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INSURANCE DIGEST BATCH 2: Hence, the contention of concealment isn5t valid. They can5t also invoke the 13nvalidation of agreement2 clause where failure of the insured to disclose information was a grounds for revocation simply because the answer assailed by the company was the heart condition question based on the insured5s opinion. He wasn5t a medical doctor, so he can5t accurately gauge his condition. Henrick v <ire! 1in such case the insurer is not ;ustified in relying upon such statement, but is obligated to make further inquiry.2 <raudulent intent must be proven to rescind the contract. This was incumbent upon the provider. 1Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the e#tent agreed upon. 3n the end, the liability of the health care provider attaches once the member is hospitali ed for the disease or in;ury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.2 *ection 6$ of the 3nsurance )ode! 1a concealment entitles the in;ured party to rescind a contract of insurance.2 "s to cancellation procedure! )ancellation requires certain conditions: 1. Prior notice of cancellation to insured0 6. /otice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned0 9. (ust be in writing, mailed or delivered to the insured at the address shown in the policy0 ,. (ust state the grounds relied upon provided in *ection +, of the 3nsurance )ode and upon request of insured, to furnish facts on which cancellation is based /one were fulfilled by the provider. "s to incontestability! The trial court said that 1under the title )laim procedures of e#penses, the defendant Philamcare Health *ystems 3nc. had twelve months from the date of issuance of the "greement within which to contest the membership of the patient if he had previous ailment of asthma, and si# months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having e#pired, the defense of concealment or misrepresentation no longer lie.2 ============= "A+ER STEE, PIPE C-RP-RATI-N a*) H-NG.-NG G-/ERN"ENT SUPP,IES DEPART"ENT# 0e&i&io*er'# v'. C-URT -% APPEA,S# S-UTH SEA SURET+ AND INSURANCE C-.# INC. a*) &he CHARTER INSURANCE C-RP-RATI-N# re'0o*)e*&'. G.R. No. 121$5$ 2(*e 13# 133 DIGEST %ACTS: Hong >ong ?overnment *upplies 'epartment contracted (ayer *teel Pipe )orporation to manufacture and supply various steel pipes and fittings. Prior to the shipping, (ayer insured these pipes and fittings against all risks with *outh *ea *urety and 3nsurance )o., 3nc. and )harter 3nsurance )orp., with 3ndustrial 3nspection 3nc. appointed as third!party inspector. "fter e#amining the pipes and fittings, 3ndustrial 3nspection certified that they are in good order condition. However, when the goods reached Hong >ong, it was discovered that a substantial portion thereof was

Philamcare v CA G.R. No. 1256 !. "arch 1!# 2$$2 DIGEST %ac&': Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family members were treated to heart trouble, asthma, diabetes, etc. The application was approved for 1 year. He was also given hospitali ation benefits and out!patient benefits. "fter the period e#pired, he was given an e#panded coverage for Php $%,&&&. 'uring the period, he suffered from heart attack and was confined at ((). The wife tried to claim the benefits but the petitioner denied it saying that he concealed his medical history by answering no to the aforementioned question. *he had to pay for the hospital bills amounting to $+,&&&. Her husband subsequently passed away. *he filed a case in the trial court for the collection of the amount plus damages. *he was awarded $+,&&& for the bills and ,&,&&& for damages. The )" affirmed but deleted awards for damages. Hence, this appeal. I''(e: -./ a health care agreement is not an insurance contract0 hence the 1incontestability clause2 under the 3nsurance )ode does not apply. Hel): No. Pe&i&io* )i'mi''e). Ra&io: Petitioner claimed that it granted benefits only when the insured is alive during the one!year duration. 3t contended that there was no indemnification unlike in insurance contracts. 3t supported this claim by saying that it is a health maintenance organi ation covered by the '.H and not the 3nsurance )ommission. 4astly, it claimed that the 3ncontestability clause didn5t apply because two!year and not one! year effectivity periods were required. *ection 6 718 of the 3nsurance )ode defines a contract of insurance as 1an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.2 *ection 9 states: every person has an insurable interest in the life and health: 718 of himself, of his spouse and of his children. 3n this case, the husband5s health was the insurable interest. The health care agreement was in the nature of non!life insurance, which is primarily a contract of indemnity. The provider must pay for the medical e#penses resulting from sickness or in;ury. -hile petitioner contended that the husband concealed materialfact of his sickness, the contract stated that: 1that any physician is, by these presents, e#pressly authori ed to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed (embers.2 This meant that the petitioners required him to sign authori ation to furnish reports about his medical condition. The contract also authori ed Philam to inquire directly to his medical history.

