FIRST BATCH:

1. Travellers Insurance & Surety Corp. Vs. CA

2. Gulf resorts inc vs. Phil. Charter insurance corp.
3. New World Intl Devt vs NYKFilJapan Shipping Corp.
4. White gold marine svcs, inc. Vs. Pioneer insurance and corporate surety corp.
5. RP vs. Del monte motors inc.
6. Phil health care providers vs. Cir
7. Philamcare health systems inc. Vs. Ca
8. Eternal gardens memorial park corp vs philam
9. Filipinas compania de seguros vs Christern, huenefeld and co.
10. Constantino vs. Asia life insurance
11. Great pacific life assurance corp vs. Cs
1.
GR No. 82036 May 22, 1997
TRAVELLERS INSURANCE & SURETY CORP. vs. CA and VICENTE MENDOZA
HERMOSISIMA, JR. J.:
FACTS:
1) On July 20, 1980, a 78-y/o woman named Feliza Vineza de Mendoza was bumped
by a taxi along Tayuman. Rolando Marvilla, Ernesto Lopez and Eulogio Tabalno
witnessed the accident. She was brought to the Mary Johnston Hospital in Tondo.
She was advised by the attending physician to be brought to the National
Orthopedic Hospital but she was instead brought to UST Hospital where she died.
2) The three witnesses identified the taxi involved pointing to Lady love Taxi with
Plate No. 438. Armando Abellon, registered owner of the said taxi, certified that the
vehicle was driven last July 20, 1980 by Rodrigo Dumlao. The latter was
apprehended, prosecuted and convicted of the offense but he absconded and
declared as a fugitive from justice.
3) Vicente Mendoza filed a complaint for damages against Abellon and Dumlao, as
the ownder and driver of the taxi, respectively. In his amended complaint, he
included Travellers Insurance & Surety Corporation as compulsory insurer of the
taxicab.
4) The trial court ruled in favor of Mendoza and ordering Dumalo (driver), Abellon
(owner) and Travellers (insurer) to pay the damages jointly and severally. On appeal,
CA affirmed the trial courts ruling. Travellers motion for reconsideration was
denied.
*PETITIONERS DEFENSE (Travellers): It did not issue an insurance policy as
compulsory insurer of Lady Love Taxi. And even if it did, private respondent
Mendoza failed to file a written notice of claim with petitioner as required by Sec.
384, PD No. 612 or Insurance Code.
ISSUES:
1) Whether or not Travellers Insurance &Surety Corporation is liable (jointly and
severally) to pay damages to the heirs of Feliza Mendoza?
2) Whether or not the private respondents cause of action has prescribed?
HELD:
1) NO, Travellers is not liable to pay damages to the heirs of Feliza Mendoza.

- The right of a third person to sue the insurer depends on whether the contract of
insurance is intended to benefit third persons also or only the insured:
(a) Where the contract provides for indemnity against liability to third persons, then
third persons to whom the insured is liable can sue the insurer.
(b) Where the contract is for indemnity against actual loss or payment, then third
persons cannot proceed against the insurer, the contract being solely to reimburse
the insured for liability actually discharged by him thru payment to third persons,
said third persons recourse being thus limited to the insured alone.
- The trial court misapplied the law and the CA grievously erred in not having
reversed the trial courts decision:
(a) Petitioner did not volunteer to present any insurance contract covering the Lady
Love taxicab that fatally hit private respondents mother, considering that petitioner
precisely presented the defense of lack of insurance coverage before the trial court.
(b) Neither did the trial court issue a subpoena duces tecum to have the insurance
contract produced before it under pain of contempt.
2) NO, private respondents cause of action against petitioner did not successfully
accrue because he failed to file with petitioner a written notice of claim within six
(6) months from the date of the accident as required by Section 384 of the
Insurance Code.
-The prescriptive period to bring suit in court under an insurance policy, begins to
run from the date of the insurers rejection of the claim filed by the insured, the
beneficiary or any person claiming under an insurance contract.
*Sec. 384 (At the time of the accident, Insurance Code was not yet amended):
within one year from date of accident
*Sec. 384, as amended by BP Blg. 874: within one year from denial of the claim

2.
GULF RESORTS, INC., petitioner,
CORPORATION,
G.R. No. 156167. May 16, 2005

vs.

PHILIPPINE

CHARTER

INSURANCE
respondent.

FACTS:
Petitioner 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). In the first 4 policies issued, the risks of loss from earthquake
shock was extended only to petitioners two swimming pools. Gulf Resorts agreed to
insure with Phil Charter the properties covered by the AHAC policy provided that the
policy wording and rates in said policy be copied in the policy to be issued by Phil
Charter. Phil Charter issued Policy No. 31944 to Gulf Resorts covering the period of
March 14, 1990 to March 14, 1991 for P10,700,600.00 for a total premium of
P45,159.92. The break-down of premiums shows that Gulf Resorts paid only P393.00
as premium against earthquake shock (ES). In Policy No. 31944 issued by
defendant, the shock endorsement provided that In consideration of the payment
by the insured to the company of the sum included additional premium the
Company agrees, notwithstanding what is stated in the printed conditions of this
policy due to the contrary, that this insurance covers loss or damage to shock to
any of the property insured by this Policy occasioned by or through or in
consequence of earthquake. In Exhibit "7-C" (several exhibits were mentioned) the

