ETERNAL GARDENS MEMORIAL PARK CORPORATION
vs. THE PHILIPPINE AMERICAN LIFE INSURANCE
COMPANY
G.R. No. 166245 09 April 2008
Facts:
Respondent Philamlife entered into an agreement
denominated as Creditor Group Life Policy with petitioner.
Under the policy, the clients of Eternal who purchased burial
lots from it on installment basis would be insured by Philamlife.
Among those insured was John Chuang who died with a
balance of payments pf PhP100,000.00. More than a year
after complying with the required documents, Philamlife had
not furnished Eternal with any reply to the latter’s insurance
claim. This prompted Eternal to demand from Philamlife the
payment of the claim for PhP 100,000 on April 25, 1986. Only
then did Philamlife respond that the deceased was not
covered by the Policy.
The RTC said that since the contract is a group life insurance,
once proof of death is submitted, payment must follow. The
CA ruled that the non-accomplishment of the submitted
application form violated Section 26 of the Insurance Code.
Thus, the CA concluded, there being no application form,
Chuang was not covered by Philamlifes insurance.
Issue: ​May the inaction of the insurer on the insurance
application be considered approval of the application?
Ruling:
Yes. As earlier stated, Philamlife and Eternal entered into an
agreement denominated as Creditor Group Life Policy No.
P-1920 dated December 10, 1980. In the policy, it is provided
that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective
on the date he contracts a loan with the Assured. However,
there shall be no insurance if the application of the Lot
Purchaser is not approved by the Company.
An examination of the above provision would show ambiguity
between its two sentences. A contract of insurance, being a
contract of adhesion, par excellence, any ambiguity therein
should be resolved against the insurer. Moreover, the mere
inaction of the insurer on the insurance application must not
work to prejudice the insured; it cannot be interpreted as a
termination of the insurance contract. The termination of the
insurance contract by the insurer must be explicit and
unambiguous.
ENRIQUEZ VS. SUN LIFE INSURANCE OF CANADA
G.R. No. L-15895; November 29, 1920 1. Whether or not the contract of life annuity was
FACTS: perfected.

This is an action made by the adminstrator of the estate of

HELD:
Joaquin Herrer of P6,000.00 paid by the deceased for a life
1. NO. The facts clearly show that Herrer was not informed of
annuity on the ground that the contract for a life annuity had
the acceptance of the policy before his death.
not been perfected.
2. NO. The contract was not perfected. Art. 1262 provides that
Joaquin Herrer made an application with Sun Life for a life
acceptance by letter does not bind the person making the offer
annuity. He paid the amount of P6,000.00 to the Manila
except from the time it came to his knowledge. The pertinent
manager who gave him a "provisional" receipt "subject to
fact is that according to the provisional receipt, the insurance
medical examination and approval of the Company's Central
company had to: 1) conduct a medical examination; 2) had to
Office." The application was forwarded to the head office in
obtain the head office's approval; and 3) somehow
Canada and the policy was issued on December 4, 1917 in
communicate such approval. It is true that the letter notifying
Canada. Meanwhile, on December 18, 1917, Herrer's attorney
acceptance was deposited in the post office, but the fact of
wrote to the Manila Office stating that Herrer wanted to
notification is a rebuttable presumption and the facts clearly
withdraw his application to which the office wrote a letter dated
show that Herrer never received the notice of the acceptance
November 26, 1917 stating that the policy had already been
before his death.
issued. The letter was received by the attorney on December
21, 1917. Herrer had died a day earlier on December 20,
1920. White Gold Marine Insurance vs. Pioneer Insurance (2005)
The trial court ruled that the contract had been perfected, Summary Cases:
● ​White Gold Marine Services, Inc., vs. Pioneer Insurance and
hence this appeal.
Surety Corporation, et al. 464 SCRA 448​Subject:
ISSUES: Concept of Insurance Sec. 2, Insurance Code as amended by
RA 10607; Who may be insured, Sec. 7 Insurance Code as
1. Whether or not the policyholder had received notice of amended by RA 10607; Marine Insurance; Mutual Insurance;
the acceptance of his policy; Protection and Indemnity Club
Facts:
Petition for Review assailing the decision of the Court of
Appeals (CA). The decision of the CA affirmed that of the
Insurance Commission.
White Gold Marine Services (White Gold) procured a
protection and indemnity coverage for its vessels from
Steamship Mutual Underwriting (Steamship) through Pioneer
Insurance and Surety Corporation (Pioneer). White Gold was
issued by Pioneer a Certificate of Entry and Acceptance, and
receipts evidencing payments for the coverage. When White
Gold failed to fully pay its accounts, Steamship Mutual refused
to renew the coverage. Steamship 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 did not have a license to engage in the insurance
business. The Insurance Commission dismissed the complaint
and such dismissal was affirmed by the CA.
Held:
The need to secure a license
I. Procedural Issues
1. 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
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.
Agent / broker needs a separate license
2. 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.
3. Although Pioneer is already licensed as an insurance
company, it needs a separate license to act as insurance
agent for Steamship Mutual.
II. Substantive Issues
| Page 1 of 2
Concept of Insurance
4. Section 2(2) of the Insurance Code enumerates what
constitutes “doing an insurance business” or “transacting an
insurance business”. These are:
(a) Making, or proposing to make, as insurer, any insurance
contract;
(b) making, or proposing to make, as surety, any contract of
suretyship as a vocation and not as merely incidental to any
other legitimate business or activity of the surety;
(c) doing any kind of business, including a reinsurance
business, specifically recognized as constituting the doing of
an insurance business within the meaning of this Code;
(d) doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to
evade the provisions of this Code.
5. The same provision also provides, 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 preclude the existence of an
insurance business
6. 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.
Marine Insurance
7. In particular, a marine insurance undertakes to indemnify
the assured against marine losses, such as the losses incident
to a marine adventure.
Mutual Insurance
8. Relatedly, a mutual insurance company is a cooperative
enterprise where the members are both the insurer and
insured. In it, the members all contribute, by a system of
premiums or assessments, to the creation of a fund from
which all losses and liabilities are paid, and where the profits
are divided among themselves, in proportion to their interest.
Additionally, mutual insurance associations, or clubs, provide
three types of coverage, namely, protection and indemnity,
war risks, and defense costs.
Protection and Indemnity Club
9. 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.
| Page 2 of 2
PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF
APPEALs
Ernani Trinos applied for a health care coverage with
Philamcare Health Systems, Inc. To the 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?’, Ernani answered ‘No’.
Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage
was approved for a period of one year from March 1, 1988 to
March 1, 1989. The agreement was however extended yearly
until June 1, 1990 which increased the amount of coverage to
a maximum sum of P75,000 per disability.
During the period of said coverage, Ernani suffered a heart
attack and was confined at the Manila Medical Center (MMC)
for one month. While in the hospital, his wife Julita tried to
claim the benefits under the health care agreement. However,
the Philamcare denied her claim alleging that the agreement
was void because Ernani concealed his 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,
Julita paid for all the hospitalization expenses.
After Ernani 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, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling
very weak. Respondent was constrained to bring him back to
the Chinese General Hospital where he died on the same day.
Julita filed an action for damages and reimbursement of her
expenses plus moral damages attorney’s fees against
Philamcare and its president, Dr. Benito Reverente. The
Regional Trial court or Manila rendered judgment in favor of
Julita. On appeal, the decision of the trial court was affirmed
but deleted all awards for damages and absolved petitioner
Reverente. Hence, this 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.
ISSUES:
(1) Whether or not the health care agreement is not an
insurance contract
(2) Whether or not there is concealment of material fact made
by Ernani
HELD:
(1)YES. Section2 (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 of the Insurance Code states that any contingent or
unknown event, whether past or future, which my damnify a
person having an insurable 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.
The insurable interest of respondent’s 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.
(2) NO. The answer assailed by petitioner was in response to
the question relating to the medical history of the applicant.
This largely depends on opinion rather than fact, especially
coming from respondent’s husband who was not a medical
doctor. Where matters of opinion or judgment are called for
answers made I good faith and without intent to deceive will
not avoid a policy even though they are untrue.

The fraudulent intent on the part of the insured must be

established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or
insurer to avoid liability is an affirmative defense and the duty
to establish such defense by satisfactory and convincing
evidence rests upon the provider or insurer. In any case, with
or without the authority to investigate, petitioner is liable for
claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to
answer 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 wherever he avails of the covered benefits which
he has prepaid.

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.