1. White Gold v Pioneer G.R. No. 154514.

July 28, 2005

J. Quisimbing

Facts:
White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual
through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts. When White Gold failed to fully pay its accounts, Steamship
Mutual refused to renew the coverage.
Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover
the unpaid balance. White Gold on the other hand, filed a complaint before the Insurance
Commission claiming that Steamship Mutual and Pioneer violated provisions of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that there was no need for Steamship
Mutual to secure a license because it was not engaged in the insurance business and that it was a P &
I club. Pioneer was not required to obtain another license as insurance agent because Steamship
Mutual was not engaged in the insurance business.
The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the
appellate court distinguished between P & I Clubs vis--vis conventional insurance. The appellate
court also held that Pioneer merely acted as a collection agent of Steamship Mutual.
Hence this petition by White Gold.

Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. Petition granted.

Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To
buttress its assertion, it cites the definition as an association composed of shipowners in general who
band together for the specific purpose of providing insurance cover on a mutual basis against
liabilities incidental to shipowning that the members incur in favor of third parties.
They argued that Steamship Mutuals primary purpose is to solicit and provide protection and
indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in the
insurance business in the Philippines. It is merely an association of vessel owners who have come
together to provide mutual protection against liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
A P & I Club is a form of insurance against third party liability, where the third party is anyone other
than the P & I Club and the members. By definition then, Steamship Mutual as a P & I Club is a
mutual insurance association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country albeit without the requisite
certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent
in the Philippines to solicit insurance and to collect payments in its behalf. Steamship Mutual even
renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue
doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the
Insurance Commission.
Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no
insurer or insurance company is allowed to engage in the insurance business without a license or a
certificate of authority from the Insurance Commission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration
issued by the Insurance Commission. It has been licensed to do or transact insurance business by
virtue of the certificate of authority issued by the same agency. However, a Certification from the
Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship
Mutual.
Although Pioneer is already licensed as an insurance company, it needs a separate license to act as
insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation or
procurement of applications for insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company doing business in the Philippines or
any agent thereof, without first procuring a license so to act from the Commissioner

2. G.R. No. 75605 January 22, 1993

Lessons Applicable: Exception to Ambiguous Provisions Interpreted Against Insurer (Insurance)

FACTS:
Rafael (Rex) Verendia's residential building was insured with Fidelity and Surety Insurance
Company, Country Bankers Insurance and Development Insurance with Monte de Piedad &
Savings Bank as beneficiary
December 28, 1980 early morning: the building was completely destroyed by fire
Fidelity refused the claim stating that there was a misrepresentation since the lessee was
not Roberto Garcia but Marcelo Garcia
trial court: favored Fidelity
CA: reversed
ISSUE: W/N there was false declaration which would forfeit his benefits under Section 13 of the policy

HELD: YES.
Section 13 thereof which is expressed in terms that are clear and unambiguous, that all benefits
under the policy shall be forfeited "If the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devises are used by
the Insured or anyone acting in his behalf to obtain any benefit under the policy"
Robert Garcia then executed an affidavit before the National Intelligence and Security Authority
(NISA) to the effect that he was not the lessee of Verendia's house and that his signature on the
contract of lease was a complete forgery.
Worse yet, by presenting a false lease contract, Verendia, reprehensibly disregarded the principle
that insurance contracts are uberrimae fidae and demand the most abundant good faith

2.

Facts:
Rizal Surety issued a 1 million peso fire insurance policy with Transworld. This was increased to 1.5
million. A four span building was part of the policy. A fire broke out and gutted the building, together
with a two storey building behind it were gaming machines were stored. The company filed its claims
but to no avail. Hence, it brought a suit in court. It aimed to make Rizal pay for almost 3 million
including legal interest and damages. Rizal claimed that the policy only covered damage on the four
span building and not the two storey building. The trial court ruled in Transworlds favor and ordered
Rizal to pay actual damages only. The court of appeals increased the damages. The insurance
company filed a MFR. The CA answered by modifying the imposition of interest. Not satisfied, the
insurance company petitioned to the Supreme Court.

Issue:
WON Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy
sued upon covered only the contents of the four-span building.
 Held: Yes. Petition dismissed.

Ratio:
The policy had clauses on the building coverage that read:
"contained and/or stored during the currency of this Policy in the premises occupied by them forming
part of the buildings situated within own Compound"
"First, said properties must be contained and/or stored in the areas occupied by Transworld and
second, said areas must form part of the building described in the policy xxx"
This generally means that the policy didnt limit its coverage to what was stored in the four-span
building.
As to questions of fact, both the trial court and the Court of Appeals found that the so called "annex "
was not an annexbuilding but an integral part of the four-span building described in the policy
and consequently, the machines and spare parts stored were covered by the fire insurance.
A report said: "Two-storey building constructed of partly timber and partly concrete hollow blocks
under g.i. roof which isadjoining and intercommunicating with the repair of the first right span of
the lofty storey building and thence by property fence wall."
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity"
Landicho v GSIS- the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain are
to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so
as to effect the dominant purpose of indemnity or payment to the insured
The issue of whether or not Transworld has an insurable interest in the fun and amusement machines
and spare parts, which entitles it to be indemnified for the loss thereof, had been settled in another
SC case.
336 SCRA 12 (2000)

o INSURANCE LAW: Interpretation of Insurance Contracts

FACTS:

Rizal Surety & Insurance Company issued a fire insurance policy in favor of Transworld Knitting Mills,
Inc. The subject policy stated that Rizal Surety is responsible in case of loss whilst contained and/or
stored during the currency of this Policy in the premises occupied by them forming part of the
buildings situated within own Compound xxx. The policy also described therein the four-span
building covered by the same.

On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its four-span building
and partly gutting the left and right sections thereof. A two-storey building (behind said four-span
building) was also destroyed by the fire.

ISSUE:

o Whether or not Rizal Surety is liable for loss of the two-storey building considering that the fire
insurance policy sued upon covered only the contents of the four-span building

HELD:

Both the trial court and the CA found that the so-called annex as not an annex building but an
integral and inseparable part of the four-span building described in the policy and consequently, the
machines and spare parts stored therein were covered by the fire insurance in dispute.
 So also, considering that the two-storey building aforementioned was already existing when subject
fire insurance policy contract was entered into on Jan. 12, 1981, having been constructed some time
in 1978, petitioner should have specifically excluded the said two-storey building from the coverage
of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that
such fire insurance policy covers the products, raw materials and supplies stored within the premises
of Transworld which was an integral part of the four-span building occupied by Transworld, knowing
fully well the existence of such building adjoining and intercommunicating with the right section of
the four-span building.

Also, in case of doubt in the stipulation as to the coverage of the fire insurance policy, under Art. 1377
of the New Civil Code, the doubt should be resolved against the Rizal Surety, whose layer or
managers drafted the fire insurance policy contract under scrutiny.

In Landicho vs. Government Service Insurance System, the Court ruled that the terms in an insurance
policy, which are ambiguous, equivocal or uncertain x x x are to be construed strictly and most
strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose
of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this
is that the insured usually has no voice in the selection or arrangement of the words employed and
that the language of the contract is selected with great care and deliberation by experts and legal
advisers employed by, and acting exclusively in the interest of, the insurance company.

Thursday, July 12, 2012

4. Philamcare v CA G.R. No. 125678. March 18, 2002
J. Ynares-Santiago

Facts:

Ernani Trinos applied for a health care coverage with Philam. He answered no to a question 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 and out-patient
benefits. After the period expired, he was given an expanded coverage for Php 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 concealed his medical history by answering no to the
aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband
subsequently passed away. She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted
awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause
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 insurance contracts. It supported
this claim by saying that it is a health maintenance organization covered by the DOH and not the
Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply because two-year
and not one-year effectivity periods were required.

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage or liability arising from an
unknown or contingent event.

Section 3 states: every person has an insurable interest in the life and health:

(1) of himself, of his spouse and of his children.

In this case, the 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. The provider must pay for the
medical expenses resulting from sickness or injury.

While petitioner contended that the husband concealed materialfact of his sickness, the contract
stated that:

that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime
relative to any information acquired by him in his professional capacity upon any question affecting
the eligibility for health care coverage of the Proposed Members.

This meant that the petitioners required him to sign authorization to furnish reports about his medical
condition. The contract also authorized Philam to inquire directly to his medical history.

Hence, the contention of concealment isnt valid.

They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose
information was a grounds for revocation simply because the answer assailed by the company was
the heart condition question based on the insureds opinion. 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 the provider.

Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the
extent agreed upon. In the end, the liability of the health care provider attaches once the member is
hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered
benefits which he has prepaid.

Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract 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 or more of the
grounds mentioned;

3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;

4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon
request of insured, to furnish facts on which cancellation is based

None 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 the date 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, the defense of concealment or misrepresentation no longer
lie.

5. Fortune v CA G.R. No. 115278 May 23, 1995

J. Davide Jr.

Facts:

Producers Banks money was stolen while it was being transported from Pasay to Makati. The people
guarding the money were charged with the theft. The bank filed a claim for the amount of Php
725,000, and such was refused by the insurance corporation due to the stipulation:

GENERAL EXCEPTIONS

The company shall not be liable under this policy in report of

(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any
officer, employee, partner, director, trustee or authorized representative of the Insured whether acting
alone or in conjunction with others. . . .

In the trial court, the bank claimed that the suspects were not any of the above mentioned. They won
the case. The appellate court affirmed on the basis that the bank had no power to hire or dismiss the
guard and could only ask for replacements from the security agency.

Issue: Did the guards fall under the general exceptions clause of the insurance policy and thus
absolved the insurance company from liability?

Held: Yes to both. Petition granted.

Ratio:
The insurance agency contended that the guards automatically became the authorized
representatives of the bank when they cited International Timber Corp. vs. NLRC where a contractor
is a "labor-only" contractor in the sense that there is an employer-employee relationship between the
owner of the project and the employees of the "labor-only" contractor.

They cited Art. 106. Of the Labor Code which said:

Contractor or subcontractor. There is "labor-only" contracting where the person supplying workers
to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such persons are
performing activities which are directly related to the principal business of such employer. In such
cases, the person or intermediary shall be considered merely as an agent of theemployer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by
him.

The bank asserted that the guards were not its employees since it had nothing to do with their
selection and engagement, the payment of their wages, their dismissal, and the control of their
conduct.

They cited a case where an employee-employer relationship was governed by (1) the selection and
engagement of theemployee; (2) the payment of wages; (3) the power of dismissal; and (4) the power
to control the employee's conduct.

The case was governed by Article 174 of the Insurance Code where it stated that casualty insurance
awarded an amount to loss cause by accident or mishap.

The term "employee," should be read as a person who qualifies as such as generally and universally
understood, or jurisprudentially established in the light of the four standards in the determination of
the employer-employee relationship, or as statutorily declared even in a limited sense as in the case
of Article 106 of the Labor Code which considers the employees under a "labor-only" contract as
employees of the party employing them and not of the party who supplied them to the employer.

But even if the contracts were not labor-only, the bank entrusted the suspects with the duty to safely
transfer the money to its head office, thus, they were representatives. According to the court, a
representative is defined as one who represents or stands in the place of another; one who
represents others or another in a special capacity, as an agent, and is interchangeable with agent.
 6.RAFAEL ENRIQUEZ vs. SUN LIFE ASSURANCE COMPANY OF CANADA G.R. No. L-15895 November
29, 1920
FACTS:
On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance Company of
Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the
manager of the company's Manila office and was given a provisional receipt.

The application was forwarded to the head office of the company at Montreal, Canada and on
November 26, 1917 a notice of acceptance was sent by cable to Manila. (There is no evidence
however, whether on the same day the cable was received notice was sent by the Manila office of
Herrer that the application had been accepted)

On December 4, 1917, the policy was issued. On December 18, 1917, Herrer communicated his desire
to withdraw his application through his lawyer.

The local office replied to Mr. Torres, stating that the policy had been issued, and called attention to
the notification of November 26, 1917. The reply was received by Herrer's council a day after the latter
died.

Plaintiff ad administrator of the estate of the late Joaquin Ma. Herrer to recover from the defendant
life insurance company the sum of pesos 6,000 paid by the deceased for a life annuity. The trial court
gave judgment for the defendant.

ISSUE:

Whether or not the insurance contract between Sun Life and Herrer has been perfected

RULING:

No, the contract for a life annuity in the case at bar was not perfected because it has not been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.

An acceptance of an offer of insurance not actually or constructively communicated to the proposer

does not make a contract. Only the mailing of acceptance, it has been said, completes the contract of
insurance, as the locus poenitentiae is ended when the acceptance has passed beyond the control of
the party.

An acceptance made by letter shall not bind the person making the offer except from the time it came
to his knowledge (Civil Code Art. 1262). When a letter or other mail matter is addressed and mailed
with postage prepaid there is arebuttable presumption of fact that it was received by the addressee as
soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of
these elemental facts fails to appear, it is fatal to the presumption. A letter will not be presumed to
have been received by the addressee unless it is shown that it was deposited in the post-office,
properly addressed and stamped.

Great Pacific v CA G.R. No. L-31845 April 30, 1979

J. De Castro

Facts:

Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essential data
which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the annual
premium the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00
as his commission for being a duly authorized agent of Pacific Life.

Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application form his
strong recommendation for the approval of the insurance application. Then Mondragon received a
letter from Pacific Life disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old,
but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the approval of the 20-year endowment insurance plan
to children, pointing out that since the customers were asking for such coverage.

Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance of
Cebu, which ruled against him.

Issues:

1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question

2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy

Held: No. Yes. Petition dismissed.

Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to
compliance of the following conditions: (1) that the company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company does not accept the application and offers to
issue a policy for a different plan, the insurance contract shall not be binding until the applicant
accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the company
disapproves the application, the insurance applied for shall not be in force at any time, and the
premium paid shall be returned to the applicant.

The receipt is merely an acknowledgment that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company. There was still approval or rejection the same on the basis of whether or not the
applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of
respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time.
The binding deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.

The deposit paid by private respondent shall have to be refunded by Pacific Life.

2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When he
supplied data, he was fully aware that his one-year old daughter is typically a mongoloid child. He
withheld the fact material to the risk insured.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute
and perfect candor or openness and honesty; the absence of any concealment or demotion, however
slight.

The concealment entitles the insurer to rescind the contract of insurance.

Verendia v. CA - Insurance Policy

217 SCRA 1993

Facts:

Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-18876 effective between June 23,
1980 and June 23, 1981 covering Rafael (Rex) Verendia's residential in the amount of P385,000.00. Designated as
beneficiary was the Monte de Piedad & Savings Bank. Verendia also insured the same building with two other companies,
namely, The Country Bankers Insurance for P56,000.00 and The Development Insurance for P400,000.00.While the three
fire insurance policies were in force, the insured property was completely destroyed by fire. Fidelity appraised the damage
amounting to 385,000 when it was accordingly informed of the loss. Despite demands, Fidelity refused payment under its
policy, thus prompting Verendia to file a complaint for the recovery of 385,000. Fidelity, averred that the policy was
avoided by reason of over-insurance, that Verendia maliciously represented that the building at the time of the fire was
leased under a contract executed on June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo Garcia
who was the lessee.

Issue:
Whether or not Verendia can claim on the insurance despite the misrepresentation as to the lessee and the
overinsurance.

Held: NO. Basically a contract of indemnity, an insurance contract is the law between the parties. Its terms and
conditions constitute the measure of the insurer's liability and compliance therewith is a condition precedent to the
insured's right to recovery from the. As it is also a contract of adhesion, an insurance contract should be liberally
construed in favor of the insured and strictly against the insurer company which usually prepares it.

Considering, however, the foregoing discussion pointing to the fact that Verendia used a false lease contract to support
his claim under Fire Insurance Policy, the terms of the policy should be strictly construed against the insured. Verendia
failed to live by the terms of the policy, specifically Section 13 thereof which is expressed in terms that are clear and
unambiguous, that all benefits under the policy shall be forfeited "if the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or devises are used by the Insured or anyone
acting in his behalf to obtain any benefit under the policy". Verendia, having presented a false declaration to support his
claim for benefits in the form of a fraudulent lease contract, he forfeited all benefits therein by virtue of Section 13 of the
policy in the absence of proof that Fidelity waived such provision

There is also no reason to conclude that by submitting the subrogation receipt as evidence in court, Fidelity bound itself to
a "mutual agreement" to settle Verendia's claims in consideration of the amount of P142,685.77. While the said receipt
appears to have been a filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as the
blank spaces for a witness and his address are not filled up. More significantly, the same receipt states that Verendia had
received the aforesaid amount. However, that Verendia had not received the amount stated therein, is proven by the fact
that Verendia himself filed the complaint for the full amount of P385,000.00 stated in the policy. It might be that there had
been efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not prove that a settlement had
been arrived at and enforced. Thus, to interpret Fidelity's presentation of the subrogation receipt in evidence as indicative
of its accession to its "terms" is not only wanting in rational basis but would be substituting the will of the Court for that of
the parties