White Gold Marine Services v Pioneer Insurance

GR No. 154514 July 28, 2005

Doctrine The fact that no profit is derived from the making of insurance contracts, agreements or transactions, or that
no separate or direct consideration is received therefor, shall not preclude the existence of an 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.

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. It said that there was no need for Steamship Mutual to secure a license
because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and
Indemnity Club (P & I Club). Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for
Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was
already licensed, hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous.

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 (1) YES. Section 2(2) of the Insurance Code enumerates what constitutes doing an insurance business or
transacting an insurance business. These are: (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.

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. 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) YES. 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:
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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, which must be
renewed annually on the first day of January, or within six months thereafter. .

Verandia vs. Court of Appeals

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Rizal Surety & Insurance Co. vs. CA

GR No. 112360

Facts:
On March 13, 1980, Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy No. 45727 in
favor of Transworld Knitting Mills, Inc. (Transworld), initially for One Million (P1,000,000.00) Pesos and eventually
increased to One Million Five Hundred Thousand (P1,500,000.00) Pesos, covering the period from August 14, 1980 to
March 13, 1981. The same pieces of property insured with the petitioner were also insured with New India Assurance
Company, Ltd., (New India).

On January 12, 1981, fire broke out in the compound of Transworld, 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) where fun
and amusement machines and spare parts were stored, was also destroyed by the fire. Transworld filed its insurance
claims with Rizal Surety & Insurance Company and New India Assurance Company but to no avail.

Petitioner Rizal Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span
building, which was partly burned, and not the damage caused by the fire on the two-storey annex building.

Issue: WON the annex building where the bulk of the burned properties were stored, was included in the coverage of
the insurance policy issued by Rizal Surety

Held:
Yes. Resolution of the issues posited here hinges on the proper interpretation of the stipulation in subject fire insurance
policy regarding its coverage, which reads:
"xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part
of the buildings situate (sic) within own Compound xxx"

Therefrom, it can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what
were stored in the four-span building. As opined by the trial court of origin, two requirements must concur in order that
the said fun and amusement machines and spare parts would be deemed protected by the fire insurance policy under
scrutiny, to wit:
"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.

The Court is mindful of the well-entrenched doctrine that factual findings by the Court of Appeals are conclusive on
the parties and not reviewable by this Court, and the same carry even more weight when the Court of Appeals has
affirmed the findings of fact arrived at by the lower court.
Indeed, the stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding
the portions of the building insured thereby. Article 1377 of the New Civil Code provides:
"Art.1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity"
Conformably, it stands to reason that the doubt should be resolved against the petitioner, Rizal Surety Insurance
Company, whose lawyer or managers drafted the fire insurance policy contract under scrutiny.

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 Philamcare v CA
G.R. No. 125678. March 18, 2002
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: Whether or not a health care agreement is not an insurance contract; hence the incontestability clause under
the Insurance Code does not apply?

Held:
No. Petition dismissed. 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.
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Section 27 of the Insurance Code provides a concealment entitles the injured party to rescind a contract of insurance.

As to cancellation procedure it 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 lies.

Fortune Insurance and Surety Co., Inc. v. Court of Appeals and Producers Bank of the Philippines
G.R. No. 115278; 23 May 1995
Facts:

Producers Bank of the Philippines (Producers) filed a complaint against Fortune Insurance and Surety Co., Inc.
(Fortune) for recovery of P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a
robbery of Producers armored vehicle while it was in transit to transfer the money from its Pasay City Branch
to its head office in Makati. Security Guard Atiga was assigned by Unicorn Security Services, Inc. with the
Producers by virtue of a contract of Security Service. Driver Magalong was assigned by PRC Management.
Fortune averred that Magalong and Atiga were employees of the Producers, which makes the loss excluded
from the coverage of the insurance policy under the General Exceptions Section (b):

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. . . .

Since Magalong and Atiga were charged with three others as liable for the robbery, Fortune denies
Producers Bank of its insurance claim.

The RTC and CA ruled in favor of Producers. Hence, this appeal.

Issue: Whether or not recovery is precluded under the General Exceptions Sec. (b). clause of the insurance
policy.

Held: Yes. Producers entrusted the three with the specific duty to safely transfer the money to its head office,
with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle which would
carry the money; and Atiga to provide the needed security for the money, the vehicle, and his two other
companions. In short, for these particular tasks, the three acted as agents of Producers. 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. Therefore, Fortune is exempt from liability
under the general exceptions clause of the insurance policy.

GULF RESORTS, INC. V. PHILIPPINE CHARTER INSURANCE CORPORATION

GR NO 156167, MAY 16, 2005

FACTS:

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Plaintiff is the owner of the Plaza Resort situated at Agoo, La Union and had its properties in said resort insured
originally with the American Home Assurance Company (AHAC-AIU). In the first four insurance policies issued by
AHAC-AIU, the risk of loss from earthquake shock was extended only to plaintiffs two swimming pools. Gulf Resorts
agreed to insure with Philippine Charter Insurance Corporation (PCIC) the properties covered by AHAC (AIU) Policy
provided that the policy wording and rates in said policy be copied in the policy to be issued by PCIC. In consideration
of the payment by the insured to the company of the sum included additional premium the Company agrees,
notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss
or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of
earthquake.

On July 16, 1990, an earthquake struck Central Luzon and Northern Luzon and Gulf Resorts properties covered by
Policy No. 31944 issued by PCIC, including the two swimming pools in its Agoo Playa Resort were damaged.

After the earthquake, petitioner advised respondent that it would be making a claim under its Insurance Policy No.
31944 for damages on its properties. Respondent instructed petitioner to file a formal claim, then assigned the
investigation of the claim to an independent claims adjuster, Bayne Adjusters and Surveyors, Inc.

On July 30, 1990, respondent, through its adjuster, requested petitioner to submit various documents in support of its
claim. On August 7, 1990, Bayne Adjusters and Surveyors, Inc., through its Vice-President A.R. de Leon, rendered a
preliminary report finding extensive damage caused by the earthquake to the clubhouse and to the two swimming
pools. Mr. de Leon stated that except for the swimming pools, all affected items have no coverage for earthquake
shocks.

On August 11, 1990, petitioner filed its formal demand for settlement of the damage to all its properties in the Agoo
Playa Resort. On August 23, 1990, respondent denied petitioners claim on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort. Petitioner and respondent failed to arrive
at a settlement. Thus, on January 24, 1991, Gulf filed a complaint with the RTC of Pasig.

On February 21, 1994, the lower court after trial ruled in favor of the respondent. Petitioners Motion for
Reconsideration was denied. Thus, petitioner filed an appeal with the Court of Appeals. On the other hand, respondent
filed a partial appeal, assailing the lower courts failure to award it attorneys fees and damages on its compulsory
counterclaim.
After review, the appellate court affirmed the decision of the trial court and ruled that the last two (2) insurance
contracts, which the plaintiff-appellant had with AHAC (AIU) and upon which the subject insurance contract with
PCIC is said to have been based and copied, covered an extended earthquake shock insurance on all the insured
properties.

ISSUE: Whether or not the CA correctly held that under PCICs insurance policy, only the 2 swimming pools, rather
than all the properties covered thereunder are insured against the risk of earthquake shock

RULING:

Yes. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. All the
provisions and riders, taken and interpreted together, indubitably show the intention of the parties to extend earthquake
shock coverage to the two swimming pools only.

A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend
earthquake shock coverage only to the two swimming pools. 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. Thus, 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 designated peril;
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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
5. In consideration of the insurer's promise, the insured pays a premium.

An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified
peril. In fire, casualty, and marine insurance, the premium payable becomes a debt as soon as the risk attaches. In the
subject policy, no premium payments were made with regard to earthquake shock coverage, except on the two
swimming pools. There is no mention of any premium payable for the other resort properties with regard to earthquake
shock.

Petitioner also cited and relies on the attachment of the phrase Subject to: Other Insurance Clause, Typhoon
Endorsement, Earthquake Shock Endorsement, Extended Coverage Endorsement, FEA Warranty & Annual
Payment Agreement on Long Term Policies to the insurance policy as proof of the intent of the parties to extend the
coverage for earthquake shock. However, this phrase is merely an enumeration of the descriptive titles of the riders,
clauses, warranties or endorsements to which the policy is subject, as required under Section 50, paragraph 2 of the
Insurance Code.

