Topic: contract of carriage vs insurance MAYER STEEL PIPE CORP. vs. COURT OF APPEALS, G.R. No.

124050, June 19, 1997 FACTS Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corp. (Mayer) to manufacture and supply various steel pipes and fitting from August to October 1983 which is to be shipped to Hongkong. The parties jointly appointed Industrial Inspection International as a third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Prior to the shipment, Mayer insured the pipes and the fitting AGAINST ALL RISKS with private respondent South Sea Surety and Insurance Co. (South Sea) and Charter Insurance Corp. (Charter). Before the shipment, International examined the steel pipes and the fitting and certified that all are in GOOD ORDER before they were loaded to the vessel. Nonetheless, when the goods when reached Hongkong, it was discovered that a substantial portion thereof was damaged. Mayer filed a claim against South Sea and Charter for indemnity under the insurance contract. Charter paid Hongkong the amount of HK$64,904.75. But South Sea refused payment on the ground that the insurance surveyors report allegedly showed that the damage is a factory defect. Trial Court decided in favour of petitioner and found that the damage to the goods is not due to manufacturing defects. That the insurance contract in controversy is at ALL RISKS policies which insure against all causes of conceivable loss or damage. CA set aside the trial courts findings and dismissed the complaint on the ground of prescription; it invoked Section 3(6) of the Carriage of Goods by the Sea Act (COGSA) since it filed on April 17, 1986 or more than two years from the time the goods were unloaded from the vessel. ISSUE: WON the petitioners cause of action has already been barred by prescription;WON the COGSA is the applicable law. SCs Ruling: The Court answered in the negative. According to the Court, the CA erred in applying the COGSA law in this case. Section 3(6) of the COGSA the carrier and the ship shall be discharged from all liability in respect of loss or damage unless the suit is brought within one year after the delivery f the goods should have been discovered. In the abovecited provision, it is clear that only the carriers liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer s liability is not based on the contract of carriage but on the contract of insurance. COGSA governs the relationship of the shipper and the carrier. It does not affect the relationship between the shipper and the insurer. The Filipino Merchants Case is not applicable in this case. In the Filipino Merchants Case, it was the insurer who filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In this case, it is the shipper which filed a case against the insurer. It based on the ALL RISKS insurance policies issued by South Sea. Topic: DOING OR TRANSACTING AN INSURANCE BUSINESS PHILIPPINE HEALTH CARE PROVIDERS INC. vs. COMMISSIONER OF INTERNAL REVENUE, GR. No. 167330 ,SEPT. 18, 2009 Facts Petitioner: Philhealth, a domestic corporation whose main purpose is to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organization (HMO) 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. Members paid their annual membership fee and are entitled to various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and other professional technical staff participating in the

group practice health delivery system at a hospital or clinic owned, operated or accredited by it. Philhealth was assessed to pay DOCUMENTARY STAMP TAX (DST) by the respondent pertaining to its health care agreement pursuant to Section 185 of the 1997 Tax Code. Philhealth contested claiming that they are not an insurance company and that they are merely a health maintenance organization. They also claimed that they availed tax amnesty pursuant to RA 9840 or the Tax Amnesty Act of 2007. Issue: WON Philhealth is engaged in an insurance business; hence they are required under Section 185 of the 1997 Tax Code to a DST. SCs Ruling: The Court answered in the negative and finds that the petitioner is merely a health maintenance organization. Petitioner is admittedly an HMO. Under RA 7875 (or The National Health Insurance Act of 1995), 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. In the long line of cases in the United States, the US Courts adopted the test to determine whether an HMO is engaged in the insurance business, the tests are the following: the assumption of risk and indemnification of loss. These tests are considered to be the principal objectives in doing an insurance business. If these are the principal objectives, the business is that of insurance. But if they are merely incidental and service is the principal purpose, then the business is not insurance. (THE PRINCIPAL OBJECT AND PURPOSE TEST) Further, American courts have pointed out that the main difference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit. In this case, petitioner as an HMO, has the obligation to maintain the good health of its members by way of its preventive and diagnostic medical services. Accordingly, its health care programs are designed to prevent or to minimize the possibility of any assumption of risk on its part. Thus, its undertaking under its agreements is not to indemnify its members against any loss or damage arising from a medical condition but, on the contrary, to provide the health and medical services needed to prevent such loss or damage. Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative medical services), but these are incidental to the principal activity of providing them medical care. The insurance-like aspect of petitioners business is miniscule compared to its noninsurance activities. Therefore, since it substantially provides health care services rather than insurance services, it cannot be considered as being in the insurance business. Petitioner, as an HMO, undertakes a business risk when it offers to provide health services: the risk that it might fail to earn a reasonable return on its investment. But it is not the risk of the type peculiar only to insurance companies. Insurance risk, also known as actuarial risk, is the risk that the cost of insurance claims might be higher than the premiums paid. The amount of premium is calculated on the basis of assumptions made relative to the insured Finally, the petitioners tax liability was extinguished under the Tax Amnesty Law.

