CASE DIGESTS-INSURANCE LAW

I. CONSTRUCTION OF INSURANCE CONTRACT

1) Calanoc vs Court of Appeals (98 Phil 79) G.R. No. L-8151. December 16, 1955
Doctrine: In case of ambiguity in an insurance contract covering accidental death, the Supreme Court held
that such terms shall be construed strictly against the insurer and liberally in favor of the insured inorder to
effect the purpose of indemnity.
Facts: Melencio Basilio, a watchman of the Manila Auto Supply, secured a life insurance policy from the
Philippine American Insurance Company in the amount of P2,000 to which was attached asupplemental
contract covering death by accident. He later died from a gunshot wound on the occasionof a robbery
committed; subsequently, his widow was paid P2,000 representing the face value of thepolicy. The widow
demanded the payment of the additional sum of P2,000 representing the value of thesupplemental policy
which the company refused because the deceased died by murder during therobbery and while making an
arrest as an officer of the law which were expressly excluded in the contract. The companys contention
which was upheld by the Court of Appeals provides that the circumstances surrounding Basilios death was
caused by one of the risks excluded by the supplementary contract which exempts the company from
liability.
Issue:Is the Philippine American Life Insurance Co. liable to the petitioner for the amount covered by
thesupplemental contract?
Held:Yes. The circumstances of Basilios death cannot be taken as purely intentional on the part of Basilio to
expose himself to the danger. There is no proof that his death was the result of intentionalkilling because
there is the possibility that the malefactor had fired the shot merely to scare away the people around. In this
case, the companys defense points out that Basilios is included among the risksexcluded in the
supplementary contract; however, the terms and phraseology of the exception clauseshould be clearly
expressed within the understanding of the insured. Art. 1377 of the New Civil Codeprovides that in case
ambiguity, uncertainty or obscurity in the interpretation of the terms of thecontract, it shall be construed
against the party who caused such obscurity. Applying this to thesituation, the ambiguous or obscure terms in
the insurance policy are to be construed strictly against theinsurer and liberally in favor of the insured party.
The reason is to ensure the protection of the insuredsince these insurance contracts are usually arranged and
employed by experts and legal advisers actingexclusively in the interest of the insurance company. As long
as insurance companies insist upon the useof ambiguous, intricate and technical provisions, which conceal
their own intentions, the courts must, infairness to those who purchase insurance, construe every ambiguity
in favor of the insured.
2) Biagtan vs. The Insular Life Assurance Company, Ltd (44 SCRA 58) G.R. No. L-25579. March 29,
1972
Biagtan was killed as his house was being robbed. The insurance company paid the basic amount of P5,000
but refused to pay the additional P5,000 under the accidental death benefit clause, on the ground that his
death was the result of injuries intentionally inflicted by third parties and was not covered. The trial court
ruled that there was no proof that the robbers intended to kill Biagtan, or just to scare him away by thrusting
at him with their knives. The Supreme Court held otherwise, pointing out that there were nine wounds in all.
The exception in the accidental benefit clause does not speak of the purpose whether homicidal or not of
a third party in causing the injuries, but only of the fact that such injuries have been intentionally inflicted.
Nine wounds inflicted with bladed weapons at close range cannot be considered innocent insofar as intent is
concerned. The manner of execution of the crime permits no other conclusion.
Dissent: The case of Calanoc is controlling. The thrusts seemed to be a reflex action on the part of the
robbers upon being surprised by Biagtan. The accidental death benefit clause carries several exceptions, with
an ambiguous fifth paragraph saying that injuries inflicted intentionally by a third party were among the
exceptions. The ambiguous clause conflicts with all the other four exceptions and seemingly except all other
injuries, intentionally inflicted by a third party, regardless of any violation of law or provocation by the
insured, and defeat the very purpose of the policy of giving the insured double indemnity in case of
accidental death by external and violent means.

