AFP GENERAL INSURANCE CORP. V.

NOEL MOLINA
FACTS
Radon security was charged with illegal dismissal. AFPGIC entered the fray by
filing before the Labor Arbiter an Omnibus Motion to Quash Notice/Writ of
Garnishment and to Discharge AFPGICs Appeal Bond on the ground that said
bond has been cancelled and thus non-existent in view of the failure of Radon
Security to pay the yearly premiums.[7]
On April 30, 1999, the Labor Arbiter denied AFPGICs Omnibus Motion for lack of
merit.[8] The Labor Arbiter pointed out that the question of non-payment of
premiums is a dispute between the party who posted the bond and the insurer; to
allow the bond to be cancelled because of the non-payment of premiums would
result in a factual and legal absurdity wherein a surety will be rendered nugatory by
the simple expedient of non-payment of premiums.
The petitioner then appealed the Labor Arbiters order to the NLRC. The appeals of
Radon Security and AFPGIC were jointly heard as NLRC NCR CA-011705-96.
NLRC dismissed.
In dismissing the appeal of AFPGIC, the NLRC pointed out that AFPGICs theory
that the bond cannot anymore be proceeded against for failure of Radon Security
to pay the premium is untenable, considering that the bond is effective until the
finality of the decision.[10] The NLRC stressed that a contrary ruling would allow
respondents to simply stop paying the premium to frustrate satisfaction of the
money judgment.[11]
AFPGIC then moved for reconsideration, but the NLRC denied the motion in its
Resolution
CA affirmed NLRC.
ISSUE
Whether THE COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING THE
PUBLIC RESPONDENT NLRC ALTHOUGH THE LATTER GRAVELY ABUSED
ITS DISCRETION WHEN IT ARBITRARILY IGNORED THE FACT THAT
SUBJECT APPEAL BOND WAS ALREADY CANCELLED FOR NON-PAYMENT
OF PREMIUM AND THUS IT COULD NOT BE SUBJECT OF EXECUTION OR
GARNISHMENT
HELD
The Insurance Code supports the private respondents arguments. The petitioners
reliance on Sections 64 and 77 of the Insurance Code is misplaced. The said
provisions refer to insurance contracts in general. The instant case pertains to a
surety bond; thus, the applicable provision of the Insurance Code is Section 177,
[31]
which specifically governs suretyship. It provides that a surety bond, once
accepted by the obligee becomes valid and enforceable, irrespective of whether or
not the premium has been paid by the obligor. The private respondents, the
obligees here, accepted the bond posted by Radon Security and issued by the

petitioner. Hence, the bond is both valid and enforceable. A verbis legis non est
recedendum (from the language of the law there must be no departure).[32]
When petitioner surety company cancelled the surety bond because Radon
Security failed to pay the premiums, it gave due notice to the latter but not to the
NLRC. By its failure to give notice to the NLRC, AFPGIC failed to acknowledge
that the NLRC had jurisdiction not only over the appealed case, but also over the
appeal bond. This oversight amounts to disrespect and contempt for a quasijudicial agency tasked by law with resolving labor disputes. Until the surety is
formally discharged, it remains subject to the jurisdiction of the NLRC.
Our ruling, anchored on concern for the employee, however, does not in any way
seek to derogate the rights and interests of the petitioner as against Radon
Security. The former is not devoid of remedies against the latter. Under Section
176[33] of the Insurance Code, the liability of petitioner and Radon Security is
solidary in nature. There is solidary liability only when the obligation expressly so
states, or when the law so provides, or when the nature of the obligation so
requires.[34] Since the law provides that the liability of the surety company and the
obligor or principal is joint and several, then either or both of them may be
proceeded against for the money award.
The Labor Arbiter directed the NLRC Sheriff to garnish the surety bond issued by
the petitioner. The latter, as surety, is mandated to comply with the writ of
garnishment, for as earlier pointed out, the bond remains enforceable and under
the jurisdiction of the NLRC until it is discharged. In turn, the petitioner may
proceed to collect the amount it paid on the bond, plus the premiums due and
demandable, plus any interest owing from Radon Security. This is pursuant to the
principle of subrogation enunciated in Article 2067 [35] of the Civil Code which we
apply to the suretyship agreement between AFPGIC and Radon Security, in
accordance with Section 178[36] of the Insurance Code.Finding no reversible error
committed by the Court of Appeals in CA-G.R. SP No. 58763, we sustain the
challenged decision.
BIAGTAN V.THE INSULAR LIFE ASSURANCE COMPANY, LTD.
Facts: Juan S. Biagtan was insured with defendant Insular Life Assurance
Company under Policy No. 398075 for the sum of P5,000.00 and, under a
supplementary contract denominated "Accidental Death Benefit Clause, for an
additional sum of P5,000.00 if "the death of the Insured resulted directly from
bodily injury effected solely through external and violent means sustained in an
accident . . . and independently of all other causes." The clause, however,
expressly provided that it would not apply where death resulted from an injury
"intentionally inflicted by a third party."
On the night of May 20, 1964 or during the first hours of the following day a band
of robbers entered the house of the insured Juan S. Biagtan.

