PINEDA v. CA (1993)Lessons Applicable: Who Exercises Rights of Minor Insured or Beneficiaries (Insurance)Laws Applicable: Art. 225 Family Code

FACTS: Prime Marine Services, Inc. (PMSI), a crewing/manning outfit, procured Group PoIicy

from Insular Life Assurance Co., Ltd. to provide life insurance coverage to its sea-based employees enrolled under the plan.

February 17 1986: 6 employees of the PMSI perished at sea when M/V Nemos, a Greek cargo vessel, sunk somewhere in El Jadida, Morocco.

The beneficiaries asked President and General Manager of PMSI, Capt. Roberto Nuval to process their respective claims and issued him special powers of attorney authorizing him to "follow up, ask, demand, collect and receive" for their benefit indemnities. It only verbally pertained to the sinking of the fatal vessel.

Unknown to them, however, the PMSI, in its capacity as employer and policyholder of the life insurance of its deceased workers, filed with formal claims with their special power of attorney.

Capt. Nuval, upon receipt of these checks from the treasurer, who happened to be his son-in-law, endorsed and deposited them in his account with the Commercial Bank of Manila, now Boston Bank.

Upon learning that they are entitled to the claim, the heirs of the ill-fated seafarers sought to recover from Insular Life but it was denied on the ground that Insular Life already delivered the checks to PMSI.

The fact that there was a verbal agreement between complainants-appellees and Capt. Nuval limiting the authority of the latter to claiming specified death benefits cannot prejudice the insurance company which relied on the terms of the powers of attorney which on their face do not disclose such limitation.

Section 180 of the Insurance Code has been amended by the Family Code 17 which grants the father and mother joint legal guardianship over the property of their unemancipated common child without the necessity of a court appointment; however, when the market value of the property or the annual income of the child exceeds P50,000.00, the parent concerned shall be required to put up a bond in such amount as the court may determine.

Insurance Commission: Favored Petitioners. The Insular Life Assurance Company appealed stating that: (a) had no jurisdiction over the case considering that the claims exceeded P100,000 (b) erred in holding that the powers of attorney relied upon by Insular Life were insufficient to

convey absolute authority to Capt. Nuval to demand, receive and take delivery of the insurance proceeds pertaining to the petitioners

(c) erred in not giving credit to the version of Insular Life that the power of attorney supposed to have been executed in favor of the Alarcons was missing, and

(d) erred in holding that Insular Life was liable for violating Section 180 of the Insurance Code for having released to the surviving mothers the insurance proceeds pertaining to the

beneficiaries who were still minors despite the failure of the former to obtain a court authorization or to post a bond.

CA: eliminated the award to minor beneficiaries Dina Ayo and Lucia Lontok

ISSUE: W/N the minor beneficiaries award should be eliminated

HELD: YES. Petition is GRANTED. CA Reversed. Insurance Commission Reinstated. Being special powers of attorney, they must be strictly construed. Insular Life knew that a

power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies.

Group Insurance: Coverage terms for group insurance are usually stated in a master agreement or policy that is

issued by the insurer to a representative of the group or to an administrator of the insurance program.

Employers act as a functionary in the collection and payment of premiums and in performing related duties.

Falling within the ambit of administration of a group policy is the disbursement of insurance payments by the employer to the employees.

The employee is in the position of a real party to the master policy Even granting for the sake of argument that the special powers of attorney were in due form,

Insular Life was grossly negligent in delivering the checks, drawn in favor of the petitioners, to a party who is not the agent mentioned in the special power of attorney

Nor can we agree with the opinion of the public respondent that since the shares of the minors in the insurance proceeds are less than P50,000.00, then under Article 225 of the Family Code their mothers could receive such shares without need of either court appointments as guardian or the posting of a bond

Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail, unless there is judicial order to the contrary.

Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned shall be required to furnish a bond in such amount as the court may determine, but not less than ten per centum (10%) of the value of the property or annual income, to guarantee the performance of the obligations prescribed for general guardians.

