Rizal Surety & Insurance Company vs. Court of Appeals[GR 112360, 18 June 2000] Third Division, Purisima (J): 4 concur

Facts:On 13 March 1980, Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy 45727 in favor of Transworld Knitting Mills, Inc. (Transworld), initially for P1,000,000.00 and eventually increased to P1,500,000.00, covering the period from 14 August 1980 to 13 March 1981. The same pieces of property insured with Rizal Insurance were also insured with New India Assurance Company, Ltd., (New India). On 12 January 1981, fire broke out in the compound of Transworld, 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) where fun and amusement machines and spare parts were stored, was also destroyed by the fire. Transworld filed its insurance claims with Rizal Insurance and New India but to no avail. On 26 May 1982, TransWorld brought against the said insurance companies an action for collection of sum of money and damages (Civil Case 46106) before Branch 161 of the then Court of First Instance of Rizal; praying for judgment ordering Rizal Insurance and New India to pay the amount of P2,747,867.00 plus legal interest, P400,000.00 as attorney's fees, exemplary damages, expenses of litigation of P50,000.00 and costs of suit. Rizal Insurance countered that its fire insurance policy sued upon covered only the contents of the four-span building, which was partly burned, and not the damage caused by the fire on the two-storey annex building. On 4 January 1990, the trial court rendered its decision; dismissing the case as against New India; ordering Rizal Insurance to pay Transworld the amount of P826,500.00 representing the actual value of the losses suffered by it; and with cost against Rizal Insurance. Both Rizal Insurance and TransWorld went to the Courtof Appeals, which came out with its decision of 15 July 1993, modifying the lower court's decision by requiring New India to pay Transworld the amount of P1,818,604.19; and Rizal Surety to pay Transworld P470,328.67, based on the actual losses sustained by Transworld in the fire, totalling P2,790,376.00 as against the amounts of fire insurance coverages respectively extended by New India in the amount of P5,800,000.00 and Rizal Surety and Insurance Company in the amount of P1,500,000.00. On 20 August 1993, from the aforesaid judgment of the Court of Appeals, New India appealed to the Supreme Court theorizing inter alia that the TransWorld could not be compensated for the loss of the fun and amusement machines and spare parts stored at the two-storey building because it (Transworld) had no insurable interest in said goods or items. On 2 February 1994, the Court denied the appeal with finality in GR L-111118 (New India Assurance Company Ltd. vs. Court of Appeals). Rizal Insurance and TransWorld, on the other hand, interposed a Motion for Reconsideration before the Court of Appeals, and on 22 October 1993, the Court of Appeals reconsidered its decision of 15 July 1993, as regards the imposition of interest on the assessment against New India on the amount of P1,818,604.19 and that against Rizal Insurance on the amount of P470,328.67, commences from 26 May 1982 when the complaint was filed until payment is made. The rest of the said decision was retained in all other respects. Rizal Insurance filed the petition for review on certiorari.

Issue [1]: Whether the fire insurance policy litigated upon protected only the contents of the main building (four-span), and did not include those stored in the two-storey annex building; or whether the so called "annex" was not an annex but was actually an integral part of the four-span building and therefore, the goods and items stored therein were covered by the same fire insurance policy.

Held [1]: INCLUDES 2-STORY ANNEX BUILDING. The stipulation in subject fire insurance policy regarding its coverage, reads "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." Therefrom, it can be gleaned unerringly that the fire insurance policy in question did not limit its coverage to what were stored in the fourspan building. The two-storey building involved a permanent structure, which adjoins and intercommunicates with the "first right span of the lofty storey building", formed part thereof, and meets the requisites for compensability under the fire insurance policy sued upon. So also, considering that the two-storey building aforementioned was already existing when subject fire insurance policy contract was entered into on 12 January 1981, having been constructed sometime in 1978, Rizal Insurance should have specifically excluded the said two-storey building from the coverage of the fire insurance if minded to exclude the same but it 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.

Issue [2]: Whether the ambiguity in fire insurance policy should be resolved against Rizal Surety.

Held [2]: YES. The stipulation as to the coverage of the fire insurance policy under controversy has created a doubt regarding the portions of the building insured thereby. Article 1377 of the New Civil Code provides that "The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity." Conformably, it stands to reason that the doubt should be resolved against Rizal Insurance, whose lawyer or managers drafted the fire insurance policy contract under scrutiny. Citing the aforecited provision of law in point, the Court in Landicho vs. Government Service Insurance System, ruled that "as regards insurance policies, in respect of which it is settled that the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain 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' (29 Am. Jur., 181), 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.' (44 C.J.S., p. 1174)." Equally relevant is the following disquisition of the Court in Fieldmen's Insurance Company, Inc. vs. Vda. De Songco, where it was held that the "rigid application of the rule on ambiguities has become necessary in view of current business practices. The courts cannot ignore that nowadays monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared 'agreements' that the weaker party may not change one whit, his participation in the 'agreement' being reduced to the alternative to 'take it or leave it' labelled since Raymond Saleilles 'contracts by adherence' (contrats [sic] d'adhesion), in contrast to these entered into by parties bargaining on an equal footing, such contracts (of which policies of insurance and international bills of lading are prime example) obviously call for greater strictness and vigilance on the part of courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary."