word "included" above the underlined portion was deleted. On July 16, 1990 an
earthquake struck Central Luzon and Northern Luzon and plaintiffs properties
covered by Policy No. 31944 issued by defendant, including the two swimming pools
in its Agoo Playa Resort were damaged. Petitioner advised respondent that it would
be making a claim under its Insurance Policy 31944 for damages on its properties.
Respondent denied petitioners claim on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort. The
trial court ruled in favor of respondent. In its ruling, the schedule clearly shows that
petitioner paid only a premium of P393.00 against the peril of earthquake shock, the
same premium it had paid against earthquake shock only on the two swimming
pools
in
all
the
policies
issued
by
AHAC.
Issue: Whether or not the policy covers only the two swimming pools owned by Gulf
Resorts
and
does
not
extend
to
all
properties
damaged
therein
Held: Yes. 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.
An insurance premium is the consideration paid an insurer for undertaking to
indemnify the insured against a specified peril. In fire, casualty and marine
insurance, the premium becomes a debt as soon as the risk attaches. In the subject
policy, no premium payments were made with regard to earthquake shock coverage
except on the two swimming pools. There is no mention of any premium payable for
the other resort properties with regard to earthquake shock. This is consistent with
the history of petitioners insurance policies with AHAC.

3.
New world Intl devt vs. NYK-FILJAPAN SHIPPING CORP
ABAD, J.:

The Facts and the Case

Petitioner New World International Development (Phils.), Inc. (New World) bought
from DMT Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech)
three emergency generator sets worth US$721,500.00. DMT shipped the generator
from Wisconsin, United States, to LEP Profit International, Inc. (LEP Profit) in
Chicago, Illinois. NYK issued a bill of lading, declaring that it received the goods in
good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72.
On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang whose
captain filed a sea protest on arrival at the Manila South Harbor respecting the loss
and damage that the goods on board his vessel suffered.
Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargohandling operator, inspected the three container vans separately carrying the
generator sets, two vans bore signs of external damage while the third van
appeared unscathed. Eventually, on October 20, 1993 customs authorities allowed
petitioners customs broker, Serbros Carrier Corporation (Serbros), to deliver the
same to petitioner New Worlds job site in Makati City.
An examination of the three generator sets in the presence of petitioner New
Worlds representatives, revealed that all three sets suffered extensive damage and
could no longer be repaired. For these reasons, New
World demanded recompense for its loss from respondents NYK, DMT, Advatech,
LEP Profit, LEP International Philippines, Inc. (LEP), Marina, and Serbros. While LEP
and NYK acknowledged receipt of the demand, both denied liability for the loss.
Since Seaboard covered the goods with a marine insurance policy, petitioner New
World sent it a formal claim
Seaboard required petitioner New World to submit to it an itemized list of the
damaged units, parts, and accessories, with corresponding values, for the
processing of the claim. But petitioner New World did not submit what was required
of it, insisting that the insurance policy did not include the submission of such a list
in connection with an insurance claim. Reacting to this, Seaboard refused to process
the claim.
On October 11, 1994 petitioner New World filed an action for specific performance
and damages against all the respondents before the Regional Trial Court (RTC) of
Makati City, Branch 62, in Civil Case 94-2770.
Issues:
a. 1) whether or not the Seaboards request from petitioner New World for an
itemized list is a reasonable imposition
2) whether or not the one-year COGSA prescriptive period for marine claims does
not apply to petitioner New Worlds prosecution of its claim against Seaboard, its
insurer.
The Courts Rulings
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent
vice, delay in voyage, or vessels unseaworthiness, among others.[6] But Seaboard
had been unable to show that petitioner New Worlds loss or damage fell within
some or one of the enumerated exceptions.
Being a contract of adhesion, an insurance policy is construed strongly against the
insurer who prepared it. The Court cannot read a requirement in the policy that was
not there.

Further, it appears from the exchanges of communications between Seaboard and

Advatech that submission of the requested itemized listing was incumbent on the
latter as the seller DMTs local agent. Petitioner New World should not be made to
suffer for Advatechs shortcomings.
Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that the
carrier and the ship shall be discharged from all liability in case of loss or damage
unless the suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered.
In the ordinary course, if Seaboard had processed that claim and paid the same,
Seaboard would have been subrogated to petitioner New Worlds right to recover
from NYK. And it could have then filed the suit as a subrogee. But, as discussed
above, Seaboard made an unreasonable demand on February 14, 1994 for an
itemized list of the damaged units, parts, and accessories, with corresponding
values when it appeared settled that New
Worlds loss was total and when the insurance policy did not require the production
of such a list in the event of a claim.
Notes:
When petitioner New World declined to comply with the demand for the list,
Seaboard against whom a formal claim was pending should not have remained
obstinate in refusing to process that claim. It should have examined the same,
found it unsubstantiated by documents if that were the case, and formally rejected
it. That would have at least given petitioner New World a clear signal that it needed
to promptly file its suit directly against NYK and the others. Ultimately, the fault for
the delayed court suit could be brought to Seaboards doorstep.
Section 241 of the Insurance Code provides that no insurance company doing
business in the Philippines shall refuse without just cause to pay or settle claims
arising under coverages provided by its policies. And, under Section 243, the insurer
has 30 days after proof of loss is received and ascertainment of the loss or damage
within which to pay the claim. If such ascertainment is not had within 60 days from
receipt of evidence of loss, the insurer has 90 days to pay or settle the claim. And,
in case the insurer refuses or fails to pay within the prescribed time, the insured
shall be entitled to interest on the proceeds of the policy for the duration of delay at
the rate of twice the ceiling prescribed by the Monetary Board.
Notably, Seaboard already incurred delay when it failed to settle petitioner New
Worlds claim as Section 243 required. Under Section 244,
a prima facieevidence of unreasonable delay in payment of the claim is created by
the failure of the insurer to pay the claim within the time fixed in Section 243.
Petitioner New World is entitled to the value stated in the policy which is
commensurate to the value of the three emergency generator sets or
US$721,500.00 with double interest plus attorneys fees as discussed above.

4.
WHITE GOLD MARINE SERVICES, INC. vs. PIONEER INSURANCE AND SURETY
CORPORATION
THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD. another
respondent in the case

CASE: This is a petition for review assailing the decision of CA which affirmed the
decision of the Insurance Commission stating that there was no violation of the
Insurance Code and the respondents do not need license as insurer and insurance
agent/broker.
FACTS:
White Gold procured a protection and indemnity coverage for its vessel from
Steamship through Pioneer. White Gold was then issued a Certificate of Entry and
Acceptance, and receipts evidencing payments for the coverage. White Gold failed
to continue paying for its accounts. Consequently, Steamship refused to renew the
coverage.
Steamship filed a case against White Gold for collection of money to recover the
latters unpaid balance. White Gold also filed a complaint against Steamship and
Pioneer before the Insurance Commission claiming that Steamship violated Secs
186-87 of the Insurance Code, while Pioneer violated Secs 299-301 in relation to
Secs 302-3.
INSURANCE COMMISSION dismissed the complaint stating that Steamship did not
need to secure a license because it was a Protection and Indemnity Club (P&I Club)
and not engaged in the insurance business. There was also no need for Pioneer to
secure another license as insurance agent and/or a broker for Steamship
considering that Steamship was not engaged in insurance business, not to mention
Pioneer was already licensed.
CA affirmed decision of Insurance Commission.
White Gold's Contention:
Insists that Steamship is engaged in the insurance business. To support its
assertion, it cites the definition of a P & I Club in Hyopsung case as an association
composed of shipowners in general who band together for the specific purpose of
providing insurance cover on a mutual basis against liabilities incidental to
shipowning that the members incur in favor of third parties. It stresses that as a P
& I Club, Steamship Mutuals primary purpose is to solicit and provide protection
and indemnity coverage and for this purpose, it has engaged the services of Pioneer
to act as its agent.
Steamship's Contention:
Although it is an P&I Club, it is not engaged in the insurance business in the
Philippines. It is merely an association of vessel owners who have come together to
provide mutual protection against liabilities incidental to shipowning.
ISSUE(S):
(1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the
Philippines?
(2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
RULING:
(1) YES. Steamship Mutual as a P & I Club is a mutual insurance association
engaged in the marine insurance business.
The test to determine if a contract is an insurance contract or not, depends on the
nature of the promise, the act required to be performed, and the exact nature of the
agreement in the light of the occurrence, contingency, or circumstances under
which the performance becomes requisite. It is not by what it is called. 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.
In particular, a marine insurance, such as in the case of Steamship, undertakes to
indemnify the assured against marine losses, such as the losses incident to a
marine adventure. Relatedly, 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.
The records reveal Steamship Mutual is doing business in the country albeit without
the requisite certificate of authority mandated by Section 187 of the Insurance
Code. It maintains a resident agent in the Philippines to solicit insurance and to
collect payments in its behalf. We note that Steamship Mutual even renewed its P &
I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue
doing business here, Steamship Mutual or through its agent Pioneer, must secure a
license from the Insurance Commission.
(2) YES. Although Pioneer is already licensed as an insurance company, it needs a
separate license to act as insurance agent for Steamship Mutual, as per Sec 299 of
the Insurance Code.
NOTES:
* P & I Club a form of insurance against third party liability, where the third party
is anyone other than the P & I Club and the members.
* SEC. 299 No person shall act as an insurance agent or as an insurance broker in
the solicitation or procurement of applications for insurance, or receive for services
in obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first
procuring a license so to act from the Commissioner, which must be renewed
annually on the first day of January, or within six months thereafter. . .
* Mutual insurance associations, or clubs, provide three types of coverage, namely,
protection and indemnity, war risks, and defense costs.

5.
Republic v Del Monte G.R. No. 156956 October 9, 2006
C.J. Panganiban
Facts:
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11
million pesos for service contracts with Del Monte, and such was sourced from the
counterbond posted by Vilfran. CISCO issued the counterbond. CISCO opposed but
was rebuffed. The RTC released a motion for execution commanding the sheriff to
levy the amount on the property of CISCO. To completely satisfy the amount, the
Insurance Commissioner was also commanded to withdraw the security deposit filed
by CISCO with the Commission according to Sec 203 of the Insurance Code.

Insurance Commissioner Malinis was ordered by the RTC to withdraw the security
bond of CISCO for the payment of the insurance indemnity won by Del Monte Motor
against Vilfran Liner, the insured.
Malinis didnt obey the order, so the respondent moved to cite him in contempt of
Court. The RTC ruled against Malinis because he didnt have legal basis.
Issues:
1. Whether or not the security deposit held by the Insurance Commissioner
pursuant to Section 203 of the Insurance Code may be levied or garnished in favor
of only one insured.
2. Whether or not the Insurance Commissioner has power to withhold the release of
the security deposit.
Held: No. Yes. Petition granted.
Ratio:
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon
any of the securities of the insurer held on deposit pursuant to the requirement of
the Commissioner.
The court also claimed that the security deposit shall be (1) answerable for all the
obligations of the depositing insurer under its insurance contracts; (2) at all times
free from any liens or encumbrance; and (3) exempt from levy by any claimant.
To allow the garnishment of that deposit would impair the fund by decreasing it to
less than the percentage of paid-up capital that the law requires to be maintained.
Further, this move would create, in favor of respondent, a preference of credit over
the other policy holders and beneficiaries.
Also, the securities are held as a contingency fund to answer for the claims against
the insurance company by all its policy holders and their beneficiaries. This step is
taken in the event that the company becomes insolvent or otherwise unable to
satisfy the claims against it. Thus, a single claimant may not lay stake on the
securities to the exclusion of all others. The other parties may have their own claims
against the insurance company under other insurance contracts it has entered
into.
2. The Insurance Code has vested the Office of the Insurance Commission with both
regulatory and adjudicatory authority over insurance matters.
Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings,
instructions, circulars, orders and decisions as he may deem necessary to secure
the enforcement of the provisions of this Code.
The commissioner is authorized to (1) issue (or to refuse to issue) certificates of
authority to persons or entities desiring to engage in insurance business in the
Philippines;16 (2) revoke or suspend these certificates of authority upon finding
grounds for the revocation or suspension; (3) impose upon insurance companies,
their directors and/or officers and/or agents appropriate penalties -- fines,
suspension or removal from office -- for failing to comply with the Code or with any
of the commissioner's orders, instructions, regulations or rulings, or for otherwise
conducting business in an unsafe or unsound manner.
Included here is the duty to hold security deposits under Secs 191 and 202 of the
Code for the benefit of policy holders. Sec 192, on the other hand, states:
the securities deposited as aforesaid shall be returned upon the company's making
application therefor and proving to the satisfaction of the Commissioner that it has
no further liability under any of its policies in the Philippines.