Applying the rule of noscitus a sociis, the double indemnity policy covers the insured against accidental
death, whether caused by fault, negligence or intent of a third party which is unforeseen and unexpected by
the insured. All the associated words and concepts in the policy plainly exclude the accidental death from the
coverage of the policy only where the injuries are self-inflicted or attended by some proscribed act of the
insured or incurred in some expressly included calamity such as riot, war or atomic explosion. Besides, two
other insurance companies which also covered the insured paid the benefits.
3) Finman General Assurance Corp. vs. Court of Appeals (213 SCRA 493) G.R. No. 100970. September
2, 1992
FACTS:
[P]etitioner filed this petition alleging grove abuse of discretion on the part of the appellate court in applying
the principle of expresso unius exclusio alterius in a personal accident insurance policy since death
resulting from murder and/or assault are impliedly excluded in said insurance policy considering that the
cause of death of the insured was not accidental but rather a deliberate and intentional act of the assailant in
killing the former as indicated by the location of the lone stab wound on the insured. Therefore, said death
was committed with deliberate intent which, by the very nature of a personal accident insurance policy,
cannot be indemnified.
ISSUE: Whether or not death petitioner is correct that results from assault or murder deemed are not
included in the terms accident and accidental.
HELD: NO. Petition for certiorari with restraining order and preliminary injunction was denied for lack of
merit.
RATIO: The terms accident and accidental as used in insurance contracts have not acquired any
technical meaning, and are construed by the courts in their ordinary and common acceptation. Thus, the
terms have been taken to mean that which happen by chance or fortuitously, without intention and design,
and which is unexpected, unusual, and unforeseen. An accident is an event that takes place without ones
foresight or expectation an event that proceeds from an unknown cause, or is an unusual effect of a
known cause and, therefore, not expected.
[I]t is well settled that contracts of insurance are to be construed liberally in favor of the insured and strictly
against the insurer. Thus ambiguity in the words of an insurance contract should be interpreted in favor of its
beneficiary.
4) Zenith Insurance Corporation vs. Court of Appeals (185 SCRA 398) G.R. No. 85296. May 14, 1990
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 Zeniths soliciting agent, it refused and failed to settle and pay
complainants insurance claim.
> Complainant seeks not only the payment of said insurance claim of 70T plus legal interest, attys 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 complainants 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 Zeniths 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
5) Sun Insurance Office, Ltd. vs. Court of Appeals (211 SCRA 554) G.R. No. 92383. July 17, 1992
Felix Lim Jr shot himself dead and the family tried to claim on the policy. The insurer refused, saying that
when he put a gun to his head, though thinking it was not loaded, he willfully exposed himself to needless
peril and removed himself from the coverage of the insurance policy. The family said that Lim had removed
the magazine before and fully believed that the gun was not loaded. As such, it was an accident that should
be covered by the policy. The court held that while Lim was unquestionably negligent, that should not
prevent his widow from recovering from the insurance policy he obtained precisely against accident. There is
nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the
insured is shown to have contributed to his own accident.
6) Villacorta vs. Insurance Commission (100 SCRA 467) G.R. No. L-54171.October 28, 1980
7) Vda. de Maglana vs. Consolacion (212 SCRA 268) G.R. No. 60506. August 6, 1992
FACTS: Lope Maglana met an accident while driving a motorcycle owned by Bureau of Customs which
resulted to his death. The jeep in which his motorcycle collided was operated andowned by Destrajo. His
widow filed an action for damages against Destrajo and AFISCOInsurance Corporation. The RTC held
AFISCO to be secondarily liable for the awardeddamages. Petitioner asserted the lower courts decision and
provided that the Insurance Codeexpressly provides that the insurers liability is direct and primary and or
jointly and severallywith the operator of the vehicle.

ISSUE: Whether or not the insured is solidarily liable with Destrajo.

HELD: No. The liability of the inusred is primary and direct but not solidarily with Destrajo.Where the
insurer directly insures liability, the liability accrues immediately upon theconcurrence of the injury or even
upon which the liability depends and does not depend on therecovery of the judgment by the injured party
against the insured, Therefore, the insurersliability is direct and primary, but its liability is only up to the
extent of the amount insured.
8) Perla Compania de Seguro, Inc. v CA and Lim (208 SCRA 478) G.R. No. 96452. May 7, 1992
Facts:
The Lim spouses opened a chattel mortgage and bought a Ford Laser from Supercars for Php 77,000 and
insured it with Perla Compania de Seguros. The vehicle was stolen while Evelyn Lim was driving it with an
expired license. The spouses requested for a moratorium on payments but this was denied by FCP, the
assignee of rights over collection of the mortgage amount of the car. The spouses also called on the insurance
company to pay the balance of the mortgage due to theft but this was denied by the company due to the
spouses violation of the Authorized Driver clause stating (driving with an expired license before being
carnapped):
Any of the following: (a) The Insured (b) Any person driving on the Insured's order, or with his permission.
Provided that the person driving is permitted, in accordance with the licensing or other laws or regulations, to
drive the Scheduled Vehicle, or has been permitted and is not disqualified by order of a Court of Law or by
reason of any enactment or regulation in that behalf.
Since the spouses didnt pay the mortgage, FCP filed suit against them. The trial court ruled in its favor
ordering spouses to pay. The appellate court reversed their decision. FCP and Perla appealed to the SC.
Issues:
1.Was there grave abuse of discretion on the part of the appellate court in holding that private respondents
did not violate the insurance contract because the authorized driver clause is not applicable to the "Theft"
clause of said Contract?
2. Whether or not the loss of the collateral exempted the debtor from his admitted obligations under the
promissory note particularly the payment of interest, litigation expenses and attorney's fees.
Held: No, No. Petition dismissed.
Ratio:
1. The car was insured against a malicious act such as theft. Therefore the Theft clause in the contract
should apply and not the authorized driver clause. The risk against accident is different from the risk against
theft.
The appellate court stated: The "authorized driver clause" in a typical insurance policy is in contemplation or
anticipation of accident in the legal sense in which it should be understood, and not in contemplation or
anticipation of an event such as theft. The distinction often seized upon by insurance companies in
resisting claims from their assureds between death occurring as a result of accident and death occurring as
a result of intent may, by analogy, apply to the case at bar.
There was no connection between valid possession of a license and the loss of a vehicle. Ruling in a different
way would render the policy a sham because the company can then easily cite restrictions not applicable to
the claim.
2. The Supreme Court stated:
The chattel mortgage constituted over the automobile is merely an accessory contract to the promissory
note. Being the principal contract, the promissory note is unaffected by whatever befalls the subject matter of
the accessory contract. Therefore, the unpaid balance on the promissory note should be paid, and not just the
installments due and payable before the automobile was carnapped, as erronously held by the Court of
Appeals.
The court, however, construed the insurance, chattel mortgage, and promissory note as interrelated contracts,
hence eliminating the payment of interests, litigation expenses, and attorneys fees stated in the promissory
note. The promissory note required securing a chattel mortage which in turn required opening an insurance
contract. The insurance was made as an accessory to the principal contract, making sure that the value in the
promissory note will be paid even if the car was lost. The insurance company promised to pay FCP for loss
or damage of the property.
CA didnt err in requiring Perla to pay the spouses, but the spouses must pay FCP for the balance in the note.

9) Geagonia v Court of Appeals (241 SCRA 153) G.R. No. 114427. February 6, 1995
10) Fortune Insurance & Surety Co., Inc. v Court of Appeals (244 SCRA 308) G.R. No. 115278 May 23,
1995
Facts: On June 29, 1987, Producers Bank of the Philippines armored vehicle was robbed, in transit, of
seven hundred twenty-five thousand pesos (Php 725,000.00) that it was transferring from its branch in Pasay
to its main branch in Makati. To mitigate their loss, they claim the amount from their insurer, namely Fortune
Insurance and Surety Co..
Fortune Insurance, however, assails that the general exemption clause in the Casualty Insurance coverage
had a general exemption clause, to wit:
GENERAL EXCEPTIONS
The company shall not be liable under this policy in respect of
xxx xxx xxx
(b) any loss caused by any dishonest, fraudulent or criminal act of the insured or any officer, employee,
partner, director, trustee or authorized representative of the Insured whether acting alone or in conjunction
with others. . . .
And, since the driver (Magalong) and security guard (Atiga) of the armored vehicle were charged with three
others as liable for the robbery, Fortune denies Producers Bank of its insurance claim.
The trial court and the court appeals ruled in favor of recovery, hence, the case at bar.
Issue: Whether recovery is precluded under the general exemption clause.
Held: Yes, recovery is precluded under the general exemption clause.
Howsoever viewed, Producers entrusted the three with the specific duty to safely transfer the money to its
head office, with Alampay to be responsible for its custody in transit; Magalong to drive the armored vehicle
which would carry the money; and Atiga to provide the needed security for the money, the vehicle, and his
two other companions. In short, for these particular tasks, the three acted as agents of Producers. A
"representative" is defined as one who represents or stands in the place of another; one who represents others
or another in a special capacity, as an agent, and is interchangeable with "agent." 23
In view of the foregoing, Fortune is exempt from liability under the general exceptions clause of the
insurance policy.
11) Edillon v Manila Bankers Life (117 SCRA 187) G.R. No. L-34200. September 30, 1982
12) Perla Compania vs CA and Cayas (185 SCRA 741) G.R. No. 78860. May 28, 1990
FACTS: Cayas was the registered owner of a Mazda bus which was insured with petitioner PERLA
COMPANIA DE SEGUROS, INC (PCSI). The bus figured in an accident in Cavite, injuring several of its
passengers. One of them, Perea, sued Cayas for damages in the CFI, while three others agreed to a settlement
of P4,000.00 each with Cayas.
After trial, the court rendered a decision in favor of Perea, Cayas ordered to compensate the latter with
damages. Cayas filed a complaint with the CFI, seeking reimbursement from PCSI for the amounts she paid
to ALL victims, alleging that the latter refused to make such reimbursement notwithstanding the fact that her
claim was within its contractual liability under the insurance policy.
The decision of the CA affirmed in toto the decision of the RTC of Cavite, the dispositive portion of which
states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered ordering defendant PCSI to pay plaintiff
Cayas the sum of P50,000.00 under its maximum liability as provided for in the insurance policy;

In this petition for review on certiorari, petitioner seeks to limit its liability only to the payment made by
private respondent to Perea and only up to the amount of P12,000.00. It altogether denies liability for the
payments made by private respondents to the other 3 injured passengers totaling P12,000.00.
ISSUE: how much should PCSI pay?
HELD: The decision of the CA is modified, petitioner only to pay Cayas P12,000,000.00
The insurance policy provides:
5. No admission, offer, promise or payment shall be made by or on behalf of the insured without the written
consent of the Company
It being specifically required that petitioners written consent be first secured before any payment in
settlement of any claim could be made, private respondent is precluded from seeking reimbursement of the
payments made to the other 3 victims in view of her failure to comply with the condition contained in the
insurance policy.
Also, the insurance policy involved explicitly limits petitioners liability to P12,000.00 per person and to
P50,000.00 per accident
Clearly, the fundamental principle that contracts are respected as the law between the contracting parties
finds application in the present case. Thus, it was error on the part of the trial and appellate courts to have
disregarded the stipulations of the parties and to have substituted their own interpretation of the insurance
policy.
We observe that although Cayas was able to prove a total loss of only P44,000.00, petitioner was made liable
for the amount of P50,000.00, the maximum liability per accident stipulated in the policy. This is patent
error. An insurance indemnity, being merely an assistance or restitution insofar as can be fairly ascertained,
cannot be availed of by any accident victim or claimant as an instrument of enrichment by reason of an
accident.
13) Aisporna v Court of Appeals (113 SCRA 459) G.R. No. L-39419. April 12, 1982
Facts
Mapalad Aisporna, the wife of one Rodolfo Aisporna, an insurance agent, solicited the application of
Eugenio Isidro in behalf of Perla Compana de Seguros without the certificate of authority to act from the
insurance commissioner. Isidro passed away while his wife was issued Php 5000 from the insurance policy.
After the death, the fiscal instigated criminal action against Mapalad for violating sec 189 of the Insurance
code for feloniously acting as agent when she solicited the application form.
In the trial court, she claimed that she helped Rodolfo as clerk and that she solicited a renewal, not a new
policy from Isidro through the phone. She did this because her husband was absent when he called. She only
left a note on top of her husbands desk to inform him of what transpired. (She did not accept compensation
from Isidro for her services)
Aisporna was sentenced to pay Php 500 with subsidiary costs in case of insolvency in 1971 in the
Cabanatuan city court.
In the appellate court, she was found guilty of having violating par 1 of sec 189 of the insurance code.
The OSG kept on repeating that she didnt violate sec 189 of the insurance code.
In seeking reversal of the judgment, Aisporna assigned errors of the appellate court:
1. the receipt of compensation was not a necessary element of the crime in par 1 of sec 189 of the insurance
code
2. CA erred in giving due weight to exhibits F, F1, F17 inclusive sufficient to establish petitioners guilt
beyond reasonable doubt.
3. The CA erred in not acquitting the petitioner
Issues: Won a person can be convicted of having violated the 1st par of the sec 189 of the IC without
reference to the 2nd paragraph of the said section. Or
Is it necessary to determine WON the agent mentioned in the 1st paragraph of the aforesaid section is
governed by the definition of an insurance agent found on its second paragraph

Decision: Aisporna acquitted

Ruling:
Sect 189 of the I.C., par 1 states that No insurance company doing business with the Philippine Islands nor l
any agent thereof shall pay any commission or other compensation to any person for services in obtaining
new insurance unless such person shall have first procured from the Insurance Commissioner a certificate of
authority to act as an agent of such company as herein after provided.
No person shall act as agent, sub-agent, or broker in the solicitation of procurement of applications for
insurance without obtaining a certificate from the Insurance Commissioner.
Par2 Any person who for COMPENSATION solicits or obtains insurance for any for any insurance compna
or offers or assumes to act in the negotiating of such insurance shall be an insurance agent in the intent of
this section and shall thereby become liable to all liabilities to which an insurance agent is subject.
Par 3 500 pseo fine for person or company violating the provisions of the section.
The court held that the 1st par prohibited a person to act as agent without certificate of authority from the
commissioner
In the 2nd par, the definition of an insurance agent is stipulated
The third paragraph provided the penalty for violating the 1st 2 rules
The appellate court said that the petitioner was penalized under the1st paragraph and not the 1nd. The fact
that she didnt receive compensation wasnt an excuse for her acquittal because she was actually punished
separately under sec 1 because she did not have a certificate of authority as under par 1.
The SC held that the definition of an insurance agent was made by CA to be limited to paragraph 2 and not
applicable to the 1st paragraph.
The appellate court said that a person was an insurance agent under par 2 if she solicits insurance for
compensation, but in the 1st paragraph, there was no necessity that a person solicits an insurance
compensation in order to be called an agent.
The SC said that this was a reversible error.
The CA said that Aisporna didnt receive compensation.
The SC said that the definition of an insurance agent was found in the 2nd par of Sec 189 (check the law)
The definition in the 2nd paragraph qualified the definition of an agent used in the 1st and third paragraphs.
DOCTRINE: The court held that legislative intent must be ascertained from the consideration of the statute
as a whole. The words shouldnt be studied in isolated explanations but the whole and every part of the
statute must be considered in fixing the meaning of any of its parts in order to pronounce the harmonious
whole.
Noscitur a sociis provides that where a particular word or phrase in a statement is ambiguous in itself, the
true meaning may be made clear in the company it is fixed in. In applying this, the court held that the
definition of an insurance agent in the 2nd paragraph was applicable in the 1st paragraph.
To receive compensation be the agent is an essential element for violation of the 1st paragraph.
The appellate court said that she didnt receive compensation by the receipt of compensation wasnt an
essential element for violation of the 1st paragraph.
The SC said that this view wasnt correct owing to the American insurance laws which qualified
compensation as a qualifying factor in penalizing unauthorized persons who solicited insurance (Texas code
and snyders law)
14) White Gold Marine Services Inc vs Pioneer Insurance and Surety Corporation (464 SCRA 448)
G.R. No. 154514. July 28, 2005
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.
15) Republic vs Sunlife Assurance (473 SCRA 129) G.R. No. 158085 October 14, 2005.
16) Philamcare Health Systems vs CA and Trinos (379 SCRA 356). G.R. No. 125678. March 18, 2002
Facts:
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 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.
Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause under
the Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
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 didnt apply because two-year and not one-year effectivity periods
were required.
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.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husbands health was the insurable interest. The health care agreement was in the nature of
non-life insurance, which is primarily a contract of indemnity. The provider must pay for the medical
expenses resulting from sickness or injury.

While petitioner contended that the husband concealed materialfact 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.
This meant that the petitioners required him to sign authorization to furnish reports about his medical
condition. The contract also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose
information was a grounds for revocation simply because the answer assailed by the company was the heart
condition question based on the insureds opinion. He wasnt a medical doctor, so he cant accurately gauge
his condition.
Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is obligated to
make further inquiry.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
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.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of
insurance.
As to cancellation procedure- Cancellation requires certain 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 were fulfilled by the provider.
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.
17) Commissioner of Internal Revenue vs Lincoln Philippine Life Insurance Co (379 SCRA 423) G.R.
No. 119176. March 19, 2002
FACTS:
Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life Insurance Company, Inc.) issued a
special kind of life insurance policy known as the "Junior Estate Builder Policy" with a distinguishing
feature. It had a "automatic increase clause" upon attainment of a certain age by the insured.
Commissioner of Internal Revenue issued deficiency documentary stamps tax assessment for the year 1984
pertaining to the amount in the automatic increase clause
Lincoln questioned the deficiency assessments
Court of Tax Appeals: found no valid basis and cancelled it
CA: affirmed CTA
CIR claims that "automatic increase clause" in the subject insurance policy is separate
ISSUE: W/N the "automatic increase clause" should not be taxed with the main policy
HELD: NO. CA set aside
Section 49, Title VI of the Insurance Code defines an insurance policy as the written instrument in which a
contract of insurance is set forth
Section 50 of the same Code provides that the policy, which is required to be in printed form, may contain
any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract
of insurance.
any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy
or contract of insurance

Section 173 that the payment of documentary stamp taxes is done at the time the act is done or transaction
had and the tax base for the computation of documentary stamp taxes on life insurance policies under Section
183 is the amount fixed in policy, unless the interest of a person insured is susceptible of exact pecuniary
measurement
the amount fixed in the policy is the figure written on its face and whatever increases will take effect in the
future by reason of the "automatic increase clause" embodied in the policy without the need of another
contract
the amount insured by the policy at the time of its issuance necessarily included the additional sum covered
by the automatic increase clause because it was already determinable at the time the transaction was entered
into and formed part of the policy
to claim that the increase in the amount insured (by virtue of the automatic increase clause incorporated into
the policy at the time of issuance) should not be included in the computation of the documentary stamp taxes
due on the policy would be a clear evasion of the law requiring that the tax be computed on the basis of the
amount insured by the policy
18) Republic vs Del Monte Motors (504 SCRA 53) G.R. No. 156956.October 9, 2006
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.
II. PERFECTION OF CONTRACT
19) Enriquez vs Sun Life Assurance Co. of Canada (041 Phil 269) G.R. No. 15895. November 29, 1920
Facts: Plaintiff is estate administrator for late Joaquin Herrer. Herrer has pending application with defendant
Sun Life Assurance Co (sun Life) evidenced by a provisional receipt. The provisional receipt reads payment
of Php6, 000 for life annuity received 26 September 1917. The application was received by Sun Life head
office a month after.
04 December 1917, the policy was issued in Montreal. A petition for withdrawal of application was filed by
Herrers lawyer 18 December 1917. Herrer died 20 December. A letter from Sun Life was received 21
December stating policy was issued and reminds the party of a notification of acceptance of the application
dated 26 November.
Plaintiff testified that he had found no letter of notification from the Sun Life.
Lower Court decides in favor of respondent. Appeal was taken.
Issue: Whether or not the there has been a valid offer and acceptance??
Held: None. The Civil Code provides that the acceptance made by letter binds the person making the offer
only from the date it has came to its knowledge. The contract of life annuity was not perfected. There was no
satisfactory evidence that the application acceptance came to the knowledge of Herrer.
Article 16 of the civil code provides that any deficiency in the special law shall be supplied by the Code. The
Insurance Code does not provide for law on the principle of acceptance, thus the Civil Code shall govern.
Article 1262 provides that consent is shown by concurrence of offer and acceptance with the thing and the
consideration to the contract. The acceptance by letter shall not bind the person making the offer except from
the time It came to his knowledge.
American Courts held that acceptance of offer not actually communicated does not complete the contract but
the mailing of the acceptance. Locus Poenitrntiae is ended when acceptance has passed beyond partys
control.
Furthermore, the provisional receipt provides for conditions before a contract is deemed final. 1. Medical
examination. 2. Approval by head office of the application. 3. the company communicates approval to the
applicant.
In the case, there was no letter of notification. No evidence of knowledge. Judgment reversed. Php6000 with
interest is to be returned.
20) Great Pacific Life Assurance Co vs CA (89 SCRA 543). G.R. No. L-31845. April 30, 1979
Private respondent, a duly authorized agent of Pacific Life, applied for a 20-year endowment policy on the
life of his one-year old daughter, a mongoloid. He did not divulge each physical defect of his daughter. He
paid the premium and was issued a binding deposit receipt. However, despite the branch managers favorable
recommendation, the Company disapproved the application, because a 20-year endowment plan is not

available for minors. Instead, it offered the Juvenile Triple Action Plan. The manager wrote back and again
strongly recommended the approval of the application. At this point, the child died of influenza with
complication
of
broncho-pneumonia.
In a suit filed by private respondent to recover the proceeds of the insurance, the trial court rendered
judgment adverse to both petitioners. The Court of Appeals in its amended decision affirmed the trial courts
decision
in
toto.
The decisive issues in these cases are: (1) whether the binding deposit receipt constituted a temporary
contract of the life insurance in question; and (2) whether private respondent concealed the state of health
and
physical
condition
of
his
child.
The Supreme Court held that a "binding receipt" does not insure by itself; that no insurance contract was
perfected between the parties with the non-compliance of the conditions provided in the binding receipt and
concealment having been committed by private Respondent.
SYLLABUS
1. INSURANCE CONTRACT; "BINDING DEPOSIT RECEIPT." Where the binding deposit receipt is
intended to be merely a provisional or temporary insurance contract, and that the receipt merely
acknowledged, on behalf of the insurance company, that the latters branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the insurance
company, such binding deposit receipt does not become in force until the application is approved.
2. ID.; PERFECTION OF CONTRACT. A binding deposit receipt which is merely conditional does not
insure outright. Thus, where an agreement is made between the applicant and the agent, no liability will
attack until the principal approves the risk and a receipt is given by the agent. The acceptance is merely
conditional, and is subordinated to the act of the company in approving or rejecting the application.
3. ID.; ID.; MEETING OF THE MIND. A contract of insurance, like other contracts, must be assented to
by both parties either in person or by their agents. The contract, to be binding from the date of the
application, must have been a completed contract, one that leaves nothing to be done, nothing to be
completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of
insurance
unless
the
minds
of
the
parties
have
met
in
agreement.
4. ID.; ID.; FAILURE OF AGENT TO COMMUNICATE THE REJECTION TO APPLICANT. The
failure of the insurance companys agent to communicate to the applicant the rejection of the insurance
application would not have any adverse effect on the allegedly perfected temporary contract. In the first
place, there was no contract perfected between the parties who had no meeting of their minds. Private
respondent, being an authorized agent is indubitably aware that said company does not offer the life
insurance applied for. When he filed the insurance application in dispute he was therefore only taking a
chance that the company will approve the recommendation of the agent for the acceptance and approval of
the application in question. Secondly, having an insurable interest on the life of his daughter, aside from
being an insurance agent and office associate of the branch, the applicant must have known and followed the
progress on the processing of such application and could not pretend ignorance of the Companys rejection
of the 20-year endowment life insurance application.
21) DBP vs CA and Estate of Dans. 449 SCRA 57. G.R. No. L-109937 March 21, 1994
FACTS: Juan B. Dans, 76 years of age, together with his family, applied for a loan worth Php 500, 000 at the
Development Bank of the Philipppines on May 1987. The loan was approved by the bank dated August 4,
1987 but in the reduced amount of Php 300, 000. Mr. Dans was advised by DBP to obtain a mortgage
redemption insurance at DBP MRI pool. DBP deducted the amount to be paid for MRI Premium that is
worth Php 1476.00. The insurance of Mr. Dans, less the DBP service fee of 10%, was credited by DBP to the
savings account of DBP MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified DBP was not eligible
for the coverage of insurance for he was beyond the maximum age of 60. The wife, Candida, filed a
complaint to the Regional Trial Court Branch I Basilan against DBP and DBP MRI pool for Collection of

