1. White Gold Marine Services vs. Pioneer Insurance, et al. (GR No.
RULING
154514, 28 July 2005);
White Gold Marine Services Inc. v. Pioneer Insurance and Surety Corp.
GR no. 154514
July 28, 2005
Quisumbing, J.
FACTS
White Gold Marine Services, Inc. procured a protection and
indemnity coverage for its vessels from The Steamship Mutual Underwriting
Association Limited through Pioneer Insurance and Surety Corporation.
White Gold was issued a Certificate of Entry and Acceptance. Pioneer also
issued receipts evidencing payments for the coverage. When White Gold
failed to fully pay its accounts, Steamship Mutual refused to renew the
coverage.
Steamship Mutual thereafter filed a case against White Gold for
collection of sum of money to recover the latter’s unpaid balance. White Gold
on the other hand, filed a complaint before the Insurance Commission
claiming that Steamship Mutual violated Sections 186 and 187, while Pioneer
violated Sections 299, to 301 of the Insurance Code.
The Insurance Commission dismissed the complaint. It said that
there was no need for Steamship Mutual to secure a license because it was
not engaged in the insurance business. It explained that Steamship Mutual
was a Protection and Indemnity Club. Likewise, Pioneer need not obtain
another license as insurance agent and/or a broker for Steamship Mutual
because Steamship Mutual was not engaged in the insurance business.
Moreover, Pioneer was already licensed; hence, a separate license solely as
agent/broker of Steamship Mutual was already superfluous.
The Court of Appeals affirmed the decision of the Insurance
Commissioner. In its decision, the appellate court distinguished between P &
I Clubs vis-à-vis conventional insurance. The appellate court also held that
Pioneer merely acted as a collection agent of Steamship Mutual.
ISSUES
Whether or not Steamship Mutual Underwriting Association (Bermuda) Ltd. Is
engaged in an insurance business.
Whether or not Pioneer Insurance and Surety Corp. needs a license to
operate as the insurance agent/broker of Steamship Mutual?
The test to determine if a contract is an insurance contract or not,
depends on the nature of the promise, the act required to be performed, and
the exact nature of the agreement in the light of the occurrence, contingency,
or circumstances under which the performance becomes requisite. It is not
by what it is called.
Basically, an insurance contract is a contract of indemnity. In it, one
undertakes for a consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.
In particular, a marine insurance undertakes to indemnify the assured against
marine losses, such as the losses incident to a marine adventure. Section 99
of the Insurance Code enumerates the coverage of marine insurance.
A P & I Club is “a form of insurance against third party liability, where
the third party is anyone other than the P & I Club and the members. By
definition then, Steamship Mutual as a P & I Club is a mutual insurance
association engaged in the marine insurance business.
The records reveal Steamship Mutual is doing business in the country
albeit without the requisite certificate of authority mandated by Section 187 of
the Insurance Code. It maintains a resident agent in the Philippines to solicit
insurance and to collect payments in its behalf. We note that Steamship
Mutual even renewed its P & I Club cover until it was cancelled due to no-
payment of the calls. Thus, to continue doing business here, Steamship
Mutual or through its agent Pioneer, must secure a license from the
Insurance Commission.
Since a contract of insurance involves public interest, regulation by the
State is necessary. Thus, no insurer or insurance company is allowed to
engage in the insurance business without a license or a certificate of
authority from the Insurance Commission.
On the second issue, Pioneer is the resident agent of Steamship Mutual
as evidenced by the certificate of registration issued by the Insurance
Commission. It has been licensed to do or transact insurance business by
virtue of the certificate of authority issued by the same agency. However, a
Certification from the Commission states that Pioneer does not have a
separate license to be an agent/broker of Steamship Mutual. Although
Pioneer is already licensed as an insurance company, it needs a separate
license to act as insurance agent for Steamship Mutual.

2. Verendia vs. CA (217 SCRA 417);
Verendia vs. Court of Appeals [GR 76399, 22 January 1993]; also Fidelity &
Surety Co. of the Philippines Inc. vs. Verendia [GR 75605] Third Division,
Melo (J): 4 concur
Facts:
Fidelity and Surety Insurance Company of the Philippines issued its
Fire Insurance Policy F-18876 effective between 23 June 1980 and 23 June
1981 covering Rafael (Rex) Verendia's residential building located at Tulip
Drive, Beverly Hills, Antipolo, Rizal in the amount of P385,000.00.
Designated as beneficiary was the Monte de Piedad & Savings Bank.
Verendia also insured the same building with two other companies, namely,
The Country Bankers Insurance for P56,000.00 under Policy No. PDB-80-
1913 expiring on 12 May 1981, and The Development Insurance for
P400,000.00 under Policy F-48867 expiring on 30 June 1981. While the
three fire insurance policies were in force, the insured property was
completely destroyed by fire on the early morning of 28 December 1980.
Fidelity was accordingly informed of the loss and despite demands, refused
payment under its policy, thus prompting Verendia to file a complaint with the
then Court of First Instance of Quezon City, praying for payment of
P385,000.00, legal interest thereon, plus attorney's fees and litigation
expenses. The complaint was later amended to include Monte de Piedad as
an "unwilling defendant." Answering the complaint, Fidelity, among other
things, averred that the policy was avoided by reason of over-insurance, that
Verendia maliciously represented that the building at the time of the fire was
leased under a contract executed on 25 June 1980 to a certain Roberto
Garcia, when actually it was a Marcelo Garcia who was the lessee. On 24
May 1983, the trial court rendered a decision, per Judge Rodolfo A. Ortiz,
ruling in favor of Fidelity. In sustaining the defenses set up by Fidelity, the
trial court ruled that Paragraph 3 of the policy was also violated by Verendia
in that the insured failed to inform Fidelity of his other insurance coverages
with Country Bankers Insurance and Development Insurance. Verendia
appealed to the then Intermediate Appellate Court and in a decision
promulgated on 31 March 1986, (CA-GR CV 02895, Coquia, Zosa,
Bartolome, and Ejercito (P), JJ.), the appellate court reversed for the
following reasons: (a) there was no misrepresentation concerning the lease
for the contract was signed by Marcelo Garcia in the name of Roberto
Garcia; and (b) Paragraph 3 of the policy contract requiring Verendia to give
notice to Fidelity of other contracts of insurance was waived by Fidelity as
shown by its conduct in attempting to settle the claim of Verendia. Fidelity
received a copy of the appellate court's decision on 4 April 1986, but instead
of directly filing a motion for reconsideration within 15 days therefrom, Fidelity
filed on 21 April 1986, a motion for extension of 3 days within which to file a
motion for reconsideration. The motion for extension was not filed on 19 April
1986 which was the 15th day after receipt of the decision because said 15th
day was a Saturday and of course, the following day was a Sunday. The
motion for extension was granted by the appellate court on 30 April 1986, but
Fidelity had in the meantime filed its motion for reconsideration on 24 April
1986. Verendia filed a motion to expunge from the record Fidelity's motion for
reconsideration on the ground that the motion for extension was filed out of
time because the 15th day from receipt of the decision which fell on a
Saturday was ignored by Fidelity, for indeed, so Verendia contended, the
Intermediate Appellate Court has personnel receiving pleadings even on
Saturdays. The motion to expunge was denied on 17 June 1986 and after a
motion for reconsideration was similarly brushed aside on 22 July 1986, a
petition (GR 75605) was initiated. Subsequently, or more specifically on 21
October 1986, the appellate court denied Fidelity's motion for reconsideration
and account thereof. Fidelity filed on 31 March 1986, the petition for review
on certiorari (GR 76399). The two petitions, inter-related as they are, were
consolidated and thereafter given due course.
Issue:
Whether Verandia forfeited all benefits due to his presentation of a
false declaration to support his claim.
Held:
The contract of lease upon which Verendia relies to support his claim
for insurance benefits, was entered into between him and one Robert Garcia,
married to Helen Cawinian, on 25 June 1980, a couple of days after the
effectivity of the insurance policy. When the rented residential building was
razed to the ground on 28 December 1980, it appears that Robert Garcia (or
Roberto Garcia) was still within the premises. However, according to the
investigation report prepared by Pat. Eleuterio M. Buenviaje of the Antipolo
police, the building appeared to have "no occupant" and that Mr. Roberto
Garcia was "renting on the otherside (sic) portion of said compound.". These
pieces of evidence belie Verendia's uncorroborated testimony that Marcelo
Garcia whom he considered as the real lessee, was occupying the building
when it was burned. Robert Garcia disappeared after the fire. It was only on
9 October 1981 that an adjuster was able to locate him. Robert Garcia then
executed an affidavit before the National Intelligence and Security Authority
(NISA) to the effect that he was not the lessee of Verendia's house and that
his signature on the contract of lease was a complete forgery. Thus, on the
strength of these facts, the adjuster submitted a report dated 4 December
1981 recommending the denial of Verendia's claim. Ironically, during the trial,
Verendia admitted that it was not Robert Garcia who signed the lease
contract. According to Verendia, it was signed by Marcelo Garcia cousin of
Robert, who had been paying the rentals all the while. Verendia, however,
failed to explain why Marcelo had to sign his cousin's name when he in fact
was paying for the rent and why Verendia himself, the lessor, allowed such a
ruse. Fidelity's conclusions on these proven facts appear, therefore, to have
sufficient bases: Verendia concocted the lease contract to deflect
responsibility for the fire towards an alleged "lessee", inflated the value of the
property by the alleged monthly rental of P6,500 when in fact, the Provincial
Assessor of Rizal had assessed the property's fair market value to be only
P40,300.00, insured the same property with two other insurance companies
for a total coverage of around P900,000, and created a dead-end for the
adjuster by the disappearance of Robert Garcia. Basically a contract of
indemnity, an insurance contract is the law between the parties. Its terms and
conditions constitute the measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right to recovery from the
insurer. As it is also a contract of adhesion, an insurance contract should be
liberally construed in favor of the insured and strictly against the insurer
company which usually prepares it. Considering, however, the foregoing
discussion pointing to the fact that Verendia used a false lease contract to
support his claim under Fire Insurance Policy F-18876, the terms of the
policy should be strictly construed against the insured. Verendia failed to live
by the terms of the policy, specifically Section 13 thereof which is expressed
in terms that are clear and unambiguous, that all benefits under the policy
shall be forfeited "if the claim be in any respect fraudulent, or if any false
declaration be made or used in support thereof, or if any fraudulent means or
devises are used by the Insured or anyone acting in his behalf to obtain any
benefit under the policy". Verendia, having presented a false declaration to
support his claim for benefits in the form of a fraudulent lease contract, he
forfeited all benefits therein by virtue of Section 13 of the policy in the
absence of proof that Fidelity waived such provision. Worse yet, by
presenting a false lease contract, Verendia reprehensibly disregarded the
principle that insurance contracts are uberrimae fidae and demand the most
abundant good faith.