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damaged. The trial court found in favor of the insured. However, when the case was elevated to the )", it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. 3t held that the action was barred under *ec. 97+8 of the )arriage of ?oods by *ea "ct 7).?*"8 since it was filed only on "pril 1$, 1@A+, more than two years from the time the goods were unloaded from the vessel. ISSUE: -hether or not the action is barred by prescription. HE,D: *ec. 97+8 of the )arriage of ?oods by *ea "ct states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Bnder this provision, only the carrier5s liability is e#tinguished if no suit is brought within one year. Cut the liability of the insurer is not e#tinguished because the insurer5s liability is based not on the contract of carriage but on the contract of insurance. "n insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. "n 1all risks2 insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. Thus, when private respondents issued the 1all risks2 policies to (ayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. *uch obligation prescribes in ten years, in accordance with "rticle 11,, of the /ew )ivil )ode. ====== "a4er S&eel Pi0e Cor0ora&io* v' Co(r& o5 A00eal' DIGEST 2 Insurance Law The Policy Prescription of Filing of Insurance Cases FACTS: 3n 1@A9, Hongkong ?overnment *upplies 'epartment 7H?*'8 contracted (ayer *teel Pipe )orporation for the latter to manufacture and deliver various steel pipes and fittings. Cefore (ayer *teel shipped the said pipes, it insured them with two insurance companies namely, *outh *ea *urety and 3nsurance )o., 3nc. and )harter 3nsurance )orporation D each insurer covering different portions of the shipment. The insurance policies cover 1all risks2 which include all causes of conceivable loss or damage. -hen the pipes reached Hongkong, the pipes were discovered to have been damaged. The insurance companies refused to make payment. .n "pril 1$ 1@A+, (ayer *teel sued the insurance companies. The case reached the )ourt of "ppeals. The )" ruled that the case filed by (ayer *teel should be dismissed. 3t held that the action is barred under *ection 97+8 of the )arriage of ?oods by *ea "ct since it was filed only on "pril 1$, 1@A+, more than two years from the time the goods were %ac&': The petitioner, a prepaid health!care organi ation offering benefits to its members. The )3G found that the organi ation had a deficiency in the payment of the '*T under *ection 1A% of the 1@@$Ta# )ode which stipulated its implementation: 1.n all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association or company or corporation transacting the business of accident, fidelity, employerHs liability, plate, glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance 7e#cept life, marine, inland, and fire insurance82 The )3G sent a demand for the payment of deficiency ta#es, including surcharges and interest, for 1@@+!1@@$ in the total amount of P66,,$&6,+,1.1A. The petitioner protested to the )3G, but it didn5t act on the appeal. Hence, the company had to go to the )T". The latter declared ;udgment against them and unloaded from the vessel. *ection 97+8 of the )arriage of ?oods by *ea "ct provides that 1the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.2 The )" ruled that this provision applies not only to the carrier but also to the insurer, citing the case ofFilipino Merchants Insurance Co., Inc. vs Alejandro. ISSUE: -hether or not the )ourt of "ppeals is correct. HE,D: /o. *ection 97+8 of the )arriage of ?oods by *ea "ct states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Bnder this provision, only the carrier5s liability is e#tinguished if no suit is brought within one year. Cut the liability of the insurer is not e#tinguished because the insurer5s liability is based not on the contract of carriage but on the contract of insurance. " close reading of the law reveals that the )arriage of ?oods by *ea "ct governs the relationship between the carrier on the one hand and the shipper, the consignee andEor the insurer on the other hand. 3t defines the obligations of the carrier under the contract of carriage. 3t does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the 3nsurance )ode. The Filipino Merchants case is different from the case at bar. 3n Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. 3n the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper5s claim is the 1all risks2 insurance policies issued by the insurers to (ayer *teel. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. ================ Phili00i*e Heal&h Care Provi)er' v CIR G.R. No. 16 66$ 2(*e 12# 2$$! F. )orona

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reduced the ta#es. 3t ordered them to pay 66 million pesos for deficiency I"T for 1@@$ and 91 million deficiency I"T for 1@@+. )" denied the company5s appeal an d increased ta#es to %% and +A million for 1@@+ to 1@@$. I''(e': -./ a health care agreement in the nature of an insurance contract and therefore sub;ect to the documentary stamp ta# 7'*T8 imposed under *ection 1A% of Gepublic "ct A,6, 7Ta# )ode of 1@@$8 Hel): %ACTS: Jes. Petition dismissed. Ra&io: The '*T is levied on the e#ercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the e#ecution of specific instruments. The '*T is an e#cise upon the privilege, opportunity, or facility offered at e#changes for the transaction of the business. 3n particular, the '*T under *ection 1A% of the 1@@$ Ta# )ode is imposed on the privilege of making or renewing any policy of insurance 7e#cept life, marine, inland and fire insurance8, bond or obligation in the nature of indemnity for loss, damage, or liability. PetitionerHs health care agreement is primarily a contract of indemnity. "nd in the recent case of Clue )ross Healthcare, 3nc. v. .livares, this )ourt ruled that a health care agreement is in thenature of a non!life insurance policy. 3ts health care agreement is not a contract for the provision of medical services. Petitioner does not actually provide medical or hospital services but merely arranges for the same 3t is also incorrect to say that the health care agreement is not based on loss or damage because, under the said agreement, petitioner assumes the liability and indemnifies its member for hospital, medical and related e#penses 7such as professional fees of physicians8. The term Kloss or damageK is broad enough to cover the monetary e#pense or liability a member will incur in case of illness or in;ury. Philamcare Health *ystems, 3nc. v. )".! The health care agreement was in the nature of non!life insurance, which is primarily a contract of indemnity. *imilarly, the insurable interest of every member of petitionerHs health care program in obtaining the health care agreement is his own health. Bnder the agreement, petitioner is bound to indemnify any member who incurs hospital, medical or any other e#pense arising from sickness, in;ury or other stipulated contingency to the e#tent agreed upon under the contract. ============= PHI,IPPINE HEA,TH CARE PR-/IDERS v. CIR June 12, 2008 Corona, J Petitioner is a domestic corporation whose primary purpose is 1to establish, maintain, conduct and operate a prepaid group practice health care delivery system or a health maintenance organi ation 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 organi ation. <or an annual membership fee, individual members are entitled to various preventive, diagnostic, and curative medical services provided by the licensed physicians of the petitioner corporation. .n Fanuary 6&&&, respondent )ommission on 3nternal Gevenue 7)3G8 sent a formal demand letter to petitioner and the corresponding assessment notices demanding the payment of deficiency ta#es 7I"T and '*T8 for 1@@+ and 1@@$. The deficiency ''*T assessment was imposed on petitioner5s health care agreements with the members of its health care program pursuant to *ection 1A% of the 1@@$ Ta# )ode. Petitioner protested the assessment, but since respondent did not act, petitioner filed a petition for review in the )ourt of Ta# "ppeals 7)T"8 seeking the cancellation of the deficiency assessments. The )T" ordered petitioner to pay a reduced deficiency I"T but cancelled the deficiency '*T assessment for 1@@+ and 1@@$. Gespondent appealed, claiming that petitioner5s health care agreement was a contract of insurance sub;ect to '*T. 3n 6&&,, the )ourt of "ppeals held that petitioner5s health care agreements was in the nature of non!life insurance contracts sub;ect to '*T. Petitioner argued that its health care agreement is not a contract of insurance but a contract for the provision on a prepaid basis of medical services. 3t said that it is a health maintenance organi ation regulated by the 'epartment of Health, not an insurance company under the ;urisdiction of the 3nsurance )ommission. ISSUE: 3s a health care agreement in the nature of an insurance contract and therefore sub;ect to the documentary stamp ta# 7'*T8 imposed under *ection 1A% of G" A,6, 7Ta# )ode of 1@@$8L RATI-: JE*. SU""AR+: Petitioner, a health maintenance organi ation, was assessed by the )3G with ta# deficiencies, which include the '*T for the years 1@@+ and 1@@$. The '*T was imposed on petitioner5s health care agreements with its members, which were considered by the )3G as insurance contracts. Petitioner argues that such agreements are not contracts of insurance but contracts for the provision on a prepaid basis of medical services, and thus, not sub;ect to '*T. D-CTRINE: Bnder the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability from an unknown or contingent event. )ontracts between companies like petitioner and the beneficiaries under the plans are treated as insurance contracts.

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Bnder the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability from an unknown or contingent event. Petitioner5s health care agreement is primarily a contract of indemnity. Blue Cross Healthcare Inc., vs. livares holds that a healthcare agreement is in the nature of a non!life insurance policy. The term 1loss2 or 1damage2 is broad enough to cover the monetary e#pense or liability a member will incur in case of illness or in;ury. "lso in case of e#posure of a member to liability, he would be entitled to indemnification by petitioner. <urthermore, the fact that petitioner must relieve its member form liability by paying for e#penses arising from the stipulated contingencies belies its claim that its services are prepaid. Petitioner does not bear the costs alone but distributes or spreads them out among a large group of persons bearing a similar risk, that is, among all the other members of the health care program. This is insurance. The case of !hila"care Health #$ste"s, Inc. v CA also holds that 1the health care agreement was in the nature of a non!life insurance, which is primarily a contract of indemnity2. Petitioner5s contention that it is a health maintenance organi ation and not a n insurance company is irrelevant. )ontracts between companies like petitioner and the beneficiaries under the plans are treated as insurance contracts. The '*T is not a ta# on the business transacted but an e#cise on the privilege, opportunity, or facility offered at e#changes for the transaction of the business.

PHI,IPPINE HEA,TH CARE PR-/IDERS v. CIR #epte"%er 18, 200& Corona, J. SU""AR+: This case is a resolution on the motion for reconsideration filed by petitioner in the 6&&A case. D-CTRINE: 1Principal ob;ect and purpose test2: whether the assumption of risk and indemnification of loss are the principal ob;ect and purpose of the organi ation or whether they are merely incidental to its business. 3f these are the principal ob;ects, the business is that of insurance. Cut if they are merely incidental and service is the principal purpose, then the business is not insurance. 3n our ;urisdiction, even if a contract contains all the elements of an insurance contract, if its primary purpose is the rendering of service, it is not a contract of insurance. %ACTS: 7same facts as the 6&&A case8 ISSUE: 3s a health care agreement in the nature of an insurance contract and therefore sub;ect to the documentary stamp ta# 7'*T8 imposed under *ection 1A% of G" A,6, 7Ta# )ode of 1@@$8L RATI-: /..

Health maintenance organi ations are not engaged in the insurance business o 3t is a cardinal rule of statutory construction that no word, clause, sentence, provision or part of a statute shall be considered surplusage or superfluous, meaningless, void and insignificant. <rom the language of *ection 1A%, two requisites must concur before the '*T can apply: 718 the document must be a policy of insurance or an obligation in the nature of indemnity and 768 the maker should be transacting the business ofM insurance. o Petitioner is an H(., an entity that provides, offers or arranges for coverage of designated health services needed by plan members for a fi#ed prepaid premium. The payments do not vary with the e#tent, frequency or type of service provided. Petitioner, as an H(., was not engaged in the business of insurance during 1@@+ and 1@@$. o *ection 6768 of the 3nsurance )ode enumerates what constitutes 1doing an insurance business2: (1) (aking or proposing to make, as insurer, any insurance contract (2) (aking or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the sirety (3) 'oing any kind of business, including a reinsurance business, specifically recogni ed as constituting the doing of an insurance business within the meaning of this )ode (4) 'oing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this )ode o B* courts: H(.s are not in the insurance business. o 1Principal ob;ect and purpose test2: whether the assumption of risk and indemnification of loss are the principal ob;ect and purpose of the organi ation or whether they are merely incidental to its business. 3f these are the principal ob;ects, the business is that of insurance. Cut if they are merely incidental and service is the principal purpose, then the business is not insurance. o B* )ourts: the main difference between an H(. and an insurance company is that H(.s undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical e#penses incurred up to a pre! agreed limit. o <or the purposes of determining what 1doing an insurance business2 means, was have to scrutini e the operations of the business as a whole and not its mere components. " health case agreement is not an insurance contract contemplated under *ection 1A% of the 1@@$ Ta# )ode

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*ection 1A% of the 1@@$ Ta# )ode, as a ta# statute, must be strictly construed against the ta#ing authority. o *ince the Blue Cross and !hila"care cases cited in the 6&&A decisions did not involve the interpretation of ta# provisions, they are not applicable in the case at bar. o *ection 6718 of the 3nsurance )ode 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. The following are its elements: 1. The insured has an insurable interest 6. The insured is sub;ect to a risk of loss by the happening of the designed peril 9. The insurer assumes the risk ,. *uch assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk %. 3n consideration of the insurer5s promise, the insured pays a premium. o /ot all the necessary elements of a contract of insurance are present in petitioner5s agreements. There is no loss, damage or liability on the part of the member that should be indemnified by petitioner as H(.. o "lthough risk is a primary element of an insurance contract, it is not necessarily true that risk alone is sufficient to establish it. "lmost anyone who undertakes a contractual obligation always bears a certain degree of financial risk. 3nsurance risk, or actuarial risk, is the risk that the cost of insurance claims might be higher than the premiums paid. o 3n our ;urisdiction, even if a contract contains all the elements of an insurance contract, if its primary purpose is the rendering of service, it is not a contract of insurance. There was no legislative intent to impose '*T on health care agreements of H(.s o The '*T history and the H(. history clearly show that when the law imposing the '*T was first passed, H(.s were unknown in the Philippines. However, when the various amendments to the '*T law were enacted, they were already in e#istence in the Philippines. 3f it had been the intent of the legislature to impose '*T on health care agreements, it could have done so in clear and categorical terms. 3t had many opportunities to do so. Cut it did not. Petitioner5s ta# liability was e#tinguished under G" @A,&, by their availing of the ta# amnesty thru payment of %N of their net worth as of the year 6&&%. o