Philamcare Health Systems Inc. vs. Court of Appeals[GR 125678, 18 March 2002] First Division, Ynares-Santiago (J): 3 concur

Facts: Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with Philamcare Health Systems, Inc. In the standard application form, he answered no to the following question: "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). " The application was approved for a period of one year from 1 March 1988 to 1 March 1989. Accordingly, he was issued Health Care Agreement P010194. Under the agreement, Trinos' 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 1 March 1989 to 1 March 1990, then from 1 March 1990 to 1 June 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 one month beginning 9 March 1990. While her husband was in the hospital, Trinos tried to claim the benefits under the health care agreement. However, Philamcare denied her claim saying that the Health Care Agreement was void. According to Philamcare, there was a concealment regarding Ernani's medical history. 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. Thus, Trinos paid the hospitalization expenses herself, amounting to about P76,000.00. After her husband was 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, Trinos brought her husband home again. In the morning of 13 April 1990, Ernani had fever and was feeling very weak. Trinos was constrained to bring him back to the Chinese General Hospital where he died on the same day. On 24 July 1990, Trinos instituted with the Regional Trial Court of Manila, Branch 44, an action for damages against Philamcare and its president, Dr. Benito Reverente (Civil Case 90 53795). She asked for reimbursement of her expenses plus moral damages and attorney's fees. After trial, the lower court ruled against Philamcare and Reverente, ordering them to pay and reimburse the medical and hospital coverage of the late Ernani Trinos in the amount of P76,000.00 plus interest, until the amount is fully paid to plaintiff who paid the same; the reduced amount of moral damages of P10,000.00 to Trinos; the reduced amount of P10,000.00 as exemplary damages to Trinos; and the attorney's fees of P20,000.00, plus costs of suit. On appeal, the Court of Appeals affirmed the decision of the trial court but deleted all awards for damages and absolved Reverente. Philamcare's motion for reconsideration was denied. Hence, Philamcare brought the petition for review, raising the primary argument that a health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance Code does not apply

Issue [1]: Whether a health care agreement between Philamcare and Ernani Trinos is an insurance contract.

Held [1]: YES. 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: (1) The insured has an insurable interest; (2) The insured is subject to a risk of loss by the happening of the designated 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; and (5) In consideration of the insurer's promise, the insured pays a premium. Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured against. Every person has an insurable interest in the life and health of himself. Section 10 provides that "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." Herein, the insurable interest of Trinos' husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.

Issue [2]: Whether answers made in good faith, where matters of opinion or judgment are called for, without intent to deceive will avoid a policy when they were untrue.

Held [2]: NO. 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. Thus, although false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud. 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. In any case, with or without the authority to investigate, Philamcare is liable for claims made under the contract. Having assumed a responsibility under the agreement, Philamcare 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.

Issue [3]: Whether rescission must be exercised before commencement of an action on the contract.

Held [3]: YES. Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance." The right to rescind should be exercised previous to the commencement of an action on the contract. Herein, no rescission was made. Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the following 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 of the above pre-conditions was fulfilled in this case. 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. By reason of the exclusive control of the insurance company over the terms and phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor of the insured, especially to avoid forfeiture. This is equally applicable to Health Care Agreements.

Issue [4]: Whether the membership of the late Trinos is now incontestable.

Held [4]: YES. Under the title Claim procedures of expenses, Philamcare 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.

Gulf Resorts Inc. vs. Philippine Charter Insurance Corporation [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 AmericanHomeAssurance 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 thepaymentby 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 thisinsurancecovers 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 itsInsurancePolicy 31944 for damages on its properties. Respondent denied petitioners claim on the ground that itsinsurancepolicy 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. Aninsurancepremium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. In fire, casualty and marineinsurance, 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 nomentionof any premium payable for the other resort properties with regard to earthquake shock. This is consistent with thehistoryof petitioners insurancepolicies with AHAC.

PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL REVENUEGR. NO. 1677330 September 18, 2009, SPECIAL FIRST DIVISION (CORONA, J.)FACTS:Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization to take care of the sick and disabled persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of the organization. On January 27, 2000, respondent CIR sent petitioner a formal deman letter and the corresponding assessment notices demanding the payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the total amount of P224,702,641.18. The deficiency assessment was imposed on petitioners health care agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code. Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not act on the protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of the deficiency VAT and DST assessments. On April 5, 2002, the CTA rendered a decision, ordering the petitioner to PAY the deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January 20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus 20% interest from January 20, 1998 until fully paid for the 1997 VAT deficiency. Accordingly, VAT Ruling No. [231]-88 is declared void and without force and effect. The 1996 and 1997 deficiency DST assessment against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is ORDERED to DESIST from collecting the said DST deficiency tax. Respondent appealed the CTA decision to the (CA) insofar as it cancelled the DST assessment. He claimed that petitioners health care agreement was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.

On August 16, 2004, the CA rendered its decision which held that petitioners health care agreement was in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the deficiency Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.

ISSUES:(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.(2) Whether or not the agreements between petitioner and its members possess all elements necessary in the insurance contract.

HELD:NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said in June 12, 2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its agreements are treated as insurance contracts and the DST is not a tax on the business but an excise on the privilege, opportunity or facility used in the transaction of the business. Petitioner, however, submits that it is of critical importance to characterize the business it is engaged in, that is, to determine whether it is an HMO or an insurance company, as this distinction is indispensable in turn to the issue of whether or not it is liable for DST on its health care agreements. Petitioner is admittedly an HMO. Under RA 7878 an HMO is an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fixed prepaid premium. The payments do not vary with the extent, frequency or type of services provided. Section 2 (2) of PD 1460 enumerates what constitutes doing an insurance business or transacting an insurance businesswhich are making or proposing to make, as insurer, any insurance contract; making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

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 petitioners business is miniscule compared to its noninsurance activities. Therefore, since it substantially provides health care services rather than insurance services, it cannot be considered as being in the insurance business.