He has been given great discretion to regulate the business to protect the public.
Also An implied trust is created by the law for the benefit of all claimants under
subsisting insurance contracts issued by the insurance company. He believed that
the security deposit was exempt from execution to protect the policy holders.

6.
G.R. No. 167330 September 18, 2009
PHILIPPINE HEALTH CARE PROVIDERS, INC. vs. COMMISSIONER OF INTERNAL
REVENUE
CORONA, J.
FACTS: Petitioner 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.
On January 27, 2000, respondent Commissioner of Internal Revenue [CIR] sent
petitioner 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.
Petitioner protested the assessment in a letter dated February 23, 2000. As
respondent did not act on the protest, petitioner filed a petition for review in the
Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST
assessments.
CTA rendered a decision ordering the petitioner to pay the deficiency VAT amounting
to P22,054,831.75 for the 1996 VAT deficiency and P31,094,163.87 for the 1997 VAT
deficiency and canceling the 1996 and 1997 deficiency DST assessment against
petitioner.
Respondent appealed the CTA decision to CA insofar as it cancelled the DST
assessment. He claimed that petitioners health care agreement was a contract of
insurance subject to DST under Section 185 of the 1997 Tax Code.
CA reversed the decision of CTA and upheld that the petitioners health care
agreement was in the nature of non-life insurance contract subject to DST.
ISSUE 1: WON the respondent is a Health Maintenance Organization (HMO)
HELD: From the language of Section 185, 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, employers liability, plate, glass, steam
boiler, burglar, elevator, automatic sprinkler, or other branch of insurance (except
life, marine, inland, and fire insurance).

Petitioner 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."
ISSUE 2: WON petitioner, as an HMO, engaged in the business of insurance during
the pertinent taxable years
HELD: No. Under Section 2 (2) PD 1460 (Insurance Code), the following constitutes
doing insurance business or transacting an insurance business:
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.
The Court adopted the principal object and purpose test of United State
jurisprudence, to wit: 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.
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 corporations
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.
Even if petitioner 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.
In fact, a substantial portion of petitioners services covers preventive and
diagnostic medical services intended to keep members from developing medical
conditions or diseases. As an HMO, it is its obligation to maintain the good health of
its members. Accordingly, its health care programs are designed to prevent or to
minimize the possibility of any assumption of risk on its part. Thus, its undertaking
under its agreements is not to indemnify its
members against any loss or damage arising from a medical condition but, on the
contrary, to provide the health and medical services needed to prevent such loss or
damage.
Petitioner, 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. In fact, in a letter dated September 3, 2000, the Insurance Commissioner

confirmed that petitioner is not engaged in the insurance business. This
determination of the commissioner must be accorded great weight. It is well-settled
that the interpretation of an administrative agency which is tasked to implement a
statute is accorded great respect and ordinarily controls the interpretation of laws
by the courts.
ISSUE 3: Whether or not a health care agreement is an insurance contract
HELD: No. 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, employers liability,
plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life, marine, inland, and fire insurance). Tax statutes are strictly
construed against the taxing authority because taxation is a destructive power
which interferes with the personal property rights of the people and takes from
them a portion of their property for the support of the government.
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 insurers promise, the insured pays a premium.
The agreements between the petitioner and its members do not possess all these
elements because:
1. 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.
2. There is no loss, damage or liability on the part of the member that should be
indemnified by pettier as an HMO. There is nothing in petitioner's agreements that
gives rise to a monetary liability on the part of the member to any third partyprovider of medical services which might in turn necessitate indemnification from
petitioner. The terms "indemnify" or "indemnity" presuppose that a liability or claim
has already been incurred. There is no indemnity precisely because the member
merely avails of medical services to be paid or already paid in advance at a preagreed price under the agreements.
3. A member can take advantage of the bulk of the benefits anytime, e.g. laboratory
services, x-ray, routine annual physical examination and consultations, vaccine
administration as well as family planning counseling, even in the absence of any
peril, loss or damage on his or her part.
4. In case of emergency, petitioner 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.
5. Although risk is a primary element of an insurance contract, it is not necessarily
true that risk alone is sufficient to establish it. Almost anyone who undertakes a
contractual obligation always bears a certain degree of financial risk. Consequently,

there is a need to distinguish prepaid service contracts (like those of petitioner)

from the usual insurance contracts.
The business risk that HMO undertakes when it offers to provide health services is
the risk that it might fail to earn a reasonable return on its investment. But it is not
the risk of the type peculiar only to insurance companies. Insurance risk, also known
as actuarial risk, is the risk that the cost of insurance claims might be higher than
the premiums paid. The amount of premium is calculated on the basis of
assumptions made relative to the insured.
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.
As a matter of fact, petitioner was assessed its DST liability only on January 27,
2000, after more than a decade in the business as an HMO.
The power to tax is not the power to destroy
Petitioner claims that the assessed DST to date which amounts to P376 million is
way beyond its net worth of P259 million. Respondent never disputed these
assertions. Given the realities on the ground, imposing the DST on petitioner would
be highly oppressive. It is not the purpose of the government to throttle private
business. On the contrary, the government ought to encourage private enterprise.
Petitioner, just like any concern organized for a lawful economic activity, has a right
to maintain a legitimate business.
Petitioners Tax Liability Was Extinguished Under The
Provisions Of RA 9840
Petitioner asserts that, regardless of the arguments, the DST assessment for taxable
years 1996 and 1997 became moot and academic60 when it availed of the tax
amnesty under RA 9480 on December 10, 2007. It paid P5,127,149.08 representing
5% of its net worth as of the year ended December 31, 2005 and complied with all
requirements of the tax amnesty. Under Section 6(a) of RA 9480, it is entitled to
immunity from payment of taxes as well as additions thereto, and the appurtenant
civil, criminal or administrative penalties under the 1997 NIRC, as amended, arising
from the failure to pay any and all internal revenue taxes for taxable year 2005 and
prior years.

7.
PHILAMCARE vs CA (G.R. No. 125678, March 18, 2002)
PHILAMCARE HEALTH SYSTEMS, INC., petitioner
COURT OF APPEALS and JULITA TRINOS, respondents
Ponente: YNARES-SANTIAGO, J.:
FACTS:

Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage
with Philamcare Health Systems, Inc. The application was approved for a period of
one year (March 1, 1988 to March 1, 1989). He was issued Health Care Agreement
No. P010194. Under the agreement, he was entitled to avail of hospitalization
benefits, whether ordinary or emergency, listed therein. He was also entitled to
avail of "out-patient benefits" (such as annual physical examinations, preventive
health care and other out-patient services). Upon the termination, the agreement
was extended for another year (March 1, 1989 to March 1, 1990, then March 1,
1990 to June 1, 1990). Amount of coverage was increased to a maximum sum of
P75,000.00 per disability.
During the period of coverage, Ernani suffered a heart attack and was confined at
Manila Medical Center (MMC) for one month beginning March 9, 1990. While her
husband was in the hospital, respondent tried to claim the benefits under the health
care agreement. However, petitioner denied her claim saying that the Health Care
Agreement was void. According to petitioner, there was a concealment regarding
Ernanis medical history. Doctors at MMC allegedly discovered at the time of
Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to
his answer in the application form. Respondent then paid the hospitalization
expenses (P76,000.00). After Ernani was discharged, he was attended by a physical
therapist at home. Later, he was admitted at the Chinese General Hospital. Due to
financial difficulties, respondent brought her husband home again.
April 13, 1990 Ernani had fever and was feeling very weak. Respondent was
constrained to bring him back to the Chinese General Hospital where he died on the
same day.
July 24, 1990 respondent instituted with RTC Manila, an action for damages
against petitioner and its president, Dr. Benito Reverente. She asked for
reimbursement of her expenses plus moral damages and attorneys fees. The lower
court ruled against petitioners and in favor of the plaintiff Julita Trinos.
On appeal, CA affirmed the decision of the trial court but deleted all awards for
damages and absolved petitioner Reverente. Petitioners motion for reconsideration
was denied. Hence, petitioner brought the instant petition for review.
PETITIONERS ARGUMENTS:
a. The agreement grants "living benefits," such as medical check-ups and
hospitalization which a member may immediately enjoy so long as he is alive upon
effectivity of the agreement until its expiration one-year thereafter.
b. Only medical and hospitalization benefits are given under the agreement without
any indemnification, unlike in an insurance contract where the insured is
indemnified for his loss.
c. Since Health Care Agreements are only for a period of one year, as compared to
insurance contracts which last longer, petitioner argues that the incontestability
clause does not apply, as the same requires an effectivity period of at least two
years.
d. It is not an insurance company, which is governed by the Insurance Commission,
but a Health Maintenance Organization under the authority of the Department of
Health.
ISSUE:
Whether a Health Care agreement is not an insurance contract; hence, the
incontestability clause under the Insurance Code does not apply

RULING:
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 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 insurers promise, the insured pays a premium.
Section 3 of the Insurance Code states that any contingent or unknown event,
whether past or future, which may damnify a person having an insurable interest
against him, may be insured against. Every person has an insurable interest in the
life and health of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or support, or
in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or prevent the
performance; and
(4) of any person upon whose life any estate or interest vested in him depends.
1. In the case at bar, the insurable interest of respondents husband 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. 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.
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. And in addition,
the petitioners additionally required him to sign authorization if favor of any person,
organization or entity to furnish any and all information relative to any
hospitalization, consultation, treatment or any other medical advice or examination.
The contract also authorized Philam to inquire directly to his medical history. Hence,
the contention of concealment is not valid.
2. Petitioner cannot rely on the stipulation regarding "Invalidation of agreement"
clause where failure of the insured to disclose information was a ground to
automatically invalidate the Agreement from the very beginning and liability of
Philamcare shall be limited to return of all Membership Fees paid. The answer
assailed by petitioner was in response to the question relating to the medical history
of the applicant. This largely depends on opinion rather than fact, especially coming
from respondents husband who was not a medical doctor. Where matters of opinion
or judgment are called
for, answers made in good faith and without intent to deceive will not avoid a policy
even though they are untrue.

