Insurance Reviewer (Based On Course Outline of Atty. Reyes)

Insurance Reviewer
Based on Course Outline of Atty. Mary Ann L. Reyes
I. Introduction
A. History of Insurance
B. Laws governing insurance
1. Article 739 of NCC
The following donations shall be void:
1. Those made between persons who were guilty of adultery or concubinage at the
time of the 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 and ascendants, by reason
of his office.
Art. 2011 of NCC

The contract of insurance is governed by special laws. Matters not expressly provided
for in such special laws shall be regulated by this Code.
Art. 2012-2017 of NCC
Art. 2012
Any person who is forbidden from receiving any donation under Art. 739 cannot be
named beneficiary of a life insurance policy by the person who cannot make any
donation to him, according to said article.
Art. 2013
Game of chance= depends more on chance or hazard than skill or ability. For
purposes of the following articles, in case of doubt a game is deemed to be one of
chance.
Art. 2014
No action can be maintained by the winner for the collection of what he has won in
a game of chance. But any loser in a game of chance may recover his lost from the
winner, with legal interest from the time he paid the amount lost, and subsidiarily
from the operator or manager of the gambling house.
Art. 2015
If cheating or deceit is committed by the winner, he, and subsidiarily the operator or
manager of the gambling house, shall pay by way of exemplary damages, not less
than the equivalent of the sum lost, in addition to the latter amount. If both the
winner and the loser have perpetrated fraud, no action for recovery can be brought
by either.
Art. 2016
If the loser refuses or neglects to bring an action to recover what has been lost, his
or her creditors, spouse, descendants or other persons entitled to be supported by
the loser may institute the action. The sum thereby obtained shall be applied to the
creditor’s claims, or to the support of the spouse or relatives, as the case may be.
Art. 2017
The provisions of Art. 2014 and 2016 apply when two or more persons bet in a
game of chance, although they take no active part in the game itself.
Art. 2186
Every owner of motor vehicle shall file with the proper government office a bond
executed by a govt.-controlled corp. or office, to answer for damages to third persons.
The amount of the bond and other terms shall be fixed by the competent public official.
Art. 2207
If the plaintiff’s property has been insured, and he has received indemnity from the
insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If the amount paid
by the insurance company does not fully cover the injury or loss, the aggrieved party
shall be entitled to recover the deficiency from the person causing the loss or injury.
2. Insurance Code, RA 10607 (amending PD 612 as amended)

AN ACT STRENGTHENING THE INSURANCE INDUSTRY, FURTHER AMENDING
PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS THE INSURANCE CODE, AS
AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, 1460, 1814 AND 1981,
AND BATAS PAMBANSA BLG. 874, AND FOR OTHER PURPOSES
3. Family Code
4. Section 185, Corporation Code?=(Hanggang Sec. 149 lang ang Corporation Code)
5. GSIS Act, SSS Act
6. RA 5756
An Act to extend the provisions of RA 4898 to Barrio Treasurers and Barrio Secretaries,
by Amending Section 1,2,3, 5,6 and 7 and the Title thereof.
7. EO 250 (July 25, 1987)

Increasing, Integrating, and Rationalizing the Insurance Benefits of Brgy. Officials
Under RA 4898, as Amended, and Members of Sangguniang Panlalawigan, Sangguniang
Panlungsod, and Sangguniang Bayan under PD 1147 and for other Purposes.
Sec. 1.
Every:
 Punong Barangay,
 Sangguniang Brgy. Member,
 Chairman of the Kabataang Brgy.,
 Brgy. Secretary and Brgy. Treasurer,
 Member fo the Sangguniang Panlalawigan, Sangguninagn Panlungsod
And Sangguniang Bayan,
 Duly elected or appointed, and duly qualified,
 Who does not receive fixed salary or compensation,
Is during his incumbency, automatically covered under this Order;
Provided, that the moment said official receives a fixed salary or
compensation whether in the same capacity or by virtue of a permanent
appointment in any government office, or by election to another public office,
= His coverage under this Order shall automatically cease and he shall then
be covered under the appropriate law.
Sec. 7. No benefit shall be allowed to a covered official or his beneficiaries when the
injury, sickness, disability or death was occasioned by any of the following:
1. His intoxication,
2. His willful intention to injure or kill himself or another, or
3. His notorious negligence
8. RA 3591 (PDIC Law)

An Act Establishing the Philippine Deposit Insurance Corp, Defining its Powers and
Duties and for other Purposes
Sec. 1. PDIC= shall insure the deposits of all banks which are entitled to the benefits of
insurance under this Act, and which shall have the powers hereinafter granted.
9. RA 9829 (Pre-Need Code)

An Act Establishing the Pre-Need Code of the Phils.
Pre-need Plans= are contracts, agreements, deeds or plans for the benefit of the
planholders which provide for the performance of future service/s, payment of
monetary considerations or delivery of other benefits at the time of actual need or
agreed maturity date, as specified therein, in exchange for cash or installment amounts
with or without interest or insurance coverage and includes life, pension, education,
interment and other plans, instruments contracts or deeds as may in the future be
determined by the Commission.
10.EO 192 (HMOs)

PROVIDING FOR THE REORGANIZATION OF THE DEPARTMENT OF
ENVIRONMENT, ENERGY AND NATURAL RESOURCES, RENAMING IT AS THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, AND FOR
OTHER PURPOSES
Read:
Enriquez vs. Sunlife Assurance
Insular Life vs. Ebrado
i. Rules on change of beneficiary (Section 11)
"Section 11. The insured shall have the right to change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in the event
the insured does not change the beneficiary during his lifetime, the designation shall be deemed
irrevocable.
Digested by: Anne
THE INSULAR LIFE ASSURANCE COMPANY, LTD. vs. CARPONIA T. EBRADO and PASCUALA
VDA. DE EBRADO
[G.R. No. L-44059 October 28, 1977]
Facts of the Case:
On September 1, 1968, Buenaventura Cristor Ebrado was issued by The Life Assurance Co., Ltd.,
Policy No. 009929 on a whole-life for P5,882.00 with a, rider for Accidental Death for the same
amount Buenaventura C. Ebrado designated Carpponia T. Ebrado as the revocable beneficiary in his
policy. He to her as his wife.
On October 21, 1969, Buenaventura C. Ebrado died when he was hit by a failing branch of a tree. As
the policy was in force, The Insular Life Assurance Co., Ltd. liable to pay the coverage in the total
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, The Insular Life Assurance
Co., Ltd. commenced an action for Interpleader before the Court of First Instance of Rizal on April 29,
1970.
After the issues have been joined, a pre-trial conference was held. In the pre-trial conference the
parties submits evidence and make admissions.xxx; 8) that the beneficiary designated by the insured
in the policy is Carponia Ebrado and the insured made reservation to change the beneficiary but
although the insured made the option to change the beneficiary, same was never changed up to the
time of his death and the wife did not have any opportunity to write the company that there was
reservation to change the designation of the parties it agreed that a decision be rendered based on
and stipulation of facts as to who among the two claimants is entitled to the policy.
On September 25, 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. The trial
court held that.It is patent from the last paragraph of Art. 739 of the Civil Code that a criminal
conviction for adultery or concubinage is not essential in order to establish the disqualification
mentioned therein. Neither is it also necessary that a finding of such guilt or commission of those
acts be made in a separate independent action brought for the purpose. The guilt of the donee
(beneficiary) may be proved by preponderance of evidence in the same proceeding (the action
brought to declare the nullity of the donation).
Since it is agreed in their stipulation during the pre-trial that the deceased insured and defendant
Carponia T. Ebrado were living together as husband and wife without being legally married and that
the marriage of the insured with the other defendant Pascuala Vda. de Ebrado was valid and still
existing at the time the insurance in question was purchased there is no question that defendant
Carponia T. Ebrado is disqualified from becoming the beneficiary of the policy in question and as such
she is not entitled to the proceeds of the insurance upon the death of the insured.
Issue of the Case:
Can a common-law wife named as beneficiary in the life insurance policy of a legally married man
claim the proceeds thereof in case of death of the latter?
Ruling:
The SC affirmed the decision of the trial court.
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 fife 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: 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.
The underscored clause neatly conveys that no criminal conviction for the offense is a condition
precedent. In fact, it cannot even be from the aforequoted provision that a prosecution is needed. On
the contrary, the law plainly states that the guilt of the party may be proved "in the same acting 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.
In the caw before Us, 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 case 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. In fact, in that
pretrial, the parties even agreed "that a decision be rendered based on this agreement and
stipulation of facts as to who among the two claimants is entitled to the policy."
ACCORDINGLY, the appealed judgment of the lower court is hereby affirmed. Carponia T. Ebrado is
hereby declared disqualified to be the beneficiary of the late Buenaventura C. Ebrado in his life
insurance policy. As a consequence, the proceeds of the policy are hereby held payable to the estate
of the deceased insured. Costs against Carponia T. Ebrado.
SO ORDERED.
Filipinas-Compania de Seguros de Nava, 17 SCRA 210
C. General Concept of Insurance
1. Sec. 2 of RA 10607
2. REPUBLIC ACT NO. 10607
3. AN ACT STRENGTHENING THE INSURANCE INDUSTRY, FURTHER AMENDING