Great Pacific Life Assurance Company vs. Court of Appeals [GR L-31845, 30 April 1979]

Facts: On 14 March 1957, Ngo Hing filed an application with the Great Pacific Life Assurance Company for a 20-year endowment policy in the amount of P50,000.00 on the life of his one-year old daughter Helen Go. Ngo Hing supplied the essential data which Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the corresponding form in his own handwriting . Mondragon finally type-wrote the data on the application form which was signed by Ngo Hing. The latter paid the annual premium, the sum of P1,077.75 going over to the Company, but he retained the amount of P1,317.00 as his commission for being a duly authorized agent of Pacific Life. Upon the payment of the insurance premium, the binding deposit receipt was issued to Ngo Hing. Likewise, Mondragon handwrote at the bottom of the back page of the application form his strong recommendation for the approval of the insurance application. Then on 30 April 1957, Mondragon received a letter from Pacific Life disapproving the insurance application. The letter stated that the said life insurance application for 20-year endowment plan is not available for minors below 7 years old, but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the Company. The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by Mondragon to Ngo Hing. Instead, on 6 May 1957, Mondragon wrote back Pacific Life again strongly recommending the approval of the 20-year endowment life insurance on the ground that Pacific Life is the only insurance company not selling the 20- year endowment insurance plan to children, pointing out that since 1954 the customers, especially the Chinese, were asking for such coverage. It was when things were in such state that on 28 May 1957 Helen Go died of influenza with complication of broncho-pneumonia. Thereupon, Ngo Hing sought the payment of the proceeds of the insurance, but having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of Cebu, which rendered a decision against Pacific Life and Mondragon, orderig them to solidarily pay Ngo Hing the amount of P50,000.00 with interest at 6% from the date of the filing of the complaint, and the sum of P10,000.00 as attorney's fees plus costs of suits. On appeal, the Court of Appeals set aside the appealed decision of the Court of First Instance of Cebu, and absolved Pacific Life and Mondragon from liability on the insurance policy, but ordered the reimbursement to Ngo Hing the amount of P1,077.75, without interest. On reconsideration, however, the appellate court affirmed in toto the decision of the Court of First Instance of Cebu, ordering Pacific Life and Mondragon jointly and severally to pay Ngo Hing. Two petitions for certiorari by way of appeal were filed by Pacific Life and Mondragon. The petitons were consolidated by the Supreme Court in a resolution dated 29 April 1970.

Issue: Whether the binding deposit receipt constituted a temporary contract of the life insurance in question, and thus negate 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 abovequoted 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.

Eternal Gardens Memorial Park Corporation v Philamlife (Insurance)G.R. No. 166245 April 9, 2008ETERNAL GARDENS MEMORIAL PARK CORPORATION, petitioner,vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondent.FACTS:Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-19202 with petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots.

Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot purchasers. In relation to the instant petition, Eternal complied by submitting a letter dated December 29, 1982,4 containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as "new business" was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died.

Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an insurance claim for Chuang's death.After more than a year, Philamlife had not furnished Eternal with any reply to the latter's insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.8

In response to Eternal's demand, Philamlife denied Eternal's insurance claim in a letter dated May 20, 1986. Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC).

DECISION OF LOWER COURTS:(1) RTC : in favor of Eternal. due to Philamlife's inaction from the submission of the requirements of the group insurance on December 29, 1982 to Chuang's death on August 2, 1984, as well as Philamlife's acceptance of the premiums during the same period, Philamlife was deemed to have approved Chuang's application. The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must follow.(2) CA : in favor of Philamlife. there being no application form, Chuang was not covered by Philamlife's insurance.

ISSUE: May the inaction of the insurer on the insurance application be considered as approval of the application?

RULING:YES. As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

An examination of the above provision would show ambiguity between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can become effective.

It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter's interest.

The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that the insurance forms for the attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. Such receipt is an admission by Philamlife against its own interest.13 The burden of evidence has shifted to Philamlife, which must prove that the letter did not contain Chuang's insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have received Chuang's insurance application.

The seemingly conflicting provisions must be harmonized to mean that upon a party's purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.

Enriquez V. Sun Life Assurance Co. Of Canada (1920)G.R. No. L-15895 November 29, 1920Lessons Applicable: Perfection (Insurance)FACTS:September 24, 1917: Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity2 days later: he paid P6,000 to the manager of the company's Manila office and was given a receiptaccording to the provisional receipt, 3 things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; -check(2) there had to be approval of the application by the head office of the company; and - check(3) this approval had in some way to be communicated by the company to the applicant - ?November 26, 1917: The head office at Montreal, Canada gave notice of acceptance by cable to Manila but this was not mailedDecember 4, 1917: policy was issued at MontrealDecember 18, 1917: attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his applicationDecember 19, 1917: local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of November 26, 1917December 21, 1917 morning: received by Mr. TorresDecember 20, 1917: Mr. Herrer diedRafael Enriquez, as administrator of the estate of the late Joaquin Ma. Herrer filed to recover from Sun Life Assurance Company of Canada through its office in Manila for a life annuityRTC: favored Sun Life Insurance

ISSUE: W/N Mr. Herrera received notice of acceptance of his application thereby perfecting his life annuity

HELD: NO. Judgment is reversed, and the Enriquez shall have and recover from the Sun Life the sum of P6,000 with legal interest from November 20, 1918, until paid, without special finding as to costs in either instance. So ordered.

