Case # 16:

G.R. No. 125678

March 18, 2002

PHILAMCARE HEALTH SYSTEMS, INC.,

vs.
COURT OF APPEALS and JULITA TRINOS
YNARES-SANTIAGO, J.
Petition for review
FACTS:
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
Ernanis 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
attorneys 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 respondents 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 respondents 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.
DISPOSITIVE PORTION:
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed decision of
the Court of Appeals dated December 14, 1995 is AFFIRMED.

Case # 17:
COMMISSIONER OF INTERNAL REVENUE,
vs.
LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMA LIFE
INSURANCE COMPANY, INC.) and THE COURT OF APPEALS
G.R. No. 119176

March 19, 2002

KAPUNAN, J.
Petition for review on certiorari
FACTS:
Private respondent Lincoln Philippine Life Insurance Co., Inc., is a domestic corporation
registered with the SEC and engaged in life insurance business. In the years prior to 1984,
private respondent issued a special kind of life insurance policy known as the Junior
Estate Builder Policy, the distinguishing feature of which is a clause providing for an
automatic increase in the amount of life insurance coverage upon attainment of a certain
age by the insured without the need of issuing a new policy. The clause was to take effect
in the year 1984. Documentary stamp taxes due on the policy were paid by petitioner only
on the initial sum assured.In 1984, private respondent also issued 50,000 shares of stock
dividends.. Documentary stamp taxes were paid based only on the par value
ofP5,000,000.00 and not on the book value. Subsequently, petitioner CIR issued deficiency
documentary stamps tax assessment for the year 1984, the first corresponding to the
amount of automatic increase of the sum assured on the policy issued by respondent, and
second corresponding to the book value in excess of the par value of the stock dividends.
Private respondent questioned the deficiency assessments and sought their cancellation in
a petition filed in the CTA. The CTA found no valid basis for the deficiency tax assessment
on the stock dividends as well as on the insurance policy.
ISSUE:
Whether or not private respondent should pay issued deficiency documentary stamps tax
assessment on the insurance policy.
HELD:
YES. The basis for the value of documentary stamp taxes to be paid on the insurance
policy is Section 183 of the National Internal Revenue Code. Section 49, Title VI of the
Insurance Code defines an insurance policy as the written instrument in which a contract
of insurance is set forth. Section 50 of the same Code provides that the policy, which is
required to be in printed form, may contain any word, phrase, clause, mark, sign, symbol,
signature, number, or word necessary to complete the contract of insurance It is thus clear
that any rider, clause, warranty or endorsement pasted or attached to the policy is
considered part of such policy or contract of insurance.
The subject insurance policy at the time it was issued contained an automatic increase
clause. Although the clause was to take effect only in 1984, it was written into the policy
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at the time of its issuance. The distinctive feature of the junior estate builder policy
called the automatic increase clause already formed part and parcel of the insurance
contract, hence, there was no need for an execution of a separate agreement for the
increase in the coverage that took effect in 1984 when the assured reached a certain
age.Here, although the automatic increase in the amount of life insurance coverage was to
take effect later on, the date of its effectivity, as well as the amount of the increase,
was already definite at the time of the issuance of the policy. Thus, the amount insured by
the policy at the time of its issuance necessarily included the additional sum covered by
the automatic increase clause because it was already determinable at the time the
transaction was entered into and formed part of the policy.The deficiency of documentary
stamp tax imposed on private respondent is definitely not on the amount of the original
insurance coverage, but on the increase of the amount insured upon the effectivity of the
Junior Estate Builder Policy. It should be emphasized that while tax avoidance schemes
and arrangements are not prohibited, tax laws cannot be circumvented in order to evade
the payment of just taxes. In the case at bar, to claim that the increase in the amount
insured (by virtue of the automatic increase clause incorporated into the policy at the time
of issuance) should not be included in the computation of the documentary stamp taxes
due on the policy would be a clear evasion of the law requiring that the tax be computed
on the basis of the amount insured by the policy.
DISPOSITIVE PORTION:
WHEREFORE, the petition is hereby given DUE COURSE. The decision of the Court of
Appeals is SET ASIDEinsofar as it affirmed the decision of the Court of Tax Appeals
nullifying the deficiency stamp tax assessment petitioner imposed on private respondent
in the amount of P464,898.75 corresponding to the increase in 1984 of the sum under the
policy issued by respondent.1wphi1.nt
Case # 18:
REPUBLIC OF THE PHILIPPINES, by EDUARDO T. MALINIS, in His Capacity as
Insurance Commissioner,petitioner,
vs.
DEL MONTE MOTORS, INC.
G.R. No. 156956

October 9, 2006

PANGANIBAN, CJ.
Petition for Review
FACTS:
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million
pesos for service contracts with Del Monte, and such was sourced from the counterbond
posted by Vilfran. CISCO issued the counterbond. CISCO opposed but was rebuffed. The
RTC released a motion for execution commanding the sheriff to levy the amount on the
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property of CISCO. To completely satisfy the amount, the Insurance Commissioner was also
commanded to withdraw the security deposit filed by CISCO with the Commission
according to Sec 203 of the Insurance Code.Insurance Commissioner Malinis was ordered
by the RTC to withdraw the security bond of CISCO for the payment of the insurance
indemnity won by Del Monte Motor against Vilfran Liner, the insured.Malinis didnt obey
the order, so the respondent moved to cite him in contempt of Court. The RTC ruled
against Malinis because he didnt have legal basis.
ISSUES:
1. Whether or not the security deposit held by the Insurance Commissioner pursuant
to Section 203 of the Insurance Code may be levied or garnished in favor of only
one insured.
2. Whether or not the Insurance Commissioner has power to withhold the release of
the security deposit.
HELD:
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any of
thesecurities of the insurer held on deposit pursuant to the requirement of the
Commissioner.
The court also claimed that the security deposit shall be (1) answerable for all the
obligations of the depositing insurer under its insurance contracts; (2) at all times free
from any liens or encumbrance; and (3) exempt from levy by any claimant.To allow the
garnishment of that deposit would impair the fund by decreasing it to less than
thepercentage of paid-up capital that the law requires to be maintained. Further, this
move wouldcreate, in favor of respondent, a preference of credit over the other policy
holders and beneficiaries.Also, the securities are held as a contingency fund
to answer for the claims against the insurance company by all its policy holders and their
beneficiaries. This step is taken in the event that the company becomes insolvent or
otherwise unable to satisfy the claims against it. Thus, asingle claimant may not lay stake
on the securities to the exclusion of all others. The other parties may have their own
claims against the insurance company under other insurance contracts it has entered
into.
2. The Insurance Code has vested the Office of the Insurance Commission with both
regulatory and adjudicatory authority over insurance matters.
Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings,
instructions, circulars, orders and decisions as he may deem necessary to secure the
enforcement of the provisions of this Code.The commissioner is authorized to (1) issue
(or to refuse to issue) certificates of authority to persons or entities desiring to engage in
insurance business in the Philippines;16 (2) revoke or suspend these certificates of
authority upon finding grounds for the revocation or suspension; (3) impose upon
insurance companies, their directors and/or officers and/or agents appropriate penalties -fines, suspension or removal from office -- for failing to comply with the Code or with any
of the commissioner's orders, instructions, regulations or rulings, or for otherwise
conducting business in an unsafe or unsound manner.
Included here is the duty to hold security deposits under Secs 191 and 202 of the Code for
the benefit of policy holders. Sec 192, on the other hand, states:the securities deposited
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as aforesaid shall be returned upon the company's making application therefor and
proving to the satisfaction of the Commissioner that it has no further liability under any of
its policies in the Philippines.He has been given great discretion to regulate the business
to protect the public. Also An implied trust is created by the law for the benefit of all
claimants under subsisting insurance contracts issued by the insurance company. He
believed that the security deposit was exempt from execution to protect the policy
holders.

DISPOSITIVE PORTION:

WHEREFORE, the Petition is GRANTED and the assailed Order SET ASIDE. No costs.