Insurance Digests pp 1-3

7/28/2019 Insurance Digests pp 1-3

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ABOITIZ SHIPPING CORPORATION V NEW INDIA ASSURANCE COMPANY, LTD.[CITATION]QUISUMBING; May 2, 2006

NATUREPetition for review on certiorari

FACTS- Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals from

France on board a vessel owned by Franco-Belgian Services, Inc.- The cargo was consigned to General Textile, Inc., in Manila and insured by respondent New India Assurance Company, Ltd.- While in Hongkong, the cargo was transferred to M/V P. Aboitiz for transshipment toManila.- Before departing, the vessel was advised that it was safe to travel to its destination, but while at sea, the vessel received a report of a typhoon moving within its path.- To avoid the typhoon, the vessel changed its course. However, it was still at the fringeof the typhoon when its hull leaked.- On October 31, 1980, the vessel sank, but the captain and his crew were saved.- On November 3, 1980, the captain of M/V P. Aboitiz filed his Marine Protest, statingthat the wind force was at 10 to 15 knots at the time the ship foundered and describedthe weather as moderate breeze, small waves, becoming longer, fairly frequent white

horse- Petitioner notified the consignee of the total loss of the vessel and all of its cargoes.- General Textile, lodged a claim with respondent for the amount of its loss.- Respondent paid General Textile and was subrogated to the rights of the latter.- Respondent hired a surveyor to investigate, and the same concluded that the cause wasthe flooding of the holds brought about by the vessels questionable seaworthiness. - Respondent filed a complaint for damages against petitioner Aboitiz, Franco-BelgianServices and the latters lo cal agent, F.E. Zuellig, Inc. (Zuellig) - On November 20, 1989, the trial court ruled in favor of respondent and held petitionerAboitiz liable for the total value of the lost cargo plus legal interest - The complaint with respect to Franco and Zuellig was dismissed- Petitioner elevated the case to the Court of Appeals, which in turn, affirmed in toto thetrial courts decision.- Petitioner moved for reconsideration but the same was denied.- Hence, this petition for reviewPetitioners Claim > Petitioner contends that respondents claim for damages should only be against theinsurance proceeds and limited to its pro-rata share in view of the doctrine of limitedliabilityRespondents Comments > Respondent counters that the doctrine of real and hypothecary nature of maritime lawis not applicable in the present case because petitioner was found to have been negligent.Hence, according to respondent, petitioner should be held liable for the total value of thelost cargo

ISSUEWON the limited liability doctrine applies in this case

HELD

NORatio Where the shipowner fails to overcome the presumption of negligence, thedoctrine of limited liability cannot be applied.

Reasoning- From the nature of their business and for reasons of public policy, common carriers arebound to observe extraordinary diligence over the goods they transport according to allthe circumstances of each case. In the event of loss, destruction or deterioration of theinsured goods, common carriers are responsible, unless they can prove that the loss,

destruction or deterioration was brought about by the causes specified in Article 17341 of the Civil Code. In all other cases, common carriers are presumed to have been at fault

or to have acted negligently, unless they prove that they observed extraordinarydiligence. Moreover, where the vessel is found unseaworthy, the shipowner is alsopresumed to be negligent since it is tasked with the maintenance of its vessel. Thoughthis duty can be delegated, still, the shipowner must exercise close supervision over itsmen.- In the present case, petitioner has the burden of showing that it exercisedextraordinary diligence in the transport of the goods it had on board in order to invokethe limited liability doctrine. Differently put, to limit its liability to the amount of theinsurance proceeds, petitioner has the burden of proving that the unseaworthiness of itsvessel was not due to its fault or negligence.- Considering the evidence presented and the circumstances obtaining in this case, we

find that petitioner failed to discharge this burden. Both the trial and the appellatecourts, in this case, found that the sinking was not due to the typhoon but to itsunseaworthiness. Evidence on record showed that the weather was moderate when thevessel sank. These factual findings of the Court of Appeals, affirming those of the trialcourt are not to be disturbed on appeal, but must be accorded great weight. Thesefindings are conclusive not only on the parties but on this Court as well.Disposition Petition is denied for lack of merit.

Philam v Arnaldo G.R. No. 76452 July 26, 1994

J. Quiason

Facts:

One Ramon Paterno complained about the unfair practices committed by the companyagainst its agents, employees and consumers. The Commissioner called for a hearing

where Paterno was required to specify which acts were illegal. Paterno then specified

that the fees and charges stated in the Contract of Agency between Philam and its agents

be declared void. Philam, on the other hand, averred that there Paterno must submit a

verified formal complaint and that his letter didnt contain information Philam was

seeking from him. Philam then questioned the Insurance Commissions jurisdiction over

1 Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causesonly:(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;(2) Act of the public enemy in war, whether international or civil;

(3) Act of omission of the shipper or owner of the goods;(4) The character of the goods or defects in the packing or in the containers;(5) Order or act of competent public authority.


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the matter and submitted a motion to quash. The commissioner denied this. Hence

this petition.

Issue: Whether or not the resolution of the legality of the Contract of Agency falls within

the jurisdiction of the Insurance Commissioner.

Held: No. Petition granted.

Ratio:

According to the Insurance code, the Insurance Commissioner was authorized to

suspend, directors, officers, and agents of insurance companies. In general, he was tasked

to regulate the insurance business, which includes:

(2) The term "doing an insurance business" or "transacting an insurance business,"

withinthe meaning of this Code, shall include

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

(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and

not as merely incidental to any other legitimate business or activity of the surety; (c)doing any kind of business, including a reinsurance business, specifically recognized as

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

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

a manner designed to evade the provisions of this Code. (Insurance Code, Sec. 2[2])

The contract of agency between Philamlife and its agents wasnt included with the

Commissoners power to regulate the business. Hence, the Insurance commissioner

wasnt vested with jurisidiction under the rule expresio unius est exclusion alterius.

The respondent contended that the commissioner had the quasi-judicial power to

adjudicate under Section 416 of the Code. It stated:

The Commissioner shall have the power to adjudicate claims and complaints involvingany loss, damage or liability for which an insurer may be answerable under any kind of

policy or contract of insurance, or for which such insurer may be liable under a contract

of suretyship, or for which a reinsurer may be used under any contract or reinsurance it

may have entered into, or for which a mutual benefit association may be held liable

under the membership certificates it has issued to its members, where the amount of any

such loss, damage or liability, excluding interest, costs and attorney's fees, being claimed

or sued upon any kind of insurance, bond, reinsurance contract, or membership

certificate does not exceed in any single claim one hundred thousand pesos.

This was, however, regarding complaints filed by the insured against the Insurance

company.

Also, the insurance code only discusses the licensing requirements for agents and

brokers. The Insurance Code does not have provisions governing the relations

between insurance companies and their agents.

Investment Planning Corporation of the Philippines v. Social Security Commission- that

an insurance company may have two classes of agents who sell its i nsurance policies: (1)

salaried employees who keep definite hours and work under the control and supervision

of the company; and (2) registered repr esentatives, who work on commission basis.

The agents under the 2 nd sentence are governed by the Civil Code laws on agency. This

means that the regular courts have jurisdiction over this category.

Gercio v CA September 28, 1925 G.R. No. 23703. J. MalcolmFacts:Gercio bought a Sunlife policy for 2000 pesos naming his wife Zialcita as the beneficiary.However, Zialcita was convicted for adultery after Gercio bought the policy. Gercio filedfor divorce and married a new woman, Adela. He informed Sunlife that he wanted to put in his new wife as the beneficiary and revoke Adela. The trial court ruled in his favor andorder Sun to cancel the former wife as the beneficiary and name the new one as such.The company refused to obey. Hence, this appeal.Issue:1. Whether the case be considered in the light of the Code of Commerce, the Civil Code, or

the Insurance Act.2. Whether the insured the husband has the power to change the beneficiary the

former wife and to name instead his actual wife, where the insured and thebeneficiary have been divorced and where the policy of insurance does not expresslyreserve to the insured the right to change the beneficiary.

Held: No. None of these. American authorities considered. Judgment reversedRatio:1. Nothing in the Code of Commerce states a provision either permitting or prohibitingthe insured to change the beneficiary.The Civil Code has no provisions which relate directly and specifically to life-insurancecontracts or to the destination of life-insurance proceeds.As for Insurance Act, there is likewise no provision either permitting or prohibiting the

insured to change the beneficiary.Hence, the courts gathered rules from American authorities given that the Insurance Act was taken from the California Code.2. One of the cases in the American jurisdiction applicable to the case at hand is Yore vs.Booth which stated:A person who procures a policy upon his own life, payable to a designated beneficiary,although he pays the premiums himself, and keeps the policy in his exclusive possession,has no power to change the beneficiary, unless the policy itself, or the charter of theinsurance company, so provides. Connecticut Mutual Life Insurance Company vs Schaefer- We do not hesitate to say,however, that a policy taken out in good faith and valid at its inception, is not avoided bythe cessation of the insurable interest, unless such be the necessary effect of theprovisions of the policy itself