PRESIDENTIAL DECREE NO. 612, OTHERWISE KNOWN AS THE INSURANCE CODE,
AS AMENDED BY PRESIDENTIAL DECREE NOS. 1141, 1280, 1455, 1460, 1814 AND
1981, AND BATAS PAMBANSA BLG. 874, AND FOR OTHER PURPOSES
Section 2. Whenever used in this Code, the following terms shall have the respective meanings
hereinafter set forth or indicated, unless the context otherwise requires:
(a) A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event.
A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this
Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter
provided.
(b) The term doing an insurance business or transacting an insurance business, within the meaning
of this Code, shall include:
(1) Making or proposing to make, as insurer, any insurance contract;

(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as
merely incidental to any other legitimate business or activity of the surety;
(3) Doing any kind of business, including a reinsurance business, specifically recognized as
constituting the doing of an insurance business within the meaning of this Code;
(4) Doing or proposing to do any business in substance equivalent to any of the foregoing in a
manner designed to evade the provisions of this Code.
In the application of the provisions of this Code, the fact that no profit is derived from the making of
insurance contracts, agreements or transactions or that no separate or direct consideration is
received therefor, shall not be deemed conclusive to show that the making thereof does not
constitute the doing or transacting of an insurance business.
(c) As used in this Code, the term Commissioner means the Insurance Commissioner.
2. Test of Insurance
Read:
White Gold Marine Services vs. Pioneer Insurance
White Gold v Pioneer G.R. No. 154514. July 28, 2005
J. Quisimbing
Facts:
White Gold procured a protection and indemnity coverage for its vessels from The Steamship Mutual
through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and
Acceptance. Pioneer also issued receipts. 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 unpaid balance. White Gold on the other hand, filed a complaint before
the Insurance Commission claiming that Steamship Mutual and Pioneer violated provisions 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 and that it was a P
& I club. Pioneer was not required to obtainanother license as insurance agent because Steamship
Mutual was not engaged in the insurance business.
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.
Hence this petition by White Gold.
Issues:
1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?
2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?
Held: Yes. Petition granted.
Ratio:
White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance business. To
buttress its assertion, it cites the definition as “an association composed of shipowners in general
who band together for the specific purpose of providing insurance cover on a mutual basis against
liabilities incidental to shipowning that the members incur in favor of third parties.”
They argued that Steamship Mutual’s primary purpose is to solicit and provide protection
and indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its
agent.
Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in
the insurance business in the Philippines. It is merely an association of vessel owners who
have come together to provide mutual protection against liabilities incidental to shipowning.
Is Steamship Mutual engaged in the insurance business?
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. Steamship Mutual
even renewed its P & I Club cover until it was cancelled due to non-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 insurancecompany is allowed to engage in the insurance business without a license or a
certificate of authority from the InsuranceCommission.
2. Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration
issued by the InsuranceCommission. 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. Section 299 of the Insurance Code clearly states:
SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation or
procurement of applications for insurance, or receive for services in obtaining insurance, any
commission or other compensation from any insurance company doing business in the Philippines or
any agent thereof, without first procuring a license so to act from the Commissioner…
Philamcare Health Services Inc. vs. CA

3. Suretyship (Sec. 2 of RA 10607)
A contract of suretyship shall be deemed to be an insurance contract, within the meaning of
this Code, only if made by a surety who or which, as such, is doing an insurance business as
hereinafter provided.
4. Pre-need plans (See Securities Regulation Code)
(b) “Pre-need plans” are contracts, agreements, deeds or plans for the benefit of the planholders
which provide for the performance of future service/s, payment of monetary considerations or
delivery of other benefits at the time of actual need or agreed maturity date, as specified therein, in
exchange for cash or installment amounts with or without interest or insurance coverage and includes
life, pension, education, interment and other plans, instruments, contracts or deeds as may in the
future be determined by the Commission.
5. Variable Contracts (Sec. 238 of RA 10607)
VARIABLE CONTRACTS
Section 238. (a) No insurance company authorized to transact business in the Philippines shall issue,
deliver, sell or use any variable contract in the Philippines, unless and until such company shall have
satisfied the Commissioner that its financial and general condition and its methods of operations,
including the issue and sale of variable contracts, are not and will not be hazardous to the public or
to its policy and contract owners. No foreign insurance company shall be authorized to issue, deliver
or sell any variable contract in the Philippines, unless it is likewise authorized to do so by the laws of
its domicile.
(b) The term variable contract shall mean any policy or contract on either a group or on an individual
basis issued by an insurance company providing for benefits or other contractual payments or values
thereunder to vary so as to reflect investment results of any segregated portfolio of investments or of
a designated separate account in which amounts received in connection with such contracts shall
have been placed and accounted for separately and apart from other investments and accounts. This
contract may also provide benefits or values incidental thereto payable in fixed or variable amounts,
or both. It shall not be deemed to be a security or securities as defined in The Securities Act, as
amended, or in the Investment Company Act, as amended, nor subject to regulations under said
Acts.
(c) In determining the qualifications of a company requesting authority to issue, deliver, sell or use
variable contracts, the Commissioner shall always consider the following:
(1) The history, financial and general condition of the company: Provided, That such company, if a
foreign company, must have deposited with the Commissioner for the benefit and security of its
variable contract owners in the Philippines, securities satisfactory to the Commissioner consisting of
bonds of the Government of the Philippines or its instrumentalities with an actual market value of
Two million pesos (P2,000,000.00);
(2) The character, responsibility and fitness of the officers and directors of the company; and
(3) The law and regulation under which the company is authorized in the state of domicile to issue
such contracts.
(d) If after notice and hearing, the Commissioner shall find that the company is qualified to issue,
deliver, sell or use variable contracts in accordance with this Code and the regulations and rules
issued thereunder, the corresponding order of authorization shall be issued. Any decision or order
denying authority to issue, deliver, sell or use variable contracts shall clearly and distinctly state the
reasons and grounds on which it is based.
6. Doing an insurance business (Sec. 2 of RA 10607)
(b) The term doing an insurance business or transacting an insurance business, within the meaning
of this Code, shall include:
(1) Making or proposing to make, as insurer, any insurance contract;
(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as
(3) Doing any kind of business, including a reinsurance business, specifically recognized as
(4) Doing or proposing to do any business in substance equivalent to any of the foregoing in a
In the application of the provisions of this Code, the fact that no profit is derived from the making of
Read: Philippine Health Care Providers vs. CIR

PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL REVENUE
July 2, 2014 § Leave a comment

GR. 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
petitioner’s 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 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 which held that petitioner’s 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
business”which 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 petitioner’s 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.
7. Mutual insurance companies (see White Gold vs. Pioneer)
TITLE 1
MUTUAL BENEFIT ASSOCIATIONS
Section 403. Any society, association or corporation, without capital stock, formed or organized not
for profit but mainly for the purpose of paying sick benefits to members, or of furnishing financial
support to members while out of employment, or of paying to relatives of deceased members of fixed
or any sum of money, irrespective of whether such aim or purpose is carried out by means of fixed
dues or assessments collected regularly from the members, or of providing, by the issuance of
certificates of insurance, payment of its members of accident or life insurance benefits out of such
fixed and regular dues or assessments, but in no case shall include any society, association, or
corporation with such mutual benefit features and which shall be carried out purely from voluntary
contributions collected not regularly and/or no fixed amount from whomsoever may contribute, shall
be known as a mutual benefit association within the intent of this Code.
Any society, association, or corporation principally organized as a labor union shall be governed by
the Labor Code notwithstanding any mutual benefit feature provisions in its charter as incident to its
organization.
In no case shall a mutual benefit association be organized and authorized to transact business as a
charitable or benevolent organization, and whenever it has this feature as incident to its existence,
the corresponding charter provision shall be revised to conform with the provision of this section.
Mutual benefit association, already licensed to transact business as such on the date this Code
becomes effective, having charitable or benevolent feature shall abandon such incidental purpose
upon effectivity of this Code if they desire to continue operating as such mutual benefit associations.
D. Characteristics
Per UP Reviewer, the following are the characteristics of Insurance Contract

A. In General
1. Consensual
2. Voluntary
3. Aleatory
4. Executory and Unilateral, but synallagmatic
5. Conditional
6. Contract of Indemnity
7.Contract of Adhesion
8. Personal contract
9. Property
10. Uberrimae fides contract (contract of the highest degree of faith)
Consensual
-perfected by meeting of the minds; concurrence of offer and acceptance.
-policy is not essential to the existence of the contract, it merely evidences the terms and conditions
thereof (UNLESS otherwise stipulated)
Voluntary
-parties are free to incorporate such terms and conditions they may deem convenient (not contrary
to l,m,gc,po,pp)
-not compulsory
Exception to Voluntariness of Insurance Contract

>it may be required by law in certain circumstances such as:
a. Compulsory motor vehicle liability insurance
b. compulsory converage in State Insurance Fund for employees
c. condition to grant a license to conduct of business or calling affecting public safety or welfare
d. Social Insurance for members of GSIS and SSS.
Aleatory
-it depends upon contingent event.
-obligation depends on the happening of an event which is uncertain, or though certain, is to occur at
indeterminate time.
Executory and Unilateral but Synallagmatic

-once the insured pays the premium, the contract already takes effect.
-after such payment, the insurance imposes unilateral obligation on the insurer who promise to
indemnify in case of loss.
-synallagmatic and reciprocal=even if the contingent event or designated peril does not occur, the
insurer has still provided protection against the risk for the period covered by the insurance contract.
Conditional
-insurer incurs liability only upon the happening of the event insured against. However, other
conditions are usually required (eg. payment of premium or performance of other act) as precedent
to the right of the insured to claim benefit under the insurance).
Contract of Indemnity (For Non-Life Insurance)
-insured who has insurable interest over the property is only entitled to recover the amount of actual
loss sustained. (burden is upon the insured to establish the amount of loss)
-Gen Rule: Only non-life insurance or property insurance contracts are contracts of indemnity. Life
insurance contracts are not contracts of indemnity because the value of a life is immeasurable.
-Exception: Life Insurance may be an indemnity contract if the basis of the insurable interest of the
policy owner on the life of the insured is a commercial relationship (eg. creditor-debtor,
mortgagor/guarantor-mortgagee, supporter and supportee)
Contract of Adhesion (Fine Print Rule)

-already presented to the insured in its printed form on a “take it or leave it” basis. Insured merely
has to agree to its terms. This is valid. However, ambiguity in such contracts shall be interpreted
liberally in favor of the insured and strictly against the insurer who prepared the same.
Personal Contract
-this contract is basically between insurer and insured.
-insured cannot assign, before the happening of the loss, his rights under a property policy to others
without the consent of the insurer. (so basta may consent si insurer pwede pa ding maassign yung
rights ni insured under a property policy)
- Property insurance is personal contract, why?= it is the damage to the personal interest not the
property that is being reimbursed.
Property (for Life Insurance)

-Life insurance, unlike property insurance, are generally assignable or transferable as they are in the
nature of property
Uberrimae Fides Contract

-each party is required to deal with each other in utmost good faith and disclose conditions affecting
the risk of which he is aware, or any material fact which the applicant knows and those which he
ought to know.
-Violation of this duty gives the aggrieved party the right to rescind the contract.
-Where the aggrieved party is the insured= bad faith of insurer will preclude it from denying liability
on the policy based on breach of warranty.
1. Risk Distributing Device

Insurance as a device serves to distribute the risk of economic loss ,among as many as possible, to
those who are subject to the same kind of risk.
This is done by paying a pre-determined amount into a general fund.
Payment will be made for an economic loss (of a defined type) wherein each member contributes to
a small degree in order to compensate for losses suffered by any member of the group.
Broad sharing of economic risk= is the principle of risk distribution
2. Contract of Adhesion (fine print rule)