G.R. %o. &'22042

August 1#, 1!"#

&essons A((lica)le: Sti(ulation *our Autrui Insurance$

%ACTS: Fulio "guilar owner and operator of several ;eepneys insured them with )apital 3nsurance O *urety )o., 3nc. <ebruary 6&, 1@+1: "long the intersection of Fuan 4una and (orostreets, )ity of (anila, the ;eepneys operated by "guilar driven by 3luminado del (onte and ?ervacio ?uingon bumped and ?uingon died some days after 3luminado del (onte was charged with homicide thru reckless imprudence and was penali ed , months imprisonment The heirs of ?ervacio ?uingon filed an action for damages praying that PA6,$$1.A& be paid to them ;ointly and severally by the driver del (onte, owner and operator "guilar, and the )apital 3nsurance O *urety )o., 3nc. )<3: 3luminado del (onte and Fulio "guilar ;ointly and severally to pay plaintiffs the sum of PA,%$6.@% as damages for the death of their father, plus P1,&&&.&& for attorneyHs fees plus costs )apital 3nsurance and *urety )o., 3nc. is hereby sentenced to pay P%,&&& plus P%&& as attorneyHs fees and costs to be applied inpartial satisfaction of the ;udgment rendered against 3luminado del (onte and Fulio "guilar in this case ISSUE: 1. -E/ there a stipulation pour autriu to enable that will enable the heirs to sue against )apital 3nsurance and *urety )o., 3nc.L ! JE* 6. -E/ the heirs can sue the insurer and insured ;ointlyL ! JE* HE,D: "ffirmed in toto. 1. JE* policy: the insurer agreed to indemnify the insured Kagainst all sums . . . which the 3nsured shall become legally lia%le to pay in respect of: a. death of or bodily in;ury to any person . . . .K ! indemnity against liability TE*T: -here the contract provides for indemnity against lia%ilit$ to third persons, then third persons to whom the insured is liable, )"/ sue the insurer. -here the contract is for indemnity against actual loss or payment, then third persons )"//.T proceed against the insurer, the contract being solely to reimburse the insured forliability actually discharged by him thru payment to third persons, said third personsH recourse being thus limited to the insured alone. 6. JE* policy: e#pressly disallows suing the insurer as a co!defendant of the insured in a suit to determine the latterHs liability

Insurance Case Digest: Guingon V. Del Monte, 20 SCRA 1043 1!"#$

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no action close: suit and final ;udgment be first obtained against the insured0 that only KthereafterK can the person in;ured recover on the policy *ec. % of Gule 6 on KFoinder of causes of actionK and *ec. + of Gule 9 on KPermissive ;oinder of partiesK cannot be superseded, at least 'ith respect to third persons not a part$ to the contract, as herein, by a Kno actionK clause in the contract of insurance. =============== Bo*i5acio Bro&her' I*c. v'. "ora 7GR ,82$!56# 23 "a4 136 9 (n Banc, Castro )J*+ & concur %ac&': Enrique (ora is the owner of an .ldsmobile sedan model 1@%+, bearing plate P) ! A&AA. He mortgaged the same to the H.*. Geyes, 3nc., with the condition that the former would insure the automobile, with the latter as beneficiary. The automobile was thereafter insured on 69 Fune 1@%@ with the *tate Conding O 3nsurance )o. 3nc., and motor car insurance policy "!&+1% was issued to (ora. 'uring the effectivity of an insurance contract, the car met with an accident. The insurance company then assigned the accident to the H.H. Cayne "d;ustment )o. for investigation and appraisal of the damage. (ora, without the knowledge and consent of the H.*. Geyes, 3nc., authori ed the Conifacio Cros. 3nc. to furnish the labor and materials, some of which were supplied by the "yala "uto Parts )o. <or the cost of labor and materials, (ora was billed at P6,1&6.$9 through the H. H. Cayne "d;ustment )o. The insurance company, after claiming a franchise in the amount of P1&&, drew a check in the amount of P6,&&6.$9, as proceeds of the insurance policy, payable to the order of (ora or H.*. Geyes, 3nc., and entrusted the check to the H.H. Cayne "d;ustment )o. for disposition and delivery to the proper party. 3n the meantime, the car was delivered to (ora without the consent of the H.*. Geyes, 3nc., and without payment to the Conifacio Cros. 3nc. and "yala "uto Parts )o. of the cost of repairs and materials. Bpon the theory that the insurance proceeds should be paid directly to them, the Conifacio Cros. 3nc. and the "yala "uto Parts )o. filed on A (ay 1@+1 a complaint with the (unicipal )ourt of (anila against (ora and the *tate Conding O 3nsurance )o. 3nc. for the collection of the sum of P6,&&6.$9. The insurance company filed its answer with a counterclaim for interpleader, requiring the Conifacio Cros. 3nc. and the H.*. Geyes, 3nc. to interplead in order to determine who has a better right to the insurance proceeds in question. (ora was declared in default for failure to appear at the hearing, and evidence