Central National Bank of Washington City vs. Hume- It is indeed the general rule that apolicy, and the money to become due under it, belong, the moment it is issued, to the


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person or persons named in it as the beneficiary or beneficiaries, and that there is nopower in the person procuring the insurance, by any act of his, by deed or by will, totransfer to any other person the interest of the person named. In Louisiana, the civil law reconciled with modern insurance laws was considered ashaving been similar to that of the Philippines.Lambert vs Penn Mutual Life- where a policy is of the semitontine variety, as in thiscase, the beneficiary has a vested right in the policy, of which she cannot be deprivedwithout her consent. Entwistle vs. Travelers Insurance Company- We agree entirely with the suggestion that

holder or holders, as used in this connection, means those who in law are the ownersof the policy, and are entitled to the rights and benefits which may accrue under it; inother words, all the beneficiaries; in the present case, not only the wife, by the children of the insured. If for any reason, prudence required the conversion of the policy into cash, aguardian would have no special difficulty in reasonable protecting the interest of hiswards. But however that may be, it is manifest that the option can only be exercised bythose having the full legal interest in the policy, or by their assignee. Neither thehusband, nor the wife, nor both together had power to destroy the vested interest of thechildren in the po licy. Wallace vs Mutual Benefit Life Insurance Co.- As soon as the policy was issued Mrs.Wallace acquired a vested interest therein, of which she could not be deprived without her consent, except under the terms of the contract with the insurance company. Noright to change the beneficiary was reserved. Her interest in the policy was her

individual property, subject to be divested only by her death, the lapse of time, or by thefailure of the insured to pay the premiums. She could keep the policy alive by paying thepremiums, if the insured did not do so. It was contingent upon these events, but it wasfree from the control of her husband. We are unable to see how the plaintiffs interest in the policy was primary or superior tothat of the husband. Both interests were contingent, but they were entirely separate anddistinct, the one from the other. The wifes interest was not affected by the decree of court which dissolved the marriage contract between the parties. It remains her separateproperty, afte r the divorce as before.

Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931. J. MalcolmFacts:Ang insured his warehouse for the total value of Php 60,000. One of these, amounting to10,000, was with Springfield Insurance Company. His warehouse burned down, then heattempted to recover 8,000 from Springfield for the indemnity. The insurance companyinterposed its defense on a rider in the policy in the form of Warranty F, fixing theamount of hazardous good that can be stored in a building to be covered by theinsurance. They claimed that Ang violated the 3 percent limit by placing hazardous goodsto as high as 39 percent of all the goods stored in the building. His suit to recover wasgranted by the trial court. Hence, this appeal.Issue: Whether a warranty referred to in the policy as forming part of the contract of insurance and in the form of a rider to the insurance policy, is null and void because not complying with the Philippine Insurance Act.Held: No. The warranty is valid. Petition dismissed.Ratio:The Insurance Act, Section 65, taken from California law, states:"Every express warranty, made at or before the execution of a policy, must be containedin the policy itself, or i n another instrument signed by the insured and referred to in thepolicy, as making a part of it."

Warranty F, indemnifying for a value of Php 20,000 and pasted on the left margin of thepolicy stated:It is hereby declared and agreed that during the currency of this policy no hazardousgoods be stored in the Building to which this insurance applies or in any buildingcommunicating therewith, provided, always, however, that the Insured be permitted tostored a small quantity of the hazardous goods specified below, but not exceeding in all 3per cent of the total value of the whole of the goods or merchandise contained in saidwarehouse, viz; . . . .Also, the court stated a book that said, "any express warranty or condition is always a

part of the policy, but, like any other part of an express contract, may be written in themargin, or contained in proposals or documents expressly referred to in the policy, andso made a part of it."It is well settled that a rider attached to a policy is a part of the contract, to the sameextent and with like effect as it actually embodied therein. In the second place, it isequally well settled that an express warranty must appear upon the face of the policy, orbe clearly incorporated therein and made a part thereof by explicit reference, or bywords clearly evid encing such intention. The court concluded that Warranty F is contained in the policy itself, because by thecontract of insurance agreed to by the parties it was made to be a part. It wasnt aseparate instrument agreed to by the parties.The receipt of the policy by the insured without objection binds him. It was his duty toread the policy and know its terms. He also never chose to accept a different policy by

considering the earlier one as a mistake. Hence, the rider is valid.Philippine Health Care Providers v CIR G.R. No. 167330, June 12, 2008. J. CoronaFacts:The petitioner, a prepaid health-care organization offering benefits to its members. TheCIR found that the organization had a deficiency in the payment of the DST under Section185 of the 1997 Tax Code which stipulated its implementation:On all policies of insurance or bonds or obligations of the nature of indemnity for loss,damage, or liability made or renewed by any person, association or company orcorporation transacting the business of accident, fidelity, employer's liability, plate, glass,steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance) The CIR sent a demand for the payment of deficiency taxes, including surcharges andinterest, for 1996-1997 in the total amount of P224,702,641.18.The petitioner protested to the CIR, but it didnt act on the ap peal. Hence, the companyhad to go to the CTA. The latter declared judgment against them and reduced the taxes. It ordered them to pay 22 million pesos for deficiency VAT for 1997 and 31 milliondeficiency VAT for 1996.CA denied the companys appeal an d increased taxes to 55 and 68 million for 1996 to1997.Issues: WON a health care agreement in the nature of an insurance contract andtherefore subject to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax Code of 1997)Held: Yes. Petition dismissed.Ratio:The DST is levied on the exercise by persons of certain privileges conferred by law forthe creation, revision, or termination of specific legal relationships through the executionof specific instruments.The DST is an excise upon the privilege, opportunity, or facility offered at exchanges forthe transaction of the business. In particular, the DST under Section 185 of the 1997 Tax


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Code is imposed on the privilege of making or renewing any policy of insurance (except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity forloss, damage, or liability.Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross Healthcare, Inc. v. Olivares, this Court ruled that a health careagreement is in the nature of a non-life insurance policy.Its health care agreement is not a contract for the provision of medical services.Petitioner does not actually provide medical or hospital services but merely arranges forthe same

It is also incorrect to say that the health care agreement is not based on loss or damagebecause, under the said agreement, petitioner assumes the liability and indemnifies itsmember for hospital, medical and related expenses (such as professional fees of physicians). The term "loss or damage" is broad enough to cover the monetary expenseor liability a member will incur in case of illness or injury.Philamcare Health Systems, Inc. v. CA.- The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity.Similarly, the insurable interest of every member of petitioner's health care program inobtaining the health care agreement is his own health. Under the agreement, petitioner isbound to indemnify any member who incurs hospital, medical or any other expensearising from sickness, injury or other stipulated contingency to the extent agreed uponunder the contract.

Philippine Health Care v CIR G.R. No. 167330 September 18, 2009. J.CoronaFacts:Philippine Health Cares objectives were: "[t]o establish, maintain, conduct and operate a prepaid group practice health caredelivery system or a health maintenance organization to take care of the sick anddisabled persons enrolled in the health care plan and to provide for the administrative,legal, and financial responsibilities of the organization. It lost the case in 2004 when it was made to pay over 100 million in VAT deficiencies. At the time the MFR was filed, it was able to avail of tax amnesty under RA 9840 by paying 5percent of the tax or 5 million pesos.Petitioner passed an MFR but the CA denied. Hence, this case.Issues:Was petitioner, as an HMO, engaged in the business of insurance during the pertinent taxable years, and was thus liable for DST?Held: No. Mfr granted. CIR must desist from collecting tax.Ratio:Section 185 of the NIRC . Stamp tax on fidelity bonds and other insurance policies. Onall policies of insurance or bonds or obligations of the nature of indemnity for loss,damage, or liability made or renewed by any person, association or company orcorporation transacting the business of accident, fidelity, employers liability, plate, glass,steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance).Two requisites must concur before the DST can apply, namely: (1) the document must bea policy of insurance or an obligation in the nature of indemnity and (2) the makershould be transacting the business of accident, fidelity, employers liability, plate, glass,steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance).

Under RA 7875, an HMO is "an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium."Various courts in the United States have determined that HMOs are not in the insurancebusiness. One test that they have applied is whether the assumption of risk andindemnification of loss are the principal object and purpose of the organization orwhether they are merely incidental to its business. If these are the principal objectives,the business is that of insurance. But if such is incidental and service is the principalpurpose, then the business is not insurance.Applying the "principal object and purpose test," there is significant American case law