Topic: CONTRACT OF ADHESION/FINE PRINT RULE ETERNAL GARDENS MEMORIAL PARK CORP. vs. THE PHILIPPINE AMERERICAN LIFE INSURANCE COMPANY, G.R. no. 166245, April 9, 2008 FACTS Eternal Gardens (Eternal) and respondent PhilAm Life entered into an agreement known as CREDITOR GROUP LIFE POLICY No. P-1920. Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis. On the agreement, it was stipulated that no insurance if the application of the Lot Purchaser is not approved by the respondents. Eternal complied with the abovecited stipulation. On December 29, 1982 Eternal sent a letter to PhilAm Life containing a list of insurable balances of its lot buyers for October 1982. One of those included in the list as "new business" was a certain John Chuang. His balance of payments was PhP 100,000. On August 2, 1984, Chuang died. Upon Chuangs death, Eternal wrote a letter to PhilAm Life, a ttaching thereto pieces of evidence that would warrant the death of Chuang. PhilAm Life replied asking for other documents relative its insurance for Chuangs death in which Eternal transmitted the requested documents on November 14, 1984. After more than a year, Eternal got no

reply from PhilAm. Hence, this prompted Eternal to demand response to the respondent. PhilAm Life replied that Chuang has no application for the group insurance submitted before their office prior to his death. PhilAm invoked the pertinent provision on their agreement which speaks that there shall be no insurance if the application is not approved by the Company." ISSUE: WON inaction of the insurer on the insurance application be considered as approval of the application. SCs DECISION: The Court answered in the affirmative. According to the Court, INSURANCE CONTRACT are contracts of adhesion which are wholly prepared by the insurer with vast amounts of experience in the industry purposely used to its advantage. It contains technical terms and conditions which an ordinary layperson cannot understand or could cause confusion. Hence, insurance contracts are imbued with public interest. So, in order to protect the interest of insurance applicants, insurance companies must be obligated to act with haste upon insurance applications, to either deny or approve the same, or otherwise be bound to honor the application as a valid, binding, and effective insurance contract. In this case, the Court finds that the letter dated December 29, 1982, which Philamlife stamped as received, states that the insurance forms for the attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the effect of acknowledging receipt of the letter together with the attachments. The burden of evidence shifted to the respondent which must prove that the letter did not contain Chuang's insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have received Chuang's insurance application. To conclude, PhilAm Life assumed the risk of loss without approving the application. Topic: PARTIES IN INSURANCE CONTRACT-INSURER AND INSURED;BENEFICIARY GREAT PACIFIC LIFE ASSURANCE CORP. vs. CA and MEDARDA V. LEUTERIO, G.R No. 113899, OCTOBER 13, 1999 FACTS Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge. However, after about a year, Dr. Leuterio died due to massive cerebral hemorrhage. When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for Specific Performance with Damages. Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP. ISSUE: WON CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor. SCs RULING: The rationale of a group of insurance policy of mortgagors, otherwise known as the mortgage redemption insurance, is a device for the protection of both the mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under such a concept so that in the event of death, the mortgage obligation will be extinguished by the application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund. Such losspayable clause does not make the mortgagee a party to the contract. The insured, being the person with whom the contract was made, is primarily the proper person to bring suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person, such as a mortgagee. And since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.

Topic: INTERPRETATION OF INSURANCE CONTRACTS RIZAL SURETY & INSURANCE CO. vs. CA, G.R. No. 112360, June 18, 2000 FACTS Rizal Surety & Insurance Company (Rizal Insurance) issued Fire Insurance Policy 45727 in favor of Transworld Knitting Mills, Inc. (Transworld), initially for P1,000,000.00 and eventually increased to P1,500,000.00, covering the period from 14 August 1980 to 13 March 1981. The same pieces of property insured with Rizal Insurance were also insured with New India Assurance Company, Ltd., (New India). On 12 January 1981, fire broke out in the compound of Transworld, razing the middle portion of its four-span building and partly gutting the left and right sections thereof. A two-storey building (behind said fourspan building) where fun and amusement machines and spare parts were stored, was also destroyed by the fire. Transworld filed its insurance claims with Rizal Insurance and New India but to no avail. Transworld now brought against Rizal and New India a action for collection of sum of money. It anchored its contention that the so called ANNEX (where the amusement machines and spare parts were stored) was NOT an ANNEX but was actually an integral part of the four-span building, hence, the goods and the items stored therein were covered by the same fire policy. Trial Court decided in favour of Transworld; ordered the Rizal Surety to pay to the former the insured amount as well as the other costs while dismissing the case agsunts New India. CA modified the decision; it ruled that New India should likewise pay the insured amount in favour to Transworld; it affirmed that Rizal Surety should also pay. ISSUE: WON the annex building where the amusement machines and other effects were stored is part of the fire insurance policy. SCs DECISION: The Court answered in the affirmative. After scrutinizing the fire insurance agreement, the Court finds that the said fire insurance policy in question did not limit its coverage to what were stored in the four-span building. ("xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx") Two requirements must concur in order that the said fun and amusement machines and spare part would be deemed protected by the fire insurance policy, to wit: said properties must contain and/or stored in the areas occupied by Transworld and said areas must form part of the building described in the policy. Both the trial court and the CA found that the so-called ANNEX was not an annex building but an integral and inseparable part of the four-span building described in the policy and consequently, the machines and the spare parts stored therein were covered by the fire insurance policy. Insurance Contracts are contracts of adhesion. Hence, the 'terms in an insurance policy, which are ambiguous, equivocal, or uncertain x x x are to be construed strictly and most strongly against the insurer, and liberally in favor of the insured so as to effect the dominant purpose of indemnity or payment to the insured, especially where forfeiture is involve. The reason for this is that the 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company. Topic: INTERPRETATION OF INSURANCE CONTRACTS AMERICAN HOME ASSURANCE CO. vs. TANTUCO ENTERPRISES, INC., G.R. No. 138941, October 8, 2001 Facts Tantuco Enterprises is engaged in the coconut milling and refining industry. It owns two oil mills both are located in the companys factory in Iyam, Lucena. It started with one oil mill and in 1988 a new oil mill was installed. The two oil mills w ere SEPARATELY covered by fire insurance policies issued by Petitioner American Home Assurance Co. The first oil mill was insured for 3million pesos while the new oil mill was for 6million pesos. A fire broke which consumed the new oil mill. Tantuco immediately informed American Home about the incident. American Home then sent an appraiser to check the burned premises. On a letter, American Home rejected Tantucos claim for the insurance proceeds. They argued that burned oil mill was not covered in the insurance policy since the description of the insured premise is not the one that had been burned. Tantuco filed a complaint for specific performance and damages. RTC- decided in favour of Tantuco; CA affirmed the same.

ISSUE: WON the burned oil mill is not covered in the insurance policy. SCs Ruling: The Court finds that the burned oil mill is covered in the fire insurance policy. According to the Court, the objective of the Court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. In determining the intent, the court will read and construe the policy as a whole to determine its purpose and object. In this case, it is clear that the parties really intended to protect the new oil mill (the one that had been burned). Notwithstanding the misdescription in the policy, it is beyond dispute that what has been insured is the new oil mill. Indeed, it would be absurd to assume that Tantuco would protect the first oil mill for different amounts and leas the uncovered its second one. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a mistake as to the identity and character of the building is extremely UNLIKELY. It is also clear that it was petitioners agent who made an error of copying the boundaries of the first oil mill when typing t he policy to be issued to the new one. Hence, the source of the discrepancy happened during the preparation of the written contract. Noteworthy also to point out that Mr. Tantuco notified Mr. Borja (Americans agent) about the discrepancy of the description in the insurance policy. However, instead of correcting the same Mr. Borja assured Mr. Tantuco that the use of the adjective NEW will distinguished the properties insured. Topic: INTERPRETATION OF INSURANCE CONTRACTS PAN MALAYAN INSURANCE CORP. vs. COURT OF APPEALS, ERLINDA FABIE and HER UNKNOWN DRIVER, G.R. No. 81026, April 3, 1990 FACTS Pan Malayan is the insurer of Canlubang Automotive Resource Corporation for a Mitsubishi Colt Lancer car with plate number DDZ-431. Sometime on May 26, 1985, due to the carelessness, recklessness and imprudence of the unknown driver of Fabie the insured car was hit by a pick-up truck owned by the latter. PanMalay defrayed the cost of the repair; it became the subrogee of Canlubang. Despite repeated demands for reimbursement from Fabie, the latter refused to pay. Fabie contended that PanMalay has no cause of action and that payment under the "own damage" clause of the insurance policy precluded subrogation under Article 2207 of the Civil Code, since indemnification thereunder was made on the assumption that there was no wrongdoer or no third party at fault. Both RTC and CA ruled that PanMalay has no cause of action. ISSUE: WON PanMalay may institute an action to recover the amount it had paid its assured in settlement of an insurance claim against Fabie as the parties allegedly responsible for the damage caused to the insured vehicle. SCs Ruling: The Court answered in the affirmative and ruled that PanMalay has cause of action. Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If the insured property is destroyed or damaged through the fault or negligence of a party other than the assured, then the insurer, upon payment to the assured, will be subrogated to the rights of the assured to recover from the wrongdoer to the extent that the insurer has been obligated to pay. Payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter 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 or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. Exceptions to the abovecited rule: 1. if the assured by his own act releases the wrongdoer or third party liable for the loss or damage, from liability, the insurer's right of subrogation is defeated, 2. where the insurer pays the assured the value of the lost goods without notifying the carrier who has in good faith settled the assured's claim for loss, the settlement is binding on both the assured and the insurer, and the latter cannot bring an action against the carrier on his right of subrogation and 3. where the insurer pays the assured for a loss which is not a risk covered by the policy, thereby effecting "voluntary payment", the former has no right of subrogation against the third party liable for the loss

It is a basic rule in the interpretation of contracts that the terms of a contract are to be construed according to the sense and meaning of the terms which the parties thereto have used. In the case of property insurance policies, the evident intention of the contracting parties, i.e., the insurer and the assured, determine the import of the various terms and provisions embodied in the policy. It is only when the terms of the policy are ambiguous, equivocal or uncertain, such that the parties themselves disagree about the meaning of particular provisions, that the courts will intervene. In such an event, the policy will be construed by the courts liberally in favor of the assured and strictly against the insurer. Both the PanMalay and Canlubang has the same understanding the coverage insurance risks under Section III-1 (a) where it is comprehensive enough to include damage to the insured vehicle arising from collision or overturning due to the fault or negligence of a third party. CANLUBANG filed its claim with PANMALAY for indemnification of the damage caused to its car. It then accepted payment from PANMALAY, and executed a Release of Claim and Subrogation Receipt in favor of latter.