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ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE received the application November 26, 1917.

he application November 26, 1917. He said that on the same day he

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY signed a letter notifying Mr. Herrer of this acceptance. They said that these
G.R. No. 166245 09 April 2008 letters, after being signed, were sent to the chief clerk and placed on the
mailing desk for transmission. The witness could not tell if the letter had every
Facts: actually been placed in the mails.
The plaintiff’s attorney testified to having prepared Herrer’s will, and his
Respondent Philamlife entered into an agreement denominated as Creditor client mentioned his application for a life annuity. He said that the only
Group Life Policy with petitioner. Under the policy, the clients of Eternal who document relating to the transaction in his possession was the provisional
purchased burial lots from it on installment basis would be insured by receipt. Rafael Enriquez, the administrator of the estate, testified that he had
Philamlife. Among those insured was John Chuang who died with a balance gone through the effects of the deceased and had found no letter of
of payments pf PhP100,000.00. More than a year after complying with the notification from the insurance company to Mr. Herrer.
required documents, Philamlife had not furnished Eternal with any reply to the Our deduction from the evidence on this issue must be that the letter of
latter’s insurance claim. This prompted Eternal to demand from Philamlife the November 26, 1917, notifying Mr. Herrer that his application had been
payment of the claim for PhP 100,000 on April 25, 1986. Only then did accepted, prepared, and signed in the local office of the insurance company
Philamlife respond that the deceased was not covered by the Policy. and was placed in the ordinary channels for transmission. But this was never
actually mailed and thus was never received by the applicant.
The RTC said that since the contract is a group life insurance, once proof of The law that applies here is the Civil Code Art 1802, because the Insurance
death is submitted, payment must follow. The CA ruled that the non- Act is silent as to the methods followed to create a contract of insurance.
accomplishment of the submitted application form violated Section 26 of the Article 1802, not only describes a contact of life annuity, but but in two other
Insurance Code. Thus, the CA concluded, there being no application form, articles, also gives strong clues as to the proper disposition of the case.
Chuang was not covered by Philamlifes insurance. For instance, article 16 of the Civil Code provides that “In matters which are
governed by special laws, any deficiency of the latter shall be supplied by the
provisions of this Code.” The special law on the subject of insurance is
Issue: May the inaction of the insurer on the insurance application be deficient in enunciating the principles governing acceptance, the subject-
considered approval of the application? matter of the Civil code, if there be any, would be controlling. In the Civil
Code is found article 1262 providing that “Consent is shown by the
Ruling: concurrence of offer and acceptance with respect to the thing and the
consideration which are to constitute the contract. An acceptance made by
Yes. As earlier stated, Philamlife and Eternal entered into an agreement letter shall not bind the person making the offer except from the time it came
denominated as Creditor Group Life Policy No. P-1920 dated December 10, to his knowledge. The contract, in such case, is presumed to have been entered
1980. In the policy, it is provided that: into at the place where the offer was made.”
The Civil Code rule, that an acceptance made by letter shall bind the person
EFFECTIVE DATE OF BENEFIT. making the offer only from the date it came to his knowledge avoids
uncertainty and tends to security.
The insurance of any eligible Lot Purchaser shall be effective on the date he Also, U.S. jurisprudence states that the courts who take this view have
contracts a loan with the Assured. However, there shall be no insurance if the expressly held that an acceptance of an offer of insurance not actually or
application of the Lot Purchaser is not approved by the Company. constructively communicated to the proposer does not make a contract. Only
the mailing of acceptance, it has been said, completes the contract of
An examination of the above provision would show ambiguity between its insurance.
two sentences. A contract of insurance, being a contract of adhesion, par The law applicable to the case is found to be the second paragraph of article
excellence, any ambiguity therein should be resolved against the insurer. 1262 of the Civil Code providing that an acceptance made by letter shall not
Moreover, the mere inaction of the insurer on the insurance application must bind the person making the offer except from the time it came to his
not work to prejudice the insured; it cannot be interpreted as a termination of knowledge. Also, that according to the provisional receipt, three things had to
the insurance contract. The termination of the insurance contract by the be accomplished by the insurance company before there was a contract: (1)
insurer must be explicit and unambiguous. There had to be a medical examination of the applicant; (2) there had to be
approval of the application by the head office of the company; and (3) this
approval had in some way to be communicated by the company to the
Enriquez v Sunlife November 29, 1920 G.R. No. L-15895 applicant. The further admitted facts are that the head office in Montreal did
Malcolm, J.: accept the application, did cable the Manila office to that effect, did actually
issue the policy and did actually write the letter of notification and place it in