It is clear from the said Article that regardless of the value of the unemancipated common child's property, the father and mother ipso jure become the legal guardian of the child's property. However, if the market value of the property or the annual income of the child exceeds P50,000.00, a bond has to be posted by the parents concerned to guarantee the performance of the obligations of a general guardian.

It must, however, be noted that the second paragraph of Article 225 of the Family Code speaks of the "market value of the property or the annual income of the child," which means,

therefore, the aggregate of the child's property or annual income; if this exceeds P50,000.00, a bond is required.

There is no evidence that the share of each of the minors in the proceeds of the group policy in question is the minor's only property. Without such evidence, it would not be safe to conclude that, indeed, that is his only property.

CIR v. Lincoln Philippine Life Insurance (2002)Lessons Applicable: Measure of Indemnity (Insurance Code)Laws Applicable: Section 173,Section 183 of the National Internal Revenue Code, Section 49,Section 50 Title VI of the Insurance Code

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 a deficiency in documentary stamps tax assessment for the year 1984 pertaining to the amount in the automatic increase clause.

Lincoln questioned the deficiency assessments. CIR claims that "automatic increase clause" in the subject insurance policy merits a seperate

documentary stamps tax assessment. Court of Tax Appeals: Found no valid basis and cancelled the increase in the documentary

stamps tax assessment. CA: affirmed CTA

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 says that the payment of documentary stamp taxes is done at the time when the transaction is done 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 to an exact pecuniary measurement.

The amount fixed in the policy is the figure written on its face and whatever increase 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 from 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.

Filipino Merchants Insurance Co. v. CA (1989)G.R. No. 85141 November 28, 1989

Lessons Applicable: Existing Interest (Insurance)Laws Applicable: Article 1523 of the Civil Code,Section 13 of the Insurance Code

FACTS: Choa Tiek Seng, a consignee of the shipment of fishmeal loaded, insured in "all risks policy" 600

metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms but only 59.940 metric tons arrived in Manila.

When it was unloaded onto the arrastre, contractor E. Razon, Inc. and Filipino Merchants's surveyor ascertained and certified 105 bags were in bad order condition which was reflected in the survey report of Bad Order Cargoes

Before delivery to Choa, E. Razon's Bad Order Certificate showed that a total of 227 bags in bad order condition

Choa brought an action against Filipino Merchants Insurance Co. who brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc.

Filipino Merchants contended that Chao has no insurable interest and therefore the policy should be void and that it was fraudulent that it did not disclose of such fact.

RTC: Ordered Filipino Merchants to pay Choa and reimburse from Compagnie Maritime Des Chargeurs Reunis and third party defendant E. Razon, Inc.

CA: Affirmed but modified by adjudicating the third party complaint

ISSUE: W/N Choa Tiek Seng as consignee of the shipment has insurable interest?

HELD: YES. CA affirmed.

GR: The burden of proof is upon the insured to show that a loss arose from a covered peril. However, under an "all risks" policy, the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. - None was shown = liable

Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured.

As vendee/consignee of the goods in transit has such existing interest. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit.

Article 1523 of the Civil Code provides that where, in pursuance to a contract of sale, when the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The Court ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of the goods and paid the insurance premium covering them.

C & F contracts are shipment contracts. The term means that the price fixed includes in a lump sum the cost of the goods and freight to the named destination. It simply means that the seller must pay the costs and freight necessary to bring the goods to the named destination but the risk of loss or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment.

Violeta R. Lalican v. Insular Life Assurance Co. Ltd. (2009)Facts: Eulogio Lalican applied for an insurance policy with the Insular Life amounting to Php 1,500,000. Under the terms of the policy, Eulogio was to pay the premiums on a quarterly basis, having a grace period of 31 days, for the payment of each premium subsequent to the first. If any premium was not paid on or before the due date, the policy would be in default and if the premium remained unpaid until the end of the grace period, the policy would automatically lapse and become void. Eulogio paid the premiums due on the first two succeeding payment dates but failed to pay subsequent premiums even after the lapse of the grace period thereby rendering the policy void. He submitted an application for reinstatement of policy through Josephine Malaluan, an agent of Insular Life, together with the payment of the unpaid premiums. However, the Insular Life notified him that his application could not be processed because he failed to pay the overdue interest of the unpaid premiums. On Sept. 17, 1998,

Eulogio submitted to Malaluan’s house a second application for reinstatement including the payment for the overdue interest as well as for the premiums due for April and July of that year, which was received by Malaluan’s husband on her behalf and was thereby issued a receipt for the amount Eulogio deposited. However, on that same day, Eulogio died of cardio-respiratory arrest secondary to electrocution. Violeta, Eulogio’s widow filed with the Insular Life a claim for payment of the full proceeds of the policy but the latter informed her that the claim could not be granted since at the time of Eulogio’s death, his policy has already lapsed and he failed to reinstate the same. Violeta requested a reconsideration of her claim but the same was also rejected. Therefore, she filed a complaint for death claim benefits with the RTC alleging the unfair claim settlement practice of Insular Life and its deliberate failure to act with reasonable promptness on her insurance claim. The trial court rendered a decision in favor of Insular Life and after the former denied her motion for reconsideration, she elevated her case to the Supreme Court via the petition for review on Certiorari.

Issue: Whether or not the policy of Eulogio was reinstated before his death.

Ruling: To reinstate a policy means to restore the same to premium-paying status after it has been permitted to lapse. Both the policy contract and application for reinstatement provide for specific conditions for the reinstatement of a lapsed policy. According to the Application for Reinstatement, the policy would only be considered reinstated upon the approval of the application by Insular Life during the applicant’s “lifetime and good health” and whatever amount the application paid in connection was considered to be a deposit only until approval of said application. Eulogio’s death rendered impossible full compliance with the conditions for reinstatement of policy even though, before his death, he managed to file his application for reinstatement and deposit the amount for payment of his overdue premiums and interest thereon with Malaluan. As expressly provided on the policy contract, agents of Insular Life have no authority to approve any application for reinstatement. They still had to turn over to Insular Life the application for reinstatement and accompanying deposit, for processing and approval of the latter.

Heirs Of Loreto C. Maramag v. Maramag (2009)Lessons Applicable: To whom insurance proceeds payable (Insurance)

FACTS: Loreto Maramag designated as beneficiary his concubine Eva de Guzman Maramag. Vicenta Maramag and Odessa, Karl Brian, and Trisha Angelie (heirs of Loreto Maramag) and his

concubine Eva de Guzman Maramag were also suspects in the killing of Loreto. His illegitimate children are also claiming for his insurance. Vicenta alleges that Eva is disqualified from claiming RTC: Granted - Civil code does NOT apply CA: Dismissed the case for lack of jurisdiction for filing beyond reglementary period

ISSUE: W/N Eva can claim even though prohibited under the civil code against donation?

HELD: YES. Petition is DENIED. Any person who is forbidden from receiving any donation under Article 739 cannot be named

beneficiary of a life insurance policy of the person who cannot make any donation to him. If a concubine is made the beneficiary, it is believed that the insurance contract will still remain

valid, but the indemnity must go to the legal heirs and not to the concubine, for evidently, what is prohibited under Art. 2012 is the naming of the improper beneficiary.

SECTION 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.

GR: Only persons entitled to claim the insurance proceeds are either the insured, if still alive; or the beneficiary, if the insured is already deceased, upon the maturation of the policy.

Exception: When the insurance contract was intended to benefit third persons who are not parties to the same in the form of favorable stipulations or indemnity. In such a case, third parties may directly sue and claim from the insurer.

It is only in cases where the insured has not designated any beneficiary, or when the designated beneficiary is disqualified by law to receive the proceeds, that the insurance policy proceeds shall redound to the benefit of the estate of the insured.

Moreover, the issue of lack of insurable interest was not among the defenses averred in petitioners answer.

Great Pacific Life Assurance Co. v. CA (1979) Facts: Respondent Ngo Hing filed an application with petitioner Great Pacific Life Assurance Company (Pacific Life) for a twenty-year endowment policy in the life of Helen Go, his one year old daughter. Petitioner Lapulapu D. Mondragon, the branch manager, prepared application form using the essential data supplied by respondent. The latter paid the annual premium and Mondragon retained a portion of it as his commission. The binding deposit receipt was issued to respondent. Mondragon wrote his strong recommendation for the approval of the insurance application. However, Pacific Life disapproved the application since the plan was not available for minors below 7 years old but it can consider the same under another plan. The non-acceptance of the insurance plan was allegedly not communicated by Mondragon to respondent. Mondragon again asserted his strong recommendation. Helen Go died of influenza. Thereupon, respondent sought the payment of the proceeds of the insurance, but having failed in his effort, he filed an action for the recovery of the same.

Issue: Whether the binding deposit receipt constituted a temporary contract of the life insurance in question, and thus negates the claim that the insurance contract was perfected.

Held: YES. The provisions printed on the binding deposit receipt show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon

compliance of the following conditions: (1) that the company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant.

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on standard rates." Since Pacific Life disapproved the insurance application of Ngo Hing, the binding deposit receipt in question had never become in force at any time. Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. Where an agreement is made between the applicant and the agent, no liability shall attach 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.

Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself. It bears repeating that through the intra-company communication of 30 April 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the 20-year endowment insurance policy to children less than 7 years of age. What it offered instead is another plan known as the Juvenile Triple Action, which Ngo Hing failed to accept. In the absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-year endowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-compliance of the above quoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by Ngo Hing shall have to be refunded by Pacific Life.

Rizal Surety v. CA (2000) INSURANCE LAW: Interpretation of Insurance Contracts

FACTS:

Rizal Surety & Insurance Company issued a fire insurance policy in favor of Transworld Knitting Mills, Inc. The subject policy stated that Rizal Surety is “responsible in case of loss whilst contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situated within own Compound xxx.” The policy also described therein the four-span building covered by the same.

On Jan. 12, 1981, fire broke out in the compound, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said four-span building) was also destroyed by the fire.

ISSUE:

Whether or not Rizal Surety is liable for loss of the two-storey building considering that the fire insurance policy sued upon covered only the contents of the four-span building

HELD:

Both the trial court and the CA found that the so-called “annex” as not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and spare parts stored therein were covered by the fire insurance in dispute.

So also, considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on Jan. 12, 1981, having been constructed some time in 1978, petitioner should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but if did not, and instead, went on to provide that such fire insurance policy covers the products, raw materials and supplies stored within the premises of Transworld which was an integral part of the four-span building occupied by Transworld, knowing fully well the existence of such building adjoining and intercommunicating with the right section of the four-span building.

Also, in case of doubt in the stipulation as to the coverage of the fire insurance policy, under Art. 1377 of the New Civil Code, the doubt should be resolved against the Rizal Surety, whose layer or managers drafted the fire insurance policy contract under scrutiny.

In Landicho vs. Government Service Insurance System, the Court ruled that “the terms in an insurance policy, which are ambiguous, equivocal or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involved, and the reason for this is that the insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.”

Philippine Health Care Providers, Inc. v. CIR (2009)Lessons Applicable: Elements (Insurance)

FACTS: Philippine Health Care Providers, Inc. 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 plan and to provide for the administrative, legal, and financial responsibilities of the organization." Individuals enrolled in its health care programs pay an annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the group practice health delivery system at a hospital or clinic owned, operated or accredited by it.

January 27, 2000: Commissioner of Internal Revenue (CIR) sent Petitioner a formal demand letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18

Petitioner protested the assessment in a letter dated February 23, 2000. CIR did not act on the protest, Petitioner filed a petition for review in the CTA seeking the

cancellation of the deficiency VAT and DST assessments. CIR: Health care agreement was a contract of insurance subject to DST under Section 185 of the

1997 Tax Code CTA: PARTIALLY GRANTED to pay VAT, DST assessment CANCELLED AND SET ASIDE. CA: Health care agreement was in the nature of a non-life insurance contract subject to DST Court Affirmed CA