3. The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. Concealment as a defense for the health care
provider or insurer to avoid liability is an affirmative defense and the duty to
establish such defense by satisfactory and convincing evidence rests upon the
provider or insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having 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.
Under Section 27 of the Insurance Code, "concealment entitles the injured party to
rescind a contract of insurance." The right to rescind should be exercised previous
to the commencement of an action on the contract. In this case, no rescission was
made. Besides, the cancellation of health care agreements as in insurance policies
requires the concurrence of the following 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 of the above pre-conditions was fulfilled in this case. When the terms of
insurance contract contain limitations on liability, courts should construe them in
such a way as to preclude the insurer from non-compliance with his obligation.
Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract the insurer.
Ambiguity must be strictly interpreted against the insurer and liberally in favor of
the insured. This is also equally applicable to Health Care Agreements. The
phraseology used in medical or hospital service contracts, such as the one at bar,
must be liberally construed in favor of the subscriber, and if doubtful the
construction conferring coverage is to be adopted, and exclusionary clauses of
doubtful import should be strictly construed against the provider.
4. 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.
5. Petitioner alleges that respondent was not the legal wife of the deceased member
considering that at the time of their marriage, the deceased was previously married
to another woman who was still alive. The health care agreement is in the nature of
a contract of indemnity. Hence, payment should be made to the party who incurred
the expenses. It is not controverted that respondent paid all the hospital and
medical expenses. She is therefore entitled to reimbursement. The records
adequately prove the expenses incurred by respondent for the deceaseds
hospitalization, medication and the professional fees of the attending physicians.
** Petition is DENIED.
** CA decision AFFIRMED.

8.
Eternal Gardens Memorial Park Corporation vs Philippine American Life Insurance
Company
FACTS:
PhilAmlife entered into an agreement denominated as Creditor Group Life Policy
with petitioner 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 covered depended upon the existing balance of the purchased burial lots.
The policy should be effective for one year, renewable on a yearly basis.
RELEVANT PROVISIONS:
Eligibility : Any lot purchaser of the Assured who is at least 18 yrs of age but not
more than 65 yrs of age, is indebted to the Assured for the unpaid balance of his
loan with the Assured, and is accepted for Life Insurance coverage by the company
on its effective date is eligible for insurance under policy.
EVIDENCE OF INSURABILITY :No medical examination shall be required for amounts
of insurance up to 50,000. However a declaration of good health shall be required
for all lots purchaser as part of the application. The company reserves the right to
require further evidence of insurability satisfactory to the company in respect of the
ff:
1. Amount of insurance in excess of 50,000
2. Lot purchaser more than 55 years of age
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
Eternal was required under the policy to submit to PhilAmlife a list of all new
purchasers, together with the application of each purchaser, and the amounts of the
respective unpaid balances of all the insured lot purchasers. Eternal complied by
submitting a letter dated December 29, 1982, containing a list of insurable balances
of its lot buyers for Oct 1982. One of those included in the list as new business
was a certain JOHN CHUANG. His balance payments was 100K. On Aug. 2, 1984,
Chuang died.
Eternal sent a letter dated to PhilAmlife, which served as an insurance claim for
Chuangs death. Attached to the claim were certain documents. In reply, PhilAmlife
requires Eternal to submit additional documents through a letter which was received
by PhilAmLife.
After more than a year, Philamlife had not furnished Eternal with any reply to the
latters insurance claim. This prompted Eternal to demand from Philamlife the
payment of the claim 100K. In Response to Eternals demand, Philamlife denied
Eternals insurance claim in a letter stating that the deceased was 59 years old
when he entered into contract with Eternal Gardens Memorial Park in Oct 1982 for
the total maximum insurable amount of 100K each. No application for Group
Insurance was submitted in their office prior to his death on August 2, 1984. In the
provision on Effective Date of Coverage under the policy which states that there
shall be no insurance if the application is not approved by the company. Since no

application had been submitted by the Insured/Assured prior to his death, for our
approval but was submitted instead on Nov 15, 1984 after his death, Mr. Chuang
was not covered under the policy.
Eternal filed a case with RTC for a sum of money against Philamlife, which decided
in favor of Eternal, ordering PhilAmlife to pay the former 100K representing the
proceeds of the policy.
ISSUE : Whether or not Chuang is covered under the insurance policy
HELD : An examination of the provision of the POLICY under effective date of
benefit, would show ambuigity 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 latters interest.
On the other hand, the seemingly conflicting provisions must be harmonized to
mean that upon a partys purchase of 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 second sentence of the Creditor Group Life Policy on Effective Date
of Benefit is in the nature of a resolutory condition which would lead to the
cessation of the insurance contract. Moreover, 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. Moreover, 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.