Civil Code: Art. 1319 (formerly Art.1262)Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made.Therefore, it was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.Enriquez vs. Sun Life Assurance Co. [GR 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.

Enriquez vs. Sun Life Assurance Company of Canada [GR 15895, 29 November 1920]Facts: On 24 September 1917, Joaquin Herrer made application to the Sun Life Assurance Company of Canada through its office in Manila for a life annuity. Two days later he paid the sum of P6,000 to the manager of the company's Manila office and was given a receipt. The application was immediately forwarded to the head office of the company at Montreal, Canada. On 26 November 1917, the head office gave notice of acceptance by cable to Manila. (Whether on the same day the cable was received notice was sent by the Manila office to Herrer that the application had been accepted, is a disputed point.) On 4 December 1917, the policy was issued at Montreal. On 18 December 1917, attorney Aurelio A. Torres wrote to the Manila office of the company stating that Herrer desired to withdraw his application. The following day the local office replied to Mr. Torres, stating that the policy had been issued, and called attention to the notification of 26 November 1917. This letter was received by Mr. Torres on the morning of 21 December 1917. Mr. Herrer died on 20 December 1917. An action was brought by Rafael Enriquez as administrator of the estate of the late Joaquin Ma. Herrer to recover from Sun Life Assurance Company of Canada the sum of P6,000 paid by the deceased for a life annuity. The trial court gave judgment for Sun Life. Enriquez appealed.

Issue: Whether Herrer received notice of acceptance of his application, to hold that the contract for a life annuity was perfected.

Held: NO. The letter of 26 November 1917, notifying Mr. Ferrer that his application had been accepted, was prepared and signed in the local office of the insurance company, was placed in the ordinary channels for transmission, but was never actually mailed and thus was never received by the applicant. The Civil Code rule, that an acceptance made by letter shall bind the person making the offer only from the date it came to his knowledge, may not be the best expression of modern commercial usage. Still it must be admitted that its enforcement avoids uncertainty and tends to security. Not only this, but in order that the principle may not be taken too lightly, it is identical with the principles announced by a considerable number of respectable, courts in the United States. The courts who take this view have expressly held that an acceptance of an offer of insurance not actually or constructively communicated to the proposer does not make a contract. Only the mailing of acceptance, it has been said, completes the contract of insurance, as the locus poienitentise is ended when the acceptance has passed beyond the control of the party. In resume, therefore, the law applicable to the case is found to be the second paragraph of article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of the application by the head office of the company; and (3) this approval had in some way to be communicated by the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually write the letter of notification and place it in the usual channels for transmission to the addressee. The fact as to the letter of notification thus fails to concur with the essential elements of the general rule pertaining to the mailing and delivery of mail matter as announced by the American courts, namely, when a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have been received by the addressee unless it is shown that it was deposited in the post-office, properly addressed and stamped. The contract for a life annuity in the case at bar was not perfected because it has not been proved satisfactorily that the acceptance of the application ever came to the knowledge of the applicant.

Development Bank of the Philippines vs. Court of Appeals [GR 109937, 21 March 1994]Facts: In May 1987, Juan B. Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000.00 with the Development Bank of the Philippines (DBP), Basilan Branch. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). A loan, in the reduced amount of P300,000.00, was approved by DBP on 4 August 1987 and released on 11 August 1987. From the proceeds of the loan, DBP deducted the amount of P1,476.00 as payment for the MRI premium. On 15 August 1987, Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool." On 20 August 1987, the MRI premium of Dans, less the DBP service fee of 10%, was credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit. On 3 September 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool. On 23 September 1987, the 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. On 21 October 1987, DBP apprised Candida Dans of the disapproval of her late husband's MRI application. The DBP offered to refund the premium of P1,476.00 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 to the loan. She, likewise, refused to accept an ex gratia settlement of P30,000.00, which the DBP later offered. On 10 February 1989, the Estate of the Late Juan B. Dans, through Candida Dans as administratrix, filed a complaint with the Regional Trial Court, Branch I, Basilan, against DBP and the insurance pool for collection of Sum of Money with Damages. On 10 March 1990, the trial court rendered a decision in favor of the Estate and against DBP. The DBP MRI Pool, however, was absolved from liability, after the trial court found no privity of contract between it and the deceased. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of his age ineligibility. The court ordered DBP to return and reimburse the Estate the amount of P139,500.00 plus legal rate of interest as amortization payment paid under protest; to consider the mortgage loan of P300,000.00 including all interest accumulated or otherwise to have been settled, satisfied or set-off by virtue of the insurance coverage of the late Juan B. Dans; to pay the Estate the amount of P10,000.00 as attorney's fees; to pay the Estate the amount of P10,000.00 as costs of litigation and other expenses, and other relief just and equitable. The DBP appealed to the Court of Appeals. In a decision dated 7 September 1992, the appellate court affirmed in toto the decision of the trial court. The DBP's motion for reconsideration was denied in a resolution dated 20 April 1993. DBP filed the petition for review on certiorari.

Issue [1]: Whether there was a perfected contract of insurance for DBP MRI Pool to be held liable.

Held [1]: NO. When Dans applied for MRI, he filled up and personally signed a "Health Statement for DBP Pool" with the following declaration: "I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the best of my knowledge and belief and form part of my application for insurance. It is understood and agreed that no insurance coverage shall be effected unless and until this application is approved and the full premium is paid during my continued good health." Under the aforementioned provisions, the MRI coverage shall take effect: (1) when the application shall be approved by the insurance pool; and (2) when the full premium is paid during the continued good health of the applicant. These two conditions, being joined conjunctively, must concur. Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which DBP credited to its account with full knowledge that it was payment for Dan's 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.

Issue [2]: Whether DBP is liable for the entire value of the insurance policy, as it led Dans to believe that he has fulfilled all the requirements for the MRI and that the issuance of his policy was forthcoming.

Held [2]: It was DBP, as a matter of policy and practice, that required Dans, the borrower, to secure MRI coverage. Instead of allowing Dans to look for his own insurance carrier or some other form of insurance policy, DBP compelled him to apply with the DBP MRI Pool for MRI coverage. When Dan's loan was released on 11 August 1987, DBP already deducted from the proceeds thereof the MRI premium. Four days latter, DBP made Dans fill up and sign his application for MRI, as well as his health statement. The DBP later submitted both the application form and health statement to the DBP MRI Pool at the DBP Main Building, Makati Metro Manila. As service fee, DBP deducted 10% of the premium collected by it from Dans. In dealing with Dans, DBP was wearing two 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. Apparently, DBP had full knowledge that Dan's application was never going to be approved. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned. 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 for MRI coverage because of his advanced age, DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's commission and service fee. The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him. The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for DBP's concealment of the limits of its authority, Dans would have secured an MRI from another insurance company, and therefore would have been fully insured by the time he died, is highly speculative. Considering his advanced age, there is no absolute certainty that Dans could obtain an insurance coverage from another company. It must also be noted that Dans died almost immediately, i.e., on the nineteenth day after applying for the MRI, and on the twenty-third day from the date of release of his loan.

CIR vs Lincoln Philippine Life Insurance Company, Inc. & CA(now JARDINE-CMA LIFE INSURANCE COMPANY, INC.)[G.R.No.119176.March19,2002]379 SCRA 423 Mercantile Law Insurance Law The Policy Automatic Increase in the Coverage Documentary Stamp TaxPrior to 1984, Lincoln Philippine Life Insurance Company, Inc. (now called Jardine-CMA Life Insurance Company, Inc.) used to issue policies called Junior Estate Builder Policy. A clause therein provides for an automatic increase in the amount of life insurance coverage upon attainment of a certain age by the insured without the need of issuing a new policy. The clause was to take effect in the year 1984. Documentary stamp taxes due on the policy were paid by Lincoln Philippine only on the initial sum assured.When the clause became effective in 1984, the Commissioner of Internal Revenue assessed an additional tax on the increased amount of the coverage of the said policies. Said tax was to cover the deficiency documentary stamps tax for said year. The Court of Appeals ruled that there is only one policy and the automatic increase is not a separate policy; that said increase of coverage is not covered by another documentary stamp tax.ISSUE:Whether or not there is only one policy.HELD:Yes. 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. It is thus clear that any rider, clause, warranty or endorsement pasted or attached to the policy is considered part of such policy or contract of insurance.The subject insurance policy at the time it was issued contained an automatic increase clause. Although the clause was to take effect only in 1984, it was written into the policy at the time of its issuance. The distinctive feature of the junior estate builder policy called the automatic increase clause already formed part and parcel of the insurance contract, hence, there was no need for an execution of a separate agreement for the increase in the coverage that took effect in 1984 when the assured reached a certain age.The said increase however is imposable with documentary stamp taxes. The original documentary stamps tax paid by Lincoln Philippine covers the original amount of the policies without the projected increase. The said increase was already definite at the time of the issuance of the policy. Thus, 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.While tax avoidance schemes and arrangements are not prohibited, tax laws cannot be circumvented in order to evade the payment of just taxes. In the case at bar, 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.

Violeta R. Lalican v. Insular Life Assurance Co. Ltd.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 Malaluans 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 Malaluans 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, Eulogios 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 Eulogios death, his policy has already lapsed and he failed to reinstate the same. Violeta requested are consideration 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 favour of Insular Life and after the former denied her motion for reconsideration, she directly 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 applicants lifetime and good health and whatever amount the application paid in connection was considered to be a deposit only until approval of said application. Eulogios 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.