against him was received e# parte. However, the counsel for the Conifacio Cros. 3nc., "yala "uto Parts )o. and *tate Conding O 3nsurance )o. 3nc. submitted a stipulation of facts, on the basis of which the (unicipal )ourt rendered a decision declaring the H.*. Geyes, 3nc. as having a better right to the disputed amount, and ordering the *tate Conding O 3nsurance )o. 3nc. to pay to the H.* Geyes, 3nc. the said sum of P6,&&6.$9. <rom this decision, Conifacio Cros. 3nc. et al. elevated the case to the )ourt of <irst 3nstance of (anila before which the stipulation of facts was reproduced. .n 1@ .ctober 1@+6 the latter court rendered a decision, affirming the decision of the (unicipal )ourt. The Conifacio Cros. 3nc. and the "yala "uto Parts )o. moved for reconsideration of the decision, but the trial court denied the motion. Conifacio Cros. 3nc. et al. appealed. I''(e: -hether Conifacio Cros. has any cause of action to claim indemnity from the insurance contract entered by *tate Conding O 3nsurance )o. and (ora. Hel): The insurance contract does not contain any words or clauses to disclose an intent to give any benefit to any repairmen or material men in case of repair of the car in question. The parties to the insurance contract omitted such stipulation, which is a circumstance that supports the said conclusion. .n the other hand, the Kloss payableK clause of the insurance policy stipulates that K4oss, if any, is payable to H.*. Geyes, 3nc.K indicating that it was only the H.*. Geyes, 3nc. which they intended to benefit. 3t is likewise observed from the brief of the *tate Conding O 3nsurance )ompany that it has vehemently opposed the assertion or pretension of Conifacio Cros. that they are privy to the contract. 3f it were the intention of the 3nsurance )ompany to make itself liable to the repair shop or material men, it could have easily inserted in the contract a stipulation to that effect. To hold now that the original parties to the insurance contract intended to confer upon Conifacio Cros. the benefit claimed by them would require as to ignore the indispensable requisite that a stipulation pour autrui must be clearly e#pressed by the parties, which the )ourt cannot do. "s regards paragraph , of the insurance contract, a perusal thereof would show that instead of establishing privity between Conifacio Cros. and the insurance company, such stipulation merely establishes the procedure that the insured has to follow in order to be entitled to indemnity for repair. This paragraph therefore should not be construed as bringing into e#istence in favor of Conifacio Cros. a right of action against the insurance company as such intention can

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never be inferred therefrom. "nother cogent reason for not recogni ing a right of action by Conifacio Cros. against the insurance company is that Ka policy of insurance is a distinct and independent contract between the insured and insurer, and third persons have no right either in a court of equity, or in a court of law, to the proceeds of it, unless there be some contract of trust, e#pressed or implied, by the insured and third person.K Herein, no contract of trust, e#pressed or implied e#ists. Thus, no cause of action e#ists in favor of Conifacio Cros. in so far as the proceeds of insurance are concerned. Conifacio Cros.H claim, if at all, is merely equitable in nature and must be made effective through Enrique (ora who entered into a contract with the Conifacio Cros 3nc. This conclusion is deducible not only from the principle governing the operation and effect of insurance contracts in general, but is clearly covered by the e#press provisions of section %& of the 3nsurance "ct which read that Kthe insurance shall be applied e#clusively to the proper interest of the person in whose name it is made unless otherwise specified in the policy.K ============= PINEDA V CA (INSULAR LIFE INSURANCE COMPANY) 226 SCRA 755 DAVIDE; September 27, 1993 ) complai"a"t$)appellee$ $o&'%t to claim #eat% be"efit$ #&e t%em a"# approac%e# Capt- Roberto 2& al, +re$i#e"t a"# 3, of +,SI, t%e" e4ec&te# $pecial po!er$ of attor"ey a&t%ori5i"' Capt- 2& al to 6follo! &p, a$7, #ema"#, collect a"# recei e8 for t%eir be"efit i"#em"itie$ of $&m$ of mo"ey #&e t%em98 ) :"7"o!" to t%e complai"a"t$, +,SI file# !it% I"$&lar 0ife claim$ for a"# i" be%alf of t%em t%ro&'% Capt- 2& al, e e" &$i"' t%e 5 $pecial po!er$ of attor"ey t%at t%ey e4ec&te# a$ #oc&me"t$- I"$&lar 0ife t%e" relea$e# 6 c%ec7$, payable to t%e or#er of t%e complai"a"t)appellee$, to t%e trea$&rer of +,SI .!%o %appe"e# to be Capt- 2& al;$ $o")i")la!/- Capt- 2& al t%e" e"#or$e# a"# #epo$ite# t%e$e c%ec7$ .!%ic% !ere for t%e complai"a"t$/ i" %i$ ba"7 acco&"t) 3 year$ after, t%e complai"a"t$)appellee$ fo&"# o&t t%at t%ey !ere e"title#, a$ be"eficiarie$, to life i"$&lar be"efit$ &"#er a 'ro&p policy !it% re$po"#e"t)appella"t $o t%ey $o&'%t to reco er t%e$e be"efit$ from I"$&lar 0ife- I"$&lar 0ife #e"ie# t%e claim, $ayi"' t%at t%eir liability to complai"a"t$ !a$ alrea#y e4ti"'&i$%e# &po" #eli ery to a"# receipt by +,SI of t%e 6 c%ec7$ i$$&e# i" t%e complai"a"t$; "ame$- Complai"a"t$ file# ca$e !it% t%e I"$&ra"ce Commi$$io" !%ic% #eci#e# i" t%eir fa or) I"$&ra"ce Commi$$io" %el# t%at t%e $pecial po!er$ of attor"ey e4ec&te# by complai"a"t$ i" fa or of t%e complai"a"t$ #o "ot co"tai" i" &"e<&i ocal a"# clear term$ a&t%ority to Capt- 2& al to obtai", recei e, receipt from re$po"#e"t compa"y i"$&ra"ce procee#$ ari$i"' from t%e #eat% of t%e $eama")i"$&re#; al$o, t%at I"$&lar 0ife #i# "ot co" i"ci"'ly ref&te# t%e claim of ,r$- Alarco" t%at "eit%er $%e "or %er %&$ba"# e4ec&te# a $pecial po!er of a&t%ority i" fa or of Capt- 2& al .a"# t%erefore, t%e compa"y $%o&l# %a e "ot relea$e# t%e c%ec7 to Capt- 2& al)+,SI/; a"# t%at it #i# "ot ob$er e Sec 1*=.3/, a$ repeale# by Art- 225 of t%e >amily Co#e, !%e" it relea$e# t%e be"efit$ #&e to t%e mi"or c%il#re" of Ayo a"# 0o"to7, !%e" t%e $ai# complai"a"t$ #i# "ot po$t a bo"# a$ re<&ire# ) I"$&lar 0ife appeale# to t%e CA; CA mo#ifie# t%e #eci$io" of t%e I"$&ra"ce Commi$$io", elimi"ati"' t%e a!ar# to t%e 0o"to7$ a"# Ayo

NATURE Appeal by certiorari for re ie! a"# $et a$i#e t%e Deci$io" of t%e p&blic re$po"#e"t Co&rt of Appeal$ a"# it$ Re$ol&tio" #e"yi"' t%e petitio"er$( motio" for reco"$i#eratio"

FACTS ) I" 19*3, +rime ,ari"e Ser ice$, I"c- .+,SI/ proc&re# a 'ro&p policy from I"$&lar 0ife to pro i#e life i"$&ra"ce co era'e to it$ $ea)ba$e# employee$ e"rolle# &"#er t%e pla"- D&ri"' t%e effecti ity of t%e policy, 6 co ere# employee$ peri$%e# at $ea- 1%ey !ere $&r i e# by complai"a"t$)appellee$, t%e be"eficiarie$ &"#er t%e policy-

ISSUES

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1- ?@2 I"$&lar 0ife $%o&l# be liable to t%e complai"a"t$ !%e" t%ey relie# o" t%e $pecial po!er$ of attor"ey, !%ic% Capt- 2& al pre$e"te# a$ #oc&me"t$, !%e" t%ey relea$e# t%e c%ec7$ to t%e latter 2- ?@2 I"$&lar 0ife $%o&l# be liable to t%e complai"a"t$ !%e" t%ey relea$e# t%e c%ec7 i" fa or of Ayo a"# 0@"to7, e e" if "o bo"# !a$ po$te# a$ re<&ire# ambit of a#mi"i$tratio" of a 'ro&p policy i$ t%e #i$b&r$eme"t of i"$&ra"ce payme"t$ by t%e employer to t%e employee$- ,o$t policie$, $&c% a$ t%e o"e i" t%i$ ca$e, re<&ire a" employee to pay a portio" of t%e premi&m, !%ic% t%e employer #e#&ct$ from !a'e$ !%ile t%e remai"#er i$ pai# by t%e employer- 1%i$ i$ 7"o!" a$ a contributory p !n a$ compare# to a "o") co"trib&tory pla" !%ere t%e premi&m$ are $olely pai# by t%e employer) t"# !bor o$ t"# #%p oy##& i& t"# tru# &ourc# o$ t"# b#n#$it&' ("ic" !r# ! $or% o$ !))ition! co%p#n&!tion to t"#%* HELD 1- AES Ratio 1%ir# per$o"$ #eal !it% a'e"t$ at t%eir peril a"# are bo&"# to i"<&ire a$ to t%e e4te"t of t%e po!er of t%e a'e"t !it% !%om t%ey co"tract- The person dealing with an agent must also act with ordinary prudence and reasonable diligence. @b io&$ly, if %e 7"o!$ or %a$ 'oo# rea$o" to belie e t%at t%e a'e"t i$ e4cee#i"' %i$ a&t%ority, %e ca""ot claim protectio"- So if t%e $&''e$tio"$ of probable limitatio"$ be of $&c% a clear a"# rea$o"able <&ality, or if t%e c%aracter a$$&me# by t%e a'e"t i$ of $&c% a $&$picio&$ or &"rea$o"able "at&re, or if t%e a&t%ority !%ic% %e $ee7$ to e4erci$e i$ of $&c% a" &"&$&al or improbable c%aracter, a$ !o&l# $&ffice to p&t a" or#i"arily pr&#e"t ma" &po" %i$ '&ar#, t%e party #eali"' !it% %im may "ot $%&t %i$ eye$ to t%e real $tate of t%e ca$e, b&t $%o&l# eit%er ref&$e to #eal !it% t%e a'e"t at all, or $%o&l# a$certai" from t%e pri"cipal t%e tr&e co"#itio" of affair$Reasoning - 1%e e4ec&tio" by t%e pri"cipal$ of $pecial po!er$ of attor"ey, !