INSURANCE LAW

WEEK 1 AND 2 CASE DIGESTS

Eternal Gardens vs. Philippine American Life Insurance Company - Assured’s certificate.
G.R. No. 166245 8 April 2008
Philam replied requiring Eternal to submit:
Facts: Philam life entered into an agreement with Eternal. Under such policy, the clients - Certificate of claimant with form attached;
of Eternal who purchased burial lots from it on installment basis would be insured by - Assured’s certificate with form attached;
Philam life. The amount of the coverage depended upon the existing balance of the - Application for insurance accomplished and signed by the insured, Chuang, while
purchased burial lots. The policy was then to be effective for a period of one year, he was still living; and
renewable on a yearly basis. - Statement of account showing the unpaid balance of Chuang before his death.

Eligibility Eternal transmitted the required documents, and after more than a year, Philam still
Any lot purchaser who is at least 18 years old, but not more than 65 years of age, and is accepted for Life Insurance haven’t replied. Thus, Eternal demanded from Philam the payment of the P100,000
Coverage.
claim. But, Philam denied such averment.
Evidence of insurability
No medical examination shall be required for amounts of insurance up to P50,000. However, a declaration of good A case was, then, filed in the RTC. The RTC found that Eternal submitted Chuang’s
health shall be required for all lot purchasers. The company reserves the right to require further evidence of
application for insurance which he accomplished before his death. It further ruled that
insurability.
due to Philam’s inaction, it was already deemed to have approved Chuang’s application.
Life insurance benefit
The insurance coverage of any lot purchaser shall be the amount of the unpaid balance of his loan, or the sum of
Philam appealed to the Court of Appeals. The Court reversed the decision claiming that
P100,000, whichever is smaller. Such benefit shall be paid to the Assured if the lot purchaser dies while insured
under the policy. non-accomplishment of the submitted application form violated Section 26 of the
Insurance Code. Thus, there being no application form, Chuang was not covered by
Effective date of benefit Philam’s insurance policy.
The insurance of any eligible lot purchaser shall be effective on the date he contracts a loan with the
assured. However, there shall be no insurance if the application of the lot purchaser is not approved by
the company. Issue: W/N Philamlife assumed the risk of loss without approving the application.

Eternal was required to submit to Philam life a list of all new lot purchasers, together Held: Yes. The Supreme Court held that there was ambiguity in the two sentences of
with a copy of the application of each purchaser, and the amounts of the respective the “effective date of benefit” as the first sentence appears to state that the insurance
unpaid balances. coverage already became effective upon contracting of the loan, while the second
sentence appears to require Philam to approve it before it can be effective.
Eternal complied by submitting a letter containing a list of insurable balances. One of
those included in the list as new businesses was a certain Chuang. His balance of An insurance contract is a contract of adhesion which must be construed liberally in
payments was P100,000. Subsequently, Chuang died. favor of the insured and strictly against the insurer in order to safeguard the latter’s
interest.
Eternal sent a letter to Philam life, which served as an insurance claim for Chuang’s
death. Attached to the claim: When the terms of an insurance contract contain limitations on liability, courts should
- Chuang’s certificate of death; construe them in such a way as to preclude the insurer from non-compliance. Thus, the
- Identification certificate stating that Chuang is a naturalized Filipino citizen; mere inaction of the insurer must not work to prejudice the insured. It cannot be
- Certificate of claimant; interpreted as a termination of the insurance contract. Termination must be explicit and
- Certificate of attending physician; and unambiguous.

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Insurance Law cases under Judge Mendinueto
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WEEK 1 AND 2 CASE DIGESTS

Enriquez vs. Sun Life Assurance Company of Canada Thus, SM filed a case against WG so that the latter would pay. But the Insurance
G.R. No. 15895 29 November 1920 Commission dismissed the case, and pointed out that SM was not engaged in an
insurance system or business. It explained that SM was a Protection and Indemnity
Facts: Herrer applied to Sun Life Assurance Company of Canada through its office in Club. Likewise, Pioneer need not obtain another license as insurance agent and/or
Manila for a life annuity. Two days later, he paid the sum of P6,000 to the manager and broker for SM because SM was not engaged in the insurance business either.
was given a receipt thereof.
Issue: W/N Steamship Mutual and Pioneer are engaged in the insurance business. If
The application was immediately forwarded to the head office in Canada. Thus, the yes, what is an insurance business.
head office gave notice of acceptance by cable to Manila. Subsequently, the policy was
issued at Montreal. Atty. Torres wrote to the Manila office stating that Herrer decided to Held: Yes. The Supreme Court held that Sec. 2(2) of the insurance code enumerates
withdraw his application. The following day, the local office replied stating that the policy what constitutes “doing an insurance business” or “transacting an insurance business”.
has already been issued. This letter was received a day after Herrer died.
The test to determine if a contract is an insurance contract or not depends on the nature
Issue: W/N the life annuity cannot be redeemed since it has already been paid for. of the promise, the act required to be performed, and the exact nature of the agreement
in the light of the occurrence, contingency, or circumstances under which the
Held: No. The Supreme Court held that an acceptance of an offer of insurance is not performance becomes a requisite.
actually or constructively communicated to the prosper does not make a contract. Only
the mailing of acceptance completes the contract of insurance, as the locus SM is a mutual insurance association engaged in marine insurance business. Basically,
poenitentiae is ended with the acceptance has passed beyond the control of the party. an insurance contract is a contract of indemnity. In it, one undertakes for a consideration
to indemnify another against loss, damage, or liability arising from an unknown or
The further admitted facts are that the head office in Canada did accept the application, contingent event.
did cable the Manila office to that effect, did actually issue the policy, and did actually
write a letter of notification and place it in the usual channels for transmission. Added to that a Protection and Indemnity 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
The contract for a life annuity in the case at bar was not perfected because it has not definition SM is a mutual insurance association engaged in the marine insurance
been proved satisfactorily that the acceptance of the application ever came to the business.
knowledge of the applicant.
Philippine Health Care Providers, Inc. vs. Commissioner of Internal Revenue
White Gold Marine Services, Inc. vs. Pioneer Insurance and Surety Corporation G.R. No. 167330 18 September 2009
G.R. No. 154514 28 July 2005
Facts: CIR sent a formal demand letter and the corresponding assessment notices
Facts: White Gold procured protection and indemnity coverage for its vessels from demanding the payment of deficiency taxes, including surcharges and interest for
Steamship Mutual and Pioneer. certain taxable years. The Documentary Stamp Tax was imposed on Phil. Health.

Subsequently, WG was issued a Certificate of Entry and Acceptance. Pioneer also However, Phil. Health protested to the CTA seeking cancellation of the deficiency VAT
issued receipts evidencing payments for such coverage. and DST assessments.

But when WG wasn’t able to pay anymore, SM refused to renew coverage.

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Insurance Law cases under Judge Mendinueto
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WEEK 1 AND 2 CASE DIGESTS

But, CIR pushed through, pointing out that such health care is a contract of insurance Held: No. The Supreme Court held that Sec. 2(1) of the Insurance Code defines a
and is subject to Documentary Stamp Tax (DST). 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
The Court of Appeals held that petitioner’s health care agreement was in the nature of contingent event.
a non-life insurance contract subject to DST. Phil. Health, however, moved for
reconsideration but the CA denied such. Hence, this petition. An insurance contract exists where the following elements concur (PARIS):
- The insurance has an insurable interest;
Issue: W/N Phil. Health is in the business of insurance. - The insured is subject to a risk of loss by the happening of the designated peril;
- The insurer assumes the risk;
Held: No. The Supreme Court held that even if petitioner assumes the risk of paying - Such assumption of risk is part of a general scheme to distribute actual losses
the cost of services even if significantly more than what the member has prepaid, it among a large group of persons bearing a similar risk; and
nevertheless cannot be considered as being engaged in the insurance business. - In consideration of the insurer’s promise, the insured pays a premium.

The mere presence of risk would be insufficient to override the primary purpose of the Sec. 3 states that any contingent or unknown event, whether past or future, which may
business to provide medical services as needed, with payment made directly to the damnify a person having an insurable interest against him, may be insured against.
provider of these services. Every person has an insurable interest in the life and health of himself.

In other words, even if petitioner assumes the risk of paying the cost of these services In the case at bar, the insurable interest of respondent’s husband in obtaining the health
even if significantly more than what the member has prepaid, it nevertheless cannot be care agreement was his own health. The health care agreement was in the nature of a
considered as being engaged in the insurance business. non-life insurance, which is primarily a contract of indemnity.