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the general rule that
insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly
against the insurer company which usually prepares it. A contract of adhesion is one wherein a party, usually a
corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. Through the years, the courts have held that in these type of contracts, the parties do not bargain on
equal footing, the weaker party's participation being reduced to the alternative to take it or leave it. Thus, these
contracts are viewed as traps for the weaker party whom the courts of justice must protect. Consequently, any
ambiguity therein is resolved against the insurer, or construed liberally in favor of the insured. We cannot apply the
general rule on contracts of adhesion to the case at bar. Petitioner cannot claim it did not know the provisions of the
policy. From the inception of the policy, petitioner had required the respondent to copy verbatim the provisions and
terms of its latest insurance policy from AHAC-AIU. Respondent, in compliance with the condition set by the
petitioner, copied AIU Policy No. 206-4568061-9 in drafting its Insurance Policy No. 31944. It is true that there was
variance in some terms, specifically in the replacement cost endorsement, but the principal provisions of the policy
remained essentially similar to AHAC-AIUs policy. Consequently, we cannot apply the "fine print" or "contract of
adhesion" rule in this case as the parties intent to limit the coverage of the policy to the two swimming pools only is not
ambiguous.

MANILA MAHOGANY MANUFACTURING CORP V CA & ZENITH INSURANCE

G.R. No. L-52756 October 12, 1987

DOCTRINE:

The right of subrogation can only exist after the insurer has paid the otherwise the insured will be deprived of his right
to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he may
sue the party responsible for the damage for the the [sic] remainder. To the extent of the amount he has already received
from the insurer enjoy's [sic] the right of subrogation.

Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving
payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But
in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the
release was made with the consent of the insurer.

FACTS:

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 From March 6, 1970 1971, petitioner insured its Mercedes Benz 4-door sedan w/ respondent insurance
company. On May 4, 1970, vehicle was bumped and damaged by a truck owned by San Miguel Corp (SMC).

Zenith paid P5K to petitioner in amicable settlement. Petitioners general manager executed a Release Claim,
subrogating respondent company to all its right to action against SMC

Dec. 11, 1972 respondent co. wrote Insurance Adjusters Inc. To demand reimbursement from SMC.
Insurance Adjusters refused saying that SMC had already paid petitioner P4,500 for the damages to petitioners
vehicle, as evidenced by a cash voucher and Release of Claim executed by the GM of petitioner discharging
SMC from all actions, claims, demands the rights of action that now exist or hereafter develop arising out of
or as a consequence of the accident

Respondent demanded the P4.5K amount from petitioner. Petitioner refused. Suit filed for recovery.

City Court ordered petitioner to pay respondent. CFI affirmed. CA affirmed with modification that petitioner
was to pay respondent the total amount of 5K it had received from respondent co.

Petitioner now contends it is not bound to pay P4,500.00, and much more, P5,000.00 to respondent company
as the subrogation in the Release of Claim it executed in favor of respondent was conditioned on recovery of
the total amount of damages petitioner had sustained. Since total damages were valued by petitioner at
P9,486.43 and only P5,000.00 was received by petitioner from respondent, petitioner argues that it was entitled
to go after San Miguel Corporation to claim the additional P4,500.00 eventually paid to it by the latter, without
having to turn over said amount to respondent.

Respondent of course disputes this allegation and states that there was no qualification to its right of
subrogation under the Release of Claim executed by petitioner, the contents of said deed having expressed all
the intents and purposes of the parties.

ISSUE: WON petitioner should pay respondent despite the subrogation in the Release of Claim was conditioned on
recovery of the total amount of damages petitioner has sustained?

HELD:

We find petitioners arguments to be untenable and without merit. In the absence of any other evidence to support its
allegation that a gentlemen's agreement existed between it and respondent, not embodied in the Release of Claim, such
ease of Claim must be taken as the best evidence of the intent and purpose of the parties.

CA was correct in holding petitioner should reimburse respondent. As has been observed:

... The right of subrogation can only exist after the insurer has paid the otherwise the insured will be deprived of his
right to full indemnity. If the insurance proceeds are not sufficient to cover the damages suffered by the insured, then he
may sue the party responsible for the damage for the the [sic] remainder. To the extent of the amount he has already
received from the insurer enjoy's [sic] the right of subrogation.

Since the insurer can be subrogated to only such rights as the insured may have, should the insured, after receiving
payment from the insurer, release the wrongdoer who caused the loss, the insurer loses his rights against the latter. But
in such a case, the insurer will be entitled to recover from the insured whatever it has paid to the latter, unless the
release was made with the consent of the insurer.

When manila Mahogany executed another release claim discharging SMC from all rights of action after the insurer had
paid the proceeds of the policy the compromise agreement of 5K- the insurer is entitled to recover from the insured

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the amount of insurance money paid. Petitioner by its own acts released SMC, thereby defeating respondents right of
subrogation, the right of action against the insurer was also nullified

Federal Express Corporation vs. American Home Assurance Company

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Eternal Gardens Memorial Park Corporation vs. Phil American Life Insurance Company

- INCOMPLETE -

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