supporting the argument that a corporation, whose main object is to provide themembers of a group with health services, is not engaged in the insurance business.For the purpose of determining what "doing an insurance business" means, we have toscrutinize the operations of the business as a whole. This is of course only prudent andappropriate, taking into account laws applicable to those in the insurance business.Petitioner, as an HMO, is not part of the insurance industry. This is evident from the fact that it is not supervised by the Insurance Commission but by the Department of Health.In fact, in a letter dated September 3, 2000, the Insurance Commissioner confirmed that petitioner is not engaged in the i nsurance business.As to whether the business is covered by the DST, we can see that while the contract didcontains all the elements of an insurance contract, as stated in Sec 2., Par 1 of theInsurance Code, the primary purpose of the company is to render service. The primarypurpose of the parties in making the contract may negate the existence of an insurance

contract.Also, there is no loss, damage or liability on the part of the member that should beindemnified by petitioner as an HMO. Under the agreement, the member pays petitionera predetermined consideration in exchange for the hospital, medical and professionalservices rendered by the petitioners physician or affiliated physician to him. In other words, there is nothing in petitioner's agreements that gives rise to a monetaryliability on the part of the member to any third party-provider of medical services whichmight in turn necessitate indemnification from petitioner. The terms "indemnify" or"indemnity" presume that a liability or claim has already been incurred. There is noindemnity precisely because the member merely avails of medical services to be paid oralready paid in advance at a pre-agreed price under the agreements.Also, a member can take advantage of the bulk of the benefits anytime, e.g. laboratoryservices, x-ray, routine annual physical examination and consultations, vaccineadministration as well as family planning counseling, even in the absence of any peril,loss or damage on his or her part.Petitioner is obliged to reimburse the member who receives care from a non-participating physician or hospital. However, this is only a very minor part of the list of services available. The assumption of the expense by petitioner is not confined to thehappening of a contingency but includes incidents even in the absence of illness orinjury.Consequently, there is a need to distinguish prepaid service contracts (like those of petitioner) from the usual insurance contracts.However, assuming that petitioners commitment to provid e medical services to itsmembers can be construed as an acceptance of the risk that it will shell out more thanthe prepaid fees, it still will not qualify as an insurance contract because petitionersobjective is to provide medical services at reduced cost, not to distribute risk like aninsurer.If it had been the intent of the legislature to impose DST on health care agreements, it could have done so in clear and categorical terms. It had many opportunities to do so.


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But it did not. The fact that the NIRC contained no specific provision on the DST liabilityof health care agreements of HMOs at a time they were already known as such, belies anylegislative intent to impose it on them. As a matter of fact, petitioner was assessed itsDST liability only on January 27, 2000, after more than a decade in the business as anHMO.In view of petitioners availment of the benefits of [RA 9840], and without conceding themerits of this case as discussed above, respondent concedes that such tax amnestyextinguishes the tax liabilities of petitioner.21 Our Insurance Code was based on California and New York laws. When a statute has

been adopted from some other state or country and said statute has previously beenconstrued by the courts of such state or country, the statute is deemed to have beenadopted with the construction given.

UCPB v Masagana G.R. No. 137172. April 4, 2001. C.J. DavideFacts:In our decision of 15 June 1999 in this case, we reversed and set aside the assaileddecision[1] of the Court of Appeals, which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of P225,753.95 as fullpayment of the premiums for the renewal of the five insurance policies on Respondentsproperties; (b) declaring the replacement-renewal policies effective and binding from 22May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies. The modification consist ed in the (1) deletion of the trial courtsdeclaration that three of the policies were in force from August 1991 to August 1992;and (2) reduction of the award of the attorneys fees from 25% to 10% of the totalamount due the Respondent.Masagana obtained from UCPB five (5) insurance policies on its Manila properties.The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992,Masaganas properties were razed by fire. On July 13, 1992, plaintiff tendered fivechecks for P225,753.45 as renewal premium payments. A receipt was issued. On July 14,1992, Masagana made its formal demand for indemnification for the burned insuredproperties. UCPB then rejected Masaganas claims under the argument that the fire took place before the tender of payment.Hence Masagana filed this case.The Court of Appeals disagreed with UCPBs argument that Masaganas tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies,having been made beyond the effective date of renewal as provided under PolicyCondition No. 26, which states:26. Renewal Clause. -- Unless the company at least forty five days in advance of the endof the policy period mails or delivers to the assured at the address shown in the policynotice of its intention not to renew the policy or to condition its renewal upon reductionof limits or elimination of coverages, the assured shall be entitled to renew the policyupon payment of the premium due on the effective date of renewal.Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana, which had procured insurance coverage from UCPB for a number of years,had been granted a 60 to 90-day credit term for the renewal of the policies. Such apractice had existed up to the time the claims were filed. Most of the premiums havebeen paid for more than 60 days after the issuance. Also, no timely notice of non-renewalwas made by UCPB.The Supreme Court ruled against UCPB in the first case on the issue of whether the fireinsurance policies issued by petitioner to the respondent covering the period from May

22, 1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and afterthe occurrence of the risk insured against.UCPB filed a motion for reconsideration.The Supreme Court, upon observing the facts, affirmed that there was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent byordinary mail was received by Masagana. Also, the premiums were paid within the graceperiod.Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to

Petitioners advantage despite its practice of granting a 60 - to 90-day credit term for thepayment of premiums.Held: No. Petition denied.Ratio:Section 77 of the Insurance Code provides: No policy or contract of insurance issued byan insurance company is valid and binding unless and until the premium thereof hasbeen paid An exception to this section is Section 78 which provides: Any acknowledgment in apolicy or contract of insurance of the receipt of premium is conclusive evidence of itspayment, so far as to make the policy binding, notwithstanding any stipulation thereinthat it shall not be binding until premium is actually paid.Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreedto the payment in installments of the premium and partial payment has been made at thetime of loss.Section 78 allows waiver by the insurer of the condition of prepayment and makes thepolicy binding despite the fact that premium is actually unpaid. Section 77 does not expressly prohibit an agreement granting credit extension. At the very least, both partiesshould be deemed in estoppel to question the arrangement they have voluntarilyaccepted.The Tuscany case has provided another exception to Section 77 that the insurer maygrant credit extension for the payment of the premium. If the insurer has granted theinsured a credit term for the payment of the premium and loss occurs before theexpiration of the term, recovery on the policy should be allowed even though thepremium is paid after the loss but within the credit term.Moreover, there is nothing in Section 77 which prohibits the parties in an insurancecontract to provide a credit term within which to pay the premiums. That agreement isnot against the law, morals, good customs, public order or public policy. The agreement binds the parties.It would be unjust if recovery on the policy would not be permitted against Petitioner,which had consistently granted a 60- to 90-day credit term for the payment of premiums.Estoppel bars it from taking refuge since Masagana relied in good faith on such practice.Estoppel then is the fifth exception.

J. Vitug in UCPB v MasaganaAn essential characteristic of an insurance is its being synallagmatic, a highly reciprocalcontract where the rights and obligations of the parties correlate and mutuallycorrespond. The insurer assumes the risk of loss which an insured might suffer inconsideration of premium payments under a risk-distributing device. Such assumptionof risk is a component of general scheme to distribute actual losses among a group of persons, bearing similar risks, who make ratable contributions to a fund from which thelosses incurred due to exposures to the peril insured against are assured andcompensated


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It is generally recognized that the business of insurance is one imbued with publicinterest. For the general good and mutual protection of all the parties, it is aptlysubjected to regulation and control by the State by virtue of an exercise of its policepower. The State may regulate in various respects the relations between the insurer andthe insured, including the internal affairs of an insurance company, without beingviolative of due process.

Philamcare v CA G.R. No. 125678. March 18, 2002. J. Ynares-Sant iagoFacts:Ernani Trinos applied for a health care coverage with Philam. He answered no to aquestion asking if he or his family members were treated to heart trouble, asthma,diabetes, etc.The application was approved for 1 year. He was also given hospitalization benefits andout-patient benefits. After the period expired, he was given an expanded coverage forPhp 75,000. During the period, he suffered from heart attack and was confined at MMC.The wife tried to claim the benefits but the petitioner denied it saying that he concealedhis medical history by answering no to the aforementioned question. She had to pay forthe hospital bills amounting to 76,000. Her husband subsequently passed away. She fileda case in the trial court for the collection of the amount plus damages. She was awarded76,000 for the bills and 40,000 for damages. The CA affirmed but deleted awards fordamages. Hence, this appeal.Issue: WON a health care agreement is not an insurance contract; hence the

incontestability clause under the Insurance Code does not apply.Held: No. Petition dismissed.Ratio:Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended that there was no indemnification unlike in insurancecontracts. It supported this claim by saying that it is a health maintenance organizationcovered by the DOH and not the Insurance Commission. Lastly, it claimed that theIncontestability clause didnt apply because two -year and not one-year effectivityperiods were required.Section 2 (1) of the Insurance Code defines a contract of in surance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damageor liability arising from an unknown or contingent event. Section 3 states: every person has an i nsurable interest in the life and health:

(1) of himself, of his spouse and of his children.In this case, the husbands health was the insurable interest. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Theprovider must pay for the medical expenses resulting from sickness or injury.While petitioner contended that the husband concealed materialfact of his sickness, thecontract stated that:that any physician is, by these presents, expressly authorized to disclose or givetestimony at anytime relative to any information acquired by him in his professionalcapacity upon any question affecting the eligibility for health care coverage of theProposed Members. This meant that the petitioners required him to sign authorization to furnish reportsabout his medical condition. The contract also authorized Philam to inquire directly tohis medical history.Hence, the contention of concealment isnt valid.