Lalican v. Insular Life Assurance Company Limited (2009)Summary:Eulogio applied for an insurance policy with Insular Life through its agent Josephine Malaluan who issued him a 20-Year Endowment Variable Income Package Flexi Plan worth P500,000 with 2 riders at P500,000 each with Violeta as the primary beneficiary. However, he failed to pay and allowed the policy to be void after the lapse of the 31-day grace period. Just when he was to pay the default amount with interest, he died beforeMalaluan was able to submit his application for reinstatement to Insular life for approval. Violeta filed a case with the RTC and was not able to appeal due to the negligence of her lawyer so he filed a petition for Certiorari. RTC, SC: denied.The cardinal principle in Insurance Law is that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurance company, yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms, which the parties themselves have used. (Lalican vs. Insular Life Assurance Company, Ltd. 597 SCRA 159, 2009)The existence of an insurance interest gives a person the legal right to insure the subject matter of the policy of insurance. Section 19 of the Insurance Code states that an interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs. (Lalican vs. Insular Life Assurance Company Ltd, 597 SCRA 159, 2009)Insurance; insurable interest. Insurable interest is one of the most basic and essential requirements in an insurance contract. In general, an insurable interest is that interest which a person is deemed to have in the subject matter insured, where he has a relation or connection with or concern in it, such that the person will derive pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary loss or damage from its destruction, termination, or injury by the happening of the event insured against. The existence of an insurable interest gives a person the legal right to insure the subject matter of the policy of insurance. Section 10 of the Insurance Code indeed provides that every person has an insurable interest in his own life. Section 19 of the same code also states that an interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.Insurance; reinstatement. 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 the Application for Reinstatement provide for specific conditions for the reinstatement of a lapsed policy. In the instant case,Eulogiosdeath rendered impossible full compliance with the conditions for reinstatement of Policy No. 9011992. True,Eulogio, before his death, managed to file his Application for Reinstatement and deposit the amount for payment of his overdue premiums and interests thereon withMalaluan; but Policy No. 9011992 could only be considered reinstated after the Application for Reinstatement had been processed and approved by Insular Life duringEulogioslifetime and good health.Eulogiosdeath, just hours after filing his Application for Reinstatement and depositing his payment for overdue premiums and interests withMalaluan, does not constitute a special circumstance that can persuade this Court to already consider Policy No. 9011992 reinstated. Said circumstance cannot override the clear and express provisions of the Policy Contract and Application for Reinstatement, and operate to remove the prerogative of Insular Life thereunder to approve or disapprove the Application for Reinstatement. Even though the Court commiserates withVioleta, as the tragic and fateful turn of events leaves her practically empty-handed, the Court cannot arbitrarily burden Insular Life with the payment of proceeds on a lapsed insurance policy. Justice and fairness must equally apply to all parties to a case. Courts are not permitted to make contracts for the parties. The function and duty of the courts consist simply in enforcing and carrying out the contracts actually made. VioletaR.Lalicanvs. The Insular Life Assurance Company Limited, as represented by the President Vicente R.Avilon,G.R. No. 183526, August 25, 2009.

Pineda v Insular G.R. No. 105562 September 27, 1993Facts:PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during the effectivity of the policy, perished while the ship sank in Morocco. The families of the victims then wanted to claim the benefits of the insurance. Hence, under the advice of Nuval, the president of PMSI, they executed a special power of attorney authorizing Capt. Nuval to, "follow up, ask, demand, collect and receive" for their benefit the indemnities.Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00 and another for P40,00.00, payable to the order the families. The checks were given to PMSI. Nuval, the PMSI president, pocketed the amounts in his bank account.When the families went to insular to get the benefits, their request was denied because Insular claimed that the checks were already given to PMSI.The families filed a petition with the Insurance Commission. They won and Insular was ordered to pay them 500 a day until the amount was furnished to them. The insurance Commission held that the special powers of attorney executed by complainants do not contain in unequivocal and clear terms authority to Nuval to obtain and receive from respondent company insurance proceeds arising from the death of the seaman-insured; also, that Insular Life did not convincingly refuted the claim of Mrs. Alarcon that neither she nor her husband executed a special power of authority in favor of Capt. Nuval and that it did not observe Sec 180(3), when it released the benefits due to the minor children of Ayo and Lontok, when the said complainants did notpost a bond as required-Insular Life appealed to the CA. CA modified the decision of the Insurance Commission, eliminating the award to the minor children.Hence, this petition by the beneficiary families.

Issues:1. WON Insular Life should still be liable to the complainants when they relied on the special powers of attorney, which Capt. Nuval presented as documents, when they released the checks to the latter.2. WON Insular Life should be liable to the complainants when they released the check in favor of Ayo and Lontok, even if no bond was posted as required.

Held: Yes to both. Petition granted.

Ratio:1. The special powers of attorney "do not contain in unequivocal and clear terms authority to Capt. Nuval to obtain, receive, receipt from respondent company insurance proceeds arising from the death of the seaman-insured.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.They gave the proceeds to the policyholder instead of the beneficiaries themselves. Even the Isnular rep admitted that he gave the checks to the policyholder.Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it acted imprudently and negligently in the premises by relying without question on the special power of attorney.Strong vs. Repide- third persons deal with agents at their peril and are bound to inquire as to the extent of the power of the agent with whom they contract.Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also act with ordinary prudence and reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he cannot claim protection the party dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs.Insular delivered the checks to a party not the agent of the beneficiaries.2. 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.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.On group insurance :Group insurance is essentially a single insurance contract that provides coverage for many individuals, particularly for the employees of one employer.There is a master agreement issued to an employer. The employer acts as the collector of the dues and premiums. Disbursement of insurance payments by the employer is also one of his duties.They require an employee to pay a portion of the premium, which the employer deducts from wages while the remainder is paid by the employer. This is known as a contributory plan as compared to a non-contributory plan where the premiums are solely paid by the employer.Although the employer may be the policyholder, the insurance is actually for the benefit of the employee. In a non-contributory plan, the payment by the employer of the entire premium is a part of the total compensation paid for the services of the employee.The primary aim of group insurance is to provide the employer with a means of procuring insurance protection for his employees at a low cost and thereby retain their loyalty and efficiency.

