Insurance Course Outline

INSURANCE LAW
Course Outline
Atty. Claire Marie B. Mauro
Class Policy
I. COURSE REQUIREMENTS AND GRADING SYSTEM
Course Requirements Grade Breakdown

Attendance, participation, quizzes and 15%
writing exercises
Case Digests 15%
Exam 70%
II. COURSE POLICIES
1. The JMC College of law requires compliance with the highest standards of academic
performance, personal integrity, and self-discipline. Attendance will be checked at
the start of every class. The Law School’s rules and regulations on attendance apply.
2. Students shall come to class decently dressed in appropriate attire. Informal or house
attire (i.e., shorts, undershirts, pajamas, flip-flop slippers, et.) is absolutely prohibited.
3. Step out of the class if you need to use your mobile phone. Laptops and similar
gadgets may be used for taking down notes or researching for class as long as they
are put on silent mode or the speakers are turned off.
4. Students caught cheating during an exam will automatically get a failing grade for
the course.
5. School policy on excessive absences shall apply but as a consideration, for as long as
the student is able to personally sign the attendance sheet before the class ends,
he/she will considered present for the said class period.
6. All cases listed for discourse (whether actually discussed or not in class) for a particular
exam coverage shall be digested. The digested cases shall be handwritten in short
bond paper and submitted on or before the scheduled relevant exam. Format shall
be:
Case Citation
I. Facts
II Issue
III. Ruling
(Maximum of two pages per case digest). Late submission will not be accepted.
PART 1
I. GENERAL CONCEPTS
A. Laws Governing Insurance

 PD 612 and its amendatory laws
 New Civil Code
 Corporation Code
B. Definition
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 Contract of Insurance
 Doing an insurance business
White Gold Marine Services v Pioneer, GR 154514
G.R. No. 154514. July 28, 2005

WHITE GOLD MARINE SERVICES, INC., Petitioners,
vs.
PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LTD., Respondents.
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. When White
Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage.
Thereafter, Steamship filed a case against White Gold or collection of sum of money for the
unpaid balance. White Gold on the other hand, filed a complaint in 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.
Insurance Commission dismissed the complaint. It said the Steamship does not need to secure
a license because it was not engaged in the insurance business.Steamship Mutual was a
Protection and Indemnity Club (P & I Club). sLikewise, 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. On
appeal, the CA affirmed the Insurance Commissioner’s decision.
ISSUE:
(1) WON Steamship is an insurance business in the Philippines.
(2) WON Pioneer needs a license as an insurance agent/broker for Steamship Mutual.
RULING:
(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; and, (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.
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
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becomes requisite. It is not by what it is called. 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.
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. With this,
must secure a license from the Insurance Commission as mandated by Section 187 of the
Insurance Code to continue doing business in the Philippines.
(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: “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.“
Phil Health Care Providers v CIR, GR 167330
G.R. No. 167330 June 12, 2008

PHILIPPINE HEALTH CARE PROVIDERS, INC., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
Facts:
Philippine Health Care Providers, Inc. (PHCPI) 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. The pertinent part of PHCPI’s
membership or health care agreement provides a benefit for In- Patient Services, Out- Patient
Services, and Emergency Care, subject to conditions and limitations.
Commissioner of Internal Revenue sent PHCPI 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 DST assessment (₱55,746,352.19 and ₱68,450,258.73) was imposed on PHCPI’s
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health care agreement with the members of its health care program pursuant to Section 185
of the 1997 Tax Code which provides:
Section 185. Stamp tax on fidelity bonds and other insurance policies. - On all policies
of insurance or bonds or obligations of the nature of indemnity for loss, damage, or
liability made or renewed by any person, association or company or corporation
transacting the business of accident, fidelity, employer's liability, plate, glass, steam
boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except life,
marine, inland, and fire insurance), and all bonds, undertakings, or recognizances,
conditioned for the performance of the duties of any office or position, for the doing
or not doing of anything therein specified, and on all obligations guaranteeing the
validity or legality of any bond or other obligations issued by any province, city,
municipality, or other public body or organization, and on all obligations guaranteeing
the title to any real estate, or guaranteeing any mercantile credits, which may be
made or renewed by any such person, company or corporation, there shall be
collected a documentary stamp tax of fifty centavos (P0.50) on each four pesos
(P4.00), or fractional part thereof, of the premium charged.
PHCPI protested the assessment and argues that its health care agreement is not a contract
of insurance but a contract for the provision on a prepaid basis of medical services, including
medical check-up, that are not based on loss or damage. PHCPI also insists that it is not
engaged in the insurance business. It is a health maintenance organization regulated by the
Department of Health, not an insurance company under the jurisdiction of the Insurance
Commission. For these reasons, PHCPI asserts that the health care agreement is not subject
to DST.
Issue:
WON a health care agreement is in the nature of an insurance contract and therefore subject
to the documentary stamp tax (DST) imposed under Section 185 of Republic Act 8424 (Tax
Code of 1997).
Ruling:
Yes. The DST is levied on the exercise by persons of certain privileges conferred by law for the
creation, revision, or termination of specific legal relationships through the execution of
specific instruments. It is an excise upon the privilege, opportunity, or facility offered at
exchanges for the transaction of the business. In particular, the DST under Section 185 of the
1997 Tax Code is imposed on the privilege of making or renewing any policy of insurance
(except life, marine, inland and fire insurance), bond or obligation in the nature of indemnity
for loss, damage, or liability.
Under the law, a contract of insurance is an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown
or contingent event. The event insured against must be designated in the contract and must
either be unknown or contingent.
PHCPI’s health care agreement is not a contract for the provision of medical services. PHCPI
does not actually provide medical or hospital services but merely arranges for the same and
pays for them up to the stipulated maximum amount of coverage. It is also incorrect to say
that the health care agreement is not based on loss or damage because, under the said
agreement, PHCPI assumes the liability and indemnifies its member for hospital, medical and
related expenses (such as professional fees of physicians). The term "loss or damage" is broad
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enough to cover the monetary expense or liability a member will incur in case of illness or
injury. The expenses to be incurred by each member cannot be predicted beforehand, if
they can be predicted at all. PHCPI assumes the risk of paying for the costs of the services
even if they are significantly and substantially more than what the member has "prepaid."
PHCPI does not bear the costs alone but distributes or spreads them out among a large group
of persons bearing a similar risk, that is, among all the other members of the health care
program. This is insurance.
PHCPI’s health care agreement is substantially similar to that involved in Philamcare Health
Systems, Inc. v. CA: [T]he insurable interest of [the subscriber] in obtaining the health care
agreement was his own health. The health care agreement was in the nature of non-life
insurance, which is primarily a contract of indemnity.
PHCPI’s contention that it is a health maintenance organization and not an insurance

company is irrelevant. Contracts between companies like PHCPI and the beneficiaries under
their plans are treated as insurance contracts.
RESOLUTION (September 18, 2009):
1. PHCPI is a health maintenance organization (HMO) and not an insurance company

PHCPI was formally registered and incorporated with the Securities and Exchange
Commission on June 30, 1987.9 It is engaged in the dispensation of preventive, diagnostic,
and curative medical services. Individuals enrolled in its health care program pay an annual
membership fee. Membership is on a year-to-year basis. The medical services are dispensed
to enrolled members in a hospital or clinic owned, operated or accredited by PHCPI, through
physicians, medical and dental practitioners under contract with it. It negotiates with such
health care practitioners regarding payment schemes, financing and other procedures for
the delivery of health services. Except in cases of emergency, the professional services are to
be provided only by PHCPI’s physicians, those directly employed by it or whose services are
contracted by it. PHCPI also provides hospital services such as room and board
accommodation, laboratory services, operating rooms, x-ray facilities and general nursing
care. If and when a member avails of the benefits under the agreement, petitioner pays the
participating physicians and other health care providers for the services rendered, at pre-
agreed rates.
2. Health Maintenance Organizations Are Not Engaged in the Insurance Business

From the language of Section 185 of the Tax Code, it is evident that two requisites must concur
before the DST can apply, namely: (1) the document must be a policy of insurance or an
obligation in the nature of indemnity and (2) the maker should be transacting the business of
accident, fidelity, employer’s liability, plate, glass, steam boiler, burglar, elevator, automatic
sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance).
PHCPI is admittedly an 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." Hence, PHCPI was not
engaged in the business of insurance during the pertinent taxable years.
Section 2 (2) of PD20 1460 (otherwise known as the Insurance Code) enumerates what
constitutes "doing an insurance business" or "transacting an insurance business:"
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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.
In the application of the provisions of this Code, 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 therefore, shall not be deemed conclusive to show that the making
thereof does not constitute the doing or transacting of an insurance business.
Various courts in the United States, whose jurisprudence has a persuasive effect on our
decisions, have determined that HMOs are not in the insurance business. One test that they
have applied is whether the assumption of risk and indemnification of loss (which are
elements of an insurance business) are the principal object and purpose of the organization
or whether they are merely incidental to its business. If these are the principal objectives, the
business is that of insurance. But if they are merely incidental and service is the principal
purpose, then the business is not insurance.
Applying the "principal object and purpose test," there is significant American case law
supporting the argument that a corporation (such as an HMO, whether or not organized for
profit), whose main object is to provide the members of a group with health services, is not
engaged in the insurance business.
That an incidental element of risk distribution or assumption may be present should not
outweigh all other factors. If attention is focused only on that feature, the line between
insurance or indemnity and other types of legal arrangement and economic function
becomes faint, if not extinct. This is especially true when the contract is for the sale of goods
or services on contingency. But obviously it was not the purpose of the insurance statutes to
regulate all arrangements for assumption or distribution of risk. That view would cause them
to engulf practically all contracts, particularly conditional sales and contingent service
agreements. The fallacy is in looking only at the risk element, to the exclusion of all others
present or their subordination to it. The question turns, not on whether risk is involved or
assumed, but on whether that or something else to which it is related in the particular plan is
its principal object purpose. 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.
Consequently, the mere presence of risk would be insufficient to override the primary purpose
of the business to provide medical services as needed, with payment made directly to the
provider of these services. In short, even if PHCPI assumes the risk of paying the cost of these
services even if significantly more than what the member has prepaid, it nevertheless cannot
be considered as being engaged in the insurance business.
It is important to emphasize that, in adopting the "principal purpose test" used in the above-
quoted U.S. cases, we are not saying that PHCPI’s operations are identical in every respect
to those of the HMOs or health providers which were parties to those cases. What we are
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stating is that, for the purpose of determining what "doing an insurance business" means, we
have to scrutinize the operations of the business as a whole and not its mere components.
Lastly, it is significant that PHCPI, 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.
3. HMO is different from Insurance

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.
The basic distinction between medical service corporations and ordinary health and
accident insurers is that the former undertake to provide prepaid medical services through
participating physicians, thus relieving subscribers of any further financial burden, while the
latter only undertake to indemnify an insured for medical expenses up to, but not beyond,
the schedule of rates contained in the policy.
The primary purpose of a medical service corporation, however, is an undertaking to provide

physicians who will render services to subscribers on a prepaid basis. Hence, if there are no
physicians participating in the medical service corporation’s plan, not only will the subscribers
be deprived of the protection which they might reasonably have expected would be
provided, but the corporation will, in effect, be doing business solely as a health and accident
indemnity insurer without having qualified as such and rendering itself subject to the more
stringent financial requirements of the General Insurance Laws.
A participating provider of health care services is one who agrees in writing to render health
care services to or for persons covered by a contract issued by health service corporation in
return for which the health service corporation agrees to make payment directly to the
participating provider.
4. A Health Care Agreement Is Not An Insurance Contract Contemplated Under Section 185
Of The NIRC of 1997
Section 185 states that DST is imposed on "all policies of insurance… or obligations of the
nature of indemnity for loss, damage, or liability…." In construing this provision, we should be
guided by the principle that tax statutes are strictly construed against the taxing authority.
This is because taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support of the
government. Hence, tax laws may not be extended by implication beyond the clear import
of their language, nor their operation enlarged so as to embrace matters not specifically
provided.
We are aware that, in Blue Cross and Philamcare, the Court pronounced that a health care
agreement is in the nature of non-life insurance, which is primarily a contract of indemnity.
However, those cases did not involve the interpretation of a tax provision. Instead, they dealt
with the liability of a health service provider to a member under the terms of their health care
agreement. Such contracts, as contracts of adhesion, are liberally interpreted in favor of the
member and strictly against the HMO.
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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
5. In consideration of the insurer’s promise, the insured pays a premium.
The agreement between PHCPI and its members does not possess all these elements. 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 PHCPI’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 availment by a member of the benefits under the
agreement, PHCPI 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. Fourth. In case of emergency, PHCPI 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.
5. There Was No Legislative Intent To Impose DST On Health Care Agreements Of HMOs.
When the law imposing the DST was first passed, HMOs were yet unknown in the Philippines.
However, when the various amendments to the DST law were enacted, they were already in
existence in the Philippines and the term had in fact already been defined by RA 7875. If it
had been the intent of the legislature to impose DST on health care agreements, it could
have done so in clear and categorical terms. It had many opportunities to do so. But it did
not. The fact that the NIRC contained no specific provision on the DST liability of health care
agreements of HMOs at a time they were already known as such, belies any legislative intent
to impose it on them.
Philamcare Health System v CA, GR 125678
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.
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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.
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
didn’t apply because two-year and not one-year effectivity periods were required.
Issue:
WON a health care agreement is not an insurance contract; hence the “incontestability
clause” under the Insurance Code does not apply.
Held:
No. 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 husband’s 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 material fact 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 isn’t valid.
They can’t 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 insured’s opinion. He wasn’t a
medical doctor, so he can’t 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.
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“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.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a
contract of insurance.”
As to cancellation procedure- Cancellation 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 lie.”
Blue Cross Health Care Providers v CIR, GR 169737
BLUE CROSS HEALTH CARE v. OLIVARES