Most of the terms of the insurance contract do not result from mutual negotiations between the
parties. The terms are prescribed by the insurer in printed form to which the insured may “adhere” if
he chooses but which he cannot change.
Hence, in case of doubt, the contract shall be interpreted strictly against the insurer and liberally in
favor of the insured.
Read:
Rizal Surety and Insurance Co. vs. CA, 336 SCRA 12
Blue Cross vs. Olivares (Feb. 12, 2008)
Facts:
Neomi Olivares applied for a health care program with Blue Cross for the amount of 12,000 pesos. 38 days after she
applied, she suffered from a stroke. Ailments due to “pre-existing conditions” were excluded from the coverage. She
was confined in Medical City and discharged with a bill of Php 34,000. Blue Cross refused to pay unless she had her
physician’s certification that she was suffering from a pre-existing condition. When Blue Cross still refused to pay,
she filed suit in the MTC. The health care company rebutted by saying that the physician didn’t disclose the
condition due to the patient’s invocation of the doctor-client privilege. The MTC dismissed for a lack of cause of
action because the physician didn’t disclose the condition. In the RTC, the spouses were awarded the amount of the
hospital bills plus 60,000 in damages. This was under the ratio that the burden to prove that Neomi had a pre-
existing condition was under Blue Cross. The CA denied the motion for reconsideration of the health care company.
Issues:
1. Whether petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition and
therefore was excluded from the coverage of the health care agreement.
2. Whether it was liable for moral and exemplary damages and attorney's fees.
Held: No. Yes. Petition dismissed.
Ratio:
1. “Philamcare Health Systems, Inc. v. CA- a health care agreement is in the nature of a non-life insurance. It is an
established rule in insurance contracts that when their terms contain limitations on liability, they should be construed
strictly against the insurer. These are contracts of adhesion the terms of which must be interpreted and enforced
stringently against the insurer which prepared the contract. This doctrine is equally applicable to health
care agreements.”
The agreement defined a pre-existing condition as:
“a disability which existed before the commencement date of membership whose natural history can be clinically
determined, whether or not the Member was aware of such illness or condition. Such conditions also
include disabilities existing prior to reinstatement date in the case of lapse of an Agreement.”
“Under this provision, disabilities which existed before the commencement of the agreement are excluded from its
coverage if they become manifest within one year from its effectivity.”
Petitioners still averred that the non-disclosure of the pre-existing condition made a presumption in its favor.
Respondents still maintained that the petitioner had the duty to prove its accusation.
Petitioner never presented evidence to prove its presumption that the Doctor’s report would work against Neomi.
They only perceived that the invocation of the privilege made the report adverse to Neomi and such was a
disreputable presumption. They should have made an independent assessment of Neomi’s condition when it failed
to obtain the report. They shouldn’t have waited for the attending physician’s report to come out.
Section 3 (e), Rule 131 of the Rules of Court states:
Under the rules of court, Rule 131, Sec. 3.
Disputable presumptions. ― The following presumptions are satisfactory if uncontradicted, but may be contradicted
and overcome by other evidence:
(e) That evidence willfully suppressed would be adverse if produced.
The exception on presenting evidence applies when the suppression is an exercise of a privilege.
Hence, Neomi had the privilege not to present the Doctor’s report under the doctor-client privilege.
2. The court quoted the CA and RTC decision stating that “ the refusal of petitioner to pay respondent Neomi's bills
smacks of bad faith, as its refusal [was] merely based on its own perception that a stroke is a pre-existing condition.”
Also, there was factual bases in the RTC and CA for the award of the damages.
Fortune Insurance and Surety Co. vs. CA, 244 SCRA 308
Gulf Resorts vs. Philippine Charter Insurance Corp., GR No. 155167, May 16, 2005
FACTS:
 Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance
Company which includes loss or damage to shock to any of the property insured by
this Policy occasioned by or through or in consequence of earthquake
 July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the
properties and 2 swimming pools in its Agoo Playa Resort were damaged
 August 23, 1990: Gulf's claim was denied on the ground that its insurance policy
only afforded earthquake shock coverage to the two swimming pools of the resort
 Petitioner contends that pursuant to this rider, no qualifications were placed
on the scope of the earthquake shock coverage. Thus, the policy extended
earthquake shock coverage to all of the insured properties.
 RTC: Favored American Home - endorsement rider means that only the two
swimming pools were insured against earthquake shock
 CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming pools
HELD: YES. Affirmed.

 It is basic that all the provisions of the insurance policy should be examined and
interpreted in consonance with each other.
 All its parts are reflective of the true intent of the parties.
Insurance Code
Section 2(1)
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 premium is the consideration paid an insurer for undertaking to
indemnify the insured against a specified peril.
 In the subject policy, no premium payments were made with regard to
earthquake shock coverage, except on the two swimming pools.
Eternal Gardens Memorial vs. Philamlife Insurance, GR No. 166245, Apr. 9, 2008
FACTS:
 December 10, 1980: Philippine American Life Insurance Company (Philamlife)
entered into an agreement denominated as Creditor Group Life Policy No. P-19202
with Eternal Gardens Memorial Park Corporation (Eternal)
 Under the policy (renewable annually), the clients of Eternal who purchased
burial lots from it on installment basis would be insured by Philamlife
 amount of insurance coverage depended upon the existing balance
 Eternal complied by submitting a letter dated December 29, 1982, a list of
insurable balances of its lot buyers for October 1982 which includes John Chuang
which was stamped as received by Philam Life
 August 2, 1984, Chuang died with a balance of 100,000 php
 April 25, 1986: Philamlife had not furnished Eternal with any reply on its insurance
claim so its demanded its claim
 According to Philam Life, since the application was submitted only on November
15, 1984, after his death, Mr. John Uy Chuang was not covered under the Policy since
his application was not approved. Moreover, the acceptance of the premiums are
only in trust for and not a sign of approval.
 RTC: favored Eternal
 CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance contract.
HELD: YES. CA reversed