Issue: Whether the wounds received by the insured at the hands of the robbers
were inflicted intentionally.
Held:
Yes. But where a gang of robbers enter a house and coming face to face with the
owner, even if unexpectedly, stab him repeatedly, it is contrary to all reason
and logic to say that his injuries are not intentionally inflicted, regardless of whether
they prove fatal or not. As it was, in the present case they did prove fatal, and the
robbers have been accused and convicted of the crime of robbery with homicide.
Under the circumstance, the insurance company was correct in refusing to pay the
additional sum of P2,000.00 under the accidental death benefit clause which
expressly provided that it would not apply where death resulted from an injury
"intentionally" inflicted by a third party.
LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA
AYO, CELIA CALUMBAG andLUCIA LONTOK, vs. HON. COURT OF APPEALS
and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED
FACTS
This is an action for the payment of insurance claims and prayer for administrative
sanctions.Prime Marine Services, Inc. (PMSI), a crewing/manning outfit, procured
a Group Policy from Insular LifeAssurance Co., Ltd. to provide life insurance
coverage to its sea-based employees. During the effectivity of the policy,
sixcovered employees perished at sea when their vessel sunk. They were survived
by the complainants-appellees, thebeneficiaries under the policy.The beneficiaries,
except the spouses Alarcon, executed special powers of attorney authorizing Capt.
Nuval,
President and General Manager of PMSI, to , among others, follow
up, ask, demand, collect and receive for their
benefit indemnities of sums of money due them relative to the sinking of the
vessel. By virtue of these written powers of attorney, complainants-appellees were
able to receive their respective death benefits. Unknown to them, however,PMSI,
in its capacity as employer and policyholder of the life insurance of its deceased
workers, filed with Insular Lifeformal claims for and in behalf of the beneficiaries,
through Capt. Nuval. On the basis of the five special powers of attorney, Insular
Life drew against its account six (6) checks, four for P200,000.00 each, one for
P50,000.00 and anotherfor P40,000.00 payable to the order of complainantsappellees. Capt. Nuval, upon receipt of these checks endorsed anddeposited them
in his own account.When the complainants-appellees learned that they were
entitled, as beneficiaries, to life insurance benefitsunder a group policy, they

sought to recover these benefits from Insular Life but the latter denied their claim
on theground that the liability to complainants-appellees was already extinguished.
ISSUE:
Whether or not Insular Life is bound by the misconduct of the employer.
RULING
A cursory reading of the questioned powers of attorney would disclose that they do
not contain in clear andunequivocal terms authority to Captain Nuval to obtain,
receive, receipt from respondent company insurance proceedarising from the
death of the seaman-insured. On the contrary, the said powers of attorney are
couched in terms whichcould easily arouse suspicion of an ordinary man.
In Elfstrom vs. New York Life Insurance Company , the California Supreme Court
explicitly ruled that ingroup insurance policies, the employer is the agent of
the insurer. Thus:We are convinced that the employer is the agent of the insurer in
performing the duties of administering group insurance policies. It cannot be said
that the employer acts entirely for its own benefit orfor the benefit of its employees
in undertaking administrative functions. While a reduced premium may resultif the
employer relieves the insurer of these tasks, and this, of course, is advantageous
to both the employerand the employees, the insurer also enjoys significant
advantages from the arrangement. The reduction in thepremium which results from
employer-administration permits the insurer to realize a larger volume of sales,and
at the same time the insurer's own administrative costs are markedly reduced.The
most persuasive rationale for adopting the view that the employer acts as the
agent of the insurer,however, is that the employee has no knowledge of or control
over the employer's actions in handling thepolicy or its administration. An agency
relationship is based upon consent by one person that another shall actin his
behalf and be subject to his control. It is clear from the evidence regarding
procedural techniques herethat the insurer-employer relationship meets this
agency test with regard to the administration of the policy, whereas that between
the employer and its employees fails to reflect true agency. The insurer directs the
performance of the employer's administrative acts, and if these duties are not
undertaken properly the insurer is in a position to exercise more constricted control
over the employer's conduct. In
Neider vs. Continental Assurance Company , which was cited in Elfstrom , it was held
that: the employer owes to the employee the duty of good faith and due care in attending
to the policy, and thatthe employer should make clear to the employee anything
required of him to keep the policy in effect, and thetime that the obligations are
due. In its position as administrator of the policy, we feel also that the employer
should be considered as the agent of the insurer, and any omission of duty to the
employee in its administration should be attributable to the insurer . In the light of the
above disquisitions and after an examination of the facts of this case, we hold that
PMSI, through its President and General Manager, Capt. Nuval, acted as the agent
of Insular Life. The latter is thus bound by the misconduct of its agent.