9.
FILIPINAS COMPAIA DE SEGUROS, petitioner, vs. CHRISTERN, HUENEFELD and CO.,
INC., respondent.
G.R. No. L-2294 May 25, 1951
PARAS, C.J.:
FACTS:
On October 1, 1941, the respondent corporation, Christern Huenefeld, & Co., Inc.,
obtained from petitioner Filipinas a fire policy covering the merchandise contained
in a building located at No. 711 Roman Street, Binondo, Manila. This was obtained
after payment of P1,000,000 as premium. On February 27, 1942, or during the
Japanese military occupation, the building and insured merchandise were burned. In
due time the Christern submitted to Filipinas its claim under the policy. The salvage
goods were sold at public auction and, after deducting their value, the total loss
suffered by the respondent was fixed at P92,650. The petitioner refused to pay the
claim on the ground that the policy in favor of the respondent had ceased to be in

force on the date the United States declared war against Germany, the respondent
Corporation (though organized under and by virtue of the laws of the Philippines)
being controlled by the German subjects and the petitioner being a company under
American jurisdiction when said policy was issued on October 1, 1941. The
petitioner, however, in pursuance of the order of the Director of Bureau of
Financing, Philippine Executive Commission, dated April 9, 1943, paid to the
respondent the sum of P92,650 on April 19, 1943.
Thus, petitioner filed an action in the CFI of Manila for the recovery of the P92, 650
from petitioner. The theory of the petitioner is that the insured merchandise were
burned up after the policy issued in 1941 in favor of the respondent corporation has
ceased to be effective because of the outbreak of the war between the United
States and Germany on December 10, 1941, and that the payment made by the
petitioner to the respondent corporation during the Japanese military occupation
was under pressure. The CFI dismissed the case and the CA affirmed the decision.
Both courts held that a corporation is a citizen of the country or state by and under
the laws of which it was created or organized. It rejected the theory that nationality
of private corporation is determine by the character or citizenship of its controlling
stockholders.
ISSUE: W/N the insurance policy is valid after the war broke out
HELD:
The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides
that "anyone except a public enemy may be insured." It stands to reason that an
insurance policy ceases to be allowable as soon as an insured becomes a public
enemy.
The respondent having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner (a
Philippine corporation) had ceased to be valid and enforcible, and since the insured
goods were burned after December 10, 1941, and during the war, the respondent
was not entitled to any indemnity under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific provision in the Insurance
Law) require that the premium paid by the respondent for the period covered by its
policy from December 11, 1941, should be returned by the petitioner. The
respondent having become an enemy corporation on December 10, 1941, the
insurance policy issued in its favor on October 1, 1941, by the petitioner (a
Philippine corporation) had ceased to be valid and enforcible, and since the insured
goods were burned after December 10, 1941, and during the war, the respondent
was not entitled to any indemnity under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific provision in the Insurance
Law) require that the premium paid by the respondent for the period covered by its
policy from December 11, 1941, should be returned by the petitioner.
EFFECT OF WAR: It further prohibits insurance upon trade with or by the enemy,
upon the life or lives of aliens engaged in service with the enemy; this for the
reason that the subjects of one country cannot be permitted to lend their assistance
to protect by insurance the commerce or property of belligerent, alien subjects, or
to do anything detrimental too their country's interest.
In the case of an ordinary fire policy, which grants insurance only from year, or for
some other specified term it is plain that when the parties become alien enemies,

the contractual tie is broken and the contractual rights of the parties, so far as not
vested. lost. (Vance, the Law on Insurance, Sec. 44, p. 112.)

10.
GR No. L-1669 August 31, 1950
PAZ LOPEZ DE CONSTANTINO vs. ASIA LIFE INSURANCE COMPANY
GR No. L-1670 August 31, 1950
Agustine Peralta vs. ASIA LIFE INSURANCE COMPANY
BENGZON, J.:
FACTS:
1) FIRST CASE (Constantino case): Asia Life Insurance Company issued on
September 27, 1941, its policy for P3,000 whereby it insured the life of Arcadio
Constantino for a term of 20 years. The first premium covered the period up to
September 26, 1942. Paz Lopez de Constantino was regularly appointed beneficiary.
After that first payment, no further premiums were paid. The insured died on
September 22, 1944.
2) SECOND CASE (Peralta case): Asia Life Insurance Company issued its policy for
Joint Life 20-Year Endowment Participating with Accident Indemnity covering the
lives of the spouses Tomas Ruiz and Agustina Peralta. The annual premium
stipulated in the policy was regularly paid from August 1, 1938, up to and including
September 30, 1941. Effective August 1, 1941, the mode of payment of premiums
was changed from annual to quarterly, so that quarterly premiums were paid, the
last having been delivered on November 18, 1941, said payment covering the
period up to January 31, 1942. No further payments were handed to the insurer. The
insured had borrowed on the policy P234.00 in January, 1941, the cash surrender
value of the policy was sufficient to maintain the policy in force only up to
September 7, 1942. Tomas Ruiz died on February 16, 1945. The plaintiff Agustina
Peralta is his beneficiary. Her demand for payment met with defendant's refusal,
grounded on non-payment of the premiums.
3) Asia Life Insurance Company, being an American corporation, had to close its
branch office in Manila by reason of the Japanese occupation (January 2, 1942 until
1945).
4) BOTH POLICIES STIPULATED THAT: All premium payments are due in advance
and any unpunctuality in making any such payment shall cause this policy to lapse
unless and except as kept in force by the Grace Period condition or under Option 4
below. (Grace of days.)
*PETITIONER (Beneficiaries): They are entitled to receive the proceeds of the
policies minus all sums due for premiums in arrears. They allege that non-payment
of the premiums was caused by the closing of defendant's offices in Manila during
the Japanese occupation and the impossible circumstances created by war.
*DEFENDANT (Asia Life): The policies had lapsed for non-payment of premiums, in
accordance with the contract of the parties and the law applicable to the situation.
5)The lower court absolved the defendant. Hence this appeal.
ISSUE: Whether or not the beneficiary in a life insurance policy may recover the
amount thereof although the insured died after repeatedly failing to pay the
stipulated premiums, such failure having been caused by the last war in the Pacific?

HELD: NO, the beneficiary in a life insurance policy cannot recover the amount
thereof had there been non-payment of premiums, even if caused by war.
a) The parties contracted not only for peacetime conditions but also for times of
war, because the policies contained provisions applicable expressly to wartime
days. The logical inference, therefore, is that the parties contemplated
uninterrupted operation of the contract even if armed conflict should ensue.
ALSO, it is stipulated in both policies that: All premium payments are due in
advance and any unpunctuality in making any such payment shall cause this policy
to lapse unless and except as kept in force by the Grace Period condition or under
Option 4 below. (Grace of days.)
b) The non-payment of premiums is such a vital defense of insurance companies
that since the very beginning, said Act no. 2427 or Insurance Act expressly
preserved it, by providing that after the policy shall have been in force for two
years, it shall become incontestable (i.e. the insurer shall have no defense) except
for fraud, non-payment of premiums, and military or naval service in time of war
(sec. 184 [b], Insurance Act). And when Congress recently amended this section
(Rep. Act No. 171), the defense of fraud was eliminated, while the defense of
nonpayment of premiums was preserved.
c) In determining the affect of non-payment of premiums occasioned by war, the
UNITED STATES RULE shall be adopted declaring that: the contract is not merely
suspended, but is abrogated by reason of non-payments is peculiarly of the essence
of the contract. It additionally holds that it would be unjust to allow the insurer to
retain the reserve value of the policy, which is the excess of the premiums paid over
the actual risk carried during the years when the policy had been in force.
THUS: it appears that the first policy had no reserve value, and that the equitable
values of the second had been practically returned to the insured in the form of loan
and advance for premium.

11.
PARTIES: GREAT PACIFIC LIFE ASSURANCE CORP, petitioner COURT OF APPEALS and
MEDARDA V. LEUTERIO, respondents.
FACTS:
* Petitioner Great Pacific Life Assurance Corporation (Grepalife) and Development
Bank of the
Philippines (DBP) executed a contract of group life insurance wherein Grepalife
agreed to insure
the lives of eligible housing loan mortgagors of DBP.
* Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for
membership in the
group life insurance plan. In his application, he certified the following: 1) that he
never had, or
consulted, a physician for a heart condition, high blood pressure, cancer, diabetes,
lung, kidney
or stomach disorder or any other physical impairment; and 2) that he is in good
health.

* On November 15, 1983, Grepalife approved his application and issued a

corresponding
certificate as insurance coverage to the extent of his DBP mortgage indebtedness
amounting to
P86,200.00.
* However, on August 6, 1984, Dr. Leuterio died due to massive cerebral
hemorrhage.
Accordingly, DBP submitted a death claim to Grepalife but the latter denied it
alleging that the
decedent was not physically healthy when he applied for an insurance coverage and
that he did
not disclose he had been suffering from hypertension. Such non-disclosure
constituted
concealment that justified the denial of the claim.
* The widow of Dr. Leuterio, herein respondent Medarda Leuterio filed a complaint
against
Grepalife for specific performance and damages. The trial court ruled in favor of the
widow.
Upon appeal, CA sustained the decision.
* Grepalife now alleges that the complaint was instituted by the widow who is not
the real party
in interest and since DBP, the indispensable party has not joined the suit, the trial
court acquired
no jurisdiction over the case.
ISSUE(S):
1. Whether or not the widow of insured-mortgagor is a real party in interest in a
claim under group
life insurance contract?
2. Whether or not there was concealment that would warrant the annulment of
insurance
contract?
3. Whether or not Grepalife is liable to pay the insurance claim without proof of the
actual
outstanding mortgage payable by the mortgagor to DBP?
HELD:
1. YES, the widow of the decedent Dr. Leuterio is a real party in interest and may file
the suit
against the insurer, Grepalife.
* The rationale of a group insurance policy of mortgagors (mortgage redemption
insurance) is to protect both mortgagee and mortgagor. It is beneficial on the part of
the
mortgagee since the proceeds from such insurance will be applied to the payment
of
the mortgage debt in case of the death of the mortgagor, relieving the heirs of the
mortgagor from paying the obligation.
* On the part of the mortgagor, the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage indebtedness. Consequently,
where the mortgagor pays the insurance premium under the group insurance policy,

making the loss payable to the mortgagee, the insurance is on the mortgagors
interest and the mortgagor continues to be a party to the contract. Hence, the
mortgagee is simply an appointee of the insurance fund and not a party to the
contract. * The insured, being the person with whom the contract was made, is
primarily the proper person to bring suit thereon but since a policy of insurance
upon life or health may pass by transfer, will or succession to any person, the widow
may file a suit against the insurer.
2. NO, theres no conclusive evidence as to point that the decedent concealed that
he was
suffering from hypertension when he applied for the insurance policy.
* Concealment exists where the assured had knowledge of a fact material to the
risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the
assured, but he designedly and intentionally withholds the same.
* There must be fraudulent intent.. In the case at bar, there was no sufficient proof
that
the insured had suffered from hypertension. Aside from the statement of the
insureds
widow who was not even sure if the medicines taken by Dr. Leuterio were for
hypertension, the petitioner failed to clearly and satisfactorily establish its defense,
and
is therefore liable to pay the proceeds of the insurance.
3. YES, Grepalife is liable to pay the insurance claim.
* A life insurance policy is a valued policy. Unless the interest of a person insured is
susceptible of exact pecuniary measurement, the measure of indemnity under a
policy
of insurance upon life or health is the sum fixed in the policy, which, in this case
amounts to P86,200. Such amount shall first be paid to the Creditor and the balance
of
the Sum Assured, if there is any shall then be paid to the beneficiaries designated
by the
debtor.
* However, it appears that DBP foreclosed the residential lot of respondent in
satisfaction
of mortgagors outstanding loan. Consequently, the insurance proceeds shall inure
to
the benefit of the heirs of the deceased person or his beneficiaries.