 construed in favor of the insured and in favor of the effectivity of the insurance
contract
 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
 Moreover, the mere inaction of the insurer on the insurance application must not
work to prejudice the insured
 The termination of the insurance contract by the insurer must be explicit and
unambiguous
Manila Bankers Life Insurance vs. Aban, GR 175666, July 29, 2013
Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance
Corporation (Bankers Life), designating respondent Cresencia P. Aban (Aban), her niece, as her beneficiary. Petitioner
issued Insurance Policy No. 747411 (the policy), with a face value of P 100,000.00, in Sotero’s favor on August 30, 1993,
after the requisite medical examination and payment of the insurance premium. On April 10, 1996, when the insurance
policy had been in force for more than two years and seven months, Sotero died. Respondent filed a claim for the
insurance proceeds on July 9, 1996. Petitioner conducted an investigation into the claim, and came out with the following
findings: 1. Sotero did not personally apply for insurance coverage, as she was illiterate; 2. Sotero was sickly since 1990;
3. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No. 747411; 4. Sotero
did not sign the July 3, 1993 application for insurance; and 5. Respondent was the one who filed the insurance application,
and x x x designated herself as the beneficiary. For the above reasons, petitioner denied respondent’s claim on April 16,
1997 and refunded the premiums paid on the policy.
Issue: Whether or not Manila Bankers is barred from denying the insurance claims based on fraud or concealment.
Held: Yes. The “incontestability clause” is a provision in law that after a policy of life insurance made payable on the
death of the insured shall have been in force during the lifetime of the insured for a period of two (2) years from the date
of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason
of fraudulent concealment or misrepresentation of the insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of
insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the
issuance of the policy or its last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation within
a period of two (2) years. It is not fair for the insurer to collect the premiums as long as the insured is still alive, only to
raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat the right of the
beneficiary to recover under the policy.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an
insurer is given two years – from the effectivity of a life insurance contract and while the insured is alive – to discover or
prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the
insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make
good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say
that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business
must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of
insurance and the public in general.
3. Aleatory (Art. 2010, Civil Code)
Obligation of Insurer to pay the proceeds of insurance= arises only upon the happening of an event
which is uncertain, or which is to occur at an indeterminate time. (Art. 2010 of NCC)
The contract of insurance is commutative because there is still exchange of equivalents- the amount
paid by the insured is deemed equivalent of the protection given by the insurer based on the
insurance contract.
4. Contract of Indemnity
Insured who has insurable interest over a property, is only entitled to recover the amount of actual
loss sustained.
the burden is upon the insured to establish the amount of such loss.
a. applicable only to property insurance EXCEPT creditor insuring the life of his debtor.
b. Life Insurance is NOT a contract of indemnity. There is no over insurance in life insurance. There is
overinsurance only in property insurance and if this is present, the insurer is only liable up to the
extent of the loss.
c. Insurance contract is NOT Wagering contracts. (Wagering= gamble;bet)
READ: Verendia vs. CA, 217 SCRA 417
Facts:
> Fidelity and Surety Insurance Company (Fidelity) issued Fire Insurance Policy No. F-18876
effective between June 23, 1980 and June 23, 1981 covering Rafael (Rex) Verendia's
residential 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 and The Development Insurance for P400,000.00.
> While the three fire insurance policies were in force, the insured property was completely
destroyed by fire.
> Fidelity appraised the damage amounting to 385,000 when it was accordingly informed of
the loss. Despite demands, Fidelity refused payment under its policy, thus prompting Verendia
to file a complaint for the recovery of 385,000
> Fidelity, 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 June 25, 1980 to a certain Roberto Garcia, when actually it was a Marcelo
Garcia who was the lessee.
Issue:
Whether or not Verendia can claim on the insurance despite the misrepresentation as to the
lessee and the overinsurance.
Held:
NOPE.
The contract of lease upon which Verendia relies to support his claim for insurance benefits,
was entered into between him and one Robert Garcia, a couple of days after the effectivity of
the insurance policy. When the rented residential building was razed to the ground, it appears
that Robert Garcia was still within the premises. However, according to the investigation by
the police, the building appeared to have "no occupants" and that Mr. Roberto Garcia was
"renting on the otherside 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.
Ironically, during the trial, Verendia admitted that it was not Robert Garcia who signed the
lease contract but it was Marcelo Garcia cousin of Robert, who had also 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 he was paying for the rent and why he (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. 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, 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
There is also no reason to conclude that by submitting the subrogation receipt as evidence in
court, Fidelity bound itself to a "mutual agreement" to settle Verendia's claims in
consideration of the amount of P142,685.77. While the said receipt appears to have been a
filled-up form of Fidelity, no representative of Fidelity had signed it. It is even incomplete as
the blank spaces for a witness and his address are not filled up. More significantly, the same
receipt states that Verendia had received the aforesaid amount. However, that Verendia had
not received the amount stated therein, is proven by the fact that Verendia himself filed the
complaint for the full amount of P385,000.00 stated in the policy. It might be that there had
been efforts to settle Verendia's claims, but surely, the subrogation receipt by itself does not
prove that a settlement had been arrived at and enforced. Thus, to interpret Fidelity's
presentation of the subrogation receipt in evidence as indicative of its accession to its
"terms" is not only wanting in rational basis but would be substituting the will of the Court for
that of the parties
4.1. Exceptions to the Principle of Indemnity
a. not applicable to life insurance except creditor insuring the life of his debtor.
5. Uberrimae Fides (Fidae) Contracts (contracts of utmost good faith)

Contract of Insurance= one of perfect good faith for both the insured and the insurer. In fact it is
more so for the insurer because of its dominant bargaining position which carries with it stricter
responsibility.
It requires the parties to the contract of insurance to disclose conditions affecting the risk of which
he is aware, or material fact which the applicant knows, and those which he ought to know.
This doctrine is essential on the account that:

 The full circumstances of the subject matter of insurance are known to the insured only, and
 The insurer in deciding whether or not to accept a risk, must rely primarily upon the information
supplied to him by the applicant.
6. Personal Contract (However this is not included in Syllabus of Atty. Reyes)

Law presumes that the insurer considered the personal qualifications of the insured in approving the
insurance application.
E. Elements of Insurance
1. Insurable Interest (Sec. 10-14, RA 10607)
"TITLE 3
"INSURABLE INTEREST
"Section 10. Every person has an insurable interest in the life and health:
"(a) Of himself, of his spouse and of his children;
"(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a
pecuniary interest;
"(c) Of any person under a legal obligation to him for the payment of money, or respecting property or
services, of which death or illness might delay or prevent the performance; and
"(d) Of any person upon whose life any estate or interest vested in him depends.
"Section 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has
expressly waived this right in said policy. Notwithstanding the foregoing, in the event the insured does not change
the beneficiary during his lifetime, the designation shall be deemed irrevocable.
"Section 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the
principal, accomplice, or accessory in willfully bringing about the death of the insured. In such a case, the share
forfeited shall pass on to the other beneficiaries, unless otherwise disqualified. In the absence of other beneficiaries,
the proceeds shall be paid in accordance with the policy contract. If the policy contract is silent, the proceeds shall
be paid to the estate of the insured.
"Section 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof,
of such nature that a contemplated/(think about) peril (serious/immediate danger) might directly damnify (cause
injury to) the insured, is an insurable interest.
"Section 14. An 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.
2. Risk of Loss (Sec. 3(1), Sec. 51 par f, RA 10607)

"Section 3. Any contingent or unknown event, whether past or future, which may damnify a person having an
insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.
Section 51. A policy of insurance must specify:

"(f) The risks insured against
3. Assumption of Risk (Sec. 2, RA 10607)
"Section 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth
or indicated, unless the context otherwise requires:
"(a) A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event.
"A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only
if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.
"(b) The term doing an insurance business or transacting an insurance business, within the meaning of this
Code, shall include:
"(1) Making or proposing to make, as insurer, any insurance contract;
"(2) Making or proposing to make, as surety, any contract of suretyship as a vocation and not as
"(3) Doing any kind of business, including a reinsurance business, specifically recognized as
"(4) Doing or proposing to do any business in substance equivalent to any of the foregoing in a
"In the application of the provisions of this Code, the fact that no profit is derived from the making of
4. Distribution of Losses; and

5. Premium (Sec. 77, RA 10607)
"TITLE 8
"PREMIUM
"Section 77.
When is An insurer is entitled to payment of the premium?
= as soon as the thing insured is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, NO policy or contract of insurance issued by an insurance company
is valid and binding unless and until the premium thereof has been paid (so ibig sabihin prerequisite ang payment of
premium para maging valid at binding ang insurance ontract), EXCEPT in the case of:
 Life Insurance or an industrial life policy:
 Whenever the grace period provision applies, or
 whenever under the broker and agency agreements with duly licensed intermediaries, a ninety (90)-day
credit extension is given.
No credit extension to a duly licensed intermediary should exceed ninety (90) days from date of issuance of
the policy.
READ: Gulf Resorts vs. PCIC (see previous one for ESCRA Doctrine)
Philamlife Health Systems vs. CA, GR 125678, Mar. 18, 2002
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his
family members were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After
the period expired, he was given an expanded coverage for Php 75,000. During the period, he suffered from heart
attack and was confined at MMC. The wife tried to claim the benefits but the petitioner denied it saying that he
concealed his medical history by answering no to the aforementioned question. She had to pay for the hospital bills
amounting to 76,000. Her husband subsequently passed away. She filed a case in the trial court for the collection of
the amount plus damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but
deleted awards for damages. Hence, this appeal.
Issue: WON a health care agreement is not an insurance contract; hence the “incontestability clause” under the
Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended
that there was no indemnification unlike in insurance contracts. It supported this claim by saying that it is a health
maintenance organization covered by the DOH and not the Insurance Commission. Lastly, it claimed that the
Incontestability clause didn’t apply because two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as “an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.”
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care agreement was in the nature of non-
life insurance, which is primarily a contract of indemnity. The provider must pay for the medical expenses resulting
from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that:
“that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to
any information acquired by him in his professional capacity upon any question affecting the eligibility for health care
coverage of the Proposed Members.”
This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The
contract also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isn’t valid.
They can’t also invoke the “Invalidation of agreement” clause where failure of the insured to disclose information
was a grounds for revocation simply because the answer assailed by the company was the heart condition question
based on the insured’s opinion. He wasn’t a medical doctor, so he can’t accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated to make
further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
“Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed
upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or
injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of insurance.”
As to cancellation procedure- Cancellation requires certain conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds
mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of
insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that “under the title Claim procedures of expenses,
the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within
which to contest the membershipof 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.”
F. Subject Matter of a Contract of Insurance
May be persons or things that have an insurable risk.
The requirements are as follows:

1. Large number of Homogenous Exposure Units;
2. Loss may be accidental or unintentional;
3. Loss must be determinable and measurable;
4. Loss should not be catastrophic;
5. Chance of loss must be calculable;
6. Premium must be economically feasible
G. Event or peril insured against (Sec. 3(1), Sec. 86, RA 10607)

"Section 3. Any contingent or unknown event, whether past or future, which may damnify a person having an
insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.
(ibig sabihin yung mga contingent at unknown event, nakaraan man o sa hinaharap na maaaring
makainjured or damnify sa tao na may insurable interest o kaya naman maaaring makalikha ng
liability against him= ang pwedeng iinsured against, (of course subject sa provision ng Insurance
Code))
"Section 86. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against
was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the
loss; but he is not liable for a loss of which the peril insured against was only a remote cause.
So kelan daw magiging liable si Insurer?

= kapag and proximate cause ng loss ay ung peril insured against, UNLESS otherwise provided by the policy.
Although a peril na hindi contemplated sa contract may have been a remote cause of the loss
Insurer is not liable for a loss kung saan yung peril insured against was only a remote cause of the loss.
Based on Engr.Jess notes:

Event may be past or future
The designated peril in insurance is the specific cause of the loss that is insured against.
H. Risk, defined; pure vs. speculative risk; past event; distinguished from fortuitous event and
condition, loss, peril, hazard
Risk
- any contingent or unknown event, whether past or future, which may damnify/cause injury to a
person having an insurable interest, or create liability against him.
Pure Risk Speculative Risk

-also known as absolute risk, is insurable -3 possible outcomes exist in this kind of risk:
-category of risk in which loss is the only possible a. something good (gain)
outcome. b. something bad (loss)
c. nothing (staying even.
Ex. Premature death, identity theft and career-
ending disabilities. -not insurable
There are products to mitigate this kind of risk, Ex. Gambling and investinig in the stock market,
examples are: business venture into new markets, purchase
a. home insurance (to protect homeowners new equipment, diversifying existing product
against their homes being destroyed) lines
Type of Pure Risk are:

a. Personal risks (directly affect an individual;
may involve losing/reducing income/assets, or
gaining expenses; ex. Unemployment, identity
theft, Poor health, Old age, permanent disability,
premature death)
b. Property Risks (property damaged or lost due

to forces outside a person’s control; ex. Fire,
lightning, windstorms or hail that causes property
damage)
c. Liability risk (litigation due to a real or

perceived injustice; ex. Person badly injured may
sue perpetrator for medical expenses, lost
income and other damages)
-individuals transfer part of a pure risk to an

insurer.
Insurance risk= actuarial risk
Past Event
-even past contingent or unknown event may be insured against, provided it will damnify a person
(having insurable interest ) or creates liabilities against him (subject to provision of insurance code).
Fortuitous Event Condition

Events which could not be foreseen or which -future or uncertain event, or past event
though foreseen were inevitable unknown to the parties
Common Types of conditions:
Types of Fortuitious event:
a. Ordinary (events that normally happen, a. Suspensive condition
reasonable, foreseeable but inevitable; ex. -suspends rights and obligations until the
Flooding during typhoon) uncertain event occurs. If the suspensive
condition is never fulfilled, the suspended rights
b. Extraordinary ( can’t be foreseen/reasonably and obligations never come into existence. It is
foreseen and don’t usually happen ; ex. War. as though they never existed.
Requisites of FE are as follows: b. Resolutory condition

a. Cause is independent of debtor’s/obligor’s will -its fulfillment ends the existence of rights and
b. Unforeseen or unavoidable event obligation. Rights and Obligations come into
c. happeing of the event made it impossible for existence immediately upon agreement. If
the debtor/obligor to fulfill his obligation in a resolutory condition is fulfilled, the operation of
normal manner. the rights and obligations ceases.
d. debtor didn’t take advantage of the ent to
aggravate the injury to the creditor/obligee. Why important to distinguish these 2 types?
= to examine whether and when certain rights
Gen Rule: There is no liability in case of vest in a party to a contract.
fortuitous event.
Exemption:
1. Law itself expressly so declares.
2. Stipulation in the contract
3. Nature of obligation requires the assumption
of risk
4. Obligor/Debtor is in default or has promised to
deliver the same thing to 2 or more persons who
don’t have the same interest.
Loss- loss is the end result of the risk insured against; involves diminution of value/disappearance of
value resulting from a risk.
Peril- serious and immediate danger; specific cause of loss that is insured against ;
Hazard- potential source of danger; danger or risk

-circumstances or conditions that creates or increase the risk of loss.
I. Right of Subrogation (Art. 2207, Civil Code)
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company
for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the
amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.
Purposes of Subrogation
1. To make the person who caused the loss legally responsible for it.
2. To prevent the insured from receiving double recovery, one from the wrongdoer and the other
from insurer.
3. To prevent the tortfeasors or wrongdoer from being free from liability (founded on consideration of
public policy)
Rules on Subrogation
a. Applicable only to property insurance- the value of human life is regarded as unlimited and
therefore, no recovery from a third party can be deemed adequate to compensate the insured
beneficiary.
b. The right of the insurer against a 3rd party is limited to the amount that the insured may recovered
from such 3rd person.
Exceptions to the Subrogation Rule