G.R. No. 169737 February 12, 2008
FACTS:
1.Neomi applied for a health care program with petitioner, a health maintainance firm, and
was approved. In the health care agreement, ailments due to “pre-exising conditions” were
excluded from the coverage.
2.38 days from effectivity of her health insurance, Neomi suffered a stroke and was admitted
at the Medical City which was one of the hospistals accredited by the petitioner. She
incurred hospital expenses amounting to P34,217.20. She requested from the representative
of petitioner at Medical City a letter of authorization in order to settle her medical bills. But
petitioner refused to issue the letter and suspended payment pending the submission of a
certification from her attending physician that the stroke she suffered was not caused by a
pre-existing condition.
3.Neomi was discharged from the hospital but the petitioner still refused to pay. She filed for
collection of sum of money against the petitioner. Petitioner maintained that it had not yet
denied respondents' claim as it was still awaiting Dr. Saniel's report, Neomi’s attending
physician.
4.MeTC dismissed complaint for lack of cause of action. RTC reversed and held that the
petitioner has the burden to prove that the stroke of Neomi was excluded from the
coverage of the health care agreement. Petitioner appealed. CA affirmed RTC.
ISSUE:
1. WON petitioner was able to prove the stroke of Neomi was caused by a pre-existing
condition and therefore was excluded from the coverage of the health care agreement
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– NO
2. WON petitioner is liable for moral and exemplary damages and attorney's fees. – YES
RULING: Petition DENIED.
RATIO:
1.The health care agreement defined a “pre-existing condition” as:
x x x a disability which existed before the commencement date of membership whose

natural history can be clinically determined, whether or not the Member was aware of such
illness or condition. Such conditions also include disabilities existing prior to reinstatement
date in the case of lapse of an Agreement. Notwithstanding, the following disabilities but
not to the exclusion of others are considered pre-existing conditions including their
complications when occurring during the first year of a Member’s coverage:
xxx
After the Member has been continuously covered for 12 months, this pre-existing provision
shall no longer be applicable except for illnesses specifically excluded by an endorsement
and made part of this Agreement.
Petitioner argues that respondents prevented Dr. Saniel from submitting his report regarding
the medical condition of Neomi. Hence, it contends that the presumption that evidence
willfully suppressed would be adverse if produced should apply in its favor. Respondents
counter that the burden was on petitioner to prove that Neomi's stroke was excluded from
the coverage of their agreement because it was due to a pre-existing condition. It failed
to prove this.
In Philamcare Health Systems, Inc. v. CA, the court ruled that a health care agreement is in
the nature of a non-life insurance. It is an established rule in insurance contracts that when
their terms contain limitations on liability, they should be construed strictly against the insurer.
These are contracts of adhesion the terms of which must be interpreted and enforced
stringently against the insurer which prepared the contract. This doctrine is equally
applicable to health care agreements.
Petitioner never presented any evidence to prove that respondent Neomi's stroke was due
to a pre-existing condition. It merely speculated that Dr. Saniel's report would be adverse
to Neomi, based on her invocation of the doctor-patient privilege. This was a disputable
presumption at best.
Section 3 (e), Rule 131 of the Rules of Court states:

Sec. 3. Disputable presumptions. ― The following presumptions are satisfactory if
uncontradicted, but may be contradicted and overcome by other evidence:
xxx xxx xxx
(e) That evidence willfully suppressed would be adverse if produced.
Suffice it to say that this 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. Respondents' refusal to present or allow
the presentation of Dr. Saniel's report was justified. It was privileged communication
between physician and patient.
2.RTC and CA found that respondents have sufficiently shown that they were forced to
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engage in a dispute with petitioner over a legitimate claim while respondent Neomi was
still experiencing the effects of a stroke and forced to pay for her medical bills during and
after her hospitalization despite being covered by petitioner’s health care program,
thereby suffering in the process extreme mental anguish, shock, serious anxiety and great
stress. They have shown that because of the refusal of petitioner to issue a letter of
authorization and to pay respondent Neomi's hospital bills, they had to engage the services
of counsel for a fee of P20,000.00. Finally, the refusal of petitioner to pay respondent
Neomi's bills smacks of bad faith, as its refusal was merely based on its own perception that
a stroke is a pre-existing condition.
Fortune Medicare v Amorin, GR 195872
Fortune Medicare vs Amorin

GR No. 195872, March 12, 2014
Facts:
David Robert Amorin was a member/cardholder of Fortune Medicare, Inc. While on vacation
in Hawai, Amorin underwent an emergency surgery on appendectomy causing him to incur
professional and hospitalization expenses of US 7,242.35 and US 1,777.79. He attempted to
recover from Fortune care the full amount but the company merely approved a
reimbursement of P12,151.36 which was based on average cost of appendectomy. Leading
to him for filing a petition citing Section 3, Article V of Benefits and Coverage of the Health
Care Contract which states “If the emergency confinement occurs in a foreign territory,
Fortune Care will be obligated to reimbursed or pay 80% of the approved standard charges
which shall cover the hospitalization cost and professional fees. RTC dismissed the complaint
and convinced that the parties intended to use the Philippine standard as basis. On appeal,
CA granted such by pointing out that, health care agreement must be construed in favor of
the subscriber.
Issue:
Whether or not Fortune care is not liable to Amorin for the reimbursement of 80 percent
representing total amount of hospitalization cost and professional fees $7,242.35 and
$1,777.79.
Ruling:
Fortune care is clearly liable to Amorin of $7,242.35 and $1,777.79. The Court emphasized that
for purposes of determining the liability of a health care provider to its members, jurisprudence
holds that a health care agreement is in the nature of non-life insurance which is primarily a
contract of indemnity. Once the member incurs hospital, medical or any other expense
arising from sickness, injury or other stipulated contingent, the health care provider must pay
for the same to the extent agreed upon under the contract.
In the instant case, the extent of Fortune Care’s liability to Amorin was governed by Section
3(B) Article V of the subject Health Care Contract. The appendectomy which the member
had to undergo qualified as an emergency care, but the treatment was performed at St.
Francis Medical Center in Honolulu, Hawaii, U.S.A., a non-accredited hospital.
The proper interpretation of the phrase "standard charges" could instead be correlated with
and reasonably inferred from the other provisions of Section 3(B), considering that Amorin’s
case fell under the second case. In case of treatments in foreign territories, its qualification
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was only as to the percentage, or 80% of that payable for treatments performed in non-
accredited hospital.
However, if the emergency confinement occurs in a foreign territory. Fortunecare will be

obligated to reimburse or pay one hundred (100%) percent under approved Philippine
Standard covered charges for hospitalization costs and professional fees but not to exceed
maximum allowable coverage, payable in pesos at prevailing currency exchange rate at
the time of availment in said territory where he/she is confined. Settled is the rule that
ambiguities in a contract are interpreted against the party that caused the ambiguity.
MMPSEU v MMPC, GR 175773
MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU), Petitioner,

vs. MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.
G.R. No. 175773 June 17, 2013
FACTS:
The CBA of the parties in this case provides that the company shoulder the hospitalization
expenses of the dependents of covered employees subject to certain limitations and
restrictions. Accordingly, covered employees pay part of the hospitalization insurance
premium through monthly salary deduction while MMPC, upon hospitalization of the covered
employees' dependents, shall pay the hospitalization expenses incurred for the hospitalizatio
of the covered employee’s dependents.
The conflict arose when a portion of the hospitalization expenses of the covered employees'
dependents were paid/shouldered by the dependent's own health insurance. While the
company refused to pay the portion of the hospital expenses already shouldered by the
dependents' own health insurance, the union (MMPSEU) insists that the covered employees
are entitled to the whole and undiminished amount of said hospital expenses.
Claiming that under the CBA, they are entitled to hospital benefits, which should not be
reduced by the amounts paid by MEDICard and by Prosper, the member-employees asked
for reimbursement from MMPC. However, MMPC denied the claims contending that double
insurance would result if the said employees would receive from the company the full amount
of hospitalization expenses despite having already received payment of portions thereof from
other health insurance providers.
Sought for comment, the Insurance Commission claims that the covered employees can
claim insurance benefits for a loss that had already been paid by another insurance
company. The Insurance Commission opined that in cases of claims for reimbursement of
medical expenses where there are two contracts providing benefits for such, recover may
be made on both simultaneously without regard to the amount of total benefits provided by
other insurance. This, it said, is consistent with the public policy underlying the collateral source
rule- that the courts have usually concluded that the liability of a health or accident insurer
is not reduced by other possible sources of indemnification or compensation.
Voluntary Arbitrator: finding MMPC liable to pay or reimburse the amount of hospitalization
expenses already paid by other health insurance companies. The Voluntary Arbitrator held
that the employees may demand simultaneous payment from both the CBA and their
dependents’ separate health insurance without resulting to double insurance, since separate
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premiums were paid for each contract. He also noted that the CBA does not prohibit
reimbursement in case there are other health insurers.
CA: reversed because both had the same subject matter, interest insured, and risk or peril
insured against. Hence employees will benefit twice for the same loss resulting in double
insurance. CA declared respondent Mitsubishi Motors (MMPC) to be under no legal
obligation to pay its covered employees’ dependents’ hospitalization expenses which were
already shouldered by other health insurance companies.
CONTENTION:
MMPSEU avers that the Decision of the Voluntary Arbitrator deserves utmost respect and
finality because it is supported by substantial evidence and is in accordance with the opinion
rendered by the Insurance Commission, an agency equipped with vast knowledge
concerning insurance contracts. It maintains that under the CBA, member-employees are
entitled to full reimbursement of medical expenses incurred by their dependents regardless
of any amounts paid by the latter’s health insurance provider. Otherwise, non-recovery will
constitute unjust enrichment on the part of MMPC. It avers that recovery from both the CBA
and other insurance companies is allowed under their CBA and not prohibited by law nor by
jurisprudence.
ISSUE: Is MMPC liable to pay the whole and undiminished amount of its employee’s
hospitalization expenses notwithstanding the amounts paid? (NO)
HELD: MMPC’S liability is only to the extent of the expenses actually incurred by their
dependents which excludes the amounts shouldered by other health insurance companies.
The employees are not entitle to the whole and undiminished amount of their hospitalization
expense.
ERROR IN APPLYING THE COLLATERAL SOURCE RULE
The Voluntary Arbitrator based his ruling on the opinion of Atty. Richard Funk (of the Claims
Adjudication Division) applying the collateral source rule, that the employees may recover
benefits from different insurance providers without regard to the amount of benefits paid by
each.
As part of American personal injury law, the COLLATERAL SOURCE RULE was originally applied
to tort cases wherein the defendant is prevented from benefiting from the plaintiff’s receipt
of money from other sources.38 Under this rule, if an injured person receives compensation for
his injuries from a source wholly independent of the tortfeasor, the payment should not be
deducted from the damages which he would otherwise collect from the tortfeasor.39 In a
recent Decision40 by the Illinois Supreme Court, the rule has been described as "an established
exception to the general rule that damages in negligence actions must be compensatory."
The Court went on to explain that although the rule appears to allow a double recovery, the
collateral source will have a lien or subrogation right to prevent such a double recovery.41
In Mitchell v. Haldar,42 the collateral source rule was rationalized by the Supreme Court of
Delaware:
The collateral source rule is ‘predicated on the theory that a tortfeasor has no interest
in, and therefore no right to benefit from monies received by the injured person from
sources unconnected with the defendant’. According to the collateral source rule, ‘a
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tortfeasor has no right to any mitigation of damages because of payments or

compensation received by the injured person from an independent source.’ The
rationale for the collateral source rule is based upon the quasi-punitive nature of tort law
liability. It has been explained as follows:
The collateral source rule is designed to strike a balance between two competing
principles of tort law: (1) a plaintiff is entitled to compensation sufficient to make him
whole, but no more; and (2) a defendant is liable for all damages that proximately result
from his wrong. A plaintiff who receives a double recovery for a single tort enjoys a
windfall; a defendant who escapes, in whole or in part, liability for his wrong enjoys a
windfall. Because the law must sanction one windfall and deny the other, it favors the
victim of the wrong rather than the wrongdoer.
Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent
conduct even if it results in a windfall for the innocent plaintiff. (Citations omitted)
As seen, the collateral source rule applies in order to place the responsibility for losses on the
party causing them.43 Its application is justified so that "'the wrongdoer should not benefit from
the expenditures made by the injured party or take advantage of contracts or other relations
that may exist between the injured party and third persons."44 Thus, it finds no application to
cases involving no-fault insurances under which the insured is indemnified for losses by
insurance companies, regardless of who was at fault in the incident generating the losses.45
HERE, IT IS CLEAR THAT MMPC IS A NO-FAULT INSURER. HENCE, IT CANNOT BE OBLIGED TO PAY
THE HOSPITALIZATION EXPENSES OF THE DEPENDENTS OF ITS EMPLOYEES WHICH HAD ALREADY
BEEN PAID BY SEPARATE HEALTH INSURANCE PROVIDERS OF SAID DEPENDENTS.
The Voluntary Arbitrator therefore erred in adopting Atty. Funk’s view that the covered
employees are entitled to full payment of the hospital expenses incurred by their dependents,
including the amounts already paid by other health insurance companies based on the
theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention to limit MMPC’s liability only
to actual expenses incurred by the employees’ dependents, that is, excluding the amounts
paid by dependents’ other health insurance providers.
The Voluntary Arbitrator ruled that the CBA has no express provision barring claims for
hospitalization expenses already paid by other insurers. Hence, the covered employees can
recover from both. The CA did not agree, saying that the conditions set forth in the CBA
implied an intention of the parties to limit MMPC’s liability only to the extent of the expenses
actually incurred by their dependents which excludes the amounts shouldered by other
health insurance companies.
We agree with the CA.
The condition that payment should be direct to the hospital and doctor implies that MMPC is
only liable to pay medical expenses actually shouldered by the employees’ dependents. It
follows that MMPC’s liability is limited, that is, it does not include the amounts paid by other
health insurance providers. This condition is obviously intended to thwart not only fraudulent
claims but also double claims for the same loss of the dependents of covered employees.
It is well to note at this point that the CBA constitutes a contract between the parties and as
such, it should be strictly construed for the purpose of limiting the amount of the employer’s
liability.46 The terms of the subject provision are clear and provide no room for any other
interpretation. As there is no ambiguity, the terms must be taken in their plain, ordinary and
popular sense.47 Consequently, MMPSEU cannot rely on the rule that a contract of insurance
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is to be liberally construed in favor of the insured. Neither can it rely on the theory that any
doubt must be resolved in favor of labor.
TO ALLOW REIMBURSEMENT OF AMOUNTS PAID UNDER OTHER INSURANCE POLICIES SHALL

CONSTITUTE DOUBLE RECOVERY
WHICH IS NOT SANCTIONED BY LAW.
MMPSEU insists that MMPC is also liable for the amounts covered under other insurance
policies; otherwise, MMPC will unjustly profit from the premiums the employees contribute
through monthly salary deductions.
This contention is unmeritorious. To constitute unjust enrichment, it must be shown that a party
was unjustly enriched in the sense that the term unjustly could mean illegally or unlawfully. 50
A claim for unjust enrichment fails when the person who will benefit has a valid claim to such
benefit.51
The CBA has provided for MMPC’s limited liability which extends only up to the amount to be
paid to the hospital and doctor by the employees’ dependents, excluding those paid by
other insurers. Consequently, the covered employees will not receive more than what is due
them; neither is MMPC under any obligation to give more than what is due under the CBA.
Moreover, since the subject CBA provision is an insurance contract, the rights and obligations
of the parties must be determined in accordance with the general principles of insurance
law.52 Being in the nature of a non-life insurance contract and essentially a contract of
indemnity, the CBA provision obligates MMPC to indemnify the covered employees’ medical
expenses incurred by their dependents but only up to the extent of the expenses actually
incurred.53 This is consistent with the principle of indemnity which proscribes the insured from
recovering greater than the loss.54 Indeed, to profit from a loss will lead to unjust enrichment
and therefore should not be countenanced. As aptly ruled by the CA, to grant the claims of
MMPSEU will permit possible abuse by employees.
C. Elements of insurance
1. The insured has an insurable interest
2. The insured is subject to a risk of loss by the happening of the designated peril
3. The insurer assumes the risk
Gulf Resort, Inc v PCIC, GR 156167
G.R. No. 156167 May 16, 2005

Gulf Resorts Inc vs Philippine Charter Insurance Corp
Before the Court is the petition for certiorari under Rule 45 of the Revised Rules of Court by
petitioner GULF RESORTS, INC., against respondent PHILIPPINE CHARTER INSURANCE
CORPORATION. Petitioner assails the appellate court decision1 which dismissed its two
appeals and affirmed the judgment of the trial court.
For review are the warring interpretations of petitioner and respondent on the scope of the
insurance company’s liability for earthquake damage to petitioner’s properties. Petitioner
avers that, pursuant to its earthquake shock endorsement rider, Insurance Policy No. 31944
covers all damages to the properties within its resort caused by earthquake. Respondent
contends that the rider limits its liability for loss to the two swimming pools of petitioner.
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FACTS:
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 plaintiff’s two swimming pools. Defendant issued Policy No. 31944 to
plaintiff covering the period of March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total
premium of P45,159.92 , in the break-down of premiums shows that plaintiff paid only P393.00
as premium against earthquake shock (ES); that in all the six insurance policies the premium
against the peril of earthquake shock is the same, that is P393.00
On July 16, 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s
properties covered by Policy No. 31944 issued by defendant, including the two swimming
pools in its Agoo Playa Resort were damaged.2
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.3 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,4 rendered a preliminary report5 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."6 On August 11,
1990, petitioner filed its formal demand7 for settlement of the damage to all its properties in
the Agoo Playa Resort. On August 23, 1990, respondent denied petitioner’s claim on the
ground that its insurance policy only afforded earthquake shock coverage to the two
swimming pools of the resort.8 Petitioner and respondent failed to arrive at a settlement.9 Thus,
on January 24, 1991, petitioner filed a complaint10 with the regional trial court of Pasig
RTC: the lower court after trial ruled in favor of the respondent, The schedule clearly shows
that plaintiff paid only a premium of P393.00 against the peril of earthquake shock, the same
premium it paid against earthquake shock only on the two swimming pools in all the policies
issued by AHAC(AIU) From this fact the Court must consequently agree with the position of
defendant that the endorsement rider means that only the two swimming pools were insured
against earthquake shock.
CA: After review, the appellate court affirmed the decision of the trial court
Petitioner filed the present petition raising the following issue
ISSUE: WON THE COURT OF APPEALS CORRECTLY HELD THAT UNDER RESPONDENT’S
INSURANCE POLICY NO. 31944, ONLY THE TWO (2) SWIMMING POOLS, RATHER THAN ALL THE
PROPERTIES COVERED THEREUNDER, ARE INSURED AGAINST THE RISK OF EARTHQUAKE SHOCK.
HELD: YES
In Insurance Policy No. 31944, four key items are important in the resolution of the case at bar.
First, in the designation of location of risk, only the two swimming pools were specified as
included, viz:
ITEM 3 – 393,000.00 – On the two (2) swimming pools only (against the peril of
earthquake shock only)20
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Second, under the breakdown for premium payments,21 it was stated that:
PREMIUM RECAPITULATION
ITEM NOS. AMOUNT RATES PREMIUM
xxx
3 393,000.00 0.100%-E/S 393.0022]
Third, Policy Condition No. 6 stated:

6. This insurance does not cover any loss or damage occasioned by or through or in
consequence, directly or indirectly of any of the following occurrences, namely:--
(a) Earthquake, volcanic eruption or other convulsion of nature. 23
Fourth, the rider attached to the policy, titled "Extended Coverage Endorsement (To Include
the Perils of Explosion, Aircraft, Vehicle and Smoke),"
It is basic that all the provisions of the insurance policy should be examined and interpreted
in consonance with each other. All its parts are reflective of the true intent of the parties. The
policy cannot be construed piecemeal. Certain stipulations cannot be segregated and then
made to control; neither do particular words or phrases necessarily determine its character.
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;
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.26 (Emphasis ours)
An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril.27 In fire, casualty, and marine insurance, the premium
payable becomes a debt as soon as the risk attaches.28 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.
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
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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.
The case law will show that this Court will only rule out blind adherence to terms where facts
and circumstances will show that they are basically one-sided.Thus, we have called on lower
courts to remain careful in scrutinizing the factual circumstances behind each case to
determine the efficacy of the claims of contending parties. In Development Bank of the
Philippines v. National Merchandising Corporation, et al.,the parties, who were acute
businessmen of experience, were presumed to have assented to the assailed documents
with full knowledge.
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. 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.
D. Characteristics of an insurance contract
1. Aleatory
2. Unilateral
3. Personal
4. Consensual
5. Risk distributing device
6. Contract of indemnity
7. Uberrimae fides contract
8. Contract of adhesion
9. Conditional
DBP v CA, GR 109937

DBP vs. CA
G.R. No. L-109937, March 21, 1994
FACTS:
Juan B. Dans applied for a loan which DBP approved in the amount of PhP300,000.00. Mr.
Dans was advised by DBP to obtain a mortgage redemption insurance (MRI) at DBP MRI Pool.
He complied and filled up and personally signed a Health Statement for DBP MRI Pool with
the following declaration: I hereby declare and agree that all the statements and answers
contained herein are true, complete and correct to the best of my knowledge and belief
and form part of my application for insurance. It is understood and agreed that no insurance
coverage shall be effected unless and until this application is approved and the full premium
is paid during my continued good health. DBP deducted the amount to be paid for MRI
Premium of PhP1,476.00.00, which DBP credited together to the savings account of DBP MRI-
Pool.
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About 20 days after the release of the loan, Mr. Dans died of cardiac arrest. DBP MRI Pool
notified DBP that Mr. Dans was not eligible for the coverage of insurance for he was beyond
the maximum age of 60. Thus, Dans cannot be paid of the value of the insurance policy.
Mrs. Dans filed a complaint against DBP and DBP MRI Pool for Collection of Sum of Money
with Damages. The trial court rendered a decision in favor of the Estate of Dans and against
DBP. The DBP MRI Pool, however, was absolved from liability, as the court found no privity of
contract between it and the deceased.
ISSUE:
1. Whether the value of the Insurance policy shall be paid by DBP MRI Pool
2. Whether or not DBP should be held liable.
RULING:
1. NO.
Under the Health Statement for DBP MRI Pool, signed by Dans, the MRI coverage shall take
effect: (1) when the application shall be approved by the insurance pool; and (2) when the
full premium is paid during the continued good health of the applicant.
Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The
pool, however, did not approve the application of Dans. There is also no showing that it
accepted the sum of P1,476.00, which DBP credited to its account with full knowledge that it
was payment for Dan's premium. There was, as a result, no perfected contract of insurance;
hence, the DBP MRI Pool cannot be held liable on a contract that does not exist.
2. Yes.
Under Article 1987 of the Civil Code of the Philippines, the agent who acts as such is not
personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers.
As an insurance agent of DBP MRI Pool, DBP made Dans go through the motion of applying
for said insurance, despite having knowledge of Mr. Dan’s age. DBP is not authorized to
accept applications for MRI when its clients are more than 60 years of age. Knowing all the
while that Dans was ineligible for MRI coverage, DBP exceeded the scope of its authority
when it accepted Dans’ application for MRI.
The liability of an agent who exceeds the scope of his authority depends upon whether the
third person is aware of the limits of the agent's powers. There is no showing that Dans knew
of the limitation on DBP's authority to solicit applications for MRI. If the third person dealing
with an agent is unaware of the limits of the authority conferred by the principal on the agent
and he (third person) has been deceived by the non-disclosure thereof by the agent, then
the latter is liable for damages to him.
However, DBP is not entitled to compensate the family of the deceased with the entire value
of the insurance policy. If DBP has not concealed its limits of its authority, there is however no
absolute certainty that Dans could obtain an insurance coverage from another company,
considering his age. Mr. Dans is entitled to moral damages, among others, but not to the
entire value of the insurance policy.
Enriquez v Sun Life, GR 15895
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RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma. Herrer vs. SUN LIFE
ASSURANCE COMPANY OF CANADA
G.R. No. 15895, November 29, 1920
FACTS:
On September 24, 1917, Joaquin Herrer made an application to Sun Life Assurance Company
of Canada through its office in Manila for a life annuity. Two days later he paid the sum of
PhP6, 000 to the manager of the company's Manila office and was given a receipt therefor.
On November 26, 1917, the head office gave notice of acceptance by cable to Manila. On
the same date the Manila office prepared a letter notifying Herrer that his application had
been accepted and this was placed in the ordinary channels for transmission, but as far as
known, was never actually mailed and was never received by the applicant. Herrer died on
December 20, 1917.
ISSUE:
Whether or not there was a perfected contract of life annuity between the late Joaquin
Herrer and respondent Sun Life.
HELD:
No. The contract for a life annuity was not perfected because it had not been proved
satisfactorily that the acceptance of the application ever came to the knowledge of the
applicant.
The Civil Code rule, that an acceptance made by letter shall bind the person making the
offer only from the date, it came to his knowledge, is controlling. Further, an acceptance of
an offer of insurance not actually or constructively communicated to the proposer does not
make a contract. Only the mailing of acceptance completes the contract of insurance, as
the locus pœnitentiæ is ended when the acceptance has passed beyond the control of the
party.
When a letter or other mail matter is addressed and mailed with postage prepaid there is a
rebuttable presumption of fact that it was received by the addressee as soon as it could have
been transmitted to him in the ordinary course of the mails. But if any one of these elemental
facts fails to appear, it is fatal to the presumption.
Thus, the Court holds that the contract for a life annuity in the case at bar was not perfected
because it has not been proved satisfactorily that the acceptance of the application ever
came to the knowledge of the applicant. Judgment is reversed, and the plaintiff shall have
and recover from the defendant the sum of P6,000 with legal interest.
EGMP Corp v Philam Life, GR 166245
ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY
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G.R. No. 166245; April 9, 2008
Facts:
Philippine American Life Insurance Company (Philamlife) entered into an agreement
denominated as Creditor Group Life Policy with Eternal Gardens Memorial Park Corporation
(Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on
installment basis would be insured by Philamlife. The amount of insurance coverage
depended upon the existing balance of the purchased burial lots. The policy was to be
effective for a period of one year, renewable on a yearly basis.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers,
together with a copy of the application of each purchaser, and the amounts of the
respective unpaid balances of all insured lot purchasers. Eternal complied by submitting a
letter containing a list of insurable balances of its lot buyers. One of those included in the list
as "new business" was a certain John Chuang. His balance of payments was PhP100,000.
Subsequently, Chuang died leading Eternal to send a letter to Philamlife, which served as an
insurance claim for Chuang’s death with attached documents necessary for the claim. In
reply, Philamlife wrote Eternal a letter requiring the latter to submit additional documents.
Eternal complied but after more than a year, Philamlife had not furnished Eternal with any
reply to the insurance claim. This prompted Eternal to demand from Philamlife the payment
of the claim for PhP100,000. In response to Eternal’s demand, Philamlife denied Eternal’s
insurance claim stating that the acceptance of premiums do not connote of an approval
per se of the insurance coverage but are held in trust for the payor until the prerequisites for
insurance coverage shall have been met. Consequently, Eternal filed a case in Makati City
RTC for a sum of money against Philamlife. The RTC decided in favor of Eternal stating that
due to Philamlife’s inaction from the submission of the requirements of the group insurance
on December 29, 1982 to Chuang’s death on August 2, 1984, as well as Philamlife’s
acceptance of the premiums during the same period, Philamlife was deemed to have
approved Chuang’s application. However, the CA reversed the RTC’s decision and
concluded that Chuang was not covered by Philamlife’s insurance since his application was
not enclosed in Eternal’s letter dated December 29, 1982. It further ruled that the non-
accomplishment of the submitted application form violated Section 26 of the Insurance
Code.
Issue:
Whether or not Philamlife is liable to pay Eternal for the insurance claim despite the former’s
inaction over the insurance application.
Held:
Yes. An insurance contract is a contract of adhesion which must be construed liberally in
favor of the insured and strictly against the insurer in order to safeguard the latter’s interest.
Upon a party’s purchase of a memorial lot on installment from Eternal, an insurance contract
covering the lot purchaser is created and the same is effective, valid, and binding until
terminated by Philamlife by disapproving the insurance application. The mere inaction of the
insurer on the insurance application must not work to prejudice the insured; it cannot be
interpreted as a termination of the insurance contract. The termination of the insurance
contract by the insurer must be explicit and unambiguous.
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To characterize the insurer and the insured as contracting parties on equal footing is
inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts
of experience in the industry purposefully used to its advantage. More often than not,
insurance contracts are contracts of adhesion containing technical terms and conditions of
the industry, confusing if at all understandable to laypersons, that are imposed on those who
wish to avail of insurance. As such, insurance contracts are imbued with public interest that
must be considered whenever the rights and obligations of the insurer and the insured are to
be delineated. Hence, in order to protect the interest of insurance applicants, insurance
companies must be obligated to act with haste upon insurance applications, to either deny
or approve the same, or otherwise be bound to honor the application as a valid, binding,
and effective insurance contract.
Pineda v CA, GR 1055562
Pineda et.al vs. CA, Insular Life Assurance Co.

GR no. 105562, September 27, 1993
Facts:
(1) Prime Marine Services Inc (PMSI) acquired a Group Policy from herein private
respondent Insular Life Assurance Company to provide life insurance coverage to its
sea-based employees enrolled under the plan.
(2) 6 covered employees of the PMSI perished at sea when their vessel sunk somewhere
in Morocco. They were survived by complainant-appellant, the beneficiaries under
the policy.
(3) To claim death benefits from Insular Life Assurance, the complainant-appellant
executed a special power of attorney (SPA) in favor of Capt. Roberto Nuva to follow
up, ask, demand, collect and receipt for benefit indemnities. On the basis of these
documents respondent-appellee drew against its account checks and released the
same to the treasurer of PMSI who endorsed and deposited in his account.
(4) Complainant-appellant filed an administrative complaint against respondent-

appellee Insular Life Assurance before the Insurance Commission demanding
payment of their claims under the group policy. The Insurance Commission ruled in
favor of the complainant-appellant but reversed by Court of Appeal holding the SPA
sufficient in form to authorize Capt. Nuval.
Issue:
W/N the CA erred in appreciating the SPA conveys absolute authority to Capt. Nuval to
receive the proceeds of the insurance claimed by the herein complainant-appellant.
Ruling:
Our insurance code has been patterned from the State of California which jurisprudence
explicitly holds that the employer-policyholder is the agent of the insurer. As an agent, it
facilitates the administration of the insurance group policy in the collection and payment of
premiums and other related duties. Thus any omission of duty to the employees in its
administration should be attributable to the insurer.
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It is clear that PMSI is an agent of Insular Life Assurance. Capt. Nuval whom the SPA was
executed in his favor is also the President and representative of PMSI, thus the Insular Life
Assurance should have ascertained the intent and terms of the said SPA which must be clear
and unequivocal. It turned out however that the insurance claims were not actually received
by the lawful beneficiaries hence Insular Life Assurance as a principal is bound by the acts of
its agent.
E. Kinds of Insurance
Compulsory
General
According to object
Special types
As to persons covered
Life
Property
II. PARTIES TO AN INSURANCE CONTRACT
A. The Insured
a. Assured and Owner
b. Capacity
c. Effect of death of owner
d. Public enemy
e. Rights of policyholders
B. The Insurer
a. Definition
b. Professional reinsurer
c. Domestic and foreign company
d. Mutual benefit association
e. Mutual insurance companies
f. Cooperatives
g. Certificate of authority
h. Grounds for disapproval
i. Prohibited acts
White Gold Marine v Pioneer Insurance,, GR 154514
WHITE GOLD MARINE SERVICES, INC., Petitioners,

vs.
PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING
ASSOCIATION (BERMUDA) LTD., Respondents.
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).
When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the
coverage.
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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 1864 and
1875 of the Insurance Code, while Pioneer violated Sections 299,63007 and 3018 in relation to
Sections 302 and 303, thereof.
SEC. 186. No person, partnership, or association of persons shall transact any insurance
business in the Philippines except as agent of a person or corporation authorized to
do the business of insurance in the Philippines, unless possessed of the capital and
assets required of an insurance corporation doing the same kind of business in the
Philippines and invested in the same manner; nor unless the Commissioner shall have
granted to him or them a certificate to the effect that he or they have complied with
all the provisions of law which an insurance corporation doing business in the
Philippines is required to observe.
Every person, partnership, or association receiving any such certificate of authority

shall be subject to the insurance laws of the Philippines and to the jurisdiction and
supervision of the Commissioner in the same manner as if an insurance corporation
authorized by the laws of the Philippines to engage in the business of insurance
specified in the certificate.
5 SEC. 187. No Insurance Company shall transact any insurance business in the
Philippines until after it shall have obtained a certificate of authority for that purpose
from the Commissioner upon application therefor and payment by the company
concerned of the fees hereinafter prescribed.
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
The Court of Appeals affirmed the decision of the Insurance Commissioner.
ISSUE/ RULING:
1. WON Steamship Mutual, a P & I Club is engaged in the insurance business in the
Philippines?
YES. Steamship Mutual as a P & I Club is a mutual insurance association engaged in the
marine insurance business. 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."19
*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
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
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business without a license or a certificate of authority from the Insurance Commission (Sec
187)
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
YES. 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:
6 SEC. 299. No insurance company doing business in the Philippines, nor any agent
thereof, shall pay any commission or other compensation to any person for services in
obtaining insurance, unless such person shall have first procured from the
Commissioner a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
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, . . .
7SEC. 300. Any person who for compensation solicits or obtains insurance on behalf
of any insurance company or transmits for a person other than himself an application
for a policy or contract of insurance to or from such company or offers or assumes to
act in the negotiating of such insurance shall be an insurance agent within the intent
of this section and shall thereby become liable to all the duties, requirements, liabilities
and penalties to which an insurance agent is subject.
8 SEC. 301. Any person who for any compensation, commission or other thing of value
acts or aids in any manner in soliciting, negotiating or procuring the making of any
insurance contract or in placing risk or taking out insurance, on behalf of an insured
other than himself, shall be an insurance broker within the intent of this Code, and shall
thereby become liable to all the duties, requirements, liabilities and penalties to which
an insurance broker is subject.
C. Beneficiary
a. Designation
b. Third parties
c. No beneficiary
d. Death of owner-beneficiary
e. Use of conjugal funds
f. Vested interest of beneficiary
g. Revocability
h. Forfeiture of rights of beneficiary
i. Disqualification of beneficiary
Picar v GSIS, GR L-25803
LUZ PICAR, NANCY PICAR, JESSE PICAR, assisted by their mother, CONSOLACION PICAR, , vs.
GOVERNMENT SERVICE INSURANCE SYSTEM
G.R. No. L-25803 May 29, 1970
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FACTS:
- That Policy No. 170329 issued in favor of the late Napoleon F. Picar, was, on September
13, 1961, in force;
- That Napoleon F. Picar died on September 13, 1961;
- That Consolacion J. Picar is the guardian of all the minors who are the plaintiffs herein;
- That the beneficiaries in the insurance policy issued in favor of Napoleon F. Picar are
the following: Nancy Picar, Jesse Picar, Sylvia Picar, Luz Picar and Consolacion Picar;
- That the administrator of the estate of the late Napoleon F. Picar is the Provincial
Treasurer of Camarines Sur;
- That on September 30, 1961 a claim was presented to the G.S.I.S. for the proceeds of
the life insurance policy for relief or payment to the beneficiaries named therein;
- That the G.S.I.S. is withholding payment of the proceeds of the life insurance policy
only on the ground that no clearance was issued to the deceased by the employer
of the deceased, the Provincial Treasurer of Camarines Sur;
- That the Provincial Treasurer filed a claim for P9,746.07 to the intestate estate of the
late Napoleon Picar;
- That the basis of the government represented by the Provincial Treasurer of Camarines
Sur in intervening in this case (Civil Case No. 5673) is Section 26 of Commonwealth Act
186, as amended;
- That the plaintiffs are also withdrawing their claim for moral damages as well as
attorney's fees, but insist on the interest due from September 30, 1961 when the claim
was made, up to the time the insurance policy is fully paid;
- That the plaintiffs secured the services of counsel to claim this insurance policy in the
amount of P500.00.
ISSUES:
1. Is it legally necessary for the plaintiffs to present a clearance from money and property
accountabilities of the deceased to be issued by the authorities concerned, and
required by the defendant, GSIS, before the proceeds of the Policy No. 170329 is paid
to the beneficiaries designated therein.
Yes.
It is true that under general principles in the law of insurance, if a policy provides that the
proceeds shall be payable to the assured, if he lives to a certain date, and, in case of his
death before that date, then they shall be payable to the beneficiary designated, the benefit
of the policy will inure to such beneficiary in case the assured dies before the end of the
period designated in the policy,1 and, generally, that the proceeds of a life insurance in
which a third person is named beneficiary belong exclusively to such beneficiary as an
individual, they are not the property of the heirs of the insured, are not subject to
administration, and cannot properly be claimed or received by the administrator or other
legal representative of the insured as assets of his estate.2 As correctly ruled by the lower
court, however, such general principles are not applicable to the life insurance herein
involved which is governed by specific law.
The law in point is Section 26 of Commonwealth Act 186 (the law creating the
Government Service Insurance System), as amended, which provides:
SEC. 26. Exemption from legal process and liens. — No policy of life insurance
issued under this Act, or the proceeds thereof, when paid to any member thereunder,
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nor any other benefit granted under this Act, shall be liable to attachment,
garnishment, or other proceeds, or to be seized, taken, appropriated, or applied by
any legal or equitable process or operation of law to pay any debt or liability of such
member, or his beneficiary, or any other person who may have a right thereunder; nor
shall the proceeds thereof, when not made payable to a named beneficiary,
constitute a part of the estate of the member for payment of his debt; Provided,
however, That this section shall not apply when obligations or indebtedness to the
System and the employer are concerned, nor when the retirement annuity is assigned
to any person, corporation, association or bank or other financial institution, which is
hereby authorized.
The above-quoted provision is too clear to require the application of any rule of statutory
construction for purposes of showing the weakness of the position taken by herein appellants.
As may be seen, it recognizes the principles relied upon by them, but at the same time, it
expressly provides that "this section shall not apply when obligations or indebtedness to the
System and the employer are concerned." In other words, in life insurance policies issued by
the GSIS in favor of government employees, the proceeds — even if not made payable to
named beneficiaries and may, therefore, be payable to the estate of the insured — shall not
constitute part of the estate of the member (insured) for payment of his debt; but such
proceeds whether or not made payable to named beneficiaries — shall so constitute part of
the estate of the insured for payment of his debt and shall thereby be liable to attachment,
garnishment and other legal processes, when obligations or indebtedness to the GSIS and the
employer, that is, the government are concerned. There can be no doubt then that the
appellee Government Service Insurance System was right in requiring herein appellants to
submit the necessary clearance from money and property accountabilities of the deceased
government employee whose insurance policy is here involved, before paying them the
proceeds of the policy concerned; and
2. Can Republic of the Philippines, as represented by the Provincial Treasurer of

Camarines Sur, legally lay claim to the proceeds of the policy in question.
Yes. The lower court did not err in holding that the appellants for their failure to submit the
certificate of clearance required of them, have no cause of action against the GSIS. Similarly,
since it is not disputed by appellants that the Republic of the Philippines, employer of the
deceased employee in this case, is claiming the proceeds of his insurance on the basis of the
provisions of the law above-quoted, We agree with the appellee GSIS that the court a quo
was right in declaring that the intervenor Republic of the Philippines is legally entitled to the
proceeds of the life insurance here put to question.
Alabat v Alabat, GR L-22169

Sergio Alabat, et al. v Toribia Tandog, Leoncio Alabat, et al.
G.R. No. L-22169 December 29, 1967
FACTS:
The plaintiff appellants, Sergio Alabat, et al. were the children of Escolastico Alabat by the
first marriage, while the defedants appelle was the surviving spouse and children of
Escolastico Alabat in his second marriage.
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Escolastico Alabat owned parcels of unregistered land in Surigao and a cash deposit of
P4,000 in PNB Butuan. When he died, these were awarded to his spouse and children in his
second marriage. Sergio Alabat, et al. then filed a case for partition in Court against Toribia
Tandog, et al. They contend that they are also entitled to the said properties. Toribia Tandog,
et al. argued that the properties in question where bought using the death benefit payments
received by Escolastico and Toribia from the US Veterans Administration on account of their
son’s (Leonardo Alabat) death. As such the defendants and his daughter Winfreda
(intervenor) are the sole heirs entitled to the said properties.
ISSUE/ RULING:
1. Are Sergio Alabat , et al. entitled to the said properties?
YES. trial Court erred in considering the death benefit payment by the U.S. Veterans
Administration as part of the estate of Leonardo Alabat. This money was paid to his parents
by the United States Government by way of indemnity or insurance for the death of the
soldier. The latter was never entitled to it himself, since he died before the payment accrued.
The money paid was therefore exclusive property of Leonardo Alabat's parents, Escolastico
Alabat and Toribia Tandog. Considering it community property, Escolastico was entitled to
one half thereof, and, hence, of the property acquired thereby. Upon his death in 1959
without leaving any testament, that half descended unto all his eight (8) surviving children of
the first and second marriages, with the surviving widow being also entitled to a share equal
to that of each of the children (Civil Code of the Philippines, Art. 996):
Art. 996. If a widow or widower and legitimate children or descendants are left, the surviving
spouse has in the succession the same share as that of each of the children.
Also the application of Article 991 of the Civil Code is misplaced because even if even if it
did apply, the death benefit payment should belong, in equal shares, to the natural child
and the parents of the soldier Leonardo Alabat and the half of the parents can not belong
to the mother alone, for she was not the only surviving parent of the predeceased Leonardo
Alabat.
The basic fact is that the estate to be settled is that of Escolastico Alabat, and not that of his
predeceased son, Leonardo Alabat. Hence, the plaintiffs-appellants being children of
Escolastico are clearly entitled to share in the properties described in their complaint and to
maintain this suit for partition.
2. Is Winfreda (intervenor) is also entitled to said properties?

Not yet determined by the Supreme Court. Whether the natural child, Wenifreda, can
succeed to the share of her father, Leonardo, by right of representation, depends upon
whether she has been properly acknowledged as his natural child. Considering that this point
was apparently not litigated, and taking into account that if Leonardo died during his
daughter's minority, the latter had four (4) years after attaining majority, to file an action to
compel acknowledgment,2 both equity and justice demand that Wenifreda be given ample
opportunity to establish in the Court below whatever rights she is entitled to in accordance
with law.
BPI v Posadas, GR 34583
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G.R. No. L-34583 October 22, 1931

THE BANK OF THE PHILIPPINE ISLANDS, administrator of the estate of the late Adolphe Oscar
Schuetze,plaintiff-appellant,
vs.
JUAN POSADAS, JR., Collector of Internal Revenue, defendant-appellee.
Facts:
Rosario Gelano Vda. de Schuetze, widow of the late Adolphe Oscar Schuetze, a native of
Manila but was actually residing and living in Germany. Rosario drew a general power
appointing BPI as her attorney-in-fact, with the power to represent her in all legal actions
instituted by or against her. Juan Posadas Jr. is a duly appointed Collector of Internal
Revenue.
Adolphe Oscar Schuetze, while in Germany, executed a will, in accordance with its law,
wherein Rosario was named his universal heir. BPI was appointed by CFI as administrator of
the estate of Adolphe. At the time of Adolphe’s death, he possessed real properties in the
Philippines and personal property consisting of shares of stock in 19 domestic corporations.
The fair market value of all the properties in the Philippines was P217,560.38. Among the
personal properties of Adolphe was a life-insurance policy No. 194538 for the sum of $10,000
by the Sun Life Assurance Company of Canada, Manila branch. The estate of Adolphe is
named as the beneficiary without any qualification whatsoever. Adolphe has already paid
the premiums for 5 consecutive years. On or about the year 1918, the Sun Life Assurance
Company of Canada, Manila branch, transferred said policy to the Sun Life Assurance
Company of Canada, London branch. Due to the transfer, Adolphe, from 1918 to the time
of his death paid the premiums of said policy to the Sun Life Assurance Company of Canada,
London Branch. The sole and only heir of Adolphe is his widow, Rosario.
BPI received from the Sun Life Assurance Company of Canada, Manila branch, the sum of
P20,150 representing the proceeds of the insurance policy; the said amount was delivered to
Rosario. Posadas imposed an inheritance tax upon the transmission of the proceeds of the
policy amounting to P1,209. BPI paid under protest the inheritance tax. Rosario demanded a
refund from Posadas but the latter refused.
Posadas alleges that it is a fundamental principle that a life-insurance policy belongs

exclusively to the beneficiary upon the death of the person insured, and that in the present
case, as the late Adolphe Oscar Schuetze named his own estate as the sole beneficiary of
the insurance on his life, upon his death the latter became the sole owner of the proceeds,
which therefore became subject to the inheritance tax.
Issue:
WON the proceeds of the Insurance Policy belongs exclusively to the estate of Adolphe.
Ruling:
No. The estate of a deceased person cannot be placed on the same footing as an individual
heir. The proceeds of a life-insurance policy payable to the estate of the insured passed to
the executor or administrator of such estate, and forms part of its assets; whereas the
proceeds of a life-insurance policy payable to an heir of the insured as beneficiary belongs
exclusively to said heir and does not form part of the deceased's estate subject to
administrator.
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Just as an individual beneficiary of a life-insurance policy taken out by a married person

becomes the exclusive owner of the proceeds upon the death of the insured even if the
premiums were paid by the conjugal partnership, so, it is argued, where the beneficiary
named is the estate of the deceased whose life is insured, the proceeds of the policy become
a part of said estate upon the death of the insured even if the premiums have been paid with
conjugal funds.
In a conjugal partnership the husband is the manager, empowered to alienate the

partnership property without the wife's consent (art. 1413, Civil Code), a third person,
therefore, named beneficiary in a life-insurance policy becomes the absolute owner of its
proceeds upon the death of the insured even if the premiums should have been paid with
money belonging to the community property. When a married man has his life insured and
names his own estate after death, beneficiary, he makes no alienation of the proceeds of
conjugal funds to a third person, but appropriates them himself, adding them to the assets of
his estate, in contravention of the provisions of article 1401, paragraph 1, of the Civil Code
cited above, which provides that "To the conjugal partnership belongs" (1) Property acquired
for a valuable consideration during the marriage at the expense of the common fund,
whether the acquisition is made for the partnership or for one of the spouses only."
Furthermore, such appropriation is a fraud practiced upon the wife, which cannot be allowed
to prejudice her, according to article 1413, paragraph 2, of said Code. Although the husband
is the manager of the conjugal partnership, he cannot of his own free will convert the
partnership property into his own exclusive property.
As all the premiums on the life-insurance policy taken out by Adolphe, were paid out of the
conjugal funds, with the exceptions of the first, the proceeds of the policy, excluding the
proportional part corresponding to the first premium, constitute community property,
notwithstanding the fact that the policy was made payable to the deceased's estate, so that
one-half of said proceeds belongs to the estate, and the other half to Rosario.
Notes:
With the exception of the premium for the first year, all the money used for paying the
premiums is conjugal property inasmuch as it does not appear to have exclusively belonged
to Adolphe or Rosario. If the premiums are paid with the exclusive property of husband or
wife, the policy belongs to the owner; if with conjugal property, or if the money cannot be
proved as coming from one or the other of the spouses, the policy is community property.
Thus, the proceeds of a life-insurance policy whereon the premiums were paid with conjugal
money, belong to the conjugal partnership.
Lampano v Jose, GR L-9401

Lampano v. Jose
GR L-9401
FACTS:
Mariano R. Barretto, constructed a house for Placida A. Jose sold the house to Antonina
Lampano for P6,000.
The house was destroyed by fire during which Lampano still owed Jose P2,000 as evidenced
by a promissory note. Jose also owed Barretto P2,000 for the construction. After the
completion of the house and before it was destroyed, Mariano R. Barretto took out an
insurance policy upon it in his own name, with the consent of Placida A. Jose, for the sum of
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P4,000. After its destruction, he collected P3,600 from the insurance company, having paid in
premiums the sum of P301.50. Lampano filed a complaint against Barreto and Jose alleging
that Jose in a verbal agreement told her that the policy will be delivered to her so she should
collected P3,600 from each of them
RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting the P2,000
Barreto alone appealed
ISSUE: Did Barreto has insurable interest in the house and could insure it for his it for his own
protection
HELD: YES. If Barretto had an insurable interest in the house, he could insure this interest for his
sole protection. The policy was in the name of Barretto alone. It was, therefore, a personal
contract between him and the company and not a contract which ran with the property.
According to this personal contract the insurance policy was payable to the insured without
regard to the nature and extent of his interest in the property, provided that he had, as we
have said, an insurable interest at the time of the making of the contract, and also at the
time of the fire. Where different persons have different interests in the same property, the
insurance taken by one in his own right and in his own interest does not in any way insure to
the benefit of another. This is the general rule prevailing in the United States and we find
nothing different in this jurisdiction.
A contract of insurance made for the insurer's (insured) indemnity only, as where there is no
agreement, express or implied, that it shall be for the benefit of a third person, does not attach
to or run with the title to the insured property on a transfer thereof personal as between the
insurer and the insured. In such case strangers to the contract cannot require in their own
right any interest in the insurance money, except through an assignment or some contract
with which they are connected.
In the case at bar Barretto assumed the responsibility for the insurance. The premiums, as we
have indicated, were paid by him without any agreement or right to recoup the amount
paid therefor should no loss result to the property. It would not, therefore, be in accordance
with t he law and his contractual obligations to compel him to account for the insurance
money, or any par thereof, to the plaintiff, who assumed no risk whatever.
Heirs of Maramag v Maramag, GR 181132
Heirs of Maramag v. Maramag

G.R. No. 181132 , June 5, 2009
FACTS:
The case stems from a petition filed against respondents with the RTC for revocation and/or
reduction of insurance proceeds for being void and/or inofficious. The petition alleged that:
(1) petitioners were the legitimate wife and children of Loreto Maramag (Loreto), while
respondents were Loreto’s illegitimate family; (2) Eva de Guzman Maramag (Eva) was a
concubine of Loreto and a suspect in the killing of the latter, thus, she is disqualified to receive
any proceeds from his insurance policies from Insular Life Assurance Company, Ltd. (Insular)
and Great Pacific Life Assurance Corporation (Grepalife) (3) the illegitimate children of
Loreto—Odessa, Karl Brian, and Trisha Angelie—were entitled only to one-half of the legitime
of the legitimate children, thus, the proceeds released to Odessa and those to be released
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to Karl Brian and Trisha Angelie were inofficious and should be reduced; and (4) petitioners
could not be deprived of their legitimes, which should be satisfied first. Insular admitted that
Loreto misrepresented Eva as his legitimate wife and Odessa, Karl Brian, and Trisha Angelie as
his legitimate children, and that they filed their claims for the insurance proceeds of the
insurance policies; that when it ascertained that Eva was not the legal wife of Loreto, it
disqualified her as a beneficiary and divided the proceeds among Odessa, Karl Brian, and
Trisha Angelie, as the remaining designated beneficiaries; and that it released Odessa’s share
as she was of age, but withheld the release of the shares of minors Karl Brian and Trisha
Angelie pending submission of letters of guardianship. Insular alleged that the complaint or
petition failed to state a cause of action insofar as it sought to declare as void the designation
of Eva as beneficiary, because Loreto revoked her designation as such in Policy No.
A001544070 and it disqualified her in Policy No. A001693029; and insofar as it sought to declare
as inofficious the shares of Odessa, Karl Brian, and Trisha Angelie, considering that no
settlement of Loreto’s estate had been filed nor had the respective shares of the heirs been
determined. Insular further claimed that it was bound to honor the insurance policies
designating the children of Loreto with Eva as beneficiaries pursuant to Section 53 of the
Insurance Code.
Grepalife alleged that Eva was not designated as an insurance policy beneficiary; that the
claims filed by Odessa, Karl Brian, and Trisha Angelie were denied because Loreto was
ineligible for insurance due to a misrepresentation in his application form that he was born on
December 10, 1936 and, thus, not more than 65 years old when he signed it in September
2001; that the case was premature, there being no claim filed by the legitimate family of
Loreto; and that the law on succession does not apply where the designation of insurance
beneficiaries is clear.
ISSUE:
Whether or not illegitimate children can be beneficiaries in an insurance contract.
RULING:
Yes. Section 53 of the Insurance Code states that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for whose benefit it is made
unless otherwise specified in the policy. Pursuant thereto, it is obvious that the only persons
entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary,
if the insured is already deceased, upon the maturation of the policy.The exception to this
rule is a situation where the insurance contract was intended to benefit third persons who are
not parties to the same in the form of favorable stipulations or indemnity. In such a case, third
parties may directly sue and claim from the insurer.
Petitioners are third parties to the insurance contracts with Insular and Grepalife and, thus,
are not entitled to the proceeds thereof. Accordingly, respondents Insular and Grepalife
have no legal obligation to turn over the insurance proceeds to petitioners. The revocation
of Eva as a beneficiary in one policy and her disqualification as such in another are of no
moment considering that the designation of the illegitimate children as beneficiaries in
Loreto’s insurance policies remains valid. Because no legal proscription exists in naming as
beneficiaries the children of illicit relationships by the insured, the shares of Eva in the
insurance proceeds, whether forfeited by the court in view of the prohibition on donations
under Article 739 of the Civil Code or by the insurers themselves for reasons based on the
insurance contracts, must be awarded to the said illegitimate children, the designated
beneficiaries, to the exclusion of petitioners. It is only in cases where the insured has not
designated any beneficiary, or when the designated beneficiary is disqualified by law to
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receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the
estate of the insured.
Nario v Philam Life, GR L-22796
Delfin Nario vs Philippine American Life Insurance Company

GR No. L-22796, June 26, 1967
Facts:
Mrs. Alejandra Santos-Mario was, upon application, issued, on June 12, 1959, by the Philippine
American Life Insurance Co., a life insurance policy (No. 503617) under a 20-year endowment
plan, with a face value of P5,000.00. She designated thereon her husband, Delfin Nario, and
their unemancipated minor son, Ernesto Nario, as her irrevocable beneficiaries.
Mrs. Nario applied for a loan on the above stated policy with the Insurance Company,
which loan she, as policy-holder, has been entitled to avail of under one of the provisions of
said policy after the same has been in force for three (3) years, for the purpose of using the
proceeds thereof for the school expenses of her minor son, Ernesto Nario.
The Insurance Company denied said application, manifesting to the policy holder that
the written consent for the minor son must not only be given by his father as legal guardian
but it must also be authorized by the court in a competent guardianship proceeding.
After the denial of said policy loan application, Mrs. Nario signified her decision to
surrender her policy to the Insurance Company, which she was also entitled to avail of under
one of the provisions of the same policy, and demanded its cash value which then amounted
to P520.00.
The Insurance Company also denied the surrender of the policy, on the same ground
as that given in disapproving the policy loan application.
Hence, Mrs. Alejandra Santos-Nario and her husband, Delfin Nario, brought suit
against the Philippine American Life Insurance Co. seeking to compel the latter to grant their
policy loan application and/or to accept the surrender of said policy in exchange for its cash
value.
The lower court found and opined that since the parties expressly stipulated in the
endorsement attached to the policy that under the above quoted provision thus dismissing
plaintiffs' complaint.
Issue:
Whether or not the lower court erred in holding that it must first secure court authority
in relation to the loan application of the appellants.
Ruling:
No. The conclusion of the lower court that the proposed transactions in question
constitute acts of disposition or alienation of property rights and not merely of management
or administration because they involve the incurring or termination of contractual obligations.
Article 320 of the Civil Code of the Philippines provides —
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The father, or in his absence the mother, is the legal administrator of the property
pertaining to the child under parental authority. If the property is worth more than two
thousand pesos, the father or mother shall give a bond subject to the approval of the
Court of First Instance.
and article 326 of the same Code reads —
When the property of the child is worth more than two thousand pesos, the father or
mother shall be considered a guardian of the child's property, subject to the duties
and obligations of guardians under the Rules of Court.
The above quoted provisions of the Civil Code have already been implemented and clarified
in our Revised Rules of Court which provides —
SEC. 7. Parents as guardians. — When the property of the child under parental
authority is worth two thousand pesos or less, the father or the mother, without the
necessity of court appointment, shall be his legal guardian. When the property of the
child is worth more than two thousand pesos, the father or the mother shall be
considered guardian of the child's property, with the duties and obligations of
guardians under these rules, and shall file the petition required by Section 2 hereof. For
good reasons the court may, however, appoint another suitable person. (Rule 93).
It appearing that the minor beneficiary's vested interest or right on the policy exceeds
two thousand pesos (P2,000.00); that plaintiffs did not file any guardianship bond to be
approved by the court; and as later implemented in the above quoted Section 7, Rule 93 of
the Revised Rules of Court, plaintiffs should have, but, had not, filed a formal application or
petition for guardianship, plaintiffs-parents cannot possibly exercise the powers vested on
them, as legal administrators of their child's property, under articles 320 and 326 of the Civil
Code.
While the father or mother would in such event be exempt from the duty of filing a
bond, and securing judicial appointment, still the parent's authority over the estate of the
ward as a legal-guardian would not extend to acts of encumbrance or disposition, as
distinguished from acts of management or administration.
Insular Life v Ebrado, GR L-44059
The Insular Life Assurance Company, Ltd., vs. Carponia Ebrado

GR. No. L- 44059 October 28, 1977
DOCTRINE: General rules of civil law should be applied to resolve any void in the Insurance
Law, as pronounced in Article 2011 of the NCC.
A contract of insurance is personal in character.
FACTS: Buenaventura Cristor Ebrado was married to Pascuala Ebrado. During his lifetime, he
was living with his common-law wife, Carponia Ebrado, although he was not legally
separated from his legal wife. Buenaventura was issued by The Insular Life Assurance Co., Ltd.,
Policy No. 009929 on a whole-life plan for PhP 5,8882.00 with a rider for Accidental Death
Benefits for the same amount.
Buenaventura designated Carponia Ebrado as the revocable beneficiary in his policy.
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Buenaventura died as a result of an accident when he was hit by a falling branch of a tree.
As the insurance policy was still in force, The Insular Life Assurance Co., Ltd stands liable to
pay the coverage.
Carponia Ebrado, his common-law wife, filed with the insurer a claim for the proceeds of the
policy as the designated beneficiary therein. Pascuala Vda. de Ebrado also filed her claim
as the widow of the deceased insured. She asserts that she is the one entitled to the insurance
proceeds, not the common-law wife.
In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life
Assurance Co., Ltd, commenced an action for Interpleader before the CFI of Rizal.
ISSUE: Can a common-law wife of a man who was not legally separated from his legal wife
be a beneficiary of his life insurance plan?
RULING: No.
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 to the 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
interpreted that it includes the beneficiary because a contract of insurance is personal in
character. 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.”
Article 2012 of the same Code states that, “any person who is forbidden from receiving any
donation under Article 739 cannot be named beneficiary of a life insurance policy by the
person who cannot make a donation to him.” Therefore, common-law spouses are barred
from receiving donations from each other.
Article 739 provides:

“The following donations shall be void:
- Those made between persons who were guilty of adultery or concubinage at the time
of the donation;
- Those made between persons found guilty of the same criminal offense, in
consideration thereof;
- Those made to a public officer or his wife, descendants or ascendants by reason of
his office.
In the case referred to in No. 1, the action for declaration of nullity may be brought by the
spouse of the donor or donee; and the guilt of the donee may be proved by preponderance
of evidence in the same action.”
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. As a consequence,
the proscription in Art. 739 of the New Civil Code should equally operate in life insurance
contracts.
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In the case at bar, the requisite proof of common-law relationship between the insured and
the beneficiary has been supplied by the stipulations between the parties in the pre-trial
conference. It was agreed an stipulated that the deceased insured Buenaventura Ebrado
was married to Pascuala Ebrado and that, during the lifetime of the deceased insured, he
was living with his common-law wife, Carponia Ebrado. Based on the foregoing, Carponia
Ebrado is hereby declared disqualified to be the beneficiary of the late Buenaventura Ebrado
in his life insurance policy. The proceeds of the policy are hereby held payable to the estate
of the deceased insured.
Why was the common law wife not ed to collect the proceeds despite the fact that she was
the beneficiary? Isn’t this against Sec. 53?
It is true that SC went against Sec. 53. However, Sec. 53 is NOT the only provision that the SC
had to consider. Art. 739 and 2012 of CC prohibit persons who are guilty of adultery or
concubinage from being beneficiaries of the life insurance policies of the persons with whom
they committed adultery or concubinage. If the SC used only Sec. 53, it would have gone
against Art. 739 and 2012.
SLEA v Golpeo, GR L-6114
Southern Luzon Employees’ Association(SLEA) vs Golpeo et.al

G.R. No. L-6114 October 30, 1954
FACTS:
The plaintiff, SLEA, is composed of laborers and employees of Laguna Tayabas Bus Co., and
Batangas Transportation Company, and one of its purposes is mutual aid of its members and
their dependents in case of death. Roman A. Concepcion was a member until his death on
December 13, 1950.
The association adopted on September 17, 1949 the following resolution:

"RESOLVED: That a family record card of each member be printed wherein the members will
put down his dependents and/or beneficiaries.
"BE IT RESOLVED, FURTHER, that a member may, if he chooses, put down his common-law wife
as his beneficiary and/or children had with her as the case may be; that in case of a widower,
he may put down his legitimate children with the first marriage who are below 21 years of
age, single, and may at the same time, also name his common-law wife, if he has any, as
dependents and/or beneficiaries; and
"BE IT RESOLVED: That such person so named by the member will be the sole persons to be
recognized by the Association regarding claims for condolence contributions."
In the form required by the association to be accomplished by its members, with reference
to the death benefit, Roman A. Concepcion listed as his beneficiaries Aquilina Maloles,
Roman M. Concepcion, Jr., Estela M. Concepcion, Rolando M. Concepcion and Robin M.
Concepcion.
After the death of Roman A. Concepcion, the association was able to collect voluntary
contributions from its members amounting to P2,505. Three sets of claimants presented
themselves, namely,
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(1) Juanita Golpeo, legal wife of Roman A. Concepcion, and her children;
(2) Aquilina Maloles, common law "wife of Roman A. Concepcion, and her children, named
beneficiaries by the deceased; and
(3) Elsie Hicban, another common law wife of Roman A. Concepcion, and her child.
The plaintiff association instituted in the Court of First Instance of Laguna an action for
interpleading against the three conflicting claimants as defendants. Marcelino and Josefina
Concepcion, children of the deceased Roman A. Concepcion with Juanita Golpeo,
intervened in their own rights, aligning themselves with the defendants Juanita Golpeo and
her minor children.
RTC : After hearing, the court rendered a decision, declaring the defendants Aquilina Maloles
and her children the sole beneficiaries of the sum of P2,505.00, and ordering the plaintiff to
deliver said amount to them. From this decision only the defendants Juanita Golpeo and her
minor children and the intervenors Marcelino and Josefina Concepcion have appealed to
this court
ISSUE 1 : WON the agreement is an insurance contract? (SLEA is NOT a regular insurance
company, but the agreement was analogous to insurance)
HELD :
It is argued for the appellants, however, that the Insurance Law is not applicable because the
plaintiff is a mutual benefit association as defined in section 1628 of the Revised Administrative
Code. This argument evidently ignores the fact that the trial court has not considered the
plaintiff as a regular insurance company but merely ruled that the death benefit in question
is analogous to an insurance. Moreover, section 1628 of the Revised Administrative Code
defines a mutual benefit association as one, among others, "providing for any method of
accident or life insurance among its members out of dues or assessments collected from the
membership."
ISSUE 2 : WON the RTC is correct in declaring Aquilina Maloles and her children as sole
beneficiaries (YES)
HELD:
The decision is based mainly on the theory that the contract between the plaintiff and the
deceased Roman A. Concepcion partook of the nature of an insurance and that, therefore,
the amount in question belonged exclusively to the beneficiaries, invoking the following
pronouncements of this Court in the case of Del Val vs. Del Val, 29 Phil, 534:
"With the finding of the trial court that the proceeds of the life-insurance policy belongs
exclusively to the defendant as his individual and separate property, we agree. That the
proceeds of an insurance policy belong exclusively to the beneficiary and not to the estate
of the person whose life was insured, and that such proceeds are the separate and individual
property of the beneficiary, and not of the heirs of the person whose life was insured, is the
doctrine in America. We believe that the same doctrine obtains in these Islands by virtue of
section 428 of the Code of Commerce, which reads:
" 'The amounts which the underwriter must deliver to the person insured, in fulfillment of the
contract, shall be the property of the latter, even against the claims of the legitimate heirs or
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creditors of any kind whatsoever of the person who effected the insurance in favor of the
former.'
"It is claimed by the attorney for the plaintiffs that the section just quoted in subordinated to
the provisions of the Civil Code as found in article 1035. This article reads:
" 'An heir by force of law surviving with others of the same character to a succession must
bring into the hereditary estate the property or securities be may have received from the
deceased during the life of the same, by way of dowry, gift, or for any good consideration,
in order to compute it in fixing the legal portions and in the account of the division.'
"Counsel also claims that the proceeds of the insurance policy were a donation or gift made
by the father during his lifetime to the defendant and that, as such, its ultimate destination is
determined by those provisions of the Civil Code which relate to donations, especially article
819. This article provides that 'gifts made to children which are not betterments shall be
considered as part of their legal portion.'
"We cannot agree with these contentions. The contract of life insurance is a special contract
and the destination of the proceeds thereof is determined by special laws which deal
exclusively with that subject. The Civil Code has no provisions which relate directly and
specifically to life-insurance contracts or to the destination of life-insurance proceeds. That
subject is regulated exclusively by the Code of Commerce which provides for the terms of
the contract, the relations of the parties and the destination of the proceeds of the policy."
(Supra, pp. 540-541.)
ISSUE 3 : WON stipulation in the beneficiaries is void being contrary to Article 2012 of the
NCC? (NO)
(contention of Appellant Golpeo) Appellants also contend that the stipulation between the
plaintiff and the deceased Roman A. Concepcion regarding the specification of the latter's
beneficiaries, and the resolution of September 17, 1949, are void for being contrary to law,
moral or public policy. Specifically, the appellants cite Article 2012 of the new Civil Code
providing that "Any person who is forbidden from receiving any donation under article 739
cannot be named beneficiary of a life insurance policy by the person who cannot make any
donation to him, according to said article." Inasmuch as, according to article 739 of the new
Civil Code, a donation is void when made "between persons who are guilty of adultery or
concubinage at the time of the donation," it is alleged that the defendant-appellee, Aquilina
Maloles, cannot be named a beneficiary, even assuming that the insurance law is
applicable.
HELD:
Without Considering the intimation in the brief for the defendants-appellees that appellant
Juanita Golpeo, by her silence and actions, had acquiesced in the illicit relations between
her husband and appellee Aquilina Maloles, appellants' argument would certainly not apply
to the children of Aquilina, likewise named beneficiaries by the deceased Roman A.
Concepcion. As a matter of fact the new Civil Code recognizes certain successional rights of
illegitimate children. (Article 287.)
The other contentions advanced rather exhaustively by counsel for appellants, and the
citations in support thereof, are either negatived or rendered inapplicable by the decisive
considerations already stated. In this connection it is noteworthy that the estate of the
deceased Roman A. Concepcion was not entirely left without anything legally due it, since
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it is an admitted fact that the sum of P500 was paid by Laguna Tayabas Bus Co., employer of
the deceased, to the appellants under the Workmen's Compensation Act.
Del Val v Del Val 29 Phil 534
FRANCISCO DEL VAL, ET AL. vs. ANDRES DEL VAL

G.R. No. L-9374, February 16, 1915
FACTS:
Plaintiffs Francisco del Val, et al. and defendant Andres del Val are brother and sisters. They
are the only heirs of Gregorio Nacianceno del Val, who died intestate. During the lifetime of
Gregorio, he took out life insurance for the sum of P40,000 and made it payable to his son,
defendant Andres, as sole beneficiary. After Gregorio’s death, Andres collected the face of
the policy. From the said amount, he redeemed a real property in the sum of PhP18,365.29
which the decedent had sold to third persons with a right to repurchase. Without Andres’
knowledge and consent, the redemption of said property was made by his lawyer in the
names of plaintiffs Francisco, et al. and his (Andres), instead of in his name alone. Andres
kept the remainder of the said insurance policy amounting to PhP21,634.80. Consequently,
plaintiff Francisco et al. used and occupied the property redeemed.
Plaintiffs Francisco et al. contend that the amount of the insurance policy belonged to the
estate of the deceased and not to Andres personally; therefore, they are entitled to a
partition not only of the real and personal property, but also of the P40,000.00 life insurance.
In fact the conveyance of the property redeemed was made in their names and Andres, as
heirs, and not to Andres’ name alone.
Andres claims that he is the sole owner of the insurance proceeds and prayed that he be
declared the sole owner of the real property redeemed with the use of the insurance
proceeds, and its remainder.
The trial court in considering the complaint as one of an action for partition, dismissed the
same for failure to comply with the requirements.
ISSUE:
Whether petitioners Francisco, et al. have a right to the insurance proceeds
HELD:
No. The proceeds of the life-insurance policy belong exclusively to defendant Andres as his
individual and separate property.
The proceeds of an insurance policy belong exclusively to the beneficiary and not to the
estate of the person whose life was insured, and that such proceeds are the separate and
individual property of the beneficiary, and not of the heirs of the person whose life was
insured, is the doctrine in America. We believe that the same doctrine obtains in these Islands
by virtue of section 428 of the Code of Commerce, which reads: The amount which the
underwriter must deliver to the person insured, in fulfillment of the contract, shall be the
property of the latter, even against the claims of the legitimate heirs or creditors of any kind
whatsoever of the person who effected the insurance in favor of the former.
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It is claimed by the plaintiffs’ counsel that the section just quoted is subordinate to the
provisions of the Civil Code as found in article 1035. This article reads: An heir by force of law
surviving with others of the same character to a succession must bring into the hereditary
estate the property or securities he may have received from the deceased during the life of
the same, by way of dowry, gift, or for any good consideration, in order to compute it in fixing
the legal portions and in the account of the division.
The contract of life insurance is a special contract and the destination of the proceeds
thereof is determined by special laws which deal exclusively with that subject. The Civil Code
has no provisions which relate directly and specifically to life- insurance contracts or to the
destination of life insurance proceeds. That subject is regulated exclusively by the Code of
Commerce which provides for the terms of the contract, the relations of the parties and the
destination of the proceeds of the policy. Thus, contention of petitioners that proceeds
should be considered as a donation or gift and should be included in the estate of the
deceased is untenable.
Since the repurchase has been made in the names of all the heirs instead of the defendant
alone, petitioners claim that the property belongs to the heirs in common and not to the
defendant alone. The SC held that if it is established by evidence that that was Andres’
intention and that the real estate was delivered to the plaintiffs with that understanding, then
it is probable that their contention is correct and that they are entitled to share equally with
the defendant. However, it appears from the evidence that the conveyances were taken in
the name of the plaintiffs without the knowledge and consent of Andres, or that it was not his
intention to make a gift to them of real estate, when it belongs to him.
The judgment is set aside and the cause returned to the lower court for the purpose of
determining whether the property redeemed belongs to the heirs in common and not to the
defendant alone.
Grecio v Sun Life, GR 23703
Hilario Gercio vs. Sun Life Assurance

G.R. No. 23703, September 28, 1925
1.INSURANCE; LAW APPLICABLE IN THE PHILIPPINES.—The Philippine Law of Insurance should

be supplemented by the general principles prevailing on the subject. The purpose should be
to have the Philippine Law of Insurance conform as nearly as possible to the modern Law of
Insurance as found in the United States proper.
2.ID.; ID.; INSURABLE INTEREST OF WIFE.—The wife has an insurable interest in the life of her
husband.
3.ID.; ID.; ID.; BENEFICIARIES.—The beneficiary has an absolute vested interest in the policy f
rom the date of its issuance and delivery.
4.ID. ; ID. ; ID. ; ID.—When a policy of life insurance is taken out by the husband in which the
wife is named as beneficiary, she has a subsisting interest in the policy. And this applies to a
policy to which there attached the incidents of a loan value, cash surrender value, and
automatic extension by premiums paid, and to an endowment policy, as well as to an
ordinary life insurance policy.
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5.ID.; ID.; ID.; ID.; RIGHT TO CHANGE BENEFICIARY.—If the policy contains no provision
authorizing a change of beneficiary without the beneficiary's consent, the insured cannot
make such change.
6.ID.; ID.; ID.; ID.; ID.—A life insurance policy of a husband made payable to the wife as
beneficiary, is the separate property of the beneficiary and beyond the control of the
husband.
7.ID.; ID.; ID.; ID.; ID.; EFFECT OF DIVORCE.—In the absence of a statute to the contrary, if a
policy is taken out upon a husband's life and the wife is named as beneficiary therein, a
subsequent divorce does not destroy her rights under the policy.
8.ID.; ID.; ID.; ID.; ID.; ID.—The insured—the husband—has no power to change the
beneficiary—the former wife—and to name instead his actual wife, where the insured and
the beneficiary have been divorced, and where the policy of insurance does not expressly
reserve to the insured the right to change the beneficiary. Gercio vs. Sun Life Assurance Co.
of Canada, 48 Phil. 53, No. 23703 September 28, 1925
FACTS: In this case, the parties are: Hilario Gercio, the insured; Sun Life Assurance, the insurer;
and Andrea Zialcita, the beneficiary.
Sun Life Assurance issued an insurance policy on the life of Hilario Gercio, having his legal wife
at that time, Andrea Zialcita, as beneficiary. However, the wife was convicted of the crime
of adultery, and a decree of divorce was issued dissolving the marital bond contracted by
Hilario and Andrea.
As such, Hilario formally notified and requested Sun Life Assurance to change the beneficiary
of his insurance policy, from the former wife, to the present one, Adela. However, the
insurance company, refuses to do so. Hence this complaint.
ISSUE: Whether or not the insured (Hilario) has the power to change the beneficiary (former
wife, Andrea) and to name instead his actual wife (Adela).
HELD: No. The wife has an insurable interest in the life of her husband. The beneficiary has an
absolute vested interest in the policy from the date of its issuance and delivery. So when a
policy of life insurance is taken out by the husband in which the wife is named as beneficiary,
she has a subsisting interest in the policy. If the husband wishes to retain to himself the control
and ownership of the policy he may so provide in the policy. But if the policy contains no
provision authorizing a change of beneficiary without the beneficiary's consent, the insured
cannot make such change. Accordingly, it is held that a life insurance policy of a husband
made payable to the wife as beneficiary, is the separate property of the beneficiary and
beyond the control of the husband.
As to the effect produced by the divorce, the Philippine Divorce Law, Act No. 2710, merely
provides in section 9 that the decree of divorce shall dissolve the community property as soon
as such decree becomes final. Unlike the statutes of a few jurisdictions, there is no provision
in the Philippine Law permitting the beneficiary in a policy for the benefit of the wife of the
husband to be changed after a divorce. It must follow, therefore, in the absence of a statute
to the contrary, that if a policy is taken out upon a husband's life the wife is named as
beneficiary therein, a subsequent divorce does not destroy her rights under the policy.
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In fine, the insured—the husband—has no power to change the beneficiary—the former

wife—and to name instead his actual wife, where the insured and the beneficiary have been
divorced, and where the policy of insurance does not expressly reserve to the insured the
right to change the beneficiary.
D. Insurance Agent/Broker
Eternal Gardens v PhilAm Life, GR 166245

ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY
G.R. No. 166245; April 9, 2008
Facts:
Philippine American Life Insurance Company (Philamlife) entered into a Creditor Group Life
Policy with Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients
of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife
depending on the existing balance of the purchased burial lots. The policy was to be
effective for a period of one year, renewable on a yearly basis. Under this policy, Eternal was
required to submit to Philamlife a list of all new lot purchasers, together with a copy of the
application of each purchaser and their respective unpaid balances. Eternal complied by
submitting a letter containing a list of insurable balances of its lot buyers. One of those
included in the list as "new business" was a certain John Chuang with a balance of
PhP100,000.
Subsequently, Chuang died leading Eternal to send a letter which served as an insurance
claim for Chuang’s death. Philamlife denied Eternal’s insurance claim stating that no
application for Group Insurance was submitted and approved prior to Chuang’s death. Also,
its acceptance of insurance premium do not connote approval per se of the insurance
coverage but are held in trust until the prerequisites for insurance coverage shall have been
met.
Consequently, Eternal filed a case before the Makati City RTC for a sum of money. The RTC
ruled in favor Eternal Gardens and found that Chuang’s application for insurance which he
accomplished before his death was evidenced by Eternal’s witness testimony and by the
letter dated December 29, 1982. Moreover, it held that Philamlife deemed to have approved
Chuang’s application due to inaction from the submission of the requirements and
acceptance of the premiums.
However, the CA reversed the RTC’s decision and concluded that Chuang was not covered
by Philamlife’s insurance since his application was not enclosed in Eternal’s letter dated
December 29, 1982. It further ruled that the non-accomplishment of the submitted
application form violated Section 26 of the Insurance Code.
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Issue:
Whether or not Philamlife, assumed the risk of loss without approving the application.
Held:
Yes. Philamlife and Eternal entered into an agreement denominated as Creditor Group Life
Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts
a loan with the Assured. However, there shall be no insurance if the application of the
Lot Purchaser is not approved by the Company.
An examination of the above provision would show ambiguity between its two sentences.
The first sentence appears to state that the insurance coverage of the clients of Eternal
already became effective upon contracting a loan with Eternal while the second sentence
appears to require Philamlife to approve the insurance contract before the same can
become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be

construed liberally in favor of the insured and strictly against the insurer in order to safeguard
the latter’s interest. Clearly, the vague contractual provision, in Creditor Group Life Policy No.
P-1920 dated December 10, 1980, must be construed in favor of the insured and in favor of
the effectivity of the insurance contract.
The seemingly conflicting provisions must be harmonized to mean that upon a party’s
purchase of a memorial lot on installment from Eternal, an insurance contract covering the
lot purchaser is created and the same is effective, valid, and binding until terminated by
Philamlife by disapproving the insurance application. The termination of the insurance
contract by the insurer must be explicit and unambiguous.
To characterize the insurer and the insured as contracting parties on equal footing is
inaccurate at best. Insurance contracts are wholly prepared by the insurer with vast amounts
of experience in the industry purposefully used to its advantage. More often than not,
insurance contracts are contracts of adhesion containing technical terms and conditions of
the industry, confusing if at all understandable to laypersons, that are imposed on those who
wish to avail of insurance. As such, insurance contracts are imbued with public interest that
must be considered whenever the rights and obligations of the insurer and the insured are to
be delineated. Hence, in order to protect the interest of insurance applicants, insurance
companies must be obligated to act with haste upon insurance applications, to either deny
or approve the same, or otherwise be bound to honor the application as a valid, binding,
and effective insurance contract.
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Pineda v CA, GR 105562

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA
CALUMBAG and LUCIA LONTOK, Petitioners,
vs.
HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED, Respondents.
FACTS
This is an action for the payment of insurance claims and prayer for administrative
sanctions.
Prime Marine Services, Inc. (PMSI), a crewing/manning outfit, procured a Group Policy
from Insular Life Assurance Co., Ltd. to provide life insurance coverage to its sea-based
employees. During the effectivity of the policy, six covered employees perished at sea when
their vessel sunk. They were survived by the complainants-appellees, the beneficiaries under
the policy.
The beneficiaries, except the spouses Alarcon, executed special powers of attorney
authorizing Capt. Nuval, President and General Manager of PMSI, to , among others, “follow-
up, ask, demand, collect and receive” for their benefit indemnities of sums of money due
them relative to the sinking of the vessel. By virtue of these written powers of attorney,
complainants-appellees were able to receive their respective death benefits. Unknown to
them, however, PMSI, in its capacity as employer and policyholder of the life insurance of its
deceased workers, filed with Insular Life formal claims for and in behalf of the beneficiaries,
through Capt. Nuval. On the basis of the five special powers of attorney, Insular Life drew
against its account six (6) checks, four for P200,000.00 each, one for P50,000.00 and another
for P40,000.00 payable to the order of complainants-appellees. Capt. Nuval, upon receipt of
these checks endorsed and deposited them in his own account.
When the complainants-appellees learned that they were entitled, as beneficiaries,
to life insurance benefits under a group policy, they sought to recover these benefits from
Insular Life but the latter denied their claim on the ground that the liability to complainants-
appellees was already extinguished.
ISSUE:
Whether or not Insular Life is bound by the misconduct of the employer.
RULING
A cursory reading of the questioned powers of attorney would disclose that they do
not contain in clear and unequivocal terms authority to Captain Nuval to obtain, receive,
receipt from respondent company insurance proceed arising from the death of the seaman-
insured. On the contrary, the said powers of attorney are couched in terms which could easily
arouse suspicion of an ordinary man.
In Elfstrom vs. New York Life Insurance Company, 27the California Supreme Court
explicitly ruled that in group insurance policies, the employer is the agent of the insurer. Thus:
We are convinced that the employer is the agent of the insurer in performing the
duties of administering group insurance policies. It cannot be said that the employer acts
entirely for its own benefit or for the benefit of its employees in undertaking administrative
functions. While a reduced premium may result if the employer relieves the insurer of these
tasks, and this, of course, is advantageous to both the employer and the employees, the
insurer also enjoys significant advantages from the arrangement. The reduction in the
premium which results from employer-administration permits the insurer to realize a larger
volume of sales, and at the same time the insurer's own administrative costs are markedly
reduced.
The most persuasive rationale for adopting the view that the employer acts as the
agent of the insurer, however, is that the employee has no knowledge of or control over the
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employer's actions in handling the policy or its administration. An agency relationship is based
upon consent by one person that another shall act in his behalf and be subject to his control.
It is clear from the evidence regarding procedural techniques here that the insurer-employer
relationship meets this agency test with regard to the administration of the policy, whereas
that between the employer and its employees fails to reflect true agency. The insurer directs
the performance of the employer's administrative acts, and if these duties are not undertaken
properly the insurer is in a position to exercise more constricted control over the employer's
conduct.
In Neider vs. Continental Assurance Company, which was cited in Elfstrom, it was held
that:
the employer owes to the employee the duty of good faith and due care in attending to the
policy, and that the employer should make clear to the employee anything required of him
to keep the policy in effect, and the time that the obligations are due. In its position as
administrator of the policy, we feel also that the employer should be considered as the agent
of the insurer, and any omission of duty to the employee in its administration should be
attributable to the insurer.
In the light of the above disquisitions and after an examination of the facts of this case,
we hold that PMSI, through its President and General Manager, Capt. Nuval, acted as the
agent of Insular Life. The latter is thus bound by the misconduct of its
agent.chanroblesvirtualawlibrary chanrobles virtual law library
Filipinas Life Assurance v Pedroso, GR 159489
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,
vs.
CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her Attorney-in-
Fact PONCIANO C. MARQUEZ, respondents.
QUISUMBING, J.:
The antecedent facts are as follows:
FACTS: Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life

insurance issued by petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims
Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums.
In the first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding
a promotional investment program for policyholders. It was offering 8% prepaid interest a
month for certain amounts deposited on a monthly basis. Enticed, she initially invested and
issued a post-dated check dated January 7, 1977 for P10,000.4 In return, Valle issued Pedroso
his personal check for P800 for the 8%5prepaid interest and a Filipinas Life "Agent’s Receipt"
No. 807838.6
Pedroso called the Escolta office and talked to Francisco Alcantara, the administrative
assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about
the promotional investment to which Apetrior confirmed.
A month after, her investment of P10,000 was returned to her after she made a written request
for its refund. After a second investment, she made 7 to 8 more investments in varying
amounts, totaling P37,000 but at a lower rate of 5%8 prepaid interest a month.
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Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about
the investment plan. Palacio made a total investment of P49,5509 but at only 5% prepaid
interest. However, when Pedroso and Palaio tried to withdraw their investments, Valle did not
want to return some of their money. With the assistance of their lawyer, they went to Filipinas
Life Escolta Office to collect their respective investments, and to inquire why they had not
seen Valle for quite some time. But their attempts were futile. Hence, respondents filed an
action for the recovery of a sum of money.
After trial, the RTC, finds the co-defendants Valle, Apetrior and Alcantara jointly and solidarily
liable to the respondents.
On appeal, the Court of Appeals affirmed the trial court’s ruling and subsequently denied the
motion for reconsideration.
ISSUE; WON petitioner and its co-defendants jointly and severally liable to the herein
respondents?
YES. Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life
insurance company and was not engaged in the business of collecting investment money. It
contends that the investment scheme offered to respondents by Valle, Apetrior and
Alcantara was outside the scope of their authority as agents of Filipinas Life such that, it
cannot be held liable to the respondents.11
Respondents assert they exercised all the diligence required of them in ascertaining the
authority of petitioner’s agents; and it is Filipinas Life that failed in its duty to ensure that its
agents act within the scope of their authority.
Considering the issue raised in the light of the submissions of the parties, we find that the
petition lacks merit. The Court of Appeals committed no reversible error nor abused gravely
its discretion in rendering the assailed decision and resolution.
It appears indisputable that respondents Pedroso and Palacio had invested P47,000
and P49,550, respectively. These were received by Valle and remitted to Filipinas Life, using
Filipinas Life’s official receipts, whose authenticity were not disputed. Valle’s authority to solicit
and receive investments was also established by the parties. When respondents sought
confirmation, Alcantara, holding a supervisory position, and Apetrior, the branch manager,
confirmed that Valle had authority. While it is true that a person dealing with an agent is put
upon inquiry and must discover at his own peril the agent’s authority, in this case, respondents
did exercise due diligence in removing all doubts and in confirming the validity of the
representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the
contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. 12 The
general rule is that the principal is responsible for the acts of its agent done within the scope
of its authority, and should bear the damage caused to third persons.13 When the agent
exceeds his authority, the agent becomes personally liable for the damage.14 But even when
the agent exceeds his authority, the principal is still solidarily liable together with the agent if
the principal allowed the agent to act as though the agent had full powers.15 In other words,
the acts of an agent beyond the scope of his authority do not bind the principal, unless the
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principal ratifies them, expressly or impliedly.16 Ratification in agency is the adoption or

confirmation by one person of an act performed on his behalf by another without authority.17
Filipinas Life cannot profess ignorance of Valle’s acts. Even if Valle’s representations were
beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior
expressly and knowingly ratified Valle’s acts. It cannot even be denied that Filipinas Life
benefited from the investments deposited by Valle in the account of Filipinas Life. In our
considered view, Filipinas Life had clothed Valle with apparent authority; hence, it is now
estopped to deny said authority. Innocent third persons should not be prejudiced if the
principal failed to adopt the needed measures to prevent misrepresentation, much more so
if the principal ratified his agent’s acts beyond the latter’s authority. The act of the agent is
considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He who
does a thing by an agent is considered as doing it himself."18
WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated
November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV
No. 33568 are AFFIRMED.
Insular Life v Feliciano, GR 47593

THE INSULAR LIFE ASSURANCE vs. FELICIANO
G.R. No. L-47593 December 29, 1943
This case was in response to the Motion for Reconsideration filed by the The Insular Life after
the September 13, 1941 decision of the SC where the SC affirmed the judgment of CA. This
case focuses only on the liability of the agent. In the present case, the agent knew all the
time the true state of health of the insured. The insurer's medical examiner approved the
application knowing full well that the applicant was sick. The situation is one in which one of
two innocent parties must bear a loss for his reliance upon a third person. In this case, it was
the insurer who gave the agent authority to deal with the applicant. It was the one who
selected the agent, thus implying that the insured could put his trust on him. It was the one
who drafted and accepted the policy and consummated the contract. That as between the
two of them, the one who employed and gave character to the third person as its agent
should be the one to bear the loss which is Insular Life in this case. In the instant case, it has
been proved that the insured could not read English, the language in which the application
was written, and that after the contract was signed, it was kept by his mother. As a
consequence, the insured had no opportunity to read or correct any misstatement therein.
In case Atty Mauro will ask about the validity:
- Validity of insurance
Although the agent and the medical examiner knew that statement to be
false, no valid contract of insurance was entered into because there was no
real meeting of the minds of the parties. The policies were issued on the basis
of the statement subscribed by the applicant to the effect that he was and
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had been in good health, when as a matter of fact he was then suffering from
advanced pulmonary tuberculosis.
- Was the insured in good faith?

The insured and the members of his family were not entirely innocent of
bad faith. In allowing himself to be used as an instrument in the wrongful
issuance of the policies, the insured was actuated by the desire for lucre. He
and the members of his family knew that a person in bad health, and especially
one "in a very serious and practically hopeless con-dition," was not insurable.
When Evaristo Feliciano, the applicant for insurance, signed the application in
blank and authorized the soliciting agent and/or the medical examiner of the
Company to write the answers for him, he made them his own agents for that
pur-pose, and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the responsibility for the
falsification. He was not supposed to sign the application in blank. He knew that
the answers to the questions therein, contained would be "the basis of the
pol-icy," and for that very reason he was required with his signature to vouch
for the truth thereof.
- What is the nature of life insurance?

Life insurance is a savings institution; it is not a gambling scheme. The life
insurance business is a cooperative enterprise in the sense that the
policy-holders as well as the company are interested in making profits and in
avoiding unnecessary or bad losses. Every fraud per-petrated upon the
company affects the policy-holders because their share in the profits is thereby
unduly minimized. The remedy suggested in the majority opinion that the
insurance companies should be more careful in the selection of their agents
and medical examiners is impracticable. The only safe and sound policy is not
to condone but to condemn fraud and deceit under any and all
circumstances.
FACTS: Evaristo Feliciano, who died on September 29, 1935, was suffering with advanced
pulmonary tuberculosis when he signed his applications for insurance with the petitioner
Insular Life on October 12, 1934.
On that same date Doctor Trepp, who had taken X-ray pictures of his lungs, informed the
respondent Dr. Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a very
serious ad practically hopeless condition." Nevertheless the question contained in the
application — "Have you ever suffered from any ailment or disease of the lungs, pleurisy,
pneumonia or asthma?" — appears to have been answered , "No" And above the signature
of the applicant, following the answers to the various questions propounded to him, is the
following printed statement:
I declare on behalf of myself and of any person who shall have or claim any
interest in any policy issued hereunder, that each of the above answers is full,
complete and true, and that to the best of my knowledge and belief I am a
proper subject for life insurance.
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The false answer above referred to, as well as the others, was written by the Company's
soliciting agent Romulo M. David, in collusion with the medical examiner Dr. Gregorio Valdez,
for the purpose of securing the Company's approval of the application so that the policy to
be issued thereon might be credited to said agent in connection with the inter- provincial
contest which the Company was then holding among its soliciting agents to boost the sales
of its policies. Agent David bribed Medical Examiner Valdez with money which the former
borrowed from the applicant's mother by way of advanced payment on the premium,
according to the finding of the Court of Appeals. Said court also found that before the insured
signed the application he, as well as the members of his family, told the agent and the
medical examiner that he had been very sick but that in spite of such information the agent
and the medical examiner told them that the applicant was a fit subject for insurance.
He was issued two insurance policies with an aggregate amount of Php25,000. In September
1935, he died. His heirs (Serafin Feliciano et al) filed an insurance claim.
Insular Life insists that upon the facts of the case the policies in question are null and void ab
initio and that all that the respondents are entitled to is the refund of the premiums paid
thereon.
ISSUES/ RULING:
1. Can Insular Life avoid the insurance policy by reason of the fact that its agent
knowingly and intentionally wrote down the answers in the application differing from
those made by Feliciano?
No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the
insurer, after obtaining from an applicant for insurance a correct and truthful answer to
interrogatories contained in the application for insurance, without knowledge of the applicant
fills in false answers, either fraudulently or otherwise, the insurer cannot assert the falsity of
such answers as a defense to liability on the policy, and this is true generally without regard
to the subject matter of the answers or the nature of the agent’s duties or limitations on his
authority, at least if not brought to the attention of the applicant. Hence instead of serving
the interests of his principal, acts in his own or another’s interest and adversely to that of his
principal.
The fact that the insured did not read the application which he signed, is not indicative of
bad faith. It has been held that it is not negligence for the insured to sign an application
without first reading it if the insurer by its conduct in appointing the agent influenced the
insured to place trust and confidence in the agent. PERO CHECK NYO LATER KAY NAIBA ANG
CONCLUSION.
2. Was Insular Life was bound by their agent’s acts?
Yes. The insurance business has grown so vast and lucrative within the past century.
Nowadays, even people of modest means enter into insurance contracts. Agents who solicit
contracts are paid large commissions on the policies secured by them. They act as general
representatives of insurance companies.
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IN the case at bar, the true state of health of the insured was concealed by the agents of the
insurer. The insurer’s medical examiner approved the application knowing fully well that the
applicant was sick. The situation is one in which of two innocent parties must bear a loss for
his reliance upon a third person. In this case, it is the one who drafted and accepted the
policy and consummated the contract. It seems reasonable that as between the two of
them, the one who employed and gave character to the third person as its agent should be
the one to bear the loss. Hence, Insular is liable to the beneficiaries.
3. Whether the insurance policies in question are void ab initio for being fraudulently
procured by the respondents.
YES. From all the facts and circumstances of this case, we are constrained to conclude that
the insured was a co-participant, and co-responsible with Agent David and Medical
Examiner Valdez, in the fraudulent procurement of the policies in question and that by reason
thereof said policies are void ab initio.
When Evaristo Feliciano, the applicant for insurance, signed the application in blank and
authorized the soliciting agent and/or medical examiner of the Company to write the
answers for him, he made them his own agents for that purpose, and he was responsible for
their acts in that connection. If they falsified the answers for him, he could not evade the
responsibility for the falsification. He was not supposed to sign the application in blank. He
knew that the answers to the questions therein contained would be "the basis of the policy,"
and for that every reason he was required with his signature to vouch for truth thereof.
Moreover, from the facts of the case we cannot escape the conclusion that the insured
acted in connivance with the soliciting agent and the medical examiner of the Company in
accepting the policies in question. When the applicant signed the application he was
"having difficulty in breathing, . . . with a very high fever." He had gone three times to the
Santol Sanatorium and had X-ray pictures taken of his lungs. He therefore knew that he was
not "a proper subject for life insurance." When he accepted the policy, he knew that he was
not in good health. Nevertheless, he not only accepted the first policy of P20,000 but then
and there applied for and later accepted another policy of P5,000.
The SC also believed that it was impossible for Feliciano to not have read the answers
contained in the copy of the application attached to the policy before he accepted the
same and paid premium thereon. He must have notice that the answers to the questions
therein asked concerning his clinical history were false, and yet he accepted the first policy
and applied for another. By accepting the policy he became charged with knowledge of its
contents, whether he actually read it or not. He knew, or was chargeable with knowledge,
from the very terms of the two policies sued upon (one of which is printed in English and the
other in Spanish) that the soliciting agent and the medical examiner had no power to bind
the Company by any verbal promise or oral representation. The insured, therefore, had no
right to rely — and we cannot believe he relied in good faith — upon the oral representation
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of said agent and medical examiner that he (the applicant) was a fit subject for insurance
notwithstanding that he had been and was still suffering with advanced pulmonary
tuberculosis.
The motion for reconsideration is therefore sustained and the decision of CA is hereby
reversed.
Glaraga v Sun Life, GR L-25963

Glaraga vs. Sun Life Assurance Co. of Canada, and Hanson
49 Phil. 737, GR No. 25963 December 14, 1926
FACTS:
On July 1924, Sun Life issued an insurance policy in favor of Jose Concepcion Juares. The
policy promised that it will pay the legal representatives of the insured upon his death,
provided that the policy has legal force and effect at the time death. It also provided that:
A. The premiums are payable in two terms, particularly June 1 and December 1 or within 30
days thereafter.
B. By the express terms of the policy, the failure of the insured to make the second payment
at maturity or within thirty days.
C. Failure to make such payment, the policy had lapsed and was of no legal force or effect
at the time of the death of the deceased.
D. No persons, except the President, Managing-Director or Secretary has power to alter this
contract, to extend the time for paying a premium, to bind the Company by making any
promise or by receiving any representation or information not contained in the application
for this policy. No payment made to any person, except in exchange for the Company's
official receipt, will be recognized by the Company. This policy does not take effect until the
first premium has been actually paid, during the life and good health of the insured.
Jose Concepcion was able to pay the first premium. However, for the second premium, his
agent O. O Hanson wrote him a letter stating that Hanson will pay for his second premium
and that Jose will just prepare his money to reimburse Hanson upon his arrival on January
1925. Jose unfortunately died on that same month.
Later, Susana Glaraga was appointed as administratix of Jose’s estate.She demanded the
amount of the policy from Sun Life. However, Sun Life refused to pay alleging that the policy
was of no effect since Jose failed to pay the second premium. Susana Glarage then filed a
case against Sun Life for the amount of the policy with legal interest. The trial court ruled in
favor of Susana Glaraga.
ISSUE:
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WON Sun Life is liable for the policy.
RULING:
NO. Where a life insurance company issued and delivered one of its policies to the insured in
and by which the powers of its special agents were limited and defined, and the policy
specified how and in what manner the premiums were to be paid and to whom they were
to be paid, in the absence of allegation and proof of an established custom or another rule
of conduct ratified and approved by the company, the premiums on the policy must be paid
at the time and in the way and manner specified in the policy, and if not so paid, the policy
will lapse and be forfeited by its own terms.
Pandiman Phil v MMM Corp, GR 143313

Pandiman v Marine Manning
G.R. No. 143313 June 21, 2005
Facts:
Respondent Rosita Singhid’s deceased husband Benito Benito was hired by Fullwin, through its local
agent, respondent Marine Manning, as chief cook on board the vessel MV Sun Richie Five for a term
of twelve (12) months.
The vessel and its crew were insured with Ocean Marine. Ocean Marine transacted business in the
Philippines through its local correspondent, petitioner Pandiman Philippines, Inc.
While the vessel was on its way to Shanghai from Ho Chih Minh City, Vietnam Benito suffered a heart
attack. His remains were flown back to the Philippines.
Rosita filed a claim for death benefits with Marine Manning, which, however, referred her to petitioner
Pandiman. Petitioner approved the claim and recommended payment in the amount of
US$79,000.00. But Rosita’s death claims remained unpaid.
Hence, Rosita filed with the Labor Arbiter a complaint against Pandiman, Marine Manning, and
Ocean Marine for recovery of death benefits, moral and exemplary damages and attorney’s fees.
The NLRC ruled in her favor but dismissed the claim against Pandiman.
On Marine Manning’s appeal to the NLRC, the latter set aside that of the Labor Arbiter, absolved the
petitioner from any liability and instead held Pandiman and Ocean Marine liable for Rosita’s claim.
Pandiman went to the Court of Appeals on a petition. It dismissed the petition and affirmed the NLRC
ruling.
Issue:
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1. Whether or not petitioner Pandiman may be held liable for Rosita’s claim for death benefits as
Benito’s widow
2. Whether or not respondent MMMC and its foreign principal Fullwin with whom unquestionably the
late Benito had an employment contract, should be absolved from death claim liabilities in this case.
Held:
Ratio:
NO.
The shipowners provided insurance for the ships and crew through an association. In this protection
and indemnity agreement, which is actually an insurance contract, the provisions of the Insurance
Code is the governing law. In the subject insurance contract, Ocean Marine is the insurer, the
shipowner (Sun Richie Five Bulkers S.A.) is the insured, and Rosita Singhid as widow and heir of a crew
on board the insured vessel like Benito, is a beneficiary.
The Court of Appeals held Panidman liable for Rosita’s death claims under the contract of insurance,
on the postulate that petitioner is an insurance agent under Section 300 of the Code.
Petitioner PPI, however, claims that it is not an insurance agent but a mere local correspondent of the
P&I Club. Thus, petitioner maintains that even if OMMIAL (the P&I Club), as insurer of Sun Richie Five, is
held principally liable to Rosita for her husband’s death benefits, petitioner cannot be held solidarily
liable together with said insurer.
There is nothing therein to show that an insurance contract in this case was in fact negotiated
between the insured Sun Richie Five and the insurer Ocean Marine, through petitioner as insurance
agent which will make petitioner an insurance agent under Section 300 of the Insurance Code.
The NLRC, in its decision, merely relied on petitioner’s reference to Ocean Marine as its “principal”
instead of its “client”. Such “reference”, however, will not and cannot vary the definition of what an
insurance agent actually is under the law, nor can it automatically turn petitioner into one.
Payment for claims arising from the peril is definitely not one of the liabilities of an insurance agent.
Thus, there is no legal basis whatsoever for holding Pandiman solidarily liable with insurer Ocean Marine
for Rosita’s claim for death benefits.
The insurance contract between the insurer and the insured, under Article 1311 of the Civil Code, is
binding only upon the parties who execute the same. Petitioner PPI is not a party to the insurance
contract in question.
2.
YES. Anent the second issue, the Court agrees with petitioner’s contention that the appellate court
erred in affirming the NLRC’s decision which absolved Fullwin and its manning agent, respondent
MMMC, of their joint and solidary liability arising from Benito’s employment contract with Fullwin.
It is undisputed that Benito was employed by Fullwin through its manning agency, Marine Manning.
Fullwin, Benito’s principal employer is, therefore, liable under the same employment contract. For its
part, MMMC is bound by its undertaking pursuant to the Rules and Regulations Governing Overseas
Employment (1991) that the manning applicants:
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(3) Shall assume joint and solidary liability with the employer for all claims and liabilities which may
arise in connection with the implementation of the contract, including but not limited to payment of
wages, health and disability compensation and repatriation;
By reason of the foregoing undertaking, respondent MMMC is jointly and solidarily liable with its foreign
principal Fullwin, for whatever death benefits Benito’s widow is entitled to under Benito’s employment
contract.
Petition granted.
III. INSURABLE INTEREST

A. Life
B. Property
C. Bailment
D. Mortgage
E. Time when insurable interest must exist
GrePa Life v CA, GR 113899

Paramount Life v Castro, GR 195728
Harvardian Colleges v Country Bankers, CA GR CV 03771
Gaisano Cagayan v Insurance Company of North America, GR 147839
Filipino Merchants v CA, GR 85141
Lopez v Del Rosario, GR L-19189
Geagonia v CA, GR 114427
Palileo v Cosio, GR L-7667
San Miguel Brewery v Law Union and Rock Insurance, GR L-14300
Sing, Jr. v FEB Leasing, GR 168115
Cha v CA, GR 124520
FIRST EXAM
Page 55 of 55

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INSURANCE LAW

I. COURSE REQUIREMENTS AND GRADING SYSTEM

Course Requirements Grade Breakdown

II. COURSE POLICIES

A. Laws Governing Insurance

White Gold Marine Services v Pioneer, GR 154514

G.R. No. 154514. July 28, 2005

becomes requisite. It is not by what it is called. An insurance contract is a contract of

Although Pioneer is already licensed as an insurance company, it needs a separate license

Phil Health Care Providers v CIR, GR 167330

G.R. No. 167330 June 12, 2008

PHCPI’s contention that it is a health maintenance organization and not an insurance

RESOLUTION (September 18, 2009):

1. PHCPI is a health maintenance organization (HMO) and not an insurance company

2. Health Maintenance Organizations Are Not Engaged in the Insurance Business

a) making or proposing to make, as insurer, any insurance contract;

3. HMO is different from Insurance

The primary purpose of a medical service corporation, however, is an undertaking to provide

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement

1. The insured has an insurable interest;

Philamcare Health System v CA, GR 125678

As to cancellation procedure- Cancellation requires certain conditions:

Blue Cross Health Care Providers v CIR, GR 169737

BLUE CROSS HEALTH CARE v. OLIVARES

RULING: Petition DENIED.

x x x a disability which existed before the commencement date of membership whose

Section 3 (e), Rule 131 of the Rules of Court states:

Fortune Medicare v Amorin, GR 195872

Fortune Medicare vs Amorin

However, if the emergency confinement occurs in a foreign territory. Fortunecare will be

MMPSEU v MMPC, GR 175773

MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU), Petitioner,

ERROR IN APPLYING THE COLLATERAL SOURCE RULE

tortfeasor has no right to any mitigation of damages because of payments or

TO ALLOW REIMBURSEMENT OF AMOUNTS PAID UNDER OTHER INSURANCE POLICIES SHALL

Gulf Resort, Inc v PCIC, GR 156167

G.R. No. 156167 May 16, 2005

Third, Policy Condition No. 6 stated:

Thus, an insurance contract exists where the following elements concur:

D. Characteristics of an insurance contract

DBP v CA, GR 109937

Enriquez v Sun Life, GR 15895

EGMP Corp v Philam Life, GR 166245

G.R. No. 166245; April 9, 2008

Pineda v CA, GR 1055562

Pineda et.al vs. CA, Insular Life Assurance Co.

(4) Complainant-appellant filed an administrative complaint against respondent-

II. PARTIES TO AN INSURANCE CONTRACT

White Gold Marine v Pioneer Insurance,, GR 154514

WHITE GOLD MARINE SERVICES, INC., Petitioners,

Every person, partnership, or association receiving any such certificate of authority

The Court of Appeals affirmed the decision of the Insurance Commissioner.

*A mutual insurance company is a cooperative enterprise where the members are

Since a contract of insurance involves public interest, regulation by the State is

2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

YES. Although Pioneer is already licensed as an insurance company, it needs a separate

No person shall act as an insurance agent or as an insurance broker in the solicitation

Picar v GSIS, GR L-25803

2. Can Republic of the Philippines, as represented by the Provincial Treasurer of

Alabat v Alabat, GR L-22169

1. Are Sergio Alabat , et al. entitled to the said properties?

2. Is Winfreda (intervenor) is also entitled to said properties?

BPI v Posadas, GR 34583