3. Philamcare Health Systems Inc. vs. CA (379 SCRA 356);
Philamcare Health Systems Inc. vs. Court of Appeals [GR 125678, 18 March
2002] First Division, Ynares-Santiago (J): 3 concur See also case entry 13
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.
4. Fortune Insurance and Surety Co., Inc. vs. CA (244 SCRA 308)l;
Fortune Insurance and Surety Co. Inc. vs. Court of Appeals [GR 115278, 23
May 1995] First Division, Davide Jr (J): 2 concur, 1 took no part, 1 on leave
Facts:
Producers Bank of the Philippines was insured by the Fortune
Insurance and Surety Co. Inc. and an insurance policy was issued. An
armored car of Producers, while in the process of transferring cash in the
sum of P725,000.00 under the custody of its teller, Maribeth Alampay, from
its Pasay Branch to its Head Office at 8737 Paseo de Roxas, Makati, Metro
Manila on 29 June 1987, was robbed of the said cash. The robbery took
place while the armored car was traveling along Taft Avenue in Pasay City.
The said armored car was driven by Benjamin Magalong y de Vera, escorted
by Security Guard Saturnino Atiga y Rosete. Driver Magalong was assigned
by PRC Management Systems with Producers by virtue of an Agreement
executed on 7 August 1983. The Security Guard Atiga was assigned by
Unicorn Security Services, Inc. with Producers by virtue of a contract of
Security Service executed on 25 October 1982. After an investigation
conducted by the Pasay police authorities, the driver Magalong and guard
Atiga were charged, together with Edelmer Bantigue Y Eulalio, Reynaldo
Aquino and John Doe, with violation of PD 532 (Anti-Highway Robbery Law)
before the Fiscal of Pasay City. The Fiscal of Pasay City then filed an
information charging the aforesaid persons with the said crime before Branch
112 of the Regional Trial Court of Pasay City. The case is still being tried as
of the date of filing of the present case. Demands were made by Producers
upon Fortune to pay the amount of the loss of P725,000.00, but the latter
refused to pay as the loss is excluded from the coverage of the insurance
policy, specifically under page 1 thereof, "General Exceptions" Section (b),
and which reads as follows: "GENERAL EXCEPTIONS The company shall
not be liable under this policy in respect of xxx (b) any loss caused by any
dishonest, fraudulent or criminal act of the insured or any officer, employee,
partner, director, trustee or authorized representative of the Insured whether
acting alone or in conjunction with others..." Producers opposed the
contention of Fortune and contended that Atiga and Magalong are not its
"officer, employee, trustee or authorized representative at the time of the
robbery. On 26 April 1990, the trial court rendered its decision in favor of
Producers. It ordered Fortune to pay Producers the net amount of
P540,000.00 as liability under Policy 0207 (as mitigated by the P40,000.00
special clause deduction and by the recovered sum of P145,000.00), with
interest thereon at the legal rate, until fully paid; the sum of P30,000.00 as
and for attorney's fees; and to pay the costs of suit. Fortune appealed this
decision to the Court of Appeals (CA-GR CV 32946). In its decision
promulgated on 3 May 1994, it affirmed in toto the appealed decision. On 20
June 1994, Fortune filed the petition for review on certiorari.
Issue:
Whether Fortune is liable under the Money, Security, and Payroll
Robbery policy it issued to the issued to Producers or whether recovery
thereunder is precluded under the general exceptions clause thereof.
