Beruflich Dokumente
Kultur Dokumente
Escalante
Insurance
A. Concepts Defined
1. Contract of Insurance
Mayer Steel Pipe vs Court of Appeals
GR No. 124050, 1997-06-19
Facts: In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted
petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and
fittings as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and
MSPC-1022
Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private
respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp.
(Charter). The pipes and fittings were checked by a third party inspector which certified that all pipes
and fittings were in good condition. However when it reached Hongkong, it was discovered that a large amount
of the goods were damage resulting to petitioners filingg an insurance claim against herein respondent.
Nonetheless only a portion of the claim was indemnified due to the insurance surveyors report that
the damage was due to factory defect which respondent claimed to be not covered by the insurance
policy. Petitioner sought the payment of the balance
Issue: Whether or not respondent is liable of indemnifying petitioner of the complete amount
Ruling: In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the
shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper,
the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage
of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer
file a claim against the carrier beyond the one-year period provided in the law. But it does not mean
that the shipper may no longer file a claim against the insurer because the basis of the insurer's
liability is the insurance contract. An insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify another for loss or damage which he may
suffer from a specified peril. An "all risks" insurance policy covers all kinds of loss other than those due
to willful and fraudulent act of the insured.Thus, when private respondents issued the "all risks"
policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage
to the goods insured.
2. Doing or Transacting an Insurance Business
Phil Health Care Providers vs Commissioner of Intenal Revenue
GR No. 167330, 2009-09-18
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 P224,702,641.18. The deficiency [documentary stamp tax
(DST)] assessment was imposed on petitioners health care agreement with the members of its health care program
pursuant to Section 185 of the 1997 Tax Code.
Issue: Whether or not Petitioner is an Insurance Business and thus liable to pay for Documentary Stamp Tax
Ruling: Petitioner was formally registered and incorporated with the Securities and Exchange Commission and is
engage in the dispensation of medical services to those that enter into the health care agreement.
Individuals enrolled in its health care program pay an annual membership fee. Membership is on a year-to-year
basis. To avail of petitioners health care programs, the individual members are required to sign and execute a
standard health care agreement embodying the terms and conditions for the provision of the health care
services. The same agreement contains the various health care services that can be engaged by the enrolled
member, i.e., preventive, diagnostic and curative medical services. Except for the curative aspect of the medical
service offered, the enrolled member may actually make use of the health care services being offered by petitioner at
any time.
Petitioner is admittedly a Health Maintenance Organization [HMO]. Under RA 7875 (or The National Health Insurance
Act of 1995), 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. As an HMO, petitioner is not engaged in the insurance business.
Section 2 (2) of PD 1460 (otherwise known as the Insurance Code) enumerates what constitutes doing an insurance
business or transacting an insurance business:
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.
An insurance company is concerned primarily, if not exclusively, with risk and the consequences of its descent, not
with service, or its extension in kind, quantity or distribution; with the unusual occurrence, not the daily routine of
living. Hazard is predominant.
Another and more compelling reason for holding that the service is not engaged in the insurance business is
that absence or presence of assumption of risk or peril is not the sole test to be applied in determining its status. The
question, more broadly, is whether, looking at the plan of operation as a whole, service rather than indemnity is its
principal object and purpose.
American courts have pointed out that the main difference between an HMO and an insurance company is that HMOs
undertake to provide or arrange for the provision of medical services through participating physicians while insurance
companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit.
Lastly, it is significant that 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. The Insurance Commissioner in
its letter confirmed that petitioner is not engaged in the insurance business and thus this determination of the
commissioner must be accorded great weight. It is well-settled that the interpretation of an administrative agency
which is tasked to implement a statute is accorded great respect and ordinarily controls the interpretation of laws by
the courts.
