1. 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
2. Phil. American Life Insurance
Company V. Ansaldo (1994)
Lessons Applicable: Doing an Insurance
Business (Insurance)
FACTS:
Ramon M. Paterno, Jr. sent a letter dated
April 17, 1986 to Insurance Commissioner
alleging certain problems encountered by
agents, supervisors, managers and public
consumers of the Philippine American Life
Insurance Company (Philamlife)
During the hearing Ramon stated that the
contract of agency is illegal
Philamlife through its president De los Reyes
contended that the Insurance Commissioner
as a quasi-judicial body cannot rule on the
matter
ISSUE:
1. W/N the Insurance Commissioner has the
authority to regulate the business of
insurance YES
2. W/N the business of insurance covers the
contract of agency - NO
HELD: petition is GRANTED
1. YES.
Insurance Code
Sec. 414. The Insurance Commissioner shall
have the duty to see that all laws relating to
insurance, insurance companies and other
insurance matters, mutual benefit
associations, and trusts for charitable uses

are faithfully executed and to perform the

duties imposed upon him by this Code, and
shall, notwithstanding any existing laws to
the contrary, have sole and exclusive
authority to regulate the issuance and sale of
variable contracts as defined in section two
hundred thirty-two and to provide for the
licensing of persons selling such contracts,
and to issue such reasonable rules and
regulations governing the same.
The Commissioner may issue such rulings,
instructions, circulars, orders and decision as
he may deem necessary to secure the
enforcement of the provisions of this Code,
subject to the approval of the Secretary of
Finance. Except as otherwise specified,
decisions made by the Commissioner shall
be appealable to the Secretary of Finance.
Sec. 415. In addition to the administrative
sanctions provided elsewhere in this Code,
the Insurance Commissioner is hereby
authorized, at his discretion, to impose upon
the insurance companies, their directors
and/or officers and/or agents, for any willful
failure or refusal to comply with, or violation
of any provision of this Code, or any order,
instruction, regulation, or ruling of the
Insurance Commissioner, or any commission
or irregularities, and/or conducting business
in an unsafe or unsound manner as may be
determined by the Insurance Commissioner,
the following:
(a) fines not in excess of five hundred pesos
a day; and
(b) suspension, or after due hearing, removal
of directors and/or officers and/or agents.
Insurance Commissioner has the authority to
regulate the business of insurance
2. NO.
power does not cover the relationship
affecting the insurance company and its
agents but is limited to adjudicating claims
and complaints filed by the insured against
the insurance company
While the subject of Insurance Agents and
Brokers is discussed under Chapter IV, Title I
of the Insurance Code, the provisions of said
Chapter speak only of the licensing
requirements and limitations imposed on
insurance agents and brokers.

Great Pacific Life Assurance Corporation v.

Judico, 180 SCRA 445 (1989):
insurance company may have two classes of
agents who sell its insurance policies:
(1) salaried employees who keep definite
hours and work under the control and
supervision of the company - governed by
the Contract of Employment and the
provisions of the Labor Code
(2) registered representatives, who work on
commission basis. - governed by the
Contract of Agency and the provisions of the
Civil Code on the Agency
3.White Gold Marine Service Inc. vs.
Pioneer Insurance and Surety Co.
Facts: Petitioner White Gold bought a
protection and indemnity coverage for its
ships from Steamship Mutual through
Respondent Pioneer. Certificates and receipts
thus were given. However, Petitioner failed to
fulfill its payments thus Steamship refused to
renew its coverage. Steamship then filed for
collection against Petitioner for recovery of
unpaid balance. Thereafter, Petitioner also
filed a complaint against Steamship and
Respondent before the Insurance
Commission for violations (186,187 for
Steamship and 299,300,301 in relation to
302 and 303 for Respondent) of the
Insurance Code-license requirements as an
Insurance company for the former and as
insurance agent for the latter. Said
commission dismissed the complaint which
decision was affirmed by the CA.
Issue: Whether or not Steamship Mutual is a
Protection and Indemnity Club engaged in
the insurance business in the Philippines
Held: Steamship Mutual as a P & I Club is a
mutual insurance company engaged in the
marine insurance business.
An insurance contract is a contract of
indemnity. This means that one party
undertakes for a consideration to indemnify
another party against loss, damage, or
liability arising from an unknown or
contingent event. While to determine if a
contract is an insurance contract we can look
at the nature of the promise, the act to be
performed, exact nature of the agreement in
view of the entire occurrence, contingency or

circumstance where the performance is

mandated. The label is not controlling. While
under Section 2(2) of the Insurance Code the
phrase doing an insurance business
constitutes the following: 1) making or
proposing to make, as insurer, any insurance
contract; 2) 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; 3) 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; 4) doing or proposing to do any
business in substance to any of the foregoing
in a manner designed to evade the provision
of this code.
Taking all of these in to consideration,
Steamship Mutual engaged in marine
insurance business undertook to indemnify
Petitioner White Gold against marine losses
as enumerated under sec. 99 of the
Insurance Code. It is immaterial whether
profit is derived from making insurance
contract and that no separate or direct
consideration is received since these does
not preclude the existence of an insurance
business.
NOTES:
*Mutual Insurance company- cooperative
enterprise where the members are both the
insurer and insured.
*Protection and Indemnity Club- a form of
insurance against third party liability where
the third party is anyone other than the P & I
Club and its members.
4. Development Bank of the Philippines
v CA
March 21, 1994
Facts: Juan B. Dans, together with his family
applied for a loan of P500,000 with DBP. As
principalmortgagor, Dans, then 76 years of
age was advised by DBP to obtain a
mortgage redemptioninsurance (MRI) with
DBP MRI pool. A loan in the reduced amount
was approved and released by DBP. From the
proceeds of the loan, DBP deducted the
payment for the MRI premium. TheMRI
premium of Dans, less the DBP service fee of

10%, was credited by DBP to the

savingsaccount of DBP MRI-Pool. Accordingly,
the DBP MRI Pool was advised of the
credit.Dans died of cardiac arrest. DBP MRI
Pool notified DBP that Dans was not eligible
for MRIcoverage, being over the acceptance
age limit of 60 years at the time of
application. DBPapprised Candida Dans of
the disapproval of her late husbands MRI
application. DBP offered torefund the
premium which the deceased had paid, but
Candida Dans refused to accept the
samedemanding payment of the face value
of the MRI or an amount equivalent of the
loan. She,likewise, refused to accept an ex
gratia settlement which DBP later offered.
Hence the case at bar.
Issue:
Whether or not the DBP MRI Pool should be
held liable on the ground that the contract
wasalready perfected?
Held:
No, it is not liable. The power to approve
MRI application is lodged with the DBP MRI
Pool.The pool, however, did not approve the
application. There is also no showing that it
accepted thesum which DBP credited to its
account with full knowledge that it was
payment for the premium.There was as a
result no perfected contract of insurance
hence the DBP MRI Pool cannot beheld liable
on a contract that does not existIn dealing
with Dans, DBP was wearing 2 legal hats: the
first as a lender and the second as
aninsurance agent. As an insurance agent,
DBP made Dans go through the motion of
applying for said insurance, thereby leading
him and his family to believe that they had
already fulfilled allthe requirements for the
MRI and that the issuance of their policy was
forthcoming. DBP had fullknowledge that the
application was never going to be approved.
The DBP is not authorized toaccept
applications for MRI when its clients are more
than 60 years of age. Knowing all the
while that Dans was ineligible, DBP exceeded
the scope of its authority when it accepted
theapplication for MRI by collecting the
insurance premium and deducting its
agents commissionand service fee. Since
the third person dealing with an agent is
unaware of the limits of theauthority

conferred by the principal on the agent and

he has been deceived by the nondisclosurethereof by the agent, then the
latter is liable for damages to him.
5. UCPB v Masagana G.R. No. 137172.
April 4, 2001
C.J. Davide
Facts:
In our decision of 15 June 1999 in this case,
we reversed and set aside the assailed
decision[1] of the Court of Appeals, which
affirmed with modification the judgment of
the trial court (a) allowing Respondent to
consign the sum of P225,753.95 as full
payment of the premiums for the renewal of
the five insurance policies on Respondents
properties; (b) declaring the replacementrenewal policies effective and binding from
22 May 1992 until 22 May 1993; and (c)
ordering Petitioner to pay Respondent
P18,645,000.00 as indemnity for the burned
properties covered by the renewalreplacement policies. The modification
consisted in the (1) deletion of the trial
courts declaration that three of the policies
were in force from August 1991 to August
1992; and (2) reduction of the award of the
attorneys fees from 25% to 10% of the total
amount due the Respondent.
Masagana obtained from UCPB five (5)
insurance policies on its Manila properties.
The policies were effective from May 22,
1991 to May 22, 1992. On June 13, 1992,
Masaganas properties were razed by fire.
On July 13, 1992, plaintiff tendered five
checks for P225,753.45 as renewal premium
payments. A receipt was issued. On July 14,
1992, Masagana made its formal demand for
indemnification for the burned insured
properties. UCPB then rejected Masaganas
claims under the argument that the fire took
place before the tender of payment.
Hence Masagana filed this case.
The Court of Appeals disagreed with UCPBs
argument that Masaganas tender of
payment of the premiums on 13 July 1992
did not result in the renewal of the policies,
having been made beyond the effective date
of renewal as provided under Policy
Condition No. 26, which states:

26. Renewal Clause. -- Unless the company

at least forty five days in advance of the end
of the policy period mails or delivers to the
assured at the address shown in the policy
notice of its intention not to renew the policy
or to condition its renewal upon reduction of
limits or elimination of coverages, the
assured shall be entitled to renew the policy
upon payment of the premium due on the
effective date of renewal.
Both the Court of Appeals and the trial court
found that sufficient proof exists that
Masagana, which had procured insurance
coverage from UCPB for a number of years,
had been granted a 60 to 90-day credit term
for the renewal of the policies. Such a
practice had existed up to the time the
claims were filed. Most of the premiums
have been paid for more than 60 days after
the issuance. Also, no timely notice of nonrenewal was made by UCPB.
The Supreme Court ruled against UCPB in the
first case on the issue of whether the fire
insurance policies issued by petitioner to the
respondent covering the period from May 22,
1991 to May 22, 1992 had been extended or
renewed by an implied credit arrangement
though actual payment of premium was
tendered on a later date and after the
occurrence of the risk insured against.
UCPB filed a motion for reconsideration.
The Supreme Court, upon observing the
facts, affirmed that there was no valid notice
of non-renewal of the policies in question, as
there is no proof at all that the notice sent by
ordinary mail was received by Masagana.
Also, the premiums were paid within the
grace period.
Issue: Whether Section 77 of the Insurance
Code of 1978 must be strictly applied to
Petitioners advantage despite its practice of
granting a 60- to 90-day credit term for the
payment of premiums.
Held: No. Petition denied.
Ratio:
Section 77 of the Insurance Code provides:
No policy or contract of insurance issued by
an insurance company is valid and binding
unless and until the premium thereof has
been paid

An exception to this section is Section 78

which provides: Any acknowledgment in a
policy or contract of insurance of the receipt
of premium is conclusive evidence of its
payment, so far as to make the policy
binding, notwithstanding any stipulation
therein that it shall not be binding until
premium is actually paid.
Makati Tuscany v Court of Appeals- Section
77 may not apply if the parties have agreed
to the payment in installments of the
premium and partial payment has been
made at the time of loss.
Section 78 allows waiver by the insurer of
the condition of prepayment and makes the
policy binding despite the fact that premium
is actually unpaid. Section 77 does not
expressly prohibit an agreement granting
credit extension. At the very least, both
parties should be deemed in estoppel to
question the arrangement they have
voluntarily accepted.
The Tuscany case has provided another
exception to Section 77 that the insurer may
grant credit extension for the payment of the
premium. If the insurer has granted the
insured a credit term for the payment of the
premium and loss occurs before the
expiration of the term, recovery on the policy
should be allowed even though the premium
is paid after the loss but within the credit
term.
Moreover, there is nothing in Section 77
which prohibits the parties in an insurance
contract to provide a credit term within
which to pay the premiums. That agreement
is not against the law, morals, good customs,
public order or public policy. The agreement
binds the parties.
It would be unjust if recovery on the policy
would not be permitted against Petitioner,
which had consistently granted a 60- to 90day credit term for the payment of
premiums. Estoppel bars it from taking
refuge since Masagana relied in good faith on
such practice. Estoppel then is the fifth
exception.
6. FIELDMENS INSURANCE v. MERCEDES
VARGAS vda. DE SONGCO, et al. and CA
1968 / Fernando / Review of CA decision

Federico Songco, a man of scant education

[first grader], owned a private jeepney. He
was induced by Fieldmens Insurance agent
Benjamin Sambat to apply for a Common
Carriers Liability Insurance Policy covering
his motor vehicle. [As testified by Songcos
son Amor later,] Federico said that his
vehicle is an owner private vehicle and not
for passengers, but agent Sambat said that
they can insure whatever kind of vehicle
because their company is not owned by the
government, so they could do what they
please whenever they believe a vehicle is
insurable. Songco paid an annual premium
and he was issued a Common Carriers
Accident Insurance Policy. After the policy
expired, he renewed the policy. During the
effectivity of the renewed policy, the insured
vehicle while being driven by Rodolfo Songco
[duly licensed driver and Federicos son]
collided with a car. As a result, Federico and
Rodolfo died, while Carlos (another son) and
his wife Angelita, and a family friend
sustained physical injuries.
The lower court held that Fieldmens
Insurance cannot escape liability under a
common carrier insurance policy on the
pretext that what was insured was a private
vehicle and not a common carrier, the policy
being issued upon the agents insistence. CA
affirmed the lower court.

CA DECISION AFFIRMED; FIELDMENS

INSURANCE IS LIABLE
From Qua Chee Gan v. Law Union and Rock
Insurance Where inequitable conduct is
shown by an insurance firm, it is estopped
from enforcing forfeitures in its favor, in
order to forestall fraud or imposition on the
insured. Estoppel is primarily based on the
doctrine of good faith and the avoidance of
harm that will befall the innocent party due
to its injurious reliance.
Fieldmens Insurance incurred legal liability
under the policy. Since some of the
conditions in the policy were impossible to
comply with under the existing conditions at
the time and inconsistent with the known
facts, the insurer is estopped from asserting
breach of such conditions. Except for the fact
that the passengers were not fare-paying,
their status as beneficiaries under the policy
is recognized. Even if the be assumed that
there was an ambiguity, such must bestrictly
interpreted against the party that caused
them.
The contract of insurance is one of perfect
good faith (uberrima fides) not for the
insured alone, but equally so for the insurer;
in fact, it is more so for the latter, since its
dominant bargaining position carries with it
stricter responsibility.