Philamcare Health Systems, Inc. vs. Court of Appeals Once the member incurs hospital, medical, or any other expense arising from sickness,
G.R. No. 125678 18 March 2002 injury, or other stipulated contingent, the health care provider must pay for the same to
the extent agreed upon under the contract.
Facts: Before Ernani died he applied for a health care coverage with Philamcare.
Geagonia vs. Court of Appeals
Under such agreement, Ernani is entitled to hospitalization benefits. Upon termination G.R. No. 114427 6 February 1995
of the insurance contract, it was, again, extended for another year. During this period
Ernani, then, suffered from a heart attack upon which he was confined. Facts: Geagonia is the owner of Norman’s Mart located in San Francisco, Agusan del
Sur. He, then, obtained from Country Bankers Insurance Corporation a fire insurance
During the period of his confinement, the health care plan was deemed void on the policy for P100,000. The period for the policy was a year, and it covered the “stock-in-
ground of concealment of Ernani’s medical history. Thus, his wife paid the bill in full. trade consisting principally of dry goods such as RTWs and other usual to the assured’s
business.”
When Ernani died, the wife sued Philamcare and demanded to pay damages and the
policy that was applied for. The policy contained the following condition:

Issue: W/N a health care agreement is an insurance contract. Condition #3:

The insured shall give notice to the Company of any insurance or insurances already affected, or which
may subsequently be effected, covering any of the property or properties consisting of stocks in trade,

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WEEK 1 AND 2 CASE DIGESTS

goods in process and/or inventories, unless such notice be given and the particulars of such be endorsed forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it
by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided that this condition shall not apply when the total insurance or
is possible to construe the policy in a manner which would permit recovery.
insurances in force at the time of the loss or damage is not more than P200,000.
Condition #3 is not totally free from ambiguity and must, perforce, be meticulously
Subsequently, fire broke out at the public market of San Francisco, Agusan del Sur. analyzed. Such analysis leads us to conclude that the prohibition applies only to double
Geagonia’s insured stock-in-trade were completely destroyed prompting him to file a insurance, and the nullity of the policy shall only be to the extent exceeding P200,000.
claim. Country Bankers denied the claim because it found that at the time of the loss,
Geagonia’s stock-in-trade were also covered by two more fire insurance policies by When a property owner obtains insurance policies from two or more insurers in a total
Philippine First Insurance Co. And it also stated that the policies were for P100,000 amount that exceeds the property’s value, the insured may have an inducement to
each. These policies indicate that the insured was herein petitioner: Geagonia. destroy the property for the purpose of collecting the insurance.

Geagonia, however, denied such and even filed a petition against Country Bankers for Thus, the public and the insurer is interested in preventing such situation wherein a fire
the recovery of the P100,000 fire insurance policy. Geagonia even claimed that he had would be profitable to the insured.
no idea that there were two more fire insurance policies existing. Thus, the Insurance
Commission claimed that Geagonia did not violate herein condition as he had no
knowledge of the additional two fire insurance policies.

However, when the case was elevated in the Court of Appeals, the latter court pointed
out that Geagonia knew about the two additional policies as he stated it in the letter he
sent Country Bankers. This explicit admission was divergent from what he claimed in
his previous petition with the Insurance Commission.

Thus, this petition.

Issue: W/N Geagonia is precluded from recovering from Country Bankers.

Held: Yes. The Supreme Court held that Condition #3 of Country Bankers’s policy is a
condition which is not proscribed by law. Its incorporation in the policy is allowed by
Sec. 75 of the Insurance Code, which provides that “a policy may declare that a violation
of specified provisions thereof shall avoid it, otherwise the breach of an immaterial
provision does not avoid the policy.”

Added to that, it is a cardinal rule on insurance that a policy or insurance contract is to

be interpreted liberally in favor of the insured and strictly against the company, the
reason being, undoubtedly, is to afford the greatest protection which the insured was
endeavoring to secured when he applied for insurance. It is also a cardinal principle of
law that forfeitures are not favored and that any construction which would result in the

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© Murallos 2018-2019
Insurance Law cases under Judge Mendinueto