EDRALIN V. INSULAR LIFE (CA CASE)

FACTS
Contending that Josefina Edralin-Montilla, an insurance policy holder, died of
accidental causes, her beneficiaries filed a claim against the Insular Life Assurance
Company, Incorporated.
Acting on the claim, Insular Life processed the supporting papers submitted by the
beneficiaries and conducted its own investigation into the circumstances
surrounding the death of the insured, after which it concluded that the insured
died by her own hands: meaning she committed suicide and hence the insurance
companys liability was limited to a return of the premiums paid in accordance with
the provisions of the policy.
Complaint was filed by beneficiaries against Insular Life. RTC ruled for
beneficiaries
ISSUE
Whether the death of the insured Edralin-Montilla was accidental or did she
commit suicide
HELD/RATIO
In life insurance, it is incumbent upon a party alleging suicide as a defense,
especially in actions involving insurance policies, to prove it by clear and
convincing proof.
We are in complete accord with the lower courts observation: From the evidence
of the defendant, its claim that the insured died of suicide has not been duly
established. All the witnesses came to the scene of the incident at the time when
the insured was already unconscious. Not one of the maids who were, more or
less, better and competent witnesses of the incident, were presented by the
parties. The testimony of said witnesses only tend to show by circumstantial
evidence that the insured purposely locked herself in the kitchen with gas stove on,
and then the defendant concluded from such circumstances that the insured
committed suicide inside the said kitchen.
In summation, we hold that the defendant has failed to establish beyond cavil that
the insured was a victim of self-destruction, hence, is liable to pay the beneficiaries
for the amount dictated in the policy.
GREAT PACIFIC LIFE v. CA
316 SCRA 677QUISUMBING; October 13, 1999
NATURE

Petition for Review of CA decision

FACTS
- A contract of group life insurance was executed between petitioner Great Pacific
Life Assurance Corporation (hereinafter Grepalife) and Development Bank of
thePhilippines (hereinafter DBP). Grepalife agreed to insure the lives of eligible
housing loan mortgagors of DBP.- In Nov. 1983, Dr. Wilfredo Leuterio, a physician
and a housing debtor of DBP applied for membership in the group life insurance
plan. In an application form, Dr.Leuterio answered Qs concerning his health
condition as follows:
Q: Have you ever had, or consulted, a physician for a heart condition, high blood
pressure, cancer, diabetes, lung, kidney or stomach disorder or any other
physical impairment? No.Q: Are you now, to the best of your knowledge, in good
health? Yes.
- Grepalife issued an insurance coverage of Dr. Leuterio, to the extent of his DBP
mortgage indebtedness of P86,200.00. In Aug. 1984, Dr. Leuterio died due
to"massive cerebral hemorrhage." DBP submitted a death claim to Grepalife.
Grepalife denied the claim because Dr. Leuterio was not physically healthy when
heapplied for an insurance. Grepalife insisted 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.Herein respondent Medarda Leuterio, widow, filed a complaint with RTC against
Grepalife for "Specific Performance with Damages." Dr. Mejia, who issued
thedeath certificate, testified that Dr. Leuterio complained of headaches
presumably due to high blood pressure. The inference was not conclusive because
Dr. Leuteriowas not autopsied, hence, other causes were not ruled out.- RTC ruled
in favor of respondent widow and against Grepalife. CA sustained the RTC
decision. Hence, the present petition.
ISSUES
1. WON CA erred in holding petitioner liable to DBP as beneficiary in a group life
insurance contract from a complaint filed by the widow of the decedent/mortgagor
HELD
1. NO
Ratio
Insured, being the person with whom the contract was made, is primarily the
proper person to bring suit. Subject to some exceptions, insured may thus sue,
although the policy is taken wholly or in part for the benefit of another person
named or unnamed, and although it is expressly made payable to another as his
interest may appear or otherwise. Although a policy issued to a mortgagor is taken
out for the benefit of the mortgagee and is made payable to him, yet the mortgagor
may sue thereon in his own name, especially where the mortgagee's interest is
less than the full amount recoverable under the policy. (See Sec. 8, Insurance
Code)

Reasoning
[a] The insure d private respondent did not cede to the mortgagee all his rights or
interests in the insurance, the policy stating that: In the event of the debtor's death
before his indebtedness with the Creditor (DBP) shall have been fully paid, an
amount to pay the outstanding indebtedness shall first be paid to the creditor and
the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies
designated by the debtor. When DBP submit ted the insurance claim against
Grepalife, the latter denied payment thereof, interposing the defense of
concealment committed by the insured. Thereafter, DBP collected the debt from
the mortgagor and took the necessary action of foreclosure on the residential lot of
private respondent.
[b] 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.
CIR V. LINCOLN PHIL LIFE INSURANCE CO, INC.
FACTS:
Lincoln Philippine Life Insurance Co., Inc., (now Jardine-CMA Life
Insurance Company, Inc.) issued a special kind of life insurance policy known
as the "Junior Estate Builder Policy" with a distinguishing feature. It had
a "automatic increase clause" upon attainment of a certain age by the insured.

