Insurance Digests Nov 22

8/10/2019 Insurance Digests Nov 22

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WHITE GOLD MARINE SERVICES, INC., petitioner , vs . PIONEER INSURANCE AND

SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING

ASSOCIATION (BERMUDA) LTD., respondents .

Facts: White Gold procured a protection and indemnity coverage for its vessels from The

Steamship Mutual through Pioneer Insurance and Surety Corporation via Pioneer

Insurance. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued

receipts. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew

the coverage.

Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to

recover the unpaid balance. White Gold on the other hand, filed a complaint before the

Insurance Commission claiming that Steamship Mutual and Pioneer violated provisions of the

Insurance Code.

The Insurance Commission dismissed the complaint. It said that there was no need for

Steamship Mutual to secure a license because it was not engaged in the insurance business and

that it was a P & I club. Pioneer was not required to obtain another license as insurance agent

because Steamship Mutual was not engaged in the insurance business.

The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the

appellate court distinguished between P & I Clubs vis-à-vis conventional insurance. The

appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual.

Hence this petition by White Gold.

Issues:

1. Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines?

2. Does Pioneer need a license as an insurance agent/broker for Steamship Mutual?

Held: Yes. Petition granted.

Ratio:

White Gold insists that Steamship Mutual as a P & I Club is engaged in the insurance

business. To buttress its assertion, it cites the definition as “an association composed ofshipowners in general who band together for the specific purpose of providing insurance cover

on a mutual basis against liabilities incidental to shipowning that the members incur in favor of

third parties.”

They argued that Steamship Mutual‟s primary purpose is to solicit and provide protection and

indemnity coverage and for this purpose, it has engaged the services of Pioneer to act as its

agent.



Respondents contended that although Steamship Mutual is a P & I Club, it is not engaged in the

insurance business in the Philippines. It is merely an association of vessel owners who have

come together to provide mutual protection against liabilities incidental to shipowning.

Is Steamship Mutual engaged in the insurance business?

A P & I Club is “a form of insurance against third party liability, where the third party is anyone

other than the P & I Club and the members.” By definition then, Steamship Mutual as a P & I

Club is a mutual insurance association engaged in the marine insurance business.

The records reveal Steamship Mutual is doing business in the country albeit without the requisite

certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident

agent in the Philippines to solicit insurance and to collect payments in its behalf. Steamship

Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the

calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer,

must secure a license from the Insurance Commission.

Since a contract of insurance involves public interest, regulation by the State is necessary. Thus,

no insurer or insurance company is allowed to engage in the insurance business without a licenseor a certificate of authority from the Insurance Commission.

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.

Although Pioneer is already licensed as an insurance company, it needs a separate license to act

as insurance agent for Steamship Mutual. Section 299 of the Insurance Code clearly states:

SEC. 299 No person shall act as an insurance agent or as an insurance broker in the solicitation

or procurement of applications for insurance, or receive for services in obtaining insurance, anycommission or other compensation from any insurance company doing business in the

Philippines or any agent thereof, without first procuring a license so to act from the

Commissioner.

PHILAMCARE HEALTH SYSTEMS, INC., petitioner , vs . COURT OF APPEALS and

JULITA TRINOS

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 benefi ts 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 feverand 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 primarilya 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 o pinion 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 whichhe 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.

Finally, petitioner alleges that respondent was not the legal wife of the deceased memberconsidering that at the time of their marriage, the deceased was previously married to another

woman who was still alive. The health care agreement is in the nature of a contract of

indemnity. Hence, payment should be made to the party who incurred the expenses. It is not

controverted that respondent paid all the hospital and medical expenses. She is therefore entitled

to reimbursement. The records adequately prove the expenses incurred by respondent for the

deceased‟s hospitalization, medication and the professional fees of the attending physicians.



Fortune Insurance and Surety Co., Inc. v. CA and Producers Bank of the Philippines

G.R. No. 115278 May 23, 1995

Davide, Jr., J.

FACTS:

Producers Bank was insured by Fortune Insurance.

Producers Bank filed against Fortune Insurance a complaint for recovery of the sum of

P725,000.00 under the policy issued by Fortune. The sum was allegedly lost during a robbery

of Producer‟s armored vehicle while it was in transit to transfer the money fr om its Pasay City

Branch to its head office in Makati

The said armored vehicle was robbed by its driver Benjamin Magalong and security guard

Saturnino Atiga tasked to man the same. Both of them are not Producers Bank‟s “employees”

but were merely assigned by and affiliated with PRC Management Systems and Unicorn

Security Services.

Fortune Insurance refused to pay the amount as the loss, according to it, is excluded from thecoverage of the insurance policy. “General Exceptions” provides: The company shall not be

liable under this policy in report of x x x (b) any loss caused by any dishonest, fraudulent or

criminal act of the insured or any officer, employee, partner, director, trustee or authorized

representative of the Insured whether acting alone or in conjunction with others…”

Producers Bank opposed the contention of Fortune Insurance and contends that Atiga and

Magalong are not its officer, employee, trustee, or authorized representative at the time of the

robbery.

According to Fortune Insurance, when Producers commissioned a guard and a driver to

transfer its funds from one branch to another, they effectively and necessarily became its

authorized representatives in the care and custody of the money. Assuming that they could not be considered authorized representatives, they were, nevertheless, employees of Producers.

ISSUE: WON Magalong and Atiga qualify as employees or authorized representatives of

Producers under paragraph (b) of the general exceptions clause of the insurance policy as to

exempt Fortune Insurance from liability to pay Producers Bank under said policy

HELD: Yes.

Employer-employee relationship depends upon four standards: (1) the manner of selection and

engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or

absence of a power to dismiss; and (4) the presence and absence of a power to control the

putative employee‟s conduct

The power of control over Magalong and Atiga was vested in and exercised by Producers

Bank; hence, an “employer -employee” relationship exists between Magalong and Atiga and

Producers Bank.



PRC Management System and Unicorn Security Services are but “labor-only” contractors

(not employers) under Article 106 of the Labor Code which provides: “There is “labor -only”

contracting where the person supplying workers to an employer does not have substantial

capital or investment in the form of tools, equipment, machineries, work premises, among

others, and the workers recruited and placed by such persons are performing activities which

are directly related to the principal business of such employer. In such cases, the person or

intermediary shall be considered merely as an agent of the employer who shall be responsible

to the workers in the same manner and extent as if the latter were directly employed by him.”

Magalong and Atiga were, in respect of the transfer of Producers Bank‟s money from its Pasay

City branch to its head office in Makati, its “authorized representatives” who served as such

with its teller Maribeth Alampay. Howsoever viewed, Producers entrusted the three with the

specific duty to safely transfer the money to its head office, with Alampay to be responsible for

its custody in transit; Magalong to drive the armored vehicle which would carry the money;

and Atiga to provide the needed security for the money, the vehicle, and his two other

companions. In short, for these particular tasks, the three acted as agents of Producers. A“representative” is defined as one who represents or stands in the place of another; one who

represents others or another in a special capacity, as an agent, and is interchangeable with

“agent.”

RAFAEL ENRIQUEZ, as administrator of the estate of the late Joaquin Ma.

Herrer, plaintiff-appellant, vs.SUN LIFE ASSURANCE COMPANY OF

CANADA, defendant-appellee.

Facts: On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance

Company of Canada through its office in Manila for a life annuity. Two days later he paid thesum of P6,000 to the manager of the company's Manila office and was given a receipt. The

application was immediately forwarded to the head office of the company at Montreal, Canada.

On November 26, 1917, the head office gave notice of acceptance by cable to Manila. (Whether

on the same day the cable was received notice was sent by the Manila office of Herrer that the

application had been accepted, is a disputed point, which will be discussed later.) On December

4, 1917, the policy was issued at Montreal. On December 18, 1917, attorney Aurelio A. Torres

wrote to the Manila office of the company stating that Herrer desired to withdraw his application.

The following day the local office replied to Mr. Torres, stating that the policy had been issued,

and called attention to the notification of November 26, 1917. This letter was received by Mr.

Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917.

Issue:Whether or not the insurance contract was perfected.

Held: The Civil Code provides that the acceptance made by letter binds the person making the

offer only from the date it came to its knowledge. The contract of life annuity was not perfected.



There was no satisfactory evidence that the application acceptance came to the knowledge of

Herrer.

Article 16 of the civil code provides that any deficiency in the special law shall be supplied by

the Code. The Insurance Code does not provide for law on the principle of acceptance, thus the

Civil Code shall govern.

Article 1262 provides that consent is shown by concurrence of offer and acceptance with the

thing and the consideration to the contract. The acceptance by letter shall not bind the person

making the offer except from the time It came to his knowledge.

The law applicable to the case is found to be the second paragraph of article 1262 of the Civil

Code providing that an acceptance made by letter shall not bind the person making the offer

except from the time it came to his knowledge. The pertinent fact is, that according to the

provisional receipt, three things had to be accomplished by the insurance company before therewas a contract: (1) There had to be a medical examination of the applicant; (2) there had to be

approval of the application by the head office of the company; and (3) this approval had in some

way to be communicated by the company to the applicant. The further admitted facts are that the

head office in Montreal did accept the application, did cable the Manila office to that effect, did

actually issue the policy and did, through its agent in Manila, actually write the letter of

notification and place it in the usual channels for transmission to the addressee. The fact as to the

letter of notification thus fails to concur with the essential elements of the general rule pertaining

to the mailing and delivery of mail matter as announced by the American courts, namely, when a

letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable

presumption of fact that it was received by the addressee as soon as it could have beentransmitted to him in the ordinary course of the mails. But if any one of these elemental facts

fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have

been received by the addressee unless it is shown that it was deposited in the post-office,

properly addressed and stamped. The contract for a life annuity in the case at bar was not

perfected because it has not been proved satisfactorily that the acceptance of the application ever

came to the knowledge of the applicant.

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner, vs.HONORABLE COURT

OF APPEALS, respondents.; LAPULAPU D. MONDRAGON, petitioner, vs.HON. COURT

OF APPEALS and NGO HING, respondents.

Facts: Ngo Hing filed an application with the Great Pacific Life Assurance Company (hereinafter

referred to as Pacific Life) for a twenty-year endownment policy in the amount of P50,000.00 on

the life of his one-year old daughter Helen Go. Said respondent supplied the essential data which

petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on

the corresponding form in his own handwriting (Exhibit I-M). Mondragon finally type-wrote the



processing by the insurance company; and that the latter will either approve or reject the same on

the basis of whether or not the applicant is "insurable on standard rates." Since Pacific Life

disapproved the insurance application of Ngo Hing, the binding deposit receipt in question had

never become in force at any time. Upon this premise, the binding deposit receipt is, manifestly,

merely conditional and does not insure outright. Where an agreement is made between the

applicant and the agent, no liability shall attach until the principal approves the risk and a receipt

is given by the agent. The acceptance is merely conditional, and is subordinated to the act of the

company in approving or rejecting the application.

Thus, in life insurance, a "binding slip" or "binding receipt" does not insure by itself. It bears

repeating that through the intra-company communication of 30 April 1957, Pacific Life

disapproved the insurance application in question on the ground that it is not offering the 20-year

endowment insurance policy to children less than 7 years of age. What it offered instead is

another plan known as the Juvenile Triple Action, which Ngo Hing failed to accept. In the

absence of a meeting of the minds between Pacific Life and Ngo Hing over the 20-yearendowment life insurance in the amount of P50,000.00 in favor of the latter's one-year old

daughter, and with the non-compliance of the abovequoted conditions stated in the disputed

binding deposit receipt, there could have been no insurance contract duly perfected between

them. Accordingly, the deposit paid by Ngo Hing shall have to be refunded by Pacific Life.

Insurance Digests Nov 22

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Transcript of Insurance Digests Nov 22