3 consolidated cases:

CASE 1:
JOSE Ledesma was the owner of a tractor which was hit by a minibus insured by SUMMIT
GUARANTY for purposes of 3rd party liability. LEDESMA immediately filed a notice of claim
with Summit, who advised him to have it repaired at GA Machineries, assuring LEDESMA that
they would pay the estimated amount of 21k. However, when GA Machineries was through
with the repair, Summit merely made assurances to LEDESMA without actually paying for the
same. This went on even until a complaint was submitted to the Insurance Commission.
Summit assured the Commission that it would pay, but it didn't.

CASE 2:
Geronima PULMANO was the owner of a jeep insured with Summit for 20k PHP. While this
jeep was being driven by Ariel Pulmano, it got into a vehicular accident which resulted in the
death of one of the victims. PULMANO immediately filed a notice of accident and claim with
Summit and submitted all the pertinent documents, but the company did not take any steps to
process the claim. The matter was brought to the Insurance Commission, but the company
still failed to settle the claim.

CASE 3:
Amelia GENERAO owned a passenger jeep that was insured with Summit under a Vehicle
Comprehensive Policy. This jeep was being driven by Carlos Pagkalinawan when it struck the
van of Mr. Hahn. 2 days after such incident, GENERAO notified the company of the accident
and demanded payment, submitting all the necessary papers. Despite this, there was still no
payment paid and Mr. Hahn filed a complaint for damages against Generao and
Pagkalinawan.

 IN ALL OF THESE CASES, the company alleged that the actions have been barred by
prescription. The only issue is whether or not the causes of action of the private
respondents have already prescribed.

→ the company alleges that the complaints have been filed beyond the 1 year period
provided in Section 384 of the Insurance Code. It contends that the 6-month period for filing
the notice of claim and the 1 year period for bringing an action/suit are MANDATORY and
must always concur.

RULING: No. There is absolutely nothing in the law which mandates that the 2 periods must
always concur. On the contrary, it is very clear that the 1 year period is only required “in
proper cases.”
→ The 1 year period is to be counted from the date the INSURER rejects the claim. This
is the time when the cause of action accrues. In this case, in all 3 complaints, the
company has never rejected any one of them and has continually promised to pay.
Thus, the prescription period has not yet start to run.
LUMIBAO v IAC

FACTS:

NORA LUMIBAO is a life insurance underwriter/agent and is a member of a Bescon

Insurance Agencies, Inc., a group of insurance underwriters representing the Manila Bankers
Life Insurance Corporation.

In January 1975, LUMIBAO was able to convince private respondent Eugenio Trinidad (VP,
Gen. Manager, and principal stockholder of Victory Liner Inc.) to take out a life insurance
policy with Manila Bankers. Medical examinations showed that TRINIDAD was diabetic, and
so the insurance premium was fized at 93,180 for a life insurance policyc with a face value of
1 million. LUMIBAO offered to return to TRINIDAD the amount corresponding to her
commission out of the first premium payment (50%), to induce TRINIDAD to take the policy,
which TRINIDAD did. He issued 2 checks totalling the price of the premium, both postdated in
order that LUMIBAO would be able to return to him the 50%, representing the amount of her
commission.

LUMIBAO received her commission, but she failed to comply with her commitment to give the
same to TRINIDAD. He made demands upon LUMIBAO, who denied she ade such an
arrangement. TRINIDAD thus filed a case for specific performance and damages against
LUMIBAO. LUMIIBAO answered with a counterclaim.

The RTC ruled that LUMIBAO had induced TRINIDAD, but their agreement was void as it was
contrary to the provisions of the Insurance Code and against public policy. For this, the RTC
dismissed the complaint.
The CA initially agreed with the RTC, but reversed the RTC when it dismissed the case,
ordering instead LUMIBAO to pay the 50% commission.
BUSINESS INSURANCE:
general overview →

insurance companies
→ general rule: you cannot transact in any insurance business in the philippines unless you
get permission from the Insurance Commission
→ WHAT do you need to get? → financial and moral standards
FINANCIAL: -Capitalization standards → can't be a small fry
-Security deposit is required
-Solvent
-CANNOT declare dividends; aside from unrestricted retained
earnings there are MORE requirements
-has to have assets; they have to maintain basic assets and these
must be QUALITY assets
-they can LEND/INVEST; these are still assets
→ there are quality requirements for investments/loans
→ they are allowed to do it but it is more stringent
→ sometimes requires a collateral
-RESERVE requirements
-basically make sure they are LIQUID
MORAL? Integrity requirements → extends to officers/directors of insurance
companies
→ code has measures of avoiding conflict interests: one being INSURANCE COMPANIES
CANNOT be insurance adjusters
→ LIMITS OF SINGLE-RISK
 ex.: net worth of bank: 1M; an applicant asks for 1M. Agreed; fire causes total loss.
But bank loses entire NET WORTH.
→ REINSURANCE: insurance company covering ANOTHER insurance company
 they have to have authority to conduct REINSURANCE business

VARIABLE CONTRACT
→ what is that? Their business is to insure risks; they're part-insurance and part-investment;
→ they will take the money and use it for investments → buy stocks or bonds; it's not really
any different from banks, BUT
→ INSURANCE COMPANIES ARE REALLY NOT SUPPOSED TO BE DOING THAT.
→ it is allowed for so long as the contracts INCLUDE an insurance component.

Investment contracts are securities → BUT VARIABLE CONTRACTS, though part

investment, are not considered as securities by the LAW.
* page 390 of Insurance Code.
– UNFAIR CLAIMS SETTLEMENTS: practices of insurance companies where they
misrepresent/ make it more difficult for claimaints to get payment from insurance companies.
→ period of time within which to pay
LIFE: depends on contract
PROPERTY: