Case Facts
 Eternal vs. Philippine American  Respondent Philamlife entered into
an agreement denominated as
Creditor Group Life Policy with
petitioner Eternal Gardens Memorial
Park Corporation (Eternal).
 Under the policy, the clients of
Eternal who purchased burial lots
from it on installment basis would be
insured by Philamlife.
 The amount of insurance coverage
depended upon the existing balance
of the purchased burial lots.
 Included in the relevant policy:
o EFFECTIVE DATE OF
BENEFIT.
o 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
lot purchasers, together with a copy
of the application of each purchaser,
and the amounts of the respective
unpaid balances of all insured lot
purchasers.
 Eternal complied by submitting a
letter dated December 29, 1982,
containing a list of insurable balances
of its lot buyers for October 1982.
 One of those included in the list as
“new business” was a certain John
Chuang.
 His balance of payments was 100K.
 On August 2, 1984, Chuang died.
 Eternal sent a letter dated to
Philamlife, which served as an
insurance claim for Chuang’s death.
 Attached to the claim were certain
Issue
 Whether or not the inaction of
the insurer on the insurance
application be considered as
approval of the application
 Whether Philamlife assumed
the risk of loss without
approving the application
Ruling
 Yes.
 An examination of the provision
of the POLICY under effective
date of benefit, would show
ambiguity between its two
sentences.
 The first sentence appears to
state that the insurance
coverage of the clients of
Eternal already became
effective upon contracting a
loan with Eternal while the
second sentence appears to
require Philamlife to approve
the insurance contract before
the same can become effective.
 It must be remembered that an
insurance contract is a contract
of adhesion which must be
construed liberally in favor of
the insured and strictly against
the insurer in order to
safeguard the latter’s interest
 On the other hand, the
seemingly conflicting provisions
must be harmonized to mean
that upon a party’s purchase of
a memorial lot on installment
from Eternal, an insurance
contract covering the lot
purchaser is created and the
same is effective, valid, and
binding until terminated by
Philamlife by disapproving the
insurance application.
 The second sentence of the
Creditor Group Life Policy on
the 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
 documents. prejudice the insured; it cannot
 In reply, Philamlife wrote Eternal a be interpreted as a termination
letter requiring Eternal to submit the of the insurance contract.
additional documents relative to its  The termination of the
insurance claim for Chuang’s death. insurance contract by the
 Eternal transmitted the required insurer must be explicit and
documents through a letter which unambiguous.
was received by Philamlife.
 In response to Eternal’s demand,
Philamlife denied Eternal’s insurance
claim in a letter a portion of which
reads:
o The deceased was 59
years old when he entered
into Contract #9558 and
9529 with Eternal Gardens
Memorial Park in October
1982 for the total maximum
insurable amount of
P100,000.00 each. No
application for Group
Insurance was
submitted in our office
prior to his death on August
2, 1984
 Eternal filed a case with the 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.
  CA reversed. Hence this petition.
 Enriquez vs. Sunlife  This is an action made by the  Whether or not the policyholder  NO. The facts clearly show that
adminstrator of the estate of Joaquin had received notice of the Herrer was not informed of the
Herrer of P6,000.00 paid by the acceptance of his policy acceptance of the policy before
deceased for a life annuity on the  Whether or not the contract of his death.
ground that the contract for a life life annuity was perfected.  NO. The contract was not
annuity had not been perfected. perfected.
 Joaquin Herrer made an application  Art. 1262 provides that
with Sun Life for a life annuity. acceptance by letter does not
 He paid the amount of P6,000.00 to bind the person making the
the Manila manager who gave him a offer except from the time it
"provisional" receipt "subject to came to his knowledge.
medical examination and approval of  The pertinent fact is that
the Company's Central Office." according to the provisional
 The application was forwarded to the receipt, the insurance company

 White Gold Marine Services vs.
Pioneer Insurance
head office in Canada and the policy
was issued on December 4, 1917 in
Canada.
 Meanwhile, on December 18, 1917,
Herrer's attorney wrote to the Manila
Office stating that Herrer wanted to
withdraw his application to which the
office wrote a letter dated November
26, 1917 stating that the policy had
already been issued.
 The letter was received by the
attorney on December 21, 1917.
 Herrer had died a day earlier on
December 20, 1920.
 The trial court ruled that the contract
had been perfected, hence this
appeal.
 White Gold Marine Services, Inc.
(White Gold) procured a protection
and indemnity coverage for its
vessels from The Steamship Mutual
Underwriting Association (Bermuda)
Limited (Steamship Mutual) through
Pioneer Insurance and Surety
Corporation (Pioneer).
 Subsequently, White Gold was
issued a Certificate of Entry and
Acceptance.
 Pioneer also issued receipts
evidencing payments for the
coverage.
 When White Gold failed to fully pay
its accounts, Steamship Mutual
refused to renew the coverage.
 Steamship Mutual thereafter filed a
case against White Gold for collection
of sum of money to recover the
latter’s unpaid balance.
 White Gold on the other hand, filed a
complaint before the Insurance
Commission claiming that Steamship
Mutual violated Sections 186[4] and
187[5] of the Insurance Code, while
Pioneer violated Sections 299 300
and 301 in relation to Sections 302
and 303, thereof.
 Whether or not the contract
entered into by the parties is an
insurance contract.
had to:
 1) conduct a medical
examination;
 2) had to obtain the head
office's approval; and
 3) somehow communicate such
approval.
 It is true that the letter notifying
acceptance was deposited in
the post office, but the fact of
notification is a rebuttable
presumption and the facts
clearly show that Herrer never
received the notice of the
acceptance before his death.
 Yes. 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.
 Basically, 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 undertakes to
indemnify the assured against
marine losses, such as the
losses incident to a marine
adventure.
 Section 99 of the Insurance
Code enumerates the coverage
of marine insurance.
 Relatedly, a mutual insurance

 Philippine Health Care
Providers vs. Commissioner of
Internal Revenue
 The Insurance Commission
dismissed the complaint.
 It said that there was no need for
Steamship Mutual to secure a license
because it was not engaged in the
insurance business.
 It explained that Steamship Mutual
was a Protection and Indemnity Club
(P & I Club). Likewise, Pioneer need
not obtain another license as
insurance agent and/or a broker for
Steamship Mutual because
Steamship Mutual was not engaged
in the insurance business.
 Moreover, Pioneer was already
licensed, hence, a separate license
solely as agent/broker of Steamship
Mutual was already superfluous.
 Petitioner is a domestic corporation
whose primary purpose is to
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
 Whether or not Philippine
Health Care Providers, Inc.
engaged in insurance
business.
 Whether or not the agreements
between petitioner and its
members possess all elements
necessary in the 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.
 Additionally, mutual insurance
associations, or clubs, provide
three types of coverage,
namely, protection and
indemnity, war risks, and
defense costs.
 A P & I Club is a form of
insurance against third party
liability, where the third party is
anyone other than the P & I
Club and the members.
 By definition then, Steamship
Mutual as a P & I Club is a
mutual insurance association
engaged in the marine
insurance business.
 Since a contract of insurance
involves public interest,
regulation by the State is
necessary.
 Thus, no insurer or insurance
company is allowed to engage
in the insurance business
without a license or a certificate
of authority from the Insurance
Commission.
 NO. Health Maintenance
Organizations are not engaged
in the insurance business.
 The SC said in June 12, 2008
decision that it is irrelevant that
petitioner is an HMO and not an
insurer because its agreements
are treated as insurance
 plan and to provide for the
administrative, legal, and financial
responsibilities of the organization.
 On January 27, 2000, respondent
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.
 The deficiency assessment was
imposed on petitioner’s health care
agreement with the members of its
health care program pursuant to
Section 185 of the 1997 Tax Code.
 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.
 On April 5, 2002, the CTA rendered a
decision, ordering the petitioner to
PAY the deficiency VAT amounting to
P22,054,831.75 inclusive of 25%
surcharge plus 20% interest from
January 20, 1997 until fully paid for
the 1996 VAT deficiency and
P31,094,163.87 inclusive of 25%
surcharge plus 20% interest from
January 20, 1998 until fully paid for
the 1997 VAT deficiency.
 Accordingly, VAT Ruling No. [231]-88
is declared void and without force
and effect.
 The 1996 and 1997 deficiency DST
assessment against petitioner is
hereby CANCELLED AND SET
ASIDE.
 Respondent is ORDERED to DESIST
from collecting the said DST
deficiency tax. Respondent appealed
the CTA decision to the (CA) insofar
contract. contracts and the DST is not a
tax on the business but an
excise on the privilege,
opportunity or facility used in
the transaction of the business.
 Petitioner, however, submits
that it is of critical importance to
characterize the business it is
engaged in, that is, to
determine whether it is an HMO
or an insurance company, as
this distinction is indispensable
in turn to the issue of whether
or not it is liable for DST on its
health care agreements.
 Petitioner is admittedly an
HMO.
 Under RA 7878 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.
 The payments do not vary with
the extent, frequency or type of
services provided. Section 2 (2)
of PD 1460 enumerates what
constitutes “doing an insurance
business” or “transacting an
insurance business” which are
making or proposing to make,
as insurer, any insurance
contract; 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; 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; doing or
proposing to do any business in

 Philippine Health Systems vs.
CA and Julita Trinos
as it cancelled the DST assessment.
 He claimed that petitioner’s health
care agreement was a contract of
insurance subject to DST under
Section 185 of the 1997 Tax Code.
 On August 16, 2004, the CA
rendered its decision which held that
petitioner’s health care agreement
was in the nature of a non-life
insurance contract subject to DST.
 Respondent is ordered to pay the
deficiency Documentary Stamp Tax.
Petitioner moved for reconsideration
but the CA denied it.
 Ernani Trinos applied for a health
care coverage with Philam.
 He answered no to a question asking
if he or his family members were
treated to heart trouble, asthma,
diabetes, etc.
 The application was approved for 1
year.
 He was also given hospitalization
benefits and out-patient benefits.
 After the period expired, he was
given an expanded coverage for Php
75,000.
 During the period, he suffered from
heart attack and was confined at
MMC.
 The wife tried to claim the benefits
but the petitioner denied it saying that
he concealed his medical history by
answering no to the aforementioned
question.
 She had to pay for the hospital bills
amounting to 76,000.
 Her husband subsequently passed
 Whether or not a health care
agreement is not an insurance
contract; hence the
“incontestability clause” under
the Insurance Code does not
apply.
substance equivalent to any of
the foregoing in a manner
designed to evade the
provisions of this Code.
 No. Overall, petitioner appears
to provide insurance-type
benefits to its members (with
respect to its curative medical
services), but these are
incidental to the principal
activity of providing them
medical care.
 The “insurance-like” aspect of
petitioner’s business is
miniscule compared to its
noninsurance activities.
 Therefore, since it substantially
provides health care services
rather than insurance services,
it cannot be considered as
being in the insurance
business.
 No. Petitioner claimed that it
granted benefits only when the
insured is alive during the one-
year duration.
 It contended that there was no
indemnification unlike in
insurance contracts.
 It supported this claim by
saying that it is a health
maintenance organization
covered by the DOH and not
the Insurance Commission.
 Lastly, it claimed that the
Incontestability clause didn’t
apply because two-year and
not one-year effectivity periods
were required.  
 away.
 She filed a case in the trial court for
the collection of the amount plus
damages.
 She was awarded 76,000 for the bills
and 40,000 for damages.
 The CA affirmed but deleted awards
for damages.
 Hence, this appeal.
 Geagonia vs. CA  Geagonia, owner of a store, obtained
from Country Bankers fire insurance
policy for P100,000.00.
 The 1 year policy and covered the
stock trading of dry goods.
 The policy noted the requirement that
o "3.  The insured shall give
notice to the Company of
any insurance or
insurances already
effected, or which may
subsequently be effected,
covering any of the
property or properties
consisting of stocks in
trade, goods in process
and/or inventories only
hereby insured, and unless
notice be given and the
particulars of such
insurance or insurances be
stated therein or endorsed
in this policy pursuant to
Section 50 of the Insurance
Code, by or on behalf of
the Company before the
occurrence of any loss or
damage, all benefits under
this policy shall be deemed
forfeited, provided
however, that this condition
shall not apply when the
total insurance or
insurances in force at the
time of the loss or damage
is not more than
P200,000.00."
 Whether or not he is prohibited
from recovering
 No, petition granted.
 Stated differently, provisions,
conditions or exceptions in
policies which tend to work a
forfeiture of insurance policies
should be construed most
strictly against those for whose
benefits they are inserted, and
most favorably toward those
against whom they are
intended to operate.  
 With these principles in mind,
Condition 3 of the subject policy
is not totally free from ambiguity
and must be meticulously
analyzed.
 Such analysis leads us to
conclude that (a) the prohibition
applies only to double
insurance, and (b) the nullity of
the policy shall only be to the
extent exceeding P200,000.00
of the total policies obtained.
 Furthermore, by stating within
Condition 3 itself that such
condition shall not apply if the
total insurance in force at the
time of loss does not exceed
P200,000.00, the private
respondent was amenable to
assume a co-insurer's liability
up to a loss not exceeding
P200,000.00.
 What it had in mind was to
discourage over-insurance.
Indeed, the rationale behind the
incorporation of "other
 The petitioners’ stocks were insurance" clause in fire
destroyed by fire. policies is to prevent over-
 He then filed a claim which was insurance and thus avert the
subsequently denied because the perpetration of fraud.
petitioner’s stocks were covered by  When a property owner obtains
two other fire insurance policies for insurance policies from two or
Php 200,000 issued by PFIC. more insurers in a total amount
 The basis of the private respondent's that exceeds the property's
denial was the petitioner's alleged value, the insured may have an
violation of Condition 3 of the policy. inducement to destroy the
 Geagonia then filed a complaint property for the purpose of
against the private respondent in the collecting the insurance.
Insurance Commission for the  The public as well as the
recovery of P100,000.00 under fire insurer is interested in
insurance policy and damages. preventing a situation in which
 He claimed that he knew the a fire would be profitable to the
existence of the other two policies. insured.
 But, he said that he had no
knowledge of the provision in the
private respondent's policy requiring
him to inform it of the prior policies
and this requirement was not
mentioned to him by the private
respondent's agent.  
 The Insurance Commission found
that the petitioner did not violate
Condition 3 as he had no knowledge
of the existence of the two fire
insurance policies obtained from the
PFIC; that it was Cebu Tesing
Textiles w/c procured the PFIC
policies w/o informing him or securing
his consent; and that Cebu Tesing
Textile, as his creditor, had insurable
interest on the stocks.
 The Insurance Commission then
ordered the respondent company to
pay complainant the sum of
P100,000.00 with interest and
attorney’s fees.
 CA reversed the decision of the
Insurance Commission because it
found that the petitioner knew of the
existence of the two other policies
issued by the PFIC.