They cant also invoke the Invalidation of agreement clause where failure of theinsured to disclose information was a grounds for revocation simply because the answerassailed by the company was the heart condition question based on the insuredsopinion. He wasnt a medical doctor, so he cant accurately gauge his condition. Henrick v Fire- in such case the insurer is not justified in relying upon such statement,but is obligated to make further inquiry. Fraudulent intent must be proven to rescind the contract. This was incumbent upon theprovider.Having assumed a responsibility under t he agreement, petitioner is bound to answer

the same to the extent agreed upon. In the end, the liability of the health care providerattaches once the member is hospitalized for the disease or injury covered by theagreement or whenever he avails of the covered benefits which he has prepaid. Section 27 of the Insurance Code- a concealment entitles the injured party to rescind acontract of insurance. As to cancellation procedure- Cancellation requires certain conditions:1. Prior notice of cancellation to insured;2. Notice must be based on the occurrence after effective date of the policy of one ormore of the grounds mentioned;3. Must be in writing, mailed or delivered to the insured at the address shown in thepolicy;4. Must state the grounds relied upon provided in Section 64 of the Insurance Codeand upon request of insured, to furnish facts on which cancellation is basedNone were fulfilled by the provider.As to incontestability- The trial court said that under the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from thedate of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, thedefense of concealment or misrepresentation no longer lie.

Blue Cross v Olivares G.R. No. 169737, February 12, 2008. J. CoronaFacts:Neomi Olivares applied for a health care program with Blue Cross for the amount of 12,000 pesos. 38 days after she applied, she suffered from a stroke. Ailments due to pre -existing conditions were excluded from the coverage. She was confined in Medical Cityand discharged with a bill of Php 34,000. Blue Cross refused to pay unless she had herphysicians certification that she was suffering from a pre -existing condition. When BlueCross still refused to pay, she filed suit in the MTC. The health care company rebutted bysaying that the physician didnt disclose the condition due to the patients invocation of the doctor-client privilege. The MTC dismissed for a lack of cause of action because thephysician didnt disclose the condition. In the RTC, the spouses were a warded theamount of the hospital bills plus 60,000 in damages. This was under the ratio that theburden to prove that Neomi had a pre-existing condition was under Blue Cross. The CAdenied the motion for reconsideration of the health care company.Issues:1. Whether petitioner was able to prove that respondent Neomi's stroke was caused by apre-existing condition and therefore was excluded from the coverage of the health careagreement.2. Whether it was liable for moral and exemplary damages and attorney's fees.Held: No. Yes. Petition dismissed.Ratio:


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1. Philamcare Health Systems, Inc. v. CA - a health care agreement is in the nature of anon-life insurance. It is an established rule in insurance contracts that when their termscontain limitations on liability, they should be construed strictly against the insurer.These are contracts of adhesion the terms of which must be interpreted and enforcedstringently against the insurer which prepared the contract. This doctrine is equallyapplicable to health care agreements. The agreement defined a pre-existing condition as:a disability which existed before the commencement date of membership whose naturalhistory can be clinically determined, whether or not the Member was aware of such

illness or condition. Such conditions also include disabilities existing prior toreinstatement date in the case of lapse of an Agreement. Under this provision, disabilities which existed before the commencement of theagreement are excluded from its coverage if they become manifest within one year fromits effectivity. Petitioners still averred that the non-disclosure of the pre-existing condition made apresumption in its favor. Respondents still maintained that the petitioner had the duty toprove its accusation.Petitioner never presented evidence to prove its presumption that the Doctors report would work against Neomi. They only perceived that the invocation of the privilegemade the report adverse to Neomi and such was a disreputable presumption. Theyshould h ave made an independent assessment of Neomis condition when it failed toobtain the report. They shouldnt have waited for the attending physicians report tocome out.Section 3 (e), Rule 131 of the Rules of Court states:Under the rules of court, Rule 131, Sec. 3.Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:(e) That evidence willfully suppressed would be adverse if produced.The exception on presenting evidence applies when the suppression is an exercise of aprivilege.Hence, Neomi had the privilege not to present the Doctors report under the doctor -client privilege.2. The court quoted the CA and RTC decision stating that the r efusal of petitioner t o payrespondent Neomi's bills smacks of bad faith, as its refusal [was] merely based on itsown perception that a stroke is a pre- existing condition. Also, there was factual bases inthe RTC and CA for the award of the damages.

Pineda v Insular G.R. No. 105562 September 27, 1993. J. Davide Jr.Facts:PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during theeffectivity of the policy, perished while the ship sank in Morocco. The families of thevictims then wanted to claim the benefits of the insurance. Hence, under the advice of Nuval, the president of PMSI, they executed a special power of attorney authorizing Capt.Nuval to, "follow up, ask, demand, collect and receive" for their benefit the indemnities.Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00and another for P40,00.00, payable to the order the families. The checks were given toPMSI. Nuval, the PMSI president, pocketed the amounts in his bank account.When the families went to insular to get the benefits, their request was denied becauseInsular claimed that the checks were already given to PMSI.The families filed a petition with the Insurance Commission. They won and Insular wasordered to pay them 500 a day until the amount was furnished to them. The insurance

Commission held that the special powers of attorney executed by complainants do not contain in unequivocal and clear terms authority to Nuval to obtain and receive fromrespondent company insurance proceeds arising from the death of the seaman-insured;also, that Insular Life did not convincingly refuted the claim of Mrs. Alarcon that neithershe nor her husband executed a special power of authority in favor of Capt. Nuval andthat it did not observe Sec 180(3), when it released the benefits due to the minorchildren of Ayo and Lontok, when the said complainants did notpost a bond as required-Insular Life appealed to the CA. CA modified the decision of the Insurance Commission,eliminating the award to the minor children.

Hence, this petition by the beneficiary families.Issues:1. WON Insular Life should still be liable to the complainants when they relied on thespecial powers of attorney, which Capt. Nuval presented as documents, when theyreleased the checks to the latter.2. WON Insular Life should be liable to the complainants when they released the check infavor of Ayo and Lontok, even if no bond was posted as required.Held: Yes to both. Petition granted.Ratio:1. The special powers of attorney "do not contain in unequivocal and clear termsauthority to Capt. Nuval to obtain, receive, receipt from respondent company insuranceproceeds arising from the death of the seaman-insured.Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection andreceipt of such proceeds was a deviation from its practice with respect to group policies.They gave the proceeds to the policyholder instead of the beneficiaries themselves. Eventhe Isnular rep admitted that he gave the checks to the policyholder.Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it acted imprudently and negligently in the premises by relying without question on thespecial power of attorney.Strong vs. Repide- third persons deal with agents at their peril and are bound to inquireas to the extent of the power of the agent with whom they contract.Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has goodreason to believe that the agent is exceeding his authority, he cannot claim protectionthe party dealing with him may not shut his eyes to the real state of the case, but shouldeither refuse to deal with the agent at all, or should ascertain from the principal the truecondition of affairs.Insular delivered the checks to a party not the agent of the beneficiaries.2. Art. 225. The father and the mother shall jointly exercise legal guardianship over theproperty of their unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail, unless there isjudicial order to the contrary.Where the market value of the property or the annual income of the child exceedsP50,000, the parent concerned shall be required to furnish a bond in such amount as thecourt may determine, but not less than ten per centum (10%) of the value of theproperty or annual income, to guarantee the performance of the obligations prescribedfor general guardians.If the market value of the property or the annual income of the child exceedsP50,000.00, a bond has to be posted by the parents concerned to guarantee theperformance of the obligat ions of a general guardian. On group insurance :


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Group insurance is essentially a single insurance contract that provides coverage formany individuals, particularly for the employees of one employer.There is a master agreement issued to an employer. The employer acts as the collector of the dues and premiums. Disbursement of insurance payments by the employer is alsoone of his duties.They require an employee to pay a portion of the premium, which the employer deductsfrom wages while the remainder is paid by the employer. This is known as a contributoryplan as compared to a non-contributory plan where the premiums are solely paid by theemployer.

Although the employer may be the policyholder, the insurance is actually for the benefit of the employee. In a non-contributory plan, the payment by the employer of the entirepremium is a part of the total compensation paid for the services of the employee.The primary aim of group insurance is to provide the employer with a means of procuring insurance protection for his employees at a low cost and thereby retain theirloyalty and efficiency.

Documents

Insurance Digests pp 1-3