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.

Respondent appealed the CTA decision to the [Court of Appeals (CA)]

insofar as it cancelled the DST assessment. He claimed that petitioner’s
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. It held that petitioner’s
health care agreement was in the nature of a non-life insurance contract
subject to DST.

Issue:

            Whether or not, a Health Maintenance Organizations’ contracts

are contract of insurance.

Ruling:

            No. An examination of petitioner’s agreements with its members

lead the Court to conclude that it is not an insurance contract within the
context of our Insurance Code.

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 designed

peril;