(19 March 2002, G.R. 119176) Doctrine An insurance policy is the written form of an insurance contract as required in the Insurance Code. The policy may contain words, phrases, clauses, marks, signs, symbols, signatures, numbers, or words necessary to complete the contract. Thus, the pasted or attached riders, clauses, warranties, endorsements are considered part of the policy. Facts Prior to 1984, Lincoln Philippines Life Insurance issued a special kind of life insurance policy known as the Junior Estate Builder Policy. It had a clause which provided for automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by Lincoln Philippines only on the initial sum assured. Lincoln Philippines questioned the assessed deficiencies by the BIR on documentary stamp taxes and sought their cancellation in their petition in the Court of Tax Appeals. On March 30, 1993, the Court of Tax Appeals found no valid basis for the deficiency tax assessment on the stock dividends as well as on the insurance policy. Meanwhile, the Commissioner of Internal Revenue claims that the automatic increase clause in the Junior Estate Builder Policy involves another transaction and not part of the insurance policy and that even there was no new policy issued, the original policy was essentially re-issued when the additional obligation was assumed upon the effectivity of this automatic increase clause in 1984. Issue Whether the automatic increase clause in the policy was an integral part of the policy and involves only one transaction? Held: The Supreme Court upheld the Lincoln Philippines argument that the automatic increase clause in the policy is an integral part of the policy and does not involve another transaction. The Supreme Court used the provision of Insurance Code which stated that an insurance policy is the written form of an insurance contract as required in the Insurance Code. The policy may contain words, phrases, clauses, marks, signs, symbols, signatures, numbers, or words necessary to complete the contract. Thus, the pasted or attached riders, clauses, warranties, endorsements are considered part of the policy.
Archibald Jose T. Manansala
CEU School of Law and Jurisprudence Summer Term 2016-2017