Commissioner of Internal Revenue issued deficiency documentary stamps

tax assessment for the year 1984 pertaining to the amount in the automatic
increase clause

Lincoln questioned the deficiency assessments

Court of Tax Appeals: found no valid basis and cancelled it

CA: affirmed CTA

CIR claims that "automatic increase clause" in the subject insurance policy
is separate
ISSUE: W/N the "automatic increase clause" should not be taxed with the main
policy

any rider, clause, warranty or endorsement pasted or attached to the policy

is considered part of such policy or contract of insurance
Section 173 that the payment of documentary stamp taxes is done at the
time the act is done or transaction had and the tax base for the computation of
documentary stamp taxes on life insurance policies under Section 183 is the
amount fixed in policy, unless the interest of a person insured is susceptible of
exact pecuniary measurement
the amount fixed in the policy is the figure written on its face and whatever
increases will take effect in the future by reason of the "automatic increase
clause" embodied in the policy without the need of another contract
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
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

HELD: NO. CA set aside

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.

PHIL AMERICAN ASSURANCE V. COMM, CTA case

FACTS
These are separate petitions for review filed by three insurance companies, the
Philippine American Assurance Company, Inc., the Philippine American Accident
Insurance Company, Inc. and the Philippine American General Insurance
Company, Inc., seeking the refund of the sums of P10,159.60, P10,163.78 and
P21,838.27, respectively, representing the lending investors' fixed and percentage
taxes paid during the period from September, 1969 to June, 1971, pursuant to
Sections 182(A) (3) (dd) and 195-A of the National Internal Revenue Code, as
amended
ISSUE
Whether the 3 insurance companies are entitled to refund.
HELD
Yes.
The flaw in respondent's contention rests on the erroneous assumption that the
lending activity of petitioners is separate and independent from their main business
of insurance. It overlooked the fact that the business of insurance actually
comprises two principal activities, namely; (1) underwriting and (2) investment, and

that the lending of money, being a form of investment, is a necessary and essential
part of insurance and can hardly be distinguished generally from the business.
We expressed the same view in Insular Life Assurance Co., Ltd. v. Commissioner
of Internal Revenue, CTA Case No. 2336 and Filipinas Life Assurance Co. v.
Commissioner of Internal Revenue, CTA Case No. 2337, November 12, 1973:
That the investment of the premiums collected by insurance companies
from policyholders appears to be not merely incidental or necessary but in
fact essential to the conduct of the life insurance business cannot be
gainsaid. Nor can it be denied that "insurance is affected with a public
interest", and that perhaps "no other business affects the public so
intimately as does the insurance business." (Vance on Insurance, p. 36.) It
is for three reasons that the investment aspect of the insurance business,
including investments in mortgage loans, is subject to stringent regulation
by the State. (See Secs. 178-A, 183, 197, 200-A of the Insurance Act.) It is
noteworthy that according to Sec. 200(1) of the Insurance Act, an
insurance corporation may purchase and hold property "as may have been
mortgaged, pledged, or conveyed to it . . . by reason of money loaned by it
in pursuance of the regular business of the corporation . . ."
It is argued that to hold that petitioners are not subject to the lending investor's tax
would in effect be giving them an exemption from taxation which is not favored,
and since a tax exemption law must be strictly construed against the person
claiming exemption, any doubt should be resolved against him. This argument
proceeds from a false premise. The law providing for a tax on lending investors is
not a tax exemption law. It is a classification statute which should be construed as
an ordinary taxing law which is to be construed fairly and justly, and in case of
doubt, the doubt should be resolved in favor of the taxpayer. (See Commissioner
of Internal Revenue v. Ledesma, G.R. No. L-17509, Jan. 30, 1970, 31 SCRA 95.)
At any rate, we entertain no doubt as to the non-applicability of the law imposing
the lending investor's tax to insurance companies like the petitioners herein.
In view of our opinion that petitioners are not engaged in business as lending
investors independently of their insurance business, they are entitled to the refund
of the amounts paid by them as lending investors' fixed and percentage taxes for
the years 1969, 1970 and 1971.
CIR V. PHILIPPINE AMERICAN ACCIDENT INSURANCE CO
FACTS
Respondents are domestic corporations licensed to transact insurance business in
the country. From August 1971 to September 1972, respondents paid the Bureau
of Internal Revenue under protest the 3% tax imposed on lending investors by