Ruling: Yes, Western Guaranty Corp., is liable . Insurance Contract is a Contract of Adhesion, the terms of such
contract are to be construed strictly against the party which prepared the contract. The Schedule of Indemnities
does not purport to limit or to enumerate exhaustively, the species of bodily injury occurrence of which generate
liability for petitioner Western. An examination of Section 1 entitled Liability to the Public quoted above, of the Master
Policy issued by the petitioner Western shows that Section Defines the Scope of Liability of Insurer Western as well
as the events which generates such liability. The Court resolve to deny the Petition for Review for lack of merit.
4. Parties in Insurance Contract
Insurer and Insured (Sec 6), Beneficiary (Art 739 and 2012 of the NCC)
And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he
has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the
widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.
5. Interpretation of Insurance Contracts
Rizal Surety and Insurance Company vs Court of Appeals
336 SCRA 12, 2000-07-18
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: 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
Ruling: 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.
American Home Assurance Company vs. Tantuco Enterprises
G.R. No. 138941, 2001-10-08
Facts: Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two mills (the first oil mill and
a new one), both located at its factory compound at Iyam, Lucena City . The two oil mills are separately covered by
fire insurance policies issued by American Home Assurance Co.
On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American Home rejected the claim for
the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the
new oil mill was under Building No. 15 while the insurance coverage extended only to the oil mill under Building No. 5.
Issue: Whether or not the new oil mill is covered by the fire insurance policy
Ruling: In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in
giving effect to the insurance. In view of the custom of insurance agents to examine buildings before writing policies
upon them, and since a mistake as to the identity and character of the building is extremely unlikely, the courts are
inclined to consider the policy of insurance covers any building which the parties manifestly intended to insure,
however inaccurate the description may be.
Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties
manifestly intended to insure was the new oil mill.
If the parties really intended to protect the first oil mill, then there is no need to specify it as new. Indeed, it would be
absurd to assume that the respondent would protect its first oil mill for different amounts and leave uncovered its
second one.
to the former of all remedies which the latter may have against the third party whose negligence or wrongful act
caused the loss.
3. Uberrima Fides
Fieldmen's Insurance Co., Inc., vs. Mercedes Vargas Vda. De Songco, Et Al. and Court Of Appeals
G.R. No. L-24833, 1968 09- 23
Facts: Federico Songco, a man of scant education being only a first grader, applied for a Common Carrier's Liability
Insurance Policy for his private jeepney after being induced by agent Benjamin Sambat. After paying the annual
premium, Fieldmen's Insurance issued the policy with effectivity on September 15, 1960 to September 15, 1961. On
September 22, 1961, Songco renewed the policy coverage from October 15, 1961 to October 15, 1962. On
October 29, 1961, the insured vehicle collided with a car leaving Songco and companions dead while Jose Manuel
was injured. Fieldmen's Insurance declined to pay the insurance proceeds on the grounds of breach of warranty and
condition in the policy. They alleged that the insured jeepney is not a common carrier. The surviving widow and
children, as well as Jose Manuel prevailed in the lower court as well as in the CA. Thus a petition was filed in the SC.
Issue: Whether or not the respondents are estopped from claiming the insurance proceeds on the grounds of breach
of warranty and condition in the policy.
Ruling: As much, if not much more so than the Qua Chee Gan decision, this is a case where the doctrine of estoppel
undeniably calls for application. After petitioner Fieldmen's Insurance Co., Inc. had led the insured Federico Songco
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, thereafter, 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.
The conclusion that inescapably emerges from the above is the correctness of the decision of respondent Court of
Appeals sought to be reviewed. For, to borrow once again from the language of the Qua Chee Gan opinion: "The
contract of insurance is one of perfect good faith (uberima fides) not for the insured alone,but equally so for the
insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility."
This is merely to stress that while the morality of the business world is not the morality of institutions of rectitude like
the pulpit and the academe, it cannot descend so low as to be another name for guile or deception. Moreover, should
it happen thus, no court of justice should allow itself to lend its approval and support.
4. Contract of Indemnity
White Gold Marine Services, Inc., vs. Pioneer Insurance And Surety Corporation
G.R. No. 154514, 2005-07-28
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 latters 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. The Court of Appeals affirmed the decision of the Insurance
Commissioner. White Gold filed a petition in the SC.
Issue: Whether or not Steamship Mutual is engaged in the insurance business in the Philippines.
Ruling: 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.17 Additionally, mutual insurance associations, or clubs, provide three types of coverage, namely, protection
and indemnity, war risks, and defense costs.
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. We note that 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.
5. Personal Contract
The Insular Life Assurance Company, Ltd., vs. Carponia T. Ebrado and Pascuala Vda. De Ebrado,
G.R. No. L-44059, 1977-10-28
Facts: Buenaventura C. Ebrado, married to Pascuala Ebrado and with six legitimate children was living with his
common-law wife Carponia T. Ebrado. They have two children. On September 1, 1968, Buenaventura Cristor Ebrado
was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for
Accidental Death for the same amount Buenaventura C. Ebrado designated CarponiaT. Ebrado as the revocable
beneficiary in his policy. On October 21, 1969, Buenaventura died. Carponia T. Ebrado filed a claim. Pascuala also
filed a claimed asserting that she is the legal wife. In doubt as to whom the insurance proceeds shall be paid, the
Insular Life filed an action for Interpleader before the CFI Rizal. The trial court disqualified Carponia T. Elardo. On
appeal, the CA held that it is a question of law and forwarded the matter before the SC.
Issue: Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally married man
can claim the proceeds thereof in case of death of the latter?
Ruling: It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD
No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand.
Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied exclusively to the proper interest
of the person in whose name it is made" cannot be validly seized upon to hold that the mm includes the beneficiary.
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a
contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the
New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance
Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under
Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law
spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense, in consideration thereof;
3. hose made to a public officer or his wife, descendants or ascendants by reason of his office.
In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are
founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the
policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As
a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance
contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be
named as beneficiary in the life insurance policy of the person who cannot make the donation. Under American law, a
policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a
will and determine the effect of a clause designating the beneficiary by rules under which wins are interpreted
E. Parties to an Insurance Contract
3. The Beneficiary
a. Beneficiary of one who insures his own life insured may designate any person as his beneficiary.
Exception: Persons specified in Article 739 NCC
The Insular Life Assurance Company, Ltd., vs. Carponia T. Ebrado and Pascuala Vda. De Ebrado,
G.R. No. L-44059, 1977-10-28
Facts: Buenaventura C. Ebrado, married to Pascuala Ebrado and with six legitimate children was living with his
common-law wife Carponia T. Ebrado. They have two children. On September 1, 1968, Buenaventura Cristor Ebrado
was issued by The Life Assurance Co., Ltd., Policy No. 009929 on a whole-life for P5,882.00 with a, rider for
Accidental Death for the same amount Buenaventura C. Ebrado designated CarponiaT. Ebrado as the revocable
beneficiary in his policy. On October 21, 1969, Buenaventura died. Carponia T. Ebrado filed a claim. Pascuala also
filed a claimed asserting that she is the legal wife. In doubt as to whom the insurance proceeds shall be paid, the
Insular Life filed an action for Interpleader before the CFI Rizal. The trial court disqualified Carponia T. Elardo. On
appeal, the CA held that it is a question of law and forwarded the matter before the SC.
Issue: Whether or not a common-law wife named as beneficiary in the life insurance policy of a legally married man
can claim the proceeds thereof in case of death of the latter?
Ruling: It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD
No. 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand.
Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied exclusively to the proper interest
of the person in whose name it is made" cannot be validly seized upon to hold that the mm includes the beneficiary.
The word "interest" highly suggests that the provision refers only to the "insured" and not to the beneficiary, since a
contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on
property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance.
Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the
New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in
such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance
Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under
Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be
named beneficiary of a fife insurance policy by the person who cannot make a donation to him. 4 Common-law
spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides:
The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the time of donation;
2. Those made between persons found guilty of the same criminal offense, in consideration thereof;