The Insular Life Assurance Company Ltd. vs. Ebrado [GR L-44059, 28 October 1977] First Division, Martin (J): 5 concurFacts: On 1 September 1968, Buenaventura Cristor Ebrado was issued by the Insular Life Assurance Co., Ltd., Policy 009929 on a whole-life plan for P5,882.00 with a rider for Accidental Death Benefits for the same amount. Buenaventura C. Ebrado designated Carponia T. Ebrado as the revocable beneficiary in his policy. He referred to her as his wife. On 21 October 1969, Buenventura C. Ebrado died as a result of an accident when he was hit by a falling branch of a tree. As the insurance policy was in force, Insular Life stands liable to pay the coverage of the policy in an amount of P11,745.73, representing the face value of the policy in the amount of P5,882.00 plus the additional benefits for accidental death also in the amount of P5,882.00 and the refund of P18.00 paid for the premium due November, 1969, minus the unpaid premiums and interest thereon due for January and February, 1969, in the sum of P36.27. Carponia T. Ebrado filed with the insurer a claim for the proceeds of the policy as the designated beneficiary therein, although she admits that she and the insured Buenaventura C. Ebrado were merely living as husband and wife without the benefit of marriage. Pascuala Vda. de Ebrado also filed her claim as the widow of the deceased insured. She asserts that she is the one entitled to the insurance proceeds, not the common-law wife, Carponia T. Ebrado. In doubt as to whom the insurance proceeds shall be paid, the insurer commenced an action for Interpleader before the Court of First Instance of Rizal on 29 April 1970. On 25 September 1972, the trial court rendered judgment declaring, among others, Carponia T. Ebrado disqualified from becoming beneficiary of the insured Buenaventura Cristor Ebrado and directing the payment of the insurance proceeds to the estate of the deceased insured. From this judgment, Carponia T. Ebrado appealed to the Court of Appeals, but on 11 July 1976, the Appellate Court certified the case to the Supreme Court as involving only questions of law.Issue [1]: Whether a common-law wife named as beneficiary in the life insurance policy of a legally married man can claim the proceeds thereof in case of death of the latter.Held[1]: NO. It is quite unfortunate that the Insurance Act (RA 2327, as amended) or even the new Insurance Code (PD 612, as amended) does not contain any specific provision grossly resolutory of the prime question at hand. Section 50 of the Insurance Act which provides that "(t)he insurance shall be applied exclusively to the proper interest of the person in whose name it is made" cannot be validly seized upon to hold that the same includes the beneficiary. The word "interest" highly suggests that the provision refers only to the insured and not to the beneficiary, since a contract of insurance is personal in character. Otherwise, the prohibitory laws against illicit relationships especially on property and descent will be rendered nugatory, as the same could easily be circumvented by modes of insurance. Rather, the general rules of civil law should be applied to resolve this void in the Insurance Law. Article 2011 of the New Civil Code states: "The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code." When not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. And under Article 2012 of the same Code, "any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him." Common-law spouses are, definitely, barred from receiving donations from each other. Article 739 of the new Civil Code provides that "the following donations shall be void: (1) Those made between persons who were guilty of adultery or concubinage at the time of donation; (2) Those made between persons found guilty of the same criminal offense, in consideration thereof; (3) Those made to a public officer or his wife, descendants or ascendants by reason of his office. In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action." In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Article 739 of the new Civil Code should equally operate in life insurance contracts. The mandate of Article 2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. Under American law, a policy of life insurance is considered as a testament and in construing it, the courts will, so far as possible treat it as a will and determine the effect of a clause designating the beneficiary by rules under which wills are interpreted. Policy considerations and dictates of morality rightly justify the institution of a barrier between common-law spouses in regard to property relations since such relationship ultimately encroaches upon the nuptial and filial rights of the legitimate family. There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration. As pointed out, a beneficiary in a life insurance policy is no different from a donee. Both the recipients of pure beneficence. So long as marriage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship. If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities.

Issue [2]: Whether a conviction for adultery or concubinage is exacted before the disabilities mentioned in Article 739 may effectuate.

Held [2]: NO. A conviction for adultery or concubinage is not exacted before the disabilities mentioned in Article 739 may effectuate. More specifically, with regard to the disability on "persons who were guilty of adultery or concubinage at the time of the donation," Article 739 itself provides that "In the case referred to in No. 1, the action for declaration of nullity may be brought by the spouse of the donor or donee; and the guilt of the donee may be proved by preponderance of evidence in the same action." The underscored clause neatly conveys that no criminal conviction for the disqualifying offense is a condition precedent. In fact, it cannot even be gleaned from the aforequoted provision that a criminal prosecution is needed. On the contrary, the law plainly states that the guilt of the party may be proved "in the same action" for declaration of nullity of donation. And, it would be sufficient if evidence preponderates upon the guilt of the consort for the offense indicated. The quantum of proof in criminal cases is not demanded. Herein, the requisite proof of common- law relationship between the insured and the beneficiary has been conveniently supplied by the stipulations between the parties in the pre-trial conference of the case. It was agreed upon and stipulated therein that the deceased insured Buenaventura C. Ebrado was married to Pascuala Ebrado with whom she has six legitimate children; that during his lifetime, the deceased insured was living with his common-law wife, Carponia Ebrado, with whom he has two children. These stipulations are nothing less than judicial admissions which, as a consequence, no longer require proof and cannot be contradicted. A fortiori, on the basis of these admissions, a judgment may be validly rendered without going through the rigors of a trial for the sole purpose of proving the illicit liaison between the insured and the beneficiary.