Facts: the usual channels for transmission to the addressee.
This is an action brought by the plaintiff ad administrator of the estate of the The fact as to the letter of notification thus fails to concur with the essential
late Joaquin Ma. Herrer to recover from the defendant life insurance company elements of the general rule pertaining to the mailing and delivery of mail
the sum of pesos 6,000 paid by the deceased for a life annuity. The trial court matter as announced by the American courts, namely, when a letter or other
gave judgment for the defendant. Plaintiff appeals. mail matter is addressed and mailed with postage prepaid there is a rebuttable
Joaquin Herrer made application to the Sun Life Assurance Company of presumption of fact that it was received by the addressee as soon as it could
Canada through its office in Manila for a life annuity. Two days later he paid have been transmitted to him in the ordinary course of the mails. But if any
the sum of P6,000 to the manager of the company’s Manila office and was one of these elemental facts fails to appear, it is fatal to the presumption. For
given a receipt. The application was given to the head office in Canada. The instance, a letter will not be presumed to have been received by the addressee
oofice gave acceptance by cable on November 26, 1917. The policy was unless it is shown that it was deposited in the post-office, properly addressed
issued on December 4. and stamped.
The attorney, Mr. Torres then wrote to the Manila office of the company The contract for a life annuity was not perfected because it has not been
stating that Herrer desired to withdraw his application. The following day the proved satisfactorily that the acceptance of the application ever came to the
local office replied to Mr. Torres, stating that the policy had been issued, and knowledge of the applicant.
called attention to the notification. This letter was received by Mr. Torres on
the morning of December 21, 1917 and Mr. Herrer died on December 20,
(Whether on the same day the cable was received notice was sent by the Insurance Case Digest: White Gold Marine Services, Inc. V. Pioneer
Manila office of Herrer that the application had been accepted, is a disputed Insurance Surety Corp. (2005)
point, which will be discussed later.) G.R.No. 154514 July 28, 2005
Lessons Applicable: Mutual Insurance Companies (Insurance)
Issue: WON Herrer received notice of acceptance of his application.
FACTS: (White Gold > Pioneer > Steamship Mutual)
Held: No. Judgment reversed.
White Gold Marine Services, Inc. (White Gold) procured a protection and
Ratio: indemnity coverage for its vessels from The Steamship Mutual Underwriting
Sunlife averred that that they prepared the letter on November 26, 1917, and Association (Bermuda) Limited (Steamship Mutual) through Pioneer
handed it to the local manager for signature. The manager said that he Insurance and Surety Corporation (Pioneer)
When White Gold failed to fully pay its accounts, Steamship Mutual refused Although Pioneer is already licensed as an insurance company, it needs a
to renew the coverage separate license to act as insurance agent for Steamship Mutual.
Steamship Mutual thereafter filed a case against White Gold for collection of Insurance Code
sum of money to recover the latter’s unpaid balance Sec. 299
White Gold filed a complaint before the Insurance Commission Sec. 299. No insurance company doing business in the Philippines, nor any
Steamship Mutual violated Sections 186[4] and 187[5] of the Insurance Code agent thereof, shall pay any commission or other compensation to any person
Pioneer violated Sections 299,[6] 300[7] and 301[8] in relation to Sections for services in obtaining insurance, unless such person shall have first
302 and 303, thereof procured from the Commissioner a license to act as an insurance agent of such
Insurance Commission: dismissed the complaint company or as an insurance broker as hereinafter provided.
no need for Steamship Mutual to secure a license because it was a Protection
and Indemnity Club (P & I Club) (NOT engaged in the insurance business) No person shall act as an insurance agent or as an insurance broker in the
Pioneer need not obtain another license as insurance agent and/or a broker for solicitation or procurement of applications for insurance, or receive for
Steamship Mutual because Steamship Mutual was not engaged in the services in obtaining insurance, any commission or other compensation from
insurance business any insurance company doing business in the Philippines, or any agent
Moreover, Pioneer was already licensed thereof, without first procuring a license to act from the Commissioner, which
CA: affirmed Insurance Commission must be renewed annually on the first day of January, or within six months
thereafter. Such license shall be issued by the Commissioner only upon the
ISSUE: written application of the person desiring it, such application if for a license to
1. W/N Steamship Mutual, a P & I Club, is engaged in the insurance business act as insurance agent, being approved and countersigned by the company
in the Philippines - YES. such person desires to represent, and shall be upon a form prescribed by the
2. W/N Pioneer as resident agent of Steamship Mutual is required to obtain a Commissioner giving such information as he may require, and upon payment
license as an insurance agent/broker - YES of the corresponding fee hereinafter prescribed. The Commissioner shall
satisfy himself as to competence and trustworthiness of the applicant and shall
HELD: petition is PARTIALLY GRANTED. CA affirmed. the revocation of have the right to refuse to issue or renew and to suspend or revoke any such
Pioneer’s Certificate of Authority and removal of its directors and officers, is license in his discretion. No such license shall be valid after the thirtieth day
DENIED of June of the year following its issuance unless it is renewed.

1. YES


(2) The term "doing an insurance business" or "transacting an insurance July 2, 2014 § Leave a comment
business", within the meaning of this Code, shall include: GR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION
(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 FACTS:
vocation and not as merely incidental to any other legitimate business or
activity of the surety; Petitioner is a domestic corporation whose primary purpose is to establish,
maintain, conduct and operate a prepaid group practice health care delivery
(c) doing any kind of business, including a reinsurance business, specifically system or a health maintenance organization to take care of the sick and
recognized as constituting the doing of an insurance business within the disabled persons enrolled in the health care plan and to provide for the
meaning of this Code; administrative, legal, and financial responsibilities of the organization. On
January 27, 2000, respondent CIR sent petitioner a formal deman letter and
(d) doing or proposing to do any business in substance equivalent to any of the the corresponding assessment notices demanding the payment of deficiency
foregoing in a manner designed to evade the provisions of this Code. taxes, including surcharges and interest, for the taxable years 1996 and 1997
in the total amount of P224,702,641.18. The deficiency assessment was
In the application of the provisions of this Code the fact that no profit is imposed on petitioner’s health care agreement with the members of its health
derived from the making of insurance contracts, agreements or transactions or care program pursuant to Section 185 of the 1997 Tax Code. Petitioner
that no separate or direct consideration is received therefor, shall not be protested the assessment in a letter dated February 23, 2000. As respondent
deemed conclusive to show that the making thereof does not constitute the did not act on the protest, petitioner filed a petition for review in the Court of
doing or transacting of an insurance business. Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST
The test to determine if a contract is an insurance contract or not, depends on assessments. On April 5, 2002, the CTA rendered a decision, ordering the
the nature of the promise, the act required to be performed, and the exact petitioner to PAY the deficiency VAT amounting to P22,054,831.75 inclusive
nature of the agreement in the light of the occurrence, contingency, or of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for
circumstances under which the performance becomes requisite the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus
a marine insurance undertakes to indemnify the assured against marine losses, 20% interest from January 20, 1998 until fully paid for the 1997 VAT
such as the losses incident to a marine adventure deficiency. Accordingly, VAT Ruling No. [231]-88 is declared void and
a mutual insurance company is a cooperative enterprise where the members without force and effect. The 1996 and 1997 deficiency DST assessment
are both the insurer and insured against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is
the members all contribute, by a system of premiums or assessments, to the ORDERED to DESIST from collecting the said DST deficiency tax.
creation of a fund from which all losses and liabilities are paid, and where the Respondent appealed the CTA decision to the (CA) insofar as it cancelled the
profits are divided among themselves, in proportion to their interest DST assessment. He claimed that petitioner’s health care agreement was a
provide 3 types of coverage: contract of insurance subject to DST under Section 185 of the 1997 Tax Code.
protection and indemnity On August 16, 2004, the CA rendered its decision which held that petitioner’s
war risks health care agreement was in the nature of a non-life insurance contract
defense costs subject to DST. Respondent is ordered to pay the deficiency Documentary
P & I Club Stamp Tax. Petitioner moved for reconsideration but the CA denied it.
a form of insurance against third party liability, where the third party is
anyone other than the P & I Club and the members ISSUES:
Steamship Mutual as a P & I Club is a mutual insurance association engaged
in the marine insurance business (1) Whether or not Philippine Health Care Providers, Inc. engaged in
Since a contract of insurance involves public interest, regulation by the State insurance business.
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 (2) Whether or not the agreements between petitioner and its members possess
Insurance Commission all elements necessary in the insurance contract.

NO. Health Maintenance Organizations are not engaged in the insurance (2) Whether or not there is concealment of material fact made by Ernani
business. The SC said in June 12, 2008 decision that it is irrelevant that
petitioner is an HMO and not an insurer because its agreements are treated as HELD:
insurance contracts and the DST is not a tax on the business but an excise on
the privilege, opportunity or facility used in the transaction of the business. (1)YES. Section2 (1)of the Insurance Code defines a contract of insurance as
Petitioner, however, submits that it is of critical importance to characterize the an agreement whereby one undertakes for a consideration to indemnify
business it is engaged in, that is, to determine whether it is an HMO or an another against loss, damage, or liability arising from an unknown or
insurance company, as this distinction is indispensable in turn to the issue of contingent event.
whether or not it is liable for DST on its health care agreements. Petitioner is
admittedly an HMO. Under RA 7878 an HMO is “an entity that provides, Section 3 of the Insurance Code states that any contingent or unknown event,
offers or arranges for coverage of designated health services needed by plan whether past or future, which my damnify a person having an insurable
members for a fixed prepaid premium. The payments do not vary with the against him, may be insured against. Every person has an insurable interest in
extent, frequency or type of services provided. Section 2 (2) of PD 1460 the life and health of himself.
enumerates what constitutes “doing an insurance business” or “transacting an
insurance business”which are making or proposing to make, as insurer, any Section 10 provides that every person has an insurable interest in the life and
insurance contract; making or proposing to make, as surety, any contract of health (1) of himself, of his spouse and of his children.
suretyship as a vocation and not as merely incidental to any other legitimate
business or activity of the surety; doing any kind of business, including a The insurable interest of respondent’s husband in obtaining the health care
reinsurance business, specifically recognized as constituting the doing of an agreement was his own health. The health care agreement was in the nature of
insurance business within the meaning of this Code; doing or proposing to do non-life insurance, which is primarily a contract of indemnity. Once the
any business in substance equivalent to any of the foregoing in a manner member incurs hospital, medical or any other expense arising from sickness,
designed to evade the provisions of this Code. injury or other stipulated contingent, the health care provider must pay for the
same to the extent agreed upon under the contract.
Overall, petitioner appears to provide insurance-type benefits to its members
(with respect to its curative medical services), but these are incidental to the (2) NO. The answer assailed by petitioner was in response to the question
principal activity of providing them medical care. The “insurance-like” aspect relating to the medical history of the applicant. This largely depends on
of petitioner’s business is miniscule compared to its noninsurance activities. opinion rather than fact, especially coming from respondent’s husband who
Therefore, since it substantially provides health care services rather than was not a medical doctor. Where matters of opinion or judgment are called for
insurance services, it cannot be considered as being in the insurance business. answers made I good faith and without intent to deceive will not avoid a
policy even though they are untrue.

The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. Concealment as a defense for the health
PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF APPEALS care provider or insurer to avoid liability is an affirmative defense and the
July 2, 2014 § Leave a comment duty to establish such defense by satisfactory and convincing evidence rests
G.R. No. 125678, March 18, 2002 (YNARES-SANTIAGO, J.) upon the provider or insurer. In any case, with or without the authority to
investigate, petitioner is liable for claims made under the contract. Having
FACTS: assumed a responsibility under the agreement, petitioner is bound to answer to
the extent agreed upon. In the end, the liability of the health care provider
Ernani Trinos applied for a health care coverage with Philamcare Health attaches once the member is hospitalized for the disease or injury covered by
Systems, Inc. To the question ‘Have you or any of your family members ever the agreement or wherever he avails of the covered benefits which he has
consulted or been treated for high blood pressure, heart trouble, diabetes, prepaid.
cancer, liver disease, asthma or peptic ulcer?’, Ernani answered ‘No’. Under
the agreement, Ernani is entitled to avail of hospitalization benefits and out- Being a contract of adhesion, the terms of an insurance contract are to be
patient benefits. The coverage was approved for a period of one year from construed strictly against the party which prepared the contract – the insurer.
March 1, 1988 to March 1, 1989. The agreement was however extended By reason of the exclusive control of the insurance company over the terms
yearly until June 1, 1990 which increased the amount of coverage to a and phraseology of the insurance contract, ambiguity must be strictly
maximum sum of P75,000 per disability. interpreted against the insurer and liberally in favor of the insured, especially
to avoid forfeiture. This is equally applicable to Health Care Agreements.
During the period of said coverage, Ernani suffered a heart attack and was
confined at the Manila Medical Center (MMC) for one month. While in the
hospital, his wife Julita tried to claim the benefits under the health care
agreement. However, the Philamcare denied her claim alleging that the
agreement was void because Ernani concealed his medical history. Doctors at
the MMC allegedly discovered at the time of Ernani’s confinement that he
was hypertensive, diabetic and asthmatic, contrary to his answer in the
application form. Thus, Julita paid for all the hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical
therapist at home. Later, he was admitted at the Chinese General Hospital.
Due to financial difficulties, however, respondent brought her husband home
again. In the morning of April 13, 1990, Ernani had fever and was feeling very
weak. Respondent was constrained to bring him back to the Chinese General
Hospital where he died on the same day.

Julita filed an action for damages and reimbursement of her expenses plus
moral damages attorney’s fees against Philamcare and its president, Dr.
Benito Reverente. The Regional Trial court or Manila rendered judgment in
favor of Julita. On appeal, the decision of the trial court was affirmed but
deleted all awards for damages and absolved petitioner Reverente. Hence, this
petition for review raising the primary argument that a health care agreement
is not an insurance contract; hence the “incontestability clause” under the
Insurance Code does not apply.


(1) Whether or not the health care agreement is not an insurance contract
Titles 1-2: Sections 1-9

Sections 2, 3, 6, and 8

1. Sec. 2 with Secs. 177-180
2. Section 6 with Secs. 190-199
3. Sec. 7 with Secs. 53-57

1. Concept of Insurance
2. Elements of an Insurance Contract
3. Characteristics/Nature of Insurance

1. Eternal Gardens Memorial Park
Corporation vs. Philam Life (April 8,
2008) GR No. 166245
2. Rafael Enriquez vs. Sun Life
Assurance Company of Canada (Nov.
29, 1920) GR No. 15895
3. White Gold Marine Services, Inc.,
versus Pioneer Insurance And Surety
Corporation And The Steamship
Mutual Underwriting Association
(Bermuda) Ltd., 2005 Jul 28
4. Philippine Health Care Providers,
Inc., vs. Commissioner Of Internal
Revenue 2009 Sep 18
5. Philamcare Health Systems, Inc. vs.
Court Of Appeals And Julita Trinos
2002 Mar 18
6. 242 SCRA 152 (1995 case)