Section 195-A[4] of Commonwealth Act No. 466 (CA 466), as amended by

Republic Act No. 6110 (RA 6110) and other laws. CA 466 was the National Internal
Revenue Code (NIRC) applicable at the time.
Respondents paid the following amounts: P7,985.25 from Philippine American
(PHILAM) Accident Insurance Company; P7,047.80 from PHILAM Assurance
Company; and P14,541.97 from PHILAM General Insurance Company. These
amounts represented 3% of each companys interest income from mortgage and
other loans. Respondents also paid the taxes required of insurance companies
under CA 466.
On 31 January 1973, respondents sent a letter-claim to petitioner seeking a refund
of the taxes paid under protest. When respondents did not receive a response,
each respondent filed on 26 April 1973 a petition for review with the CTA. These
three petitions, which were later consolidated, argued that respondents were not
lending investors and as such were not subject to the 3% lending investors tax
under Section 195-A.
The CTA archived respondents case for several years while another case with a
similar issue was pending before the higher courts. When respondents case was
reinstated, the CTA ruled that respondents were entitled to their refund.
CIR appealed to CA
CA affirmed CTAs decision and
ruled that respondents are not taxable as lending investors
ISSUE
WHETHER RESPONDENT INSURANCE COMPANIES ARE SUBJECT TO THE 3%
PERCENTAGE TAX ASLENDING INVESTORS UNDER SECTIONS 182(A)(3)(DD) AND 195A, RESPECTIVELY IN RELATION TOSECTION 194(U), ALL OF THE NIRC.

The definition in Section 194(u) of CA 466 is not broad enough to include the
business of insurance companies. The Insurance Code of 1978 [21] is very clear on
what constitutes an insurance company. It provides that an insurer or insurance
company shall include all individuals, partnerships, associations or corporations
xxx engaged as principals in the insurance business, excepting mutual benefit
associations.[22] More specifically, respondents fall under the category of insurance
corporations as defined in Section 185 of the Insurance Code, thus:
SECTION 185. Corporations formed or organized to save any person or persons or
other corporations harmless from loss, damage, or liability arising from any
unknown or future or contingent event, or to indemnify or to compensate any
person or persons or other corporations for any such loss, damage, or liability, or to
guarantee the performance of or compliance with contractual obligations or the
payment of debts of others shall be known as insurance corporations.

Plainly, insurance companies and lending investors are different enterprises in

the eyes of the law. Lending investors cannot, for a consideration, hold anyone
harmless from loss, damage or liability, nor provide compensation or indemnity for
loss. The underwriting of risks is the prerogative of insurers, the great majority of
which are incorporated insurance companies[23] like respondents.

9. COMM. OF INTERNAL REVENUE V. PHOENIX ASSURANCE

Phoenix Assurance Co. Ltd., a foreign insurance corporation organized under the
laws of GreatBritain, is licensed to do business in the Philippines with head office
in London. Through its head office itentered, in London, into worldwide reinsurance
treaties with various foreign insurance companies. Itagreed to cede a portion of
premiums received on original insurances underwritten by its head
office,subsidiaries, and branch offices throughout the world, in consideration for
assumption by the foreigninsurance companies of an equivalent portion of the
liability from such original insurances. Pursuant to such reinsurance
treaties,Phoenix Assurance Co., Ltd. ceded portions of the premiums it earned
from its underwriting business in the Philippines (1952, P316,526.75; 1953,
P246,082.04; 1954, P203,384.69) upon which the CIR , byletter of 6 May 1958,
assessed
withholding
tax totaling
P183,838.42
(1952,
P75,966.42;
1953,59,059.68; 1954, 48,812.32). On 1 April 1951, Phoenix Assurance filed its
Philippine income tax returnfor 1950, claiming therein, among others, a deduction
of P37,147.04 as net addition to marine insurance reserve equivalent to 40% of the
gross marine insurance premiums received during the year. TheCommissioner
disallowed P11,772.57 of such claim for deduction and subsequently assessed
againstPhoenix Assurance the sum of P1,884.00 as deficiency income tax. The
disallowance resulted from thefixing by the Commissioner of the net addition to the
marine insurance reserve at 100% of the marineinsurance premiums received
during the last three months of the year. The Commissioner assumed
that ninety and thirty days are approximately the length of time required before s
hipments reach their destination or before claims are received by the insurance
companies. On 1 April 1953 PhoenixAssurance filed its Philippine income tax return for
1952, declaring therein a deduction from gross incomeof P35,912.25 as part of the
head office expenses incurred for its Philippine business, computed at 5% onits
gross Philippine income. On 30 August 1955 it amended its income tax return for
1952 by excludingfrom its gross income the amount of P316,526.75 representing
reinsurance premiums ceded to foreign reinsurers and further eliminating
deductions corresponding to the ceded premiums. The amended returnshowed an
income tax due in theamount of P2,502.00. The Commissioner disallowed
P15,826.35 of the claimed deduction for head officeexpenses and assessed a
deficiency tax of P5,667.00 on 24 July 1958. On 30 April 1954 PhoenixAssurance
filed its Philippine income tax return for 1953 and claimed therein a deduction from
grossincome of P33,070.88 as head office expenses allocable to its Philippine
business, equivalent to 5% of itsgross Philippine income. On 30 August 1955 it
amended its 1953 income tax return to exclude from itsgross income the amount of
P246,082.04 representing reinsurance premiums ceded to foreignreinsurers. At the
same time it requested the refund of P23,409.00 as overpaid income tax for 1953.
Toavoid the prescriptive period provided for in Section 306 of the Tax Code, it filed
a petition for review on11 August 1956 in the Court of Tax Appeals praying for such
refund. After verification of the amendedincome tax return the Commissioner
disallowed P12,304.10 of the deduction representing head officeexpenses