Filipino Merchants Insurance Co. Inc. vs. Court of Appeals [GR 85141, 28 November 1989]

Facts: In December 1976, Choa Tiek Seng insured said shipment with Filipino Merchants Insurance Company (FMICI) under cargo Policy M-2678 for the sum of P267,653.59 for the goods described as 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. Actually, what was imported was 59.940 metric tons not 600 tons at $395.42 a ton CNF Manila. The fishmeal in 666 new gunny bags were unloaded from the ship on 11 December 1976 at Manila unto the arrastre contractor E. Razon, Inc. and FMICI's surveyor ascertained and certified that in such discharge 105 bags were in bad order condition as jointly surveyed by the ship's agent and the arrastre contractor. The condition of the bad order was reflected in the turn over survey report of Bad Order cargoes 120320 to 120322, consisting of 3 pages. The cargo was also surveyed by the arrastre contractor before delivery of the cargo to the consignee and the condition of the cargo on such delivery was reflected in E. Razon's Bad Order Certificates 14859, 14863 and 14869 covering a total of 227 bags in bad order condition. FMICI's surveyor has conducted a final and detailed survey of the cargo in the warehouse for which he prepared a survey report with the findings on the extent of shortage or loss on the bad order bags totalling 227 bags amounting to 12,148 kilos. Based on said computation, Choa made a formal claim against FMICI for P51,568.62 the computation of which claim is contained therein. A formal claim statement was also presented by the Choa against the vessel dated 21 December 1976, but FMICI refused to pay the claim. Consequently, an action was brought by the consignee (Choa Tiek Seng) of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about 11 December 1976 and seeks to recover from FMICI the amount of P51,568.62 representing damages to said shipment which has been insured by FMICI under Policy M-2678. FMICI brought a third party complaint against third party defendants Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc. seeking judgment against the third party defendants in case judgment is rendered against FMICI. The court below, after trial on the merits, rendered judgment in favor of Choa, ordering FMICI to pay Choa the sum of P51,568.62 with interest at legal rate from the date of the filing of the complaint; and, on the third party complaint, the third party defendant Compagnie Maritime Des Chargeurs Reunis and third party defendant E. Razon, Inc. are ordered to pay FMICI jointly and severally reimbursement of the amounts paid by FMICI with legal interest from the date of such payment until the date of such reimbursement; without pronouncement as to costs. On appeal, and on 18 July 1988, the Court of Appeals affirmed the decision of the lower court insofar as the award on the complaint is concerned and modified the same with regard to the adjudication of the third-party complaint. A motion for reconsideration of the aforesaid decision was denied, hence FMICI filed the petition for review.

Issue [1]: Whether an "all risks" marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be "some fortuity," "casualty" or "accidental cause" to which the alleged loss is attributable.Held [1]: NO. The "all risks clause" of the Institute Cargo Clauses read as follows "5. This insurance is against all risks of logs or damage to the subject-matter insured but shall in no case be deemed to extend to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject-matter insured. Claims recoverable hereunder shall be payable irrespective of percentage." An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. The terms "accident" and "accidental", as used in insurance contracts, have not acquired any technical meaning. They are construed by the courts in their ordinary and common acceptance. Thus, the terms have been taken to mean that which happens by chance or fortuitously, without intention and design, and which is unexpected, unusual and unforeseen. An accident is an event that takes place without one's foresight or expectation; an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected. The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a wilful and fraudulent act of the insured. This is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. An "all risks" policy has been evolved to grant greater protection than that afforded by the "perils clause," in order to assure that no loss can happen through the incidence of a cause neither insured against nor creating liability in the ship; it is written against all losses, that is, attributable to external causes. The term "all risks" cannot be given a strained technical meaning, the language of the clause under the Institute Cargo Clauses being unequivocal and clear, to the effect that it extends to all damages/losses suffered by the insured cargo except (a) loss or damage or expense proximately caused by delay, and (b) loss or damage or expense proximately caused by the inherent vice or nature of the subject matter insured.

Issue [2]: Whether the failure of Choa to adduce evidence, showing that the alleged loss to the cargo in question was due to a fortuitous event, precludes his right to recover from the insurance policy.Held [2]: NO. Although generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, 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. As held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that the insurance company has the burden of proving that the loss is caused by the risks excepted and for want of such proof, the company is liable. Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage; the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated, and covers all losses except such as arise from the fraud of the insured. The burden of the insured, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to prove that the loss was due to excepted perils. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance.

Issue [3]: Whether the insurer is liable Held [3]: There being no showing that the loss was caused by any of the excepted perils, the insurer is liable under the policy. It is believed that in the absence of any showing that the losses/damages were caused by an excepted peril, i.e. delay or the inherent vice or nature of the subject matter insured, and there is no such showing, the loss was covered by the policy. Herein, there is no evidence presented to show that the condition of the gunny bags in which the fishmeal was packed was such that they could not hold their contents in the course of the necessary transit, much less any evidence that the bags of cargo had burst as the result of the weakness of the bags themselves. Had there been such a showing that spillage would have been a certainty, there may have been good reason to plead that there was no risk covered by the policy (See Berk vs. Style [1956] cited in Marine Insurance Claims, p. 125). Under an all risks policy, it was sufficient to show that there was damage occasioned by some accidental cause of any kind, and there is no necessity to point to any particular cause. Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The agreement has the force of law between the parties. The terms of the policy constitute the measure of the insurer's liability. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense.

Issue [4]: Whether the consignee (Choa) has an insurable interest in said goods.Held [4]: Choa, as consignee of the goods in transit under an invoice containing the terms under "C & F Manila," has insurable interest in said goods. 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. In principle, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property. Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. As vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. 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 he performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in the present case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficien