Fieldman’s Insurance Co., Inc vs. Mercedes Vargas vda. De Songco et.al, G.R. No.

L-
24833, September 23, 1968.

Songco, owner of a private jeepney and a man of scant education, was induced by an
agent of the Petitioner to apply for a Common Carrier’s Liability Insurance. Such
insurance was renewed by the petitioner at least twice. Later on during the effectivity of the
renewed policy, the insured vehicle while being driven by Rodolfo Songco, a duly licensed driver and
son of Federico (the vehicle owner) collided with a car in the municipality of Calumpit, province of
Bulacan, as a result of which mishap Federico Songco (father) and Rodolfo Songco (son) died,
Carlos Songco (another son), the latter's wife, Angelita Songco, and a family friend by the name of
Jose Manuel sustained physical injuries of varying degree.His wife is not seeking to collect the
insurance claim. Petitioner denied the application on the ground that a private jeepney cannot
be covered by a Common
Carrier’s Liability Insurance because it is not used as a public utility vehicle. The Court
held that the doctrine of estoppel applies. After petitioner had led the insured to believe that he
could qualify under the common carrier liability insurance policy, and to enter into contract of
insurance paying the premiums due, it could not, later on, be permitted to change its stand to
the detriment of the heirs of the insured.

W/N estoppel could be invoked by the heirs of the insured as a bar to the alleged breach of
warranty and condition in the policy

YES.
The doctrine of estoppel applies. After petitioner had led the insured to believethat he could
qualify under the common carrier liability insurance policy, and to enter into contract of
insurance paying the premiums due, it could not there after in any litigation arising out of such
representation, be permitted to change its stand to the detriment of the heirs of the insured.

As estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will
befall the innocent party due to its injurious reliance, the failure to apply it in this case would
result in a gross travesty of justice.
WHITE GOLD MARINE SERVICES, INC. vs. PIONEER INSURANCE
AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL
UNDERWRITING ASSOCIATION (BERMUDA) LTD. [G.R. No. 154514,
July 28, 2005]Facts:

White Gold Marine Services, Inc. (White Gold) procured a protection and indemnity coverage for
its vessels from The Steamship Mutual Underwriting Association (Bermuda) Limited (Steamship Mutual)
through Pioneer Insurance and Surety Corporation (Pioneer). Subsequently, White Gold was issued a
Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage.
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 latter’s unpaid balance. White Gold on the other hand, filed a complaint before the Insurance
Commission claiming that Steamship Mutual violated Sections 186 and 187 of the Insurance Code, while
Pioneer violated Sections 299, 300 and 301 in relation to Sections 302 and 303, thereof.
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.

Steamship Mutual contend 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.

Issue:
Whether or not Steamship Mutual, a P & I Club, engaged in the insurance business
in the Philippines

Yes. 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 test to determine if a contract is an insurance contract or not, depends on the nature 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 performance becomes requisite.
It is not by what it is called.
Basically, 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
contingent event.
In particular, a marine insurance undertakes to indemnify the assured against marine losses,
such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates
the coverage of marine insurance.
Relatedly, a mutual insurance company is a cooperative enterprise where the members are both
the insurer and insured. In it, the members all contribute, by a system of premiums or
assessments, to the creation of a fund from which all losses and liabilities are paid, and where the
profits are divided among themselves, in proportion to their interest. Additionally, mutual
insurance associations, or clubs, provide three types of coverage, namely, protection and
indemnity, war risks, and defense costs.
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MEDICARD PHILIPPINES, INC VS. CIR (GR NO. 222743) APRIL 5, 2017

ACTS
MEDICARD is a health maintenance organization (HMO) that provides prepaid
health and medical insurance coverage to its clients. Individuals enrolled in its
health care programs pay an annual membership fee and are entitled to various
preventive, diagnostic and curative medical services provided by duly licensed
physicians, specialists, and other professional technical staff participating in the
group practice health delivery system at a hospital or clinic owned, operated or
accredited by it.

MEDICARD filed it first, second, and third quarterly VAT Returns through Electronic
Filing and Payment System (EFPS) on April 20, July 25, and October 25, 2006,
respectively, and its fourth quarterly VAT Return on January 25, 2007.
Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR)
and VAT Returns, the CIR issued a Letter Notice (LN) dated September 20, 2007.
Subsequently, the CIR also issued a Preliminary Assessment Notice (PAN) against
MEDICARD for deficiency VAT. MEDICARD received CIR’s FAN dated December 10,
2007 for allegedly deficiency VAT for taxable year 2006 including penalties.

MEDICARD filed a protest arguing, among others, that that the services it render is
not limited merely to arranging for the provision of medical and/or hospitalization
services but include actual and direct rendition of medical and laboratory services.
On June 19, 2009, MEDICARD received CIR’s Final Decision denying its protest. The
petitioner MEDICARD proceeded to file a petition for review before the CTA.

The CTA Division held that the determination of deficiency VAT is not limited to the
issuance of Letter of Authority (LOA) alone and that in lieu of an LOA, an LN was
issued to MEDICARD informing it if the discrepancies between its ITRs and VAT
Returns and this procedure is authorized under Revenue Memorandum Order
(RMO) No. 30-2003 and 42-2003. Also, the amounts that MEDICARD earmarked and
eventually paid to doctors, hospitals and clinics cannot be excluded from the
computation of its gross receipts because the act of earmarking or allocation is by
itself an act of ownership and management over the funds by MEDICARD which is
beyond the contemplation of RR No. 4-2007. Furthermore, MEDICARD’s earnings
from its clinics and laboratory facilities cannot be excluded from its gross receipts
because the operation of these clinics and laboratory is merely an incident to
MEDICARD’s line of business as an HMO.

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MEDICARD filed a Motion for Reconsideration but it was denied. Petitioner

elevated the matter to the CTA en banc.

CTA en banc partially granted the petition only insofar as 10% VAT rate for January
2006 is concerned but sustained the findings of the CTA Division.

ISSUES:

1. Is the absence of the Letter of Authority fatal?

2. Should the amounts that MEDICARD earmarked and eventually paid to the
medical service providers still form part of its gross receipts for VAT
purposes?

RULING
1. Yes.
The absence of the LOA violated MEDICARD’s right to due process. An LOA is the
authority given to the appropriate revenue officer assigned to perform assessment
functions. Under the NLRC, unless authorized by the CIR himself or by his duly
authorized representative, through an LOA, an examination of the taxpayer cannot
ordinarily be undertaken. An LOA is premised on the fact that the examination of a
taxpayer who has already filed his tax returns is a power that statutorily belongs
only to the CIR himself or his duly authorized representatives. In this case, there is
no dispute that no LOA was issued prior to the issuance of a PAN and FAN against
MEDICARD. Therefore, no LOA was also served on MEDICARD.

The LN cannot replace the LOA required under the law even if the same was issued
by the CIR himself. Under RR No. 12-2002, LN is issued to a person found to have
underreported sales/receipts per data generated under the RELIEF system. Upon
receipt of the LN, a taxpayer may avail of the BIR’s Voluntary Assessment and
Abatement Program. If a taxpayer fails or refuses to avail of the said program, the
BIR may avail of administrative and criminal remedies, particularly closure,
criminal action, or audit and investigation. Since the law specifically requires an
LOA and RMO No. 32-2005 requires the conversion of the previously issued LN to
an LOA, the absence thereof cannot be simply swept under the rug, as the CIR
would have it. In fact, Revenue Memorandum Circular No. 40-2003 considers an LN
as a notice of audit or investigation only for the purpose of disqualifying the
taxpayer from amending his returns. The revenue officers not having authority to
examine MEDICARD in the first place, the assessment issued by the CIR is
inescapably void.

3. No.
The VAT is a tax on the value added by the performance of the service by the
taxpayer. It is, thus, this service and the value charged thereof by the
taxpayer that is taxable under the NLRC.
CASE DIGEST] PHILIPPINE HEALTH
CARE PROVIDERS, INC., Petitioner, vs.
COMMISSIONER OF INTERNAL
REVENUE. [G.R. No. 167330, September
18, 2009]
Facts:
Petitioner is a domestic corporation whose primary purpose is “[t]o establish,
maintain, conduct and operate a prepaid group practice health care delivery
system or a health maintenance organization to take care of the sick and
disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization.”
Individuals enrolled in its health care programs pay an annual membership fee
and are entitled to various preventive, diagnostic and curative medical services
provided by its duly licensed physicians, specialists and other professional
technical staff participating in the group practice health delivery system at a
hospital or clinic owned, operated or accredited by it.

On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent

petitioner a formal demand letter and the corresponding assessment notices
demanding the payment of deficiency taxes, including surcharges and interest,
for the taxable years 1996 and 1997 in the total amount of ₱224,702,641.18.
xxxx

The deficiency [documentary stamp tax (DST)] assessment was imposed on

petitioner’s health care agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code xxxx

Petitioner protested the assessment in a letter dated February 23, 2000. As

respondent did not act on the protest, petitioner filed a petition for review in the
Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT
and DST assessments.
Respondent appealed the CTA decision to the [Court of Appeals (CA)] insofar
as it cancelled the DST assessment. He claimed that petitioner’s health care
agreement was a contract of insurance subject to DST under Section 185 of the
1997 Tax Code. CA rendered its decision. It held that petitioner’s
health care agreement was in the nature of a non-life insurance
contract subject to DST.

Issue:
Whether or not, a Health Maintenance Organizations’
contracts are contract of insurance.

Ruling:
No. An examination of petitioner’s agreements with its
members lead the Court to conclude that it is not an insurance
contract within the context of our Insurance Code.

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. An insurance contract exists where
the following elements concur:

1. The insured has an insurable interest;

2. The insured is subject to a risk of loss by the happening of the

designed peril;

3. The insurer assumes the risk;

4. Such assumption of risk is part of a general scheme to distribute

actual losses among a large group of persons bearing a similar risk
and . In consideration of the insurer’s promise, the insured pays a
premium.
Do the agreements between petitioner and its members possess all
these elements? They do not.

First. In our jurisdiction, a commentator of our insurance laws has

pointed out that, even if a contract contains all the elements of an
insurance contract, if its primary purpose is the rendering of
service, it is not a contract of insurance:.

Second. Not all the necessary elements of a contract of insurance are

present in petitioner’s agreements. To begin with, there is no loss,
damage or liability on the part of the member that should be
indemnified by petitioner as an HMO. Under the agreement, the
member pays petitioner a predetermined consideration in
exchange for the hospital, medical and professional services
rendered by the petitioner’s physician or affiliated physician to
him. In case of an ailment by a member of the benefits under the
agreement, petitioner does not reimburse or indemnify the
member as the latter does not pay any third party. Instead, it is the
petitioner who pays the participating physicians and other health
care providers for the services rendered at pre-agreed rates. The
member does not make any such payment.

Third. According to the agreement, a member can take advantage of

the bulk of the benefits anytime, e.g. laboratory services, x-ray,
routine annual physical examination and consultations, vaccine
administration as well as family planning counseling, even in the
absence of any peril, loss or damage on his or her part.

Fourth. In case of emergency, 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 the happening of a contingency but includes
incidents even in the absence of illness or injury.
Fifth. Although risk is a primary element of an insurance contract, it
is not necessarily true that risk alone is sufficient to establish it.
Almost anyone who undertakes a contractual obligation always
bears a certain degree of financial risk. Consequently, there is a
need to distinguish prepaid service contracts (like those of
petitioner) from the usual insurance contracts.

Indeed, petitioner, as an HMO, undertakes a business risk when it

offers to provide health services: the risk that it might fail to earn a
reasonable return on its investment. But it is not the risk of the type
peculiar only to insurance companies. Insurance risk, also known
as actuarial risk, is the risk that the cost of insurance claims might
be higher than the premiums paid. The amount of premium is
calculated on the basis of assumptions made relative to the insured.

However, assuming that petitioner’s commitment to provide

medical services to its members can be construed as an acceptance
of the risk that it will shell out more than the prepaid fees, it still
will not qualify as an insurance contract because petitioner’s
objective is to provide medical services at reduced cost, not to
distribute risk like an insurer.
 Case Digest: Blue Cross Health Care vs. Olivares
FACTS

Neomi Olivares applied for a health care program with Blue Cross Health
Care Inc., (Blue Cross) a health maintenance firm. When her application was
approved, the health care agreement excluded ailments due to “pre-existing
conditions” from the coverage. After the effectivity of her health insurance, she
suffered a stroke and was admitted at a hospital. When she requested Blue
Cross to pay her medical expenses, the latter refused due to the pending
submission of a certificate from her attending physician, Dr. Edmundo Saniel,
that the stroke suffered was not caused by a pre-existing condition.

Olivares settled her own medical expenses then filed a complaint for a
collection of sum of money with the Municipal Trial Court (MTC) against Blue
Cross. She called Dr. Saniel and invoking patient-physician confidentiality,
she did not allow him to release any medical information to Blue Cross.

ISSUE

Whether the presumption that evidence willfully suppressed would be adverse

if produced would apply in the case

No. The burden was on Blue Cross to prove that Olivares’s stroke was
excluded from the coverage of their agreement because it was due to a pre-
existing condition. It failed to prove this. Blue Cross never presented any
evidence to prove such. It merely speculated that Dr. Saniel’s report would be
adverse to Olivares, based on her invocation of the doctor-patient privilege.
This was a disputable presumption as described in Sec. 3(e), Rule 131 of the
Rules of Court.

The disputable presumption does not apply if (a) the evidence is at the
disposal of both parties; (b) the suppression was not willful; (c) it is merely
corroborative or cumulative and (d) the suppression is an exercise of a
privilege. Here, respondents’ refusal to present or allow the presentation of
Dr. Saniel’s report was justified. It was privileged communication between
physician and patient.
PARAMOUNT INSURANCE CORPORATION,
Petitioner,vs.
SPOUSES YVES and MARIA TERESA REMONDEULAZ,
Respondents.

FACTS:
On May 26, 1994, respondents insured with petitioner their 1994 Toyota Corolla sedan under a
comprehensive motor vehicle insurance policy for one year. During the effectivity of said insurance,
respondents’ car was unlawfully taken. Respondents alleged that a certain Ricardo Sales (Sales)
took possession of the subject vehicle to add accessories and improvements thereon, however, Sales
failed to return the subject vehicle within the agreed three-day period. Then, respondents notified
petitioner to claim for the reimbursement of their lost vehicle. However, petitioner refused to
pay. Accordingly, respondents lodged a complaint for a sum of money against petitioner
before the Regional Trial Court of Makati City but dismissed the complaint filed by respondents.
Not in conformity with the trial court’s Order, respondents filed an appeal to the Court of Appeals
and in its decision the appellate court reversed and set aside the Order issued by the trial court.
Petitioner, thereafter, filed a motion for reconsideration against said Decision, but the same was
denied by the appellate court. Hence this Petition for Review on Certiorari.

ISSUE:
Whether or not Paramount Insurance Corporation is liable under the insurance policy for the loss of
respondents’ vehicle.

RULING:

The Supreme Court DENIED the motion of Paramount Insurance Company and AFFIRMED the
Decision of the Court of Appeals entirely. Paramount Insurance Corporation is liable under the
insurance policy. InPeople v. Bustinera this Court had the occasion to interpret the
"theft clause" of an insurance policy In this case, the Court explained that when one takes the
motor vehicle of another without the latter’s consent even if the motor vehicle is later returned, there is
theft there being intent to gain as the use of the thing unlawfully taken constitutes gain. Also, in
Malayan Insurance Co., Inc. v. Court of Appeals this Court held that the taking of a vehicle by
another person without the permission or authority from the owner thereof is sufficient to place it
within the ambit of the word theft
as contemplated in the policy, and is therefore, compensable. Records would show that respondents
entrusted possession of their vehicle only to the extent that Sales will introduce repairs and
improvements thereon, and not to permanently deprive them of possession thereof. Since, Theft can
also be committed through misappropriation, the fact that Sales
failed to return the subject vehicle to respondents constitutes Qualified Theft. Hence, since repondents’
car is undeniably covered by a Comprehensive Motor Vehicle Insurance Policy that allows
for recovery in cases of theft, petitioner is liable under the policy for the loss of respondents’
vehicle under the "theft clause."

GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS)

vs.
COURT OF APPEALS,et al.G.R. No. 101439, June 21, 1999

National Food Authority (NFA, formerly National Grains Authority) was the owner of a Chevrolet
truck which was insured against liabilities for death of and injuries to third persons with the GSIS.
the said truck driven by Guillermo Corbeta collided with a public utility vehicle, a Toyota Tamaraw.
The Toyota Tamaraw was owned and operated by Victor Uy, under the name and style of "Victory
Line." The
Tamaraw was a total wreck.
All the collision victims were passengers of the Toyota Tamaraw. Five (5) passengers died[4] while
ten (10) others sustained bodily injuries.
Three (3) cases were filed... first, Civil Case No. 2196 for quasi-delict, damages and attorney's fees,
was commenced by Uy... against NFA and Corbeta.
second, Civil Case No. 2225 for damages, was filed by an injured passenger... against Uy, the
operator of the public utility vehicle, and insurer, Mabuhay Insurance and Guaranty Co. (MIGC).
third, Civil Case No. 2256, was instituted by herein private respondents... against the following: NFA
and Corbeta for damages due to quasi-delict; GSIS as insurer of the truck; Uy for breach of contract
of... carriage; and MIGC as insurer of the Toyota Tamaraw.
trial court awarded Uy the total amount of one hundred nine thousand one hundred (P109,100.00)
pesos for damages.
In Civil Case No. 2225, said court dismissed the case against Uy and ordered MIGC, Corbeta and
NFA to pay plaintiff
Damages were likewise awarded to the herein private respondents in Civil Case No. 2256, as
earlier... mentioned.
Court of Appeals agreed with the conclusions of the trial court
Issues:
Whether the respondent court erred in holding GSIS solidarily liable with the negligent
insured/owner-operator of the Chevrolet truck for damages awarded to private respondents which are
beyond the limitations of the insurance policy
Ruling:
It is now established that the injured or the heirs of a deceased victim of a vehicular accident may sue
directly the insurer of the vehicle.
However, although the victim may proceed directly against the insurer for indemnity, the third party
liability is only up to the extent of the insurance policy and those required by law. While it is true that
where the insurance contract provides for indemnity against liability... to third persons, and such
third persons can directly[17] sue the insurer, the direct liability of the insurer under indemnity
contracts against third party liability does not mean that the insurer can be held liable in solidum with
the insured... and/or the other parties found at fault.[18] For the liability of the insurer is based on
contract; that of the insured carrier or vehicle owner is based on tort.[19] The liability of GSIS based
on the insurance contract is direct, but... not solidary with that of the NFA.
Obviously, the insurer could be held liable only up to the extent of what was provided for by the
contract of insurance, in accordance with CMVLI law.