#

"rivate respondent, a duly authoried agent of "acific ife, applied for a #$6year endoment policy on the

life of his one6year old daughter, a mongoloid. %e did not divulge each physical defect of his daughter. %epaid the premium and as issued a binding deposit receipt. %oever, despite the branch manager+s favorable

recommendation, the Company disapproved the application, because a #$6year endoment plan is not


12/15

available for minors. Instead, it offered the Juvenile (riple !ction "lan. (he manager rote bac) and again

strongly recommended the approval of the application. !t this point, the child died of influena ith

complication of broncho6pneumonia.

In a suit filed by private respondent to recover the proceeds of the insurance, the trial court rendered

4udgment adverse to both petitioners. (he Court of !ppeals in its amended decision affirmed the trial court+s

decision in toto.

(he decisive issues in these cases are: G/H hether the binding deposit receipt constituted a temporary

contract of the life insurance in 'uestion& and G#H hether private respondent concealed the state of health

and physical condition of his child.

(he Supreme Court held that a Lbinding receiptL does not insure by itself& that no insurance contract as

perfected beteen the parties ith the non6compliance of the conditions provided in the binding receipt and

concealment having been committed by private @espondent.

S!Bhen he filed the insurance application in dispute he as therefore only ta)ing a

chance that the company ill approve the recommendation of the agent for the acceptance and approval of

the application in 'uestion. Secondly, having an insurable interest on the life of his daughter, aside frombeing an insurance agent and office associate of the branch, the applicant must have )non and folloed the

progress on the processing of such application and could not pretend ignorance of the Company+s re4ection

of the #$6year endoment life insurance application.

1) D/% vs CA an2 Estat! of Dans. 33# SCRA (. G.R. No. L-16##5( 4arc& 1 1##3

F!C(S: Juan B. Dans, 1R years of age, together ith his family, applied for a loan orth "hp 3$$, $$$ at the

Development Ban) of the "hilipppines on May /N1. (he loan as approved by the ban) dated !ugust ,

/N1 but in the reduced amount of "hp 0$$, $$$. Mr. Dans as advised by DB" to obtain a mortgage

redemption insurance at DB" M@I pool. DB" deducted the amount to be paid for M@I "remium that is

orth "hp /1R.$$. (he insurance of Mr. Dans, less the DB" service fee of /$U, as credited by DB" to the

savings account of DB" M@I6"ool. !ccordingly, the DB" M@I "ool as advised of the credit.

?n September 0, /N1, Mr. Dans died of cardiac arrest. DB" M@I notified DB" as not eligiblefor the coverage of insurance for he as beyond the ma*imum age of R$. (he ife, Candida, filed a

complaint to the @egional (rial Court Branch I Basilan against DB" and DB" M@I pool for VCollection of


13/15

Sum of Money ith Damages+. "rior to that, DB" offered the administratri* GMrs. DansH a refund of the

M@I payment but she refused for insisting that the family of the deceased must receive the amount

e'uivalent of the loan. DB" also offered and e* gratia for settlement orth "hp 0$, $$$. Mrs. Dans refused to

ta)e the offer. (he decision of the @(C rendered in favor of the family of the deceased and against DB".

%oever, DB" appealed to the court.

ISShether or not the DB" M@I "ool should be held liable on the ground that the contract as already

perfected.

%=D: 2o. DB" M@I "ool is not liable. (hough the poer to approve the insurance is lodged to the pool,

the DB" M@I "ool did not approve the application of the deceased. (here as no perfected contract beteen

the insurance pool and Mr. Dans.

DB" as earing to legal hats: as a lender and insurance agent. !s an insurance agent, DB"

made believed that the family already fulfilled the re'uirements for the said insurance although DB" had a

full )noledge that the application ould never be approved. DB" acted beyond the scope of its authority

for accepting applications for M@I. If the third person ho contracted is unaare of the authority conferred

by the principal on the agent and he has been deceived, the latter is liable for damages. (he limits of the

agency carries ith it the implication that a deception as perpetratedA!rticles /6#/ come into play.

%oever, DB" is not entitled to compensate the family of the deceased ith the entire value of the

insurance policy. Speculative damages are too remote to be included in the cost of damages. Mr. Dans is

entitled only to moral damages. Such damages do not need a proof of pecuniary loss for assessment. (he

court granted only moral damages G"hp 3$, $$$H plus attorney fees+s G"hp /$, $$$H and the reimbursement of

the M@I fees ith legal interest from the date of the filing of the complaint until fully paid.

22) Philamcare Health Systems vs CA and Trinos- supra

5) Gulf R!sorts Inc vs %&'l''n! C&art!r Insuranc! Cororat'on "3$ SCRA 6)G.R. No. 1,1,(

4a 1, 66

Facts: Oulf @esorts is the oner of the "laa @esort situated at !goo, a


14/15

casualty and marine insurance, the premium becomes a debt as soon as the ris) attaches. In the sub4ect

policy, no premium payments ere made ith regard to earth'ua)e shoc) coverage e*cept on the to

simming pools. (here is no mention of any premium payable for the other resort properties ith regard to

earth'ua)e shoc). (his is consistent ith the history of petitioner+s insurance policies ith !%!C.

III. SU/ROGATION

3) 4alaan Insuranc! Co Inc vs CA "1, SCRA 5,) G.R. No. L-5,315. S!t!*+!r , 1#$$) 4an'la 4a&o0an 4anufactur'n0 Co vs CA "13 SCRA ,6) G.R. No. L-(, Octo+!r 1 1#$(

,) %an 4alaan Insuranc! vs CA an2 Fa+'!. "1$3 SCRA 3) G.R. No. $16,. Ar'l 5 1##6

() C!+u S&'ar2 vs. W'll'a* L'n!s "56, SCRA (,) GR. No.15,6( 4a 1###

$) D!lsan Transort L'n!s vs CA an2 S&''n0 Co. vs Insuranc! Co. of Nort& A*!r'ca "35$ SCRA 11) G.R. No. 1,$36. Au0ust

, 66$

I9. INSURA/LE INTEREST

51) Sous!s C&a vs CA "( SCRA ,#6) G.R. No. 136. Au0ust 1$ 1##(

5) Gr!at %ac'f'c L'f! Assuranc! vs CA an2 L!ut!r'o "56# SCRA 6) G.R. No. 115$##.Octo+!r 15

1###

33) Harvardian Colleges vs Country Bankers nsurance Co! "# CA$A 2) CA C% &o! '3((! *anuary +

#,+

3.) Ang /a 0u vs Phoeni1 Assurance "# CA$A ('.) Septemer 2 #,+#

5) Ga'sano Ca0aan Inc. vs Insuranc! Co. of Nort& A*!r'ca "3#6 SCRA $,) G.R. No. 13($5#. 8un!

$ 66,

5,) Et!rnal Gar2!ns 4!*or'al %ar; Co. vs %&'la*l'f! Insuranc! Co. G.R. No. 1,,3. Ar'l # 66$

9. /URDEN OF %ROOF

5() D/% %ool of Accr!2't!2 Insuranc! vs Ra2'o 4'n2anao N!t@or; "3$6 SCRA 513) G.R. No. 13(65#

8anuar ( 66,

9I. CONCEAL4ENT AND RE%RESENTATION

5$) Insular L'f! vs F!l'c'ano "(5 %&'l 61) G.R. No. 3(#5. S!t!*+!r 15 1#31

5#) %&'la*car!

9II. /REAC< OF WARRANT

3) %ru2!nt'al Guarant!! vs Trans-As'a S&''n0 L'n!s "3#1 SCRA 311) G.R. No. 11$#6. 8un! 6

66,

9III. %ERSONS ENTITLED TO RECO9ER UNDER T

3) S&!r*an S&af!r vs 8u20! of RTC Olon0ao ""1,( SCRA 5,$) G.R. No. ($$3$ Nov!*+!r 13 1#$$

IB. INCONTESTA/ILIT CLAUSE

3,) Tan vs CA. G.R. No. 3$63# 8un! # 1#$#


15/15

B. LIA/ILIT UNDER AN O%EN %OLIC

3() D!v!lo*!nt Insuranc! Cororat'on v. Int!r*!2'at! A!llat! Court "135 SCRA ,1) G.R. No.

(15,6 8ul 1, 1#$,

Documents

Digest Insurance Law 1