Sum of Money with Damages. Prior to that, DBP offered the administratrix (Mrs. Dans) a refund of the
MRI payment but she refused for insisting that the family of the deceased must receive the amount
equivalent of the loan. DBP also offered and ex gratia for settlement worth Php 30, 000. Mrs. Dans refused to
take the offer. The decision of the RTC rendered in favor of the family of the deceased and against DBP.
However, DBP appealed to the court.
ISSUE: Whether or not the DBP MRI Pool should be held liable on the ground that the contract was already
perfected.
HELD: No. DBP MRI Pool is not liable. Though the power to approve the insurance is lodged to the pool,
the DBP MRI Pool did not approve the application of the deceased. There was no perfected contract between
the insurance pool and Mr. Dans.
DBP was wearing two legal hats: as a lender and insurance agent. As an insurance agent, DBP
made believed that the family already fulfilled the requirements for the said insurance although DBP had a
full knowledge that the application would never be approved. DBP acted beyond the scope of its authority
for accepting applications for MRI. If the third person who contracted is unaware of the authority conferred
by the principal on the agent and he has been deceived, the latter is liable for damages. The limits of the
agency carries with it the implication that a deception was perpetratedArticles 19-21 come into play.
However, DBP is not entitled to compensate the family of the deceased with the entire value of the
insurance policy. Speculative damages are too remote to be included in the cost of damages. Mr. Dans is
entitled only to moral damages. Such damages do not need a proof of pecuniary loss for assessment. The
court granted only moral damages (Php 50, 000) plus attorney feess (Php 10, 000) and the reimbursement of
the MRI fees with legal interest from the date of the filing of the complaint until fully paid.
22) Philamcare Health Systems vs CA and Trinos- supra
23) Gulf Resorts Inc vs Philippine Charter Insurance Corporation (458 SCRA 550)G.R. No. 156167
May 16, 2005
Facts: Gulf Resorts 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 (Exhs. "1-D", "2-D", "3-A",
"4-B", "5-A", "6-D" and "7-C"). In Exhibit "7-C" 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. 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. 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.
III. SUBROGATION
24) Malayan Insurance Co Inc vs CA (165 SCRA 536) G.R. No. L-36413. September 26, 1988
25) Manila Mahogany Manufacturing Co vs CA (154 SCRA 650) G.R. No. L-52756, October 12, 1987
26) Pan Malayan Insurance vs CA and Fabie. (184 SCRA 54) G.R. No. 81026. April 3, 1990
27) Cebu Shipyard vs. William Lines (306 SCRA 762) GR. No.132607 May5, 1999
28) Delsan Transport Lines vs CA and Home Assurance (369 SCRA 24) GR No 127897 15 November
2001
29) Federal Express Corporation vs American Home Assurance Co (437 SCRA 50) G.R. No. 150094.
August 18, 2004
30) Aboitiz Shipping Co. vs Insurance Co. of North America (438 SCRA 511) G.R. No. 168402. August
6, 2008
IV. INSURABLE INTEREST
31) Spouses Cha vs CA (227 SCRA 690) G.R. No. 124520. August 18, 1997
32) Great Pacific Life Assurance vs CA and Leuterio (309 SCRA 250) G.R. No. 113899.October 13,
1999
33) Harvardian Colleges vs Country Bankers Insurance Co. (1 CARA 2) CA CV No. 0377., January 6,
1986
34) Ang Ka Yu vs Phoenix Assurance (1 CARA 704) September 28, 1961
35) Gaisano Cagayan Inc. vs Insurance Co. of North America (490 SCRA 286) G.R. No. 147839. June
8, 2006
36) Eternal Gardens Memorial Park Co. vs Philamlife Insurance Co. G.R. No. 166245. April 9, 2008
V. BURDEN OF PROOF
37) DBP Pool of Accredited Insurance vs Radio Mindanao Network (480 SCRA 314) G.R. No. 147039,
January 27, 2006
VI. CONCEALMENT AND REPRESENTATION
38) Insular Life vs Feliciano (73 Phil 201) G.R. No. 47593. September 13, 1941
39) Philamcare Health Systems vs CA and Trinos (379 SCRA 356) G.R. No. 125678. March 18, 2002
(SUPRA)
40) Sunlife Assurance of Canada vs CA (245 SCRA 268) G.R. No. 105135. June 22, 1995
41) Vda. De Canilang vs CA (223 SCRA 443) G.R. No. 92492. June 17, 1993
VII. BREACH OF WARRANTY
42) Prudential Guarantee vs Trans-Asia Shipping Lines (491 SCRA 411) G.R. No. 151890. June 20,
2006
VIII. PERSONS ENTITLED TO RECOVER UNDER THE POLICY
43) Bonifacio Bros. vs Mora (20 SCRA 262) G.R. No. L-20853. May 29, 1967
44) First Integrated Bonding vs Hernando (199 SCRA 796) G.R. No. L-51221 July 31, 1991
45) Sherman Shafer vs Judge of RTC Olongapo ((167 SCRA 368) G.R. No. 78848 November 14, 1988
IX. INCONTESTABILITY CLAUSE
46) Tan vs CA. G.R. No. 48049 June 29, 1989

X. LIABILITY UNDER AN OPEN POLICY

47) Development Insurance Corporation v. Intermediate Appellate Court (143 SCRA 621) G.R. No.
71360, July 16, 1986