allocable to Philippine business thereby reducing the refundable amount to

P20,180.00. On 29April 1955 Phoenix Assurance filed its Philippine income tax
return for 1954 claiming therein, amongothers, a deduction from gross income of
P29,624.75 as head office expenses allocable to its Philippinebusiness, computed
at 5% of its gross Philippine income. It also excluded from its gross income
theamount of P203,384.69 representing reinsurance premiums ceded to foreign
reinsurers not doingbusiness in the Philippines. On 1 August 1958 the Bureau of
Internal Revenue released an assessmentfor deficiency income tax for the years
1952 and 1954 against Phoenix Assurance amounting to P2,847.The assessment
resulted from the disallowance of a portion of the deduction claimed
by PhoenixAssurance as head office expenses allocable to its business in the
Philippines fixed by the Commissionerat 5% of the net Philippine income instead of
5% of the gross Philippine income as claimed in thereturns. Phoenix Assurance
protested against the assessments for withholding tax and deficiency incometax.
However,
the
Commissioner
denied
such
protest.Subsequently, Phoenix Assurance appealed to the Court of Tax Appeals
(CTA Cases 305 and 543). In adecision dated 14 February 1962, the Court of Tax
Appeals allowed in full the deduction claimed byPhoenix Assurance for 1950 as
net addition to marine insurance reserve; determined the allowable headoffice
expenses allocable to Philippine business to be 5% of the net income in the
Philippines; declaredthe right of the Commissioner to assess deficiency income tax
for 1952 to have prescribed; absolvedPhoenix Assurance from payment of the
statutory penalties for non-filing of withholding tax return. Thus,the court
ordered Phoenix Assurance to pay the Commissioner the respective amounts of
P75,966.42,P59,059.68 and P48,812.32, as withholding tax for the years 1952,
1953 and 1954, and P2,847.00 asincome tax for 1954, or the total sum of
P186,685.42 within 30 days from the date the decision becomesfinal. Upon the
other hand, the Commissioner was ordered to refund to Phoenix Assurance the
sum of P20,180.00 as overpaid income tax for 1953, which sum is to be deducted
from the total sum of P186,685.42 due as taxes; and ordered further that if any
amount of the tax is not paid within the timeprescribed, there shall be collected a
surcharge of 5%of the tax unpaid, plus interest at the rate of 1% a month from the
date of delinquency to the date of payment, provided that the maximum amount
that may be collected as interest shall not exceed theamount corresponding to a
period of 3 years; without pronouncement as to costs. Both parties appealedto the
Supreme Court.
ISSUE
Whether Phoenix Assurance Co., Ltd.'s is entitled to claim for deduction
HELD/RATIO
We next consider Phoenix Assurance Co., Ltd.'s claim for deduction of P37,147.04
for 1950 representing net addition to reserve computed at 40% of the marine

insurance premiums received during the year. Treating said said deduction to be
excessive, the Commissioner of Internal Revenue reduced the same to
P25,374.47 which is equivalent to 100% of all marine insurance premiums
received during the last months of the year.
Paragraph (a) of Section 32 of the Tax Code states:
SEC. 32. Special provisions regarding income and deductions of
insurance companies, whether domestic or foreign. (a) Special
deductions allowed to insurance companies. In the case of insurance
companies, except domestic life insurance companies and foreign life
insurance companies doing business in the Philippines, the net additions,
if any, required by law to be made within the year to reserve funds and the
sums other than dividends paid within the year on policy and annuity
contracts may be deducted from their gross income: Provided, however,
That the released reserve be treated as income for the year of release.
Section 186 of the Insurance Law requires the setting up of reserves for liability on
marine insurance:
SEC. 186. ... Provided, That for marine risks the insuring company shall be
required to charge as the liability for reinsurance fifty per centum of the
premiums written in the policies upon yearly risks, and the full
premiums written in the policies upon all other marine risks not
terminated (Emphasis supplied.)
The reserve required for marine insurance is determined on two bases: 50% of
premiums under policies on yearly risks and 100% of premiums under policies of
marine risks not terminated during the year. Section 32 (a) of the Tax Code quoted
above allows the full amount of such reserve to be deducted from gross income.
It may be noteworthy to observe that the formulas for determining the marine
reserve employed by Phoenix Assurance Co., Ltd. and the Commissioner of
Internal Revenue 40% of premiums received during the year and 100% of
premiums received during the last three months of the year, respectively do not
comply with Section 186. Said determination runs short of the requirement. For
purposes of the Insurance Law, this Court therefore cannot countenance the same.
The reserve called for in Section 186 is a safeguard to the general public and
should be strictly followed not only because it is an express provision but also as a
matter of public policy. However, for income tax purposes a taxpayer is free to
deduct from its gross income a lesser amount, or not to claim any deduction at all.

What is prohibited by the income tax law is to claim a deduction beyond the
amount authorized therein.
Phoenix Assurance Co., Ltd.'s claim for deduction of P37,147.04 being less than
the amount required in Section 186 of the Insurance Law, the same cannot be and
is not excessive, and should therefore be fully allowed. *

PHIL AMERICAN LIFE INSURANCE CO V. ARNALDO, GR No 57816, January 6,

1982.

Sec. 415
Sec. 415. In addition to the administrative sanctions provided elsewhere in this Code,
Commissioner is hereby authorized, at his discretion, to impose upon the insurance co
directors and/or officers and/or agents, for any willful failure or refusal to comply with, or
provision of this Code, or any order, instruction, regulation, or ruling of the Insurance Co
any commission or irregularities, and/or conducting business in an unsafe or unsound man
determined by the Insurance Commissioner, the following:

Weird ito. Walang lumalabas na ganyan name na case. Hinanap ko din GR No

and yung date niya sa lawphil. Wala din dun. Sc website naman, 90s lang start ng
case. ESCRA, January 16 start ng cases ng 1982. Closest na Nakita ko is Phil Am
Life v. Ansaldo. Pero 1994 siya. Chineck ko codal ng insurance, about Insurance
Commissioner yung provision. So baka ito yun. Pero hindi talaga ako sure.
FACTS:

Ramon M. Paterno, Jr. sent a letter dated April 17, 1986 to Insurance
Commissioner alleging certain problems encountered by agents, supervisors,
managers and public consumers of the Philippine American Life Insurance
Company (Philamlife)

During the hearing Ramon stated that the contract of agency is illegal

Philamlife through its president De los Reyes contended that the Insurance
Commissioner as a quasi-judicial body cannot rule on the matter
ISSUE:
1. W/N the Insurance Commissioner has the authority to regulate the business of
insurance - YES
2. W/N the business of insurance covers the contract of agency - NO
HELD: petition is GRANTED
1. YES.

(a) fines not in excess of five hundred pesos a day; and

(b) suspension, or after due hearing, removal of directors and/or officers and/or agents.
Insurance Commissioner has the authority to regulate the business of
insurance
2. NO.

power does not cover the relationship affecting the insurance company
and its agents but is limited to adjudicating claims and complaints filed by the
insured against the insurance company

While the subject of Insurance Agents and Brokers is discussed under

Chapter IV, Title I of the Insurance Code, the provisions of said Chapter speak
only of the licensing requirements and limitations imposed on insurance
agents and brokers.

Great Pacific Life Assurance Corporation v. Judico, 180 SCRA 445 (1989):

insurance company may have two classes of agents who sell its
insurance policies:

(1) salaried employees who keep definite hours and work

under the control and supervision of the company - governed by the Contract
of Employment and the provisions of the Labor Code

(2) registered representatives, who work on commission

basis. - governed by the Contract of Agency and the provisions of the Civil
Code on the Agency

Insurance Code
Sec. 414
SUN
LIFE V INGERSOLL G.R. No. 16475 November 8, 1921
Sec. 414. The Insurance Commissioner shall have the duty to see that all laws relating
to insurance,
insurance companies and other insurance matters, mutual benefit associations, and trusts for charitable
Facts:and shall,
uses are faithfully executed and to perform the duties imposed upon him by this Code,
Life issued
notwithstanding any existing laws to the contrary, have sole and exclusive authority Sun
to regulate
the a policy on Dy Pocos life for US$12,500. The contract stipulated
that
it
would
be payable to the said assured or his assigns on the 21st day of
issuance and sale of variable contracts as defined in section two hundred thirty-two and to provide for the
February,
1938,
licensing of persons selling such contracts, and to issue such reasonable rules and regulations governing and if he should die before that date, then it would be given to his
legal representatives. The payment of a stipulated annual premium during the
the same.
period of the policy, or until the premiums had been completely paid for twenty
The Commissioner may issue such rulings, instructions, circulars, orders and decision asyears,
he may deem
Dy Poco, of
was
necessary to secure the enforcement of the provisions of this Code, subject to the approval
theadjudged an insolvent by the trial court and Frank B. Ingersoll was
appointed
assignee
of his estate. Poco died, and Tan Sit, was appointed as the
Secretary of Finance. Except as otherwise specified, decisions made by the Commissioner shall be
administratrix
of
his
intestate
estate.
appealable to the Secretary of Finance.

Both Ingersoll, as assignee, and Tan Sit, as administratix of Dy Poco's estate,

asserted claims to the proceeds of the policy. The lower court found that Ingersoll
had a better right and ordered Sun Life to pay.
The polic stipulated that after the payment of three full premiums, the assured
could surrender the policy to the company for a "cash surrender value." Butno
more than two premiums had been paid upon the policy up to the time of the death
of the assured. Hence this provision had not become effective. It must therefore be
accepted that this policy had no cash surrender value, at the time of the assured's
death, either by contract or by convention practice of the company in such cases.
Issue:
WON Ingersoll, as assignee, has a right to the proceeds of the insurance
Held: No. Sunlife must pay to the administratrix.
Ratio:
The property and interests of the insolvent which become vested in the assignee of
the insolvent are specified in section 32 of the Insolvency Law.
Sec 32 declares that the assignment to be made by the clerk of the court "shall
operate to vest in the assignee all of the estate of the insolvent debtor not exempt
by law from execution."
Moreover, by section 24, the court is required, upon making an order adjudicating
any person insolvent, to stay any civil proceedings pending against him; and it is
declared in section 60 that no creditor whose debt is provable under the Act shall
be allowed, after the commencement of proceedings in insolvency, to prosecute to
final judgment any action therefor against the debtor. In connection with the
foregoing may be mentioned subsections 1 and 2 of section 36, as well as the
opening words of section 33, to the effect that the assignee shall have the right and
power to recover and to take into his possession, all of the estate, assets, and
claims belonging to the insolvent, except such as are exempt by law from
execution.
These provisions clearly evince an intention to vest in the assignee, for the benefit
of all the creditors of the insolvent, such elements of property and property right as
could be reached and subjected by process of law by any single creditor suing
alone. "leviable assets" and "assets in insolvency" are practically coextensive

terms. Hence, in determining what elements of value constitute assets in

insolvency, the court is at liberty to consider what elements of value are subject to
be taken upon execution, and vice versa.
Section 48 of the Insolvency Law, didnt declare items from the ownership of which
the assignee is excluded. Moreover, all life insurance policies are declared by law
to be assignable, regardless of whether the assignee has an insurable interest in
the life of the insured or not.
The assignee in insolvency acquired no beneficial interest in the policy of
insurance in question; that its proceeds are not liable for any of the debts provable
against the insolvent in the pending proceedings, and that said proceeds should
therefore be delivered to his administratrix.
In re McKinney: no beneficial interest in this policy had ever passed to the
assignee over and beyond what constituted the surrender value, and that the legal
title to the policy was vested in the assignee merely in order to make the surrender
value available to him. The conclusion therefore was that the assignee should
surrender the policy upon the payment to him of said value, as he was in fact
directed to do.
A surrender value of a policy "arises from the fact that the fixed annual premiums is
much in excess of the annual risk during the earlier years of the policy, an excess
made necessary in order to balance the deficiency of the same premium to meet
the annual risk during the latter years of the policy. This is the practical, though not
the legal, relation of the company to this fund. "Upon the surrender of the policy
before the death of the assured, the company, to be relieved from all responsibility
for the increased risk, which is represented by this accumulating reserve, could
well afford to surrender a considerable part of it to the assured, or his
representative. A return of a part in some form or other is now Usually made."
The stipulation providing for a cash surrender value is a comparatively recent
innovation in life insurance. Furthermore, the practice is common among insurance
companies even now to concede nothing in the character of cash surrender value,
until three full premiums have been paid, as in this case.
The courts are therefore practically unanimous in refusing to permit the assignee in
insolvency to wrest from the insolvent a policy of insurance which contains in it no
present realizable assets.