1. Where the insured by his own act releases, from liability, the wrongdoer or 3 rd party liable for
loss/damage. Insurer loses his rights against the wrongdoer since the insurer can only be subrogated
to only such rights as the insured may have.
2. Insurer cannot recover from the wrongdoer the excess amount it paid to the insured if it pays the
insured greater than that which the latter can lawfully claim against the person causing the loss.
3. If the cause of loss or injury is not included in the risk covered by the policy
4. Not applicable to life insurance.
5. Insurer pays the insured the value of the loss without notifying the carrier who has in good faith
also settled the insured claim for loss.
READ:
Manila Mahogany Manufacturing Corp. vs. CA, GR L-52756, Oct. 12, 1987
Federal Express Corp. vs. American Home Assurance, GR No. 150094, Aug. 18, 2004
Keppel Cebu Shipyard vs. Pioneer Insurance, Sept. 25 2009
FACTS
KCSI and WG&A Jebsens Shipmanagement, Inc. (WG&A)
executed a Shiprepair Agreement wherein KCSI would
renovate and reconstruct WG&A’s M/V “Superferry 3” using
its dry docking facilities pursuant to its restrictive safety and
security rules and regulations. Prior to the execution of the
Shiprepair Agreement, “Superferry 3” was already insured by
WG&A with Pioneer. In the course of its repair, M/V
“Superferry 3” was gutted by fire. Claiming that the extent of
the damage was pervasive, WG&A declared the vessel’s
damage as a “total constructive loss” and, hence, filed an
insurance claim with Pioneer. Armed with the subrogation
receipt, Pioneer tried to collect from KCSI, but the latter
denied any responsibility for the loss of the subject vessel.
Arbitration ensued, the Construction Industry Arbitration
Commission (CIAC) rendered its Decision declaring both
WG&A and KCSI guilty of negligence. However, the award
amount was limited to only PhP50 Million.
ISSUE
Whether or not the right of subrogation covers total
constructive loss of “Superferry 3”.
RULING
YES. There existed a total constructive loss so that it had to
pay WG&A the full amount of the insurance coverage and,
by operation of law, it was entitled to be subrogated to the
rights of WG&A to claim the amount of the loss. The
Supreme Court held that payment by the insurer to the
insured operates as an equitable assignment to the insurer
of all the remedies that the insured may have against the
third party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor
does it grow out of, any privity of contract. It accrues simply
upon payment by the insurance company of the insurance
claim. The doctrine of subrogation has its roots in equity. It
is designed to promote and to accomplish justice; and is the
mode that equity adopts to compel the ultimate payment of a
debt by one who, in justice, equity, and good conscience,
ought to pay. KCSI is ordered to pay Pioneer the net amount
of P329,747,351.91 plus legal interests.
Malayan Insurance vs. Alberto, GR 194320, Feb. 1, 2012
Asian Terminals vs. First Lepanto, GR 185964, June 16, 2014
FACTS: A shipment of 3,000 bags of sodium tripolyphosphate arrived in Manila through COSCO and
was discharged into the possession and custody of ATI, a domestic corporation engaged in arrastre bu
siness. The shipment remained for quite some time at ATI’s storage area until it was withdrawn by br
oker, PROVEN, on for delivery to the consignee. Upon receipt of the shipment, it was found out that t
he delivered goods incurred shortages and spillage for a loss/damage valued at P166,772.41. GASI so
ught recompense from COSCO, thru its Philippine agent SMITH BELL, ATI and PROVEN but was de
nied. Hence, it pursued indemnification from the shipment’s insurer, FIRST LEPANTO. As subrogee,
FIRST LEPANTO demanded from COSCO, its shipping agency in the Philippines, SMITH BELL, PRO
VEN and ATI, reimbursement of the amount it paid to GASI. ATI and PROVEN denied liability for the
lost/damaged shipment and claimed that it exercised due diligence and care in handling the same.
MeTC dismissed the case. On appeal, the Regional Trial Court (RTC) reversed the MeTC’s findings. A
TI sought recourse with the CA challenging the RTC’s finding that FIRST LEPANTO was validly subro
gated to the rights of GASI with respect to the lost/damaged shipment. ATI argued that there was no v
alid subrogation because FIRSTLEPANTO failed to present a valid, existing and enforceable Marine O
pen Policy or insurance contract. ATI reasoned that the Certificate of Insurance or Marine Cover Note
submitted by FIRST LEPANTO as evidence is not the same as an actual insurance contract.
ISSUE:
Whether or not the non-presentation of an insurance contract will bar a subrogee from collecting reim
bursement.
HELD:
No, Non-presentation of the insurance contract is not fatal to FIRST LEPANTO’s cause of action for r
eimbursement as subrogee. Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities.
In the case at bar, the Supreme Court observed that it is conspicuous from the records that ATI put in
issue the submission of the insurance contract for the first time before the CA. Despite opportunity to
study FIRST LEPANTO’s complaint before the MeTC, ATI failed to allege in its answer the necessity o
f the insurance contract. Neither was the same considered during pre-trial as one of the decisive matte
rs in the case. Further, ATI never challenged the relevancy or materiality of the Certificate of Insuranc
e presented by FIRST LEPANTO as evidence during trial as proof of its right to be subrogated in the c
onsignee’s stead. Since it was not agreed during the pre-trial proceedings that FIRST LEPANTO will h
ave to prove its subrogation rights by presenting a copy of the insurance contract, ATI is barred from
pleading the absence of such contract in its appeal. It is imperative for the parties to disclose during p
re-trial all issues they intend to raise during the trial because, they are bound by the delimitation of su
ch issues. The determination of issues during the pre-trial conference bars the consideration of other
questions, whether during trial or on appeal.
J. Kinds of Insurance
Per UP Reviewer, Classes of Insurance are:

a. Marine Insurance
b. Fire Insurance
c. Casualty Insurance
d. Suretyship
e. Life Insurance
f. Compulsory Motor Vehicle Liability Insurance
Marine Insurance
-type of transpo insurance w/c is concerned with the perils of property in, or incidental to, transit as
opposed to property perils at a generally fixed location.
-this includes:
Two major divisions of Marine Insurance:
Ocean Marine Insurance Inland Marine Insurance

-insures against risk connected with navigation, -cover the land or over the land tranpo perils of
to which the following may be exposed during a property shipped by:
certain voyage or a fixed period of time: a. railroads
a. ship b. motor trucks
b. cargo c. airplanes
c. freightage d. and other means of transpo.
d. profits or
e. other insurable interest on movable property. -it also covers risk of the following:
a. lake
b. river
c. or other inland waterway transpo
and other waterborned perils outside those
covered by ocean marine insurance.
-its scope includes:
a. Ships or Hulls
b. Goods or Cargoes
c. Earnings such as freight, passage money,
commissions, or profits, and
d. Liability (protection and indemnity insurance)
Bottomry vs. Respondentia

Bottomry Loan Respondentia Loan
-loan obtained for the value of the vessel on a -loan obtained as a security for the value of the
voyage. cargo to be transported and the lender is repaid
-lender is repaid only if the vessel subject of the only if the cargo arrives safely at its destination.
loan arrives safely at its destination.
-insurable interest of shipowner= amount of the
loan-value of the boat
Thus, if the amount of the loan does not cover
the total value of the boat, the owner can still
insure the boat.
Risk involved in Marine Insurance

a. Perils of the Sea/Perils of Navigation
b. Perils of the Ship
Perils of the Sea

-casualties arising from the violent action of the elements and does not cover ordinary wear and tear
or other damage usually incident to the voyage.
-the mere fact that an injury is due to violence of some marine force does not necessarily bring it
within the protection of the policy if such violence was not unusual or unexpected.
GenRule: Perils of the sea extends only to losses caused by sea damage, or by violence of the
elements, and does not embrace all losses happening at sea. Insure against losses from
extraordinary occurences only (w/c cannot be guarded against by the ordinary exertion of human
skill or prudence) . The phrase also extends to barratry= willful and intentional act on the part of the
master or the crew, in pursuance of some unlawful or fraudulent purpose without the consent of the
owner, and to the prejudice of his interest (eg. burning the ship or unlawfully selling the cargo).
Note: mere honest error of judgement or mere negligence cannot be considered barratry unless
criminally gross.
Exception: “all-risk policy”.
Perils of the Ship

-cause a loss which is in the ordinary course of events, results:
Rules on the Risks covered:

Gen. Rule: Risks insured against are ONLY Perils of the Sea
Exception:
If there is stipulation to the contrary
“All risk policy” (unless expressly excepted, and the burden rests on the insurer to proved that
the loss is caused by a risk that is excluded).
Loss
-may be total or partial.
Total Loss
-may be actual or constructive
Actual Total Loss (Sec. 132) Contructive Total Loss (Sec. 133)
-caused by: -gives to a person insured a right to abandon
a. total destruction of thing insured (under Sec. 141)
b. irretrievable loss of the thing by sinking, or by
being broken up;
c. any damage which renders it valueless to the
owner for the purpose to which it is held;
d. other event which effectively deprives the
owner of the possession, at the port of
destination of the thing insured.
-actual loss may be presumed from the continued

absence of a ship without being heard of. Length
of time sufficient to raise this presumption
depends on the circumstances of the case.
-exist when the subject matter of the insurance is

wholly destroyed or lost or when it is so damaged
as no longer to exist in its original character
-or “technical total loss” is one in which the total

loss, although not actually total , is of such
character that the insured is entitled, if he thinks
fit, to treat it as total by abandonment.
-3 rules exist to determine when constructive
total loss exists:
Abandonment (Sec. 140)
-act of the insured by which, after a constructive total loss, he declares the relinquishment to the
insurer of his interest in the thing insured.
-other conditions apart from Sec. 141

a. abandonment must be neither partial nor conditional
b. it must be made within a reasonable time after receipt of reliable info of the loss, but where the
info is of doubtful character, the insured is entitled to a reasonable time to make inquiry.
c. it is made by giving notice thereof to the insurer (orally or writing). Provided that if it be done
orally, a written notice of such abandonment shall be submitted within 7 days from such oral notice.
d. it must be absolute and total
Valid abandonment has the following characteristics:

Effects of abandonment:
a. equivalent to transfer by the insured of his interest to the insurer, with all the chances of recovery
and indemnity
b. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to the remain of
the thing insured, or its proceeds or salvage, as if there had been formal abandonment.
c. Upon abandonment, acts done in good faith by those who were agents of the insured in respect to
the thing insured, subsequent to the loss, are at the risk of the insurer, and for his benefit.
(pg. 68 of 320 of UP reviewer in Mercantile Law)
Fire Insurance
- includes insurance against loss by fire, lightning, windstorm, tornado or earthquake and other
allied risks, when such risks are covered by extension to fire insurance policies or under
separate policies.
- Contract of indemnity by which the insurer, for a stipulated premium, agrees to indemnify the
insured against loss of, or damage to, a property caused by hostile fire.
- Fire- oxidation which is so rapid as to produce either a flame or a glow. Spontaneous
combustion is usually rapid oxidation. Fire is always caused by combustion, but combustion
does not always cause fire.
- The presence of heat, steam, or even smoke is evidence of fire, but taken by itself will not
prove the existence of fire.
- Cannot be considered natural disaster or calamity since it almost always arises from some acts
of man or by human means. It cannot be an act of God unless caused by lightning or a natural
disaster or casualty not atributable to human agency.
C. Casualty Insurance
D. Surety ship
E. Life Insurance
TYPES:

Insurance Reviewer (Based On Course Outline of Atty. Reyes)

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Insurance Reviewer (Based On Course Outline of Atty. Reyes)

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Insurance Reviewer

Based on Course Outline of Atty. Mary Ann L. Reyes

Art. 2011 of NCC

Art. 2012-2017 of NCC

2. Insurance Code, RA 10607 (amending PD 612 as amended)

5. GSIS Act, SSS Act

7. EO 250 (July 25, 1987)

8. RA 3591 (PDIC Law)

9. RA 9829 (Pre-Need Code)

10.EO 192 (HMOs)

Facts of the Case:

Issue of the Case:

The SC affirmed the decision of the trial court.

2. REPUBLIC ACT NO. 10607

3. AN ACT STRENGTHENING THE INSURANCE INDUSTRY, FURTHER AMENDING

(1) Making or proposing to make, as insurer, any insurance contract;

Held: Yes. Petition granted.

Philamcare Health Services Inc. vs. CA

5. Variable Contracts (Sec. 238 of RA 10607)

6. Doing an insurance business (Sec. 2 of RA 10607)

(1) Making or proposing to make, as insurer, any insurance contract;

Read: Philippine Health Care Providers vs. CIR

July 2, 2014 § Leave a comment

7. Mutual insurance companies (see White Gold vs. Pioneer)

Per UP Reviewer, the following are the characteristics of Insurance Contract

Exception to Voluntariness of Insurance Contract

Executory and Unilateral but Synallagmatic

Contract of Adhesion (Fine Print Rule)

Property (for Life Insurance)

Uberrimae Fides Contract

1. Risk Distributing Device

This is done by paying a pre-determined amount into a general fund.

Broad sharing of economic risk= is the principle of risk distribution

2. Contract of Adhesion (fine print rule)

Held: No. Yes. Petition dismissed.

HELD: YES. Affirmed.

HELD: YES. CA reversed

READ: Verendia vs. CA, 217 SCRA 417

5. Uberrimae Fides (Fidae) Contracts (contracts of utmost good faith)

This doctrine is essential on the account that:

6. Personal Contract (However this is not included in Syllabus of Atty. Reyes)

"(a) Of himself, of his spouse and of his children;

"Section 14. An insurable interest in property may consist in:

"(a) An existing interest;

"(b) An inchoate interest founded on an existing interest; or

2. Risk of Loss (Sec. 3(1), Sec. 51 par f, RA 10607)

Section 51. A policy of insurance must specify:

3. Assumption of Risk (Sec. 2, RA 10607)

"(1) Making or proposing to make, as insurer, any insurance contract;

4. Distribution of Losses; and

When is An insurer is entitled to payment of the premium?

= as soon as the thing insured is exposed to the peril insured against.

 Life Insurance or an industrial life policy:

 Whenever the grace period provision applies, or

Held: No. Petition dismissed.

The requirements are as follows:

G. Event or peril insured against (Sec. 3(1), Sec. 86, RA 10607)

So kelan daw magiging liable si Insurer?

Based on Engr.Jess notes:

Pure Risk Speculative Risk

Type of Pure Risk are:

b. Property Risks (property damaged or lost due

c. Liability risk (litigation due to a real or