Held:
It should be noted that the insurance policy entered into by the
parties is a theft or robbery insurance policy which is a form of casualty
insurance. Section 174 of the Insurance Code provides that "Casualty
insurance is insurance covering loss or liability arising from accident or
mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of insurance such as fire or
marine. It includes, but is not limited to, employer's liability insurance, public
liability insurance, motor vehicle liability insurance, plate glass insurance,
burglary and theft insurance, personal accident and health insurance as
written by non-life insurance companies, and other substantially similar kinds
of insurance." Except with respect to compulsory motor vehicle liability
insurance, the Insurance Code contains no other provisions applicable to
casualty insurance or to robbery insurance in particular. These contracts are,
therefore, governed by the general provisions applicable to all types of
insurance. Outside of these, the rights and obligations of the parties must be
determined by the terms of their contract, taking into consideration its
purpose and always in accordance with the general principles of insurance
law. It has been aptly observed that in burglary, robbery, and theft insurance,
"the opportunity to defraud the insurer — the moral hazard — is so great that
insurers have found it necessary to fill up their policies with countless
restrictions, many designed to reduce this hazard. Seldom does the insurer
assume the risk of all losses due to the hazards insured against." Persons
frequently excluded under such provisions are those in the insured's service
and employment. The purpose of the exception is to guard against liability
should the theft be committed by one having unrestricted access to the
property." In such cases, the terms specifying the excluded classes are to be
given their meaning as understood in common speech. The terms "service"
and "employment" are generally associated with the idea of selection,
control, and compensation. A contract of insurance is a contract of adhesion,
thus any ambiguity therein should be resolved against the insurer, or it
should be construed liberally in favor of the insured and strictly against the
insurer. Limitations of liability should be regarded with extreme jealousy and
must be construed in such a way as to preclude the insurer from non-
compliance with its obligation. It goes without saying then that if the terms of
the contract are clear and unambiguous, there is no room construction and
such terms cannot be enlarged or diminished by judicial construction. An
insurance contract is a contract of indemnity upon the terms and conditions
specified therein. It is settled that the terms of the policy constitute the
measure of the insurer's liability. In the absence of statutory prohibition to the
contrary, insurance companies have the same rights as individuals to limit
their liability and to impose whatever conditions they deem best upon their
obligations not inconsistent with public policy. Insofar as Fortune is
concerned, it was its intention to exclude and exempt from protection and
coverage losses arising from dishonest, fraudulent, or criminal acts of
persons granted or having unrestricted access to Producers' money or
payroll. When it used then the term "employee," it must have had in mind any
person who qualifies as such as generally and universally understood, or
jurisprudentially established in the light of the four standards in the
determination of the employer-employee relationship, or as statutorily
declared even in a limited sense as in the case of Article 106 of the Labor
Code which considers the employees under a "laboronly" contract as
employees of the party employing them and not of the party who supplied
them to the employer. Still, howsoever viewed, Producers entrusted the three
with the specific duty to safely transfer the money to its head office, with
Alampay to be responsible for its custody in transit; Magalong to drive the
armored vehicle which would carry the money; and Atiga to provide the
needed security for the money, the vehicle, and his two other companions. In
short, for these particular tasks, the three acted as agents of Producers. A
"representative" is defined as one who represents or stands in the place of
another; one who represents others or another in a special capacity, as an
agent, and is interchangeable with "agent." In view of the foregoing, Fortune
is exempt from liability under the general exceptions clause of the insurance
policy.
5. Gulf Resorts Inc. vs. Philippine Charter Insurance Corp. GR No.
155167, 16 May 2005;
6. Manila Mahogany vs. CA (154 SCRA 650);
7. Federal Express Corporation vs. American Home Assurance
Company and Phil-Am Insurance Company, Inc., G.R. No. 150094, 18
August 2004);
8. Eternal Gardens Memorial Park Corporation vs. Phil. American Life
Insurance Co., GR No. 166245, 09 April 2008I.
9. Enriquez vs. Sun Life Insurance of Canada (G.R. No. 15895, Nov. 29,
1920);
Enriquez vs. Sun Life Assurance Company of Canada [GR 15895, 29
November 1920] En Banc, Malcolm (J): 4 concur, 1 dissents
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 Rafaek 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.
10. Development Bank vs. CA (G.R. No. 100937, March 21, 1994);
Development Bank of the Philippines vs. Court of Appeals [GR 109937, 21
March 1994] First Division, Quiason (J): 4 concur
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.
11. Great Pacific Life Assurance Co. vs. CA (G.R. Nos. 31845 & 31873,
April 30, 1979)
Great Pacific Life Assurance Company vs. Court of Appeals [GR L-31845, 30
April 1979]; also Mondragon vs. Court of Appeals [GR L-31878] First
Division, De Castro (J): 4 concur, 1 took no part See case entry 17
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.