GULF RESORTS v. PHILIPPINE CHARTER INSURANCE CORPORATION, GR No.

156167, 2005-05-16

Facts:

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 decision[1] which dismissed its two appeals and affirmed the judgment of the trial court.

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.

After the earthquake, petitioner advised respondent that it would be making a claim under its Insurance
Policy No. 31944 for damages on its properties.

On August 7, 1990, Bayne Adjusters and Surveyors, Inc., through its Vice-President

A.R. de Leon,[4] rendered a preliminary report[5] 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."

On August 11, 1990, petitioner filed its formal demand[7] 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

After review, the appellate court affirmed the decision of the trial court

Issues:

WHETHER 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.

Ruling:

petition is devoid of merit

It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance
with each other.[25] 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.

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. This is consistent with... the history of petitioner's previous insurance policies
from AHAC-AIU. A

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.[34] 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.

Insurance Case Digest: Philamcare Health Systems, Inc. V. CA (2002)

FACTS: Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with Philamcare
Health Systems, Inc.

He answered the standard application form: Have you or any of your family members ever consulted or been
treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes,
give details). - NO

the application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he
was issued Health Care Agreement No. P010194
Under the agreement, respondent’s husband 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 of the agreement, the same was extended for another year from March 1, 1989 to
March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a
maximum sum of P75,000.00 per disability.

During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical
Center (MMC) for 1 month beginning March 9, 1990.

While her husband was in the hospital, Julina Trinos tried to claim the benefits under the health care
agreement.

Philamcare denied her claim saying that the Health Care Agreement was void for concealing Ernani’s medical
history so she paid the hospitalization expenses of P76,000.00 herself.

Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive,
diabetic and asthmatic, contrary to his answer in the application form.

After being discharged from the MMC, he was attended by a physical therapist at home.

Later, he was admitted at the Chinese General Hospital.

Due to financial difficulties, however, he was brought home again.

April 13, 1990 morning: Ernani had fever and was feeling very weak

He was brought to Chinese General Hospital where he died

July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its president, Dr.
Benito Reverente

RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral damages, exemplary
damages, attorney's fees and cost of suit

CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare

Philamcare brought an instant petition for review arguing that:

health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance
Code does not apply.

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

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

since Health Care Agreements are only for a period of one year, as compared to insurance contracts which
last longer; incontestability clause does not apply, as the same requires an effectivity period of at least two
years

insurance company is governed by the Insurance Commission, but a Health Maintenance Organization under
the authority of the Department of Health

ISSUE:

W/N the health care agreement is a contract of insurance. - YES

W/N the spouse being "not" legal wife can claim – YES

HELD: Petition is DENIED. CA AFFIRMED.

1. YES.

P.D. 612 Insurance Code

Sec. 2 (1)

(1) 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.

Sec. 3
Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an
insurable interest, or create a liability against him, may be insured against, subject to the provisions of this
chapter.

The consent of the husband is not necessary for the validity of an insurance policy taken out by a married
woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health
and accident insurance, with any insurance company duly authorized to do business in the Philippines,
provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the
minor's father, mother, husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights
and privileges of an owner under a policy.

All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a
minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided
for in the policy.

In the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement was
his own health.

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.

The answer in response to the question relating to the medical history of the applicant largely depends on
opinion rather than fact, especially coming from respondent's 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.

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.

P.D. 612 Insurance Code

Sec. 27

Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of
insurance.

cancellation of health care agreements as in insurance policies require the concurrence of the following
conditions: - none of these was made

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.

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.

(U)nder 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.

2. YES.

P.D. 612 Insurance Code

Sec. 10

Sec. 10. 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.

not the legal wife (deceased was previously married to another woman who was still alive)

health care agreement is in the nature of a contract of indemnity.

payment should be made to the party who incurred the expenses

Insular Life vs. Ebrado

80 SCRA 181

Facts:

> Buenaventura Ebrado was issued al life plan by Insular Company. He designated Capriona as his
beneficiary, referring to her as his wife.

> The insured then died and Carponia tried to claim the proceeds of the said plan.

> She admitted to being only the common law wife of the insured.

> Pascuala, the legal wife, also filed a claim asserting her right as the legal wife. The company then filed an
action for interpleader.

Issue:

Whether or not the common law wife named as beneficiary can collect the proceeds.

Held:

NO. The civil code prohibitions on donations made between persons guilty of adulterous concubinage applies
to insurance contracts. On matters not specifically provided for by the Insurance Law, the general rules on
Civil law shall apply. A life insurance policy is no different from a civil donation as far as the beneficiary is
concerned, since both are founded on liberality.

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 201

Insurance Case Digest:The Insular Life Assurance Co. Ltd. V. Ebrado (1977)

Art. 2011 Civil Code (Insurance)

Invalid Designation (Insurance)

FACTS:

September 1, 1968: Buenaventura Cristor Ebrado was issued by The Insular Life Assurance Co., Ltd., Policy on
a whole-life for P5,882.00 with a, rider for Accidental Death and designated Carponia T. Ebrado as the
revocable beneficiary in his policy

October 21, 1969: Buenaventura was hit by a falling branch and died.
Carponia filed a claim as the designated beneficiary, although she admits that they were merely living as
husband and wife without the benefit of marriage

Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured

In doubt as to whom the insurance proceeds shall be paid, the insurer, The Insular Life Assurance Co., Ltd.
commenced an action for Interpleader bef. the CFI

CFI: Carponia was disqualified because of adultery

CA: affirmed CFI decision

ISSUE: W/N Carponia is disqualified for violating the Civil Code which supplements the silent Insurance Code.

HELD: YES. CA affirmed.

Civil Code

Art. 2011

Art. 2011. The contract of insurance is governed by special laws. Matters not expressly provided for in such
special laws shall be regulated by this Code.

Art. 2012

Art. 2012. 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.

Art. 739

Art. 739. The following donations shall be void:

(1) Those made between persons who were guilty of adultery or concubinage at the time of the donation;

(2) Those made between persons found guilty of the same criminal offense, in consideration thereof;

(3) Those made to a public officer or his wife, descedants and 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 donor and donee may be proved by preponderance of evidence in the
same action.

Common-law spouses are, definitely, barred from receiving donations from each other

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. A beneficiary is like a donee, because from the
premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or
profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should
equally operate in life insurance contracts.

We do not think that a conviction for adultery or concubinage is exacted before the disabilities mentioned in
Article 739 may effectuate.

requisite proof of common-law relationship between the insured and the beneficiary has been conveniently
supplied by the stipulations between the parties in the pre-trial conference of the case

Zenith Insurance Corporation v. The Insurance Commission- Insurable Interest

87 OG 6249

Facts:

> Zenith entered into an insurance contract, denominated as Equipment Floater Policy covering a Kato
Bachoe including its accessories and appurtenances thereof, from loss of damage. Complainant paid the
stipulated premiums therefore.

> Within the period of effectivity of the policy, the two pieces of hydraulic wheel gear pumps, which are
considered appurtenances and/or parts attached to and/or installed in the Kato BAchoe were lost, stolen
and/or illegally detached by unknown thieves or malefactors
> Despite repeated assurances by Zenith’s soliciting agent, it refused and failed to settle and pay
complainant’s insurance claim.

> Complainant seeks not only the payment of said insurance claim of 70T plus legal interest, atty’s fees, and
litigation expenses, but also the revocation or cancellation of the license of Zenith to do insurance business.

> Zenith on the other hand contends that:

o Complainant is not the real party in interest since the policy carries with it a designated loss payee, the BA
Finance Corp

o The policy insures against loss or damage caused by fire and lightning, etc, while theft or robbery is NOT
insured against in the policy, it not having been expressly mentioned

o Loss nevertheless is excluded under the exception of “infidelity exclusion” by the operator who left it
unguarded, unattended and deserted while entrusted to him, and for failure to give timely notice of loss

o Complainant and/or BA Finance is guilty of concealment and misrepresentation at the time they secured
the policy, because at the time it became operative, the complainant was NOT yet the owner of the property
insured, the property still hot having been delivered to him, and BA finance had no insurable interest yet,
henceforth, the contract of insurance was VOID AB INITIO for lack of insurable interest at the time the
insurance took effect.

Issues and Resolutions:

(1) Whether or not the loss through theft or robbery claimed is within the coverage of the policy.

The Insurance Commissioner, as reiterated by the SC, found for the complainant in this wise: While the policy
enumerated the risks covered, it does NOT, however, in its express terms, limit compensability to that stated
in the enumeration. The enumerated risks excluded did not include theft or robbery committed or
perpetrated by an unidentified culprit, hence the complainant’s claim for damages is compensable.

The foregoing policy is supported by the long time honored doctrine of “contra proferentem: which provides
that: “any ambiguity in the policy shall be resolved in favor of the insured and against the insurer”. This is
true because insurance contracts are essentially contracts of adhesion and applicants for insurance have no
choice but to accept the terms and conditions in the policy even if they are not in full accord therewith.

(2) Whether or not the complainant was with insurable interest therein when the said policy contract was
procured.

The complainant has insurable interest in the insured property at the time of the procurement of the
insurance policy. As the CC provides, “the contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price,” and Sec. 15 of the IC allows the
insurance of a mere contingent or expectant interest in anything if the same is founded on an actual right to
the thing, or upon any valid contract.

As this is the case, mere possession of an equitable title, like that pertaining to the buyer, gives rise to
insurable interest in the property in which such title inheres. Furthermore, considering that Zenith’s agent
had been fully apprised of the circumstances prior to the actual issuance of the policy and the endorsement,
it cannot now allege that complainant has no insurable interest on the property insured. Zenith is now
precluded by the equitable principle of estoppel from impugning and dishonoring the very insurance policy
contract it issued and the endorsement and increase in the coverage made through its duly authorized agent.