ISSUE: 1. W/N the Philippine Health Care Providers, Inc (HMO) was engaged in the business of insurance

during the pertinent taxable years - NO2. W/N the Philippine Health Care Providers, Inc enters into an insurance contract - NO

HELD: motion for reconsideration is GRANTED

1. NO

P.D. 612 Insurance CodeSec. 2 (2)(2) The term "doing an insurance business" or "transacting an insurance business", within the meaning of this Code, shall include:

(a) making or proposing to make, as insurer, any insurance contract;(b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety;

(c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code;

(d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

No profit was derived by the Petitioner from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefore, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business

2. NO Basic distinction between medical service corporations and ordinary health and accident

insurers is that the former undertake to provide prepaid medical services through participating physicians, thus relieving subscribers of any further financial burden, while the latter only undertake to indemnify an insured for medical expenses up to, but not beyond, the schedule of rates contained in the policy.

A participating provider of health care services is one who agrees in writing to render health care services to or for persons covered by a contract issued by health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider

Any indemnification resulting from the payment for services rendered in case of emergency by non-participating health providers would still be incidental to petitioner’s purpose of providing and arranging for health care services and does not transform it into an insurer.

As an HMO, it is its obligation to maintain the good health of its members. Its undertaking under its agreements is not to indemnify its members against any loss or

damage arising from a medical condition but, on the contrary, to provide the health and medical services needed to prevent such loss or damage.

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 non-insurance activities. Therefore, since it substantially provides health care services rather than insurance services, it cannot be considered as being in the insurance business.

Principal Purpose Test purpose of determining what "doing an insurance business" means, we have to

scrutinize the operations of the business as a whole and not its mere components In a letter dated September 3, 2000, the Insurance Commissioner confirmed that petitioner is

not engaged in the insurance business. This determination of the commissioner must be accorded great weight.

Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. An insurance contract exists where the following elements concur: - NOT present1. The insured has an insurable interest;2. The insured is subject to a risk of loss by the happening of the designed peril;3. The insurer assumes the risk;4. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk and5. In consideration of the insurer’s promise, the insured pays a premium.

No Indemnity Member can take advantage of the bulk of the benefits anytime even in the absence of any

peril, loss or damage on his or her part. The assumption of the expense by petitioner is not confined to the happening of a contingency

but includes incidents even in the absence of illness or injury Since indemnity of the insured was not the focal point of the agreement but the extension of

medical services to the member at an affordable cost, it did not partake of the nature of a contract of insurance

HMO, undertakes a business risk when it offers to provide health services. But it is not the risk of the type peculiar only to insurance companies. Insurance risk, also known as actuarial risk, is the risk that the cost of insurance claims might be higher than the premiums paid. The amount of premium is calculated on the basis of assumptions made relative to the insured.

In our jurisdiction, a commentator of our insurance laws has pointed out that, even if a contract contains all the elements of an insurance contract, if its primary purpose is the rendering of service, it is not a contract of insurance. The primary purpose of the parties in making the contract may negate the existence of an insurance contract.

Health care agreements are clearly not within the ambit of Section 185 of the NIRC and there was never any legislative intent to impose the same on HMOs

Pacific Timber v. CA (1982)Lessons Applicable: Rules on cover notes (if premium CANNOT yet be computed) (Insurance)Laws Applicable: Section 84 of the Insurance Code

FACTS: March 19, l963: Pacific Timber secured temporary insurance from Workmen's Insurance

Company, Inc. for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan Bay, Quezon Province to Tokyo, Japan.

Workmen's Insurance Company, Inc. issued a Cover Note insuring the cargo "Subject to the Terms and Conditions of the Workmen's Insurance Company, Inc."

April 2, 1963: Regular marine cargo policies were issued for a total of 1,195.498 bd. ft. Due to the bad weather some of the logs were lost during loading operations. 45 pieces of logs were salvaged, but 30 pieces were lost. Pacific informed Workmen's who refused to indemnify

stating that the logs covered in the 2 marine policies were received in good order at the point of destination and that the cover note was null and void upon the issuance of the Marine Policies.

CFI: Cover note is valid. CA: Cover note is not valid.

ISSUE: W/N the cover note is valid despite the absence of premium payment upon it?

HELD: YES. CA set aside. CFI reinstated It was not necessary to ask for payment of the premium on the Cover Note, for the loss insured

against having already occurred, the more practical procedure is simply to deduct the premium from the amount due on the Cover Note

Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium.

Cover note as a "binder" Supported by the doctrine that where a policy is delivered without

requiring payment of the premium, the presumption is that a credit was intended and policy is valid.

It sent its adjuster to investigate and assess the loss to determine if petitioner was guilty of delay in communicating the loss but there was none.

Section 84 Delay in the presentation to an insurer of notice or proof of loss is waived

if caused by any act of his or if he omits to take objection promptly and specifically upon that ground.

Philamcare Health Systems, Inc. v. CA (2002)Lessons Applicable:

Elements (Insurance) Blood Relationship (Insurance)

FACTS: Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with

Philamcare Health Systems, Inc. He answered the standard application form: Have you or any of your family members ever

consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details). - NO

The application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was issued Health Care Agreement No. P010194.

Under the agreement, respondent’s husband was entitled to avail of hospitalization benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient benefits" such as annual physical examinations, preventive health care and other out-patient services.

Upon the termination of the agreement, the same was extended for another year from March 1, 1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was increased to a maximum sum of P75,000.00 per disability.

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

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

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

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

After being discharged from the MMC, he was attended by a physical therapist at home. Later, he was admitted at the Chinese General Hospital. Due to financial difficulties, however, he was brought home again. April 13, 1990 morning: Ernani had fever and was feeling very weak He was brought to Chinese General Hospital where he died July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its

president, Dr. Benito Reverente. RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral

damages, exemplary damages, attorney's fees and cost of suit CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare. Philamcare brought an instant petition for review arguing that:

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

It grants "living benefits," such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter.

Only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss.

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

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

ISSUE: 1. W/N the Health Care Agreement is a Contract of Insurance. - YES2. W/N the spouse being "not" the legal wife can claim - YES

HELD: Petition is DENIED. CA AFFIRMED.

1. YES.

P.D. 612 Insurance CodeSec. 2 (1)(1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.Sec. 3Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.

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

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

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

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

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

In the nature of non-life insurance, which is primarily a contract of indemnit, once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

The answer in response to the question relating to the medical history of the applicant largely depends on opinion rather than fact, especially coming from respondent's husband who was not a medical doctor.

Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.

The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.

Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. P.D. 612 Insurance CodeSec. 27Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.

cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: - none of these was made1. Prior notice of cancellation to insured;2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based.

When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his obligation.

Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which prepared the contract - the insurer.

(U)nder the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.

2. YES.

P.D. 612 Insurance CodeSec. 10Sec. 10. Every person has an insurable interest in the life and health:(1) of himself, of his spouse and of his children;(2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;(3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and(4) of any person upon whose life any estate or interest vested in him depends.

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

Health care agreement is in the nature of a contract of indemnity. Payment should be made to the party who incurred the expenses.

Development Bank of the Philippines v CA (1994)Facts:Juan B. Dans, together with his family applied for a loan of P500,000 with DBP. As principal mortgagor, Dans, then 76 years of age was advised by DBP to obtain a mortgage redemption insurance (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. The MRI premium of 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.

Dans died of cardiac arrest. DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60 years at the time of application. DBP apprised Candida Dans of the disapproval of her late husband’s MRI application. DBP offered to refund the premium which the deceased had paid, but Candida Dans refused to accept the same demanding 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.

Issue:Whether or not the DBP MRI Pool should be held liable on the ground that the contract was already 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 the sum 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 be held liable on a contract that does not exist

In dealing with Dans, DBP was wearing 2 legal hats: the first as a lender and the second as an insurance 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 all the requirements for the MRI and that the issuance of their policy was forthcoming. DBP had full knowledge that the application was never going to be approved. The DBP is not authorized to accept 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 the application for MRI by collecting the insurance premium and deducting its agent’s commission and service fee. Since the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him.