%ic% clearly appeare# to be i" prepare# form$ a"# o"ly %a# to be fille# &p !it% t%eir "ame$, re$i#e"ce$, #ate$ of e4ec&tio", #ate$ of ac7"o!le#'eme"t a"# ot%er$, e4cl&#e$ a"y i"te"t to 'ra"t a 'e"eral po!er of attor"ey or to co"$tit&te a &"i er$al a'e"cy- Bei"' $pecial po!er$ of attor"ey, t%ey m&$t be $trictly co"$tr&e#- Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a deviation from its practice with respect to group policies (that the employerpolicyholder is the agent of the insurer). - 1%e employer act$ a$ a f&"ctio"ary i" t%e collectio" a"# payme"t of premi&m$ a"# i" performi"' relate# #&tie$- 0i7e!i$e falli"' !it%i" t%e ) t"# #%p oy#r i& t"# !+#nt o$ t"# in&ur#r in p#r$or%in+ t"# )uti#& o$ !)%ini&t#rin+ +roup in&ur!nc# po ici#&* It ca""ot be $ai# t%at t%e employer act$ e"tirely for it$ o!" be"efit or for t%e be"efit of it$ employee$ i" &"#erta7i"' a#mi"i$trati e f&"ctio"$- ?%ile a re#&ce# premi&m may re$&lt if t%e employer relie e$ t%e i"$&rer of t%e$e ta$7$, a"# t%i$, of co&r$e, i$ a# a"ta'eo&$ to bot% t%e employer a"# t%e employee$, t%e i"$&rer al$o e"Coy$ $i'"ifica"t a# a"ta'e$ from t%e arra"'eme"t- 1%e re#&ctio" i" t%e premi&m !%ic% re$&lt$ from employer)a#mi"i$tratio" permit$ t%e i"$&rer to reali5e a lar'er ol&me of $ale$, i"$&rer to reali5e a lar'er ol&me of $ale$, a"# at t%e $ame time t%e i"$&rer($ o!" a#mi"i$trati e co$t$ are mar7e#ly re#&ce#) t%e employee %a$ "o 7"o!le#'e of or co"trol o er t%e employer($ actio"$ i" %a"#li"' t%e policy or it$ a#mi"i$tratio"- A" a'e"cy relatio"$%ip i$ ba$e# &po" co"$e"t by o"e per$o" t%at a"ot%er $%all act i" %i$ be%alf a"# be $&bCect to %i$ co"trol- It i$ clear from t%e e i#e"ce re'ar#i"' proce#&ral tec%"i<&e$ %ere t%at t%e i"$&rer)employer relatio"$%ip meet$ t%i$ a'e"cy te$t !it% re'ar# to t%e a#mi"i$tratio" of t%e policy, !%erea$ t%at bet!ee" t%e employer a"# it$ employee$ fail$ to reflect tr&e a'e"cy- 1%e i"$&rer #irect$ t%e performa"ce of t%e employer($ a#mi"i$trati e act$, a"# if t%e$e #&tie$ are "ot &"#erta7e" properly t%e i"$&rer i$ i" a po$itio" to e4erci$e more co"$tricte# co"trol o er t%e employer($ co"#&ct) @2 3R@:+ I2S:RA2CED 3ro&p i"$&ra"ce i$ essentially a single insurance contract that provides coverage for many individuals. I" it$ ori'i"al a"# mo$t commo" form, 'ro&p i"$&ra"ce pro i#e$ life or health insurance coverage for the employees of one employer - 1%e co,#r!+# t#r%& for group insurance are &$&ally $tate# i" a ma$ter a'reeme"t or policy t%at i$ i$$&e# by t%e i"$&rer to a repre$e"tati e of t%e 'ro&p or to a" a#mi"i$trator of t%e i"$&ra"ce pro'ram, $&c% a$ a" employer- Alt%o&'% t%e employer may be t%e tit&lar or "ame# i"$&re#, the insurance is actually related to the life and health of the employee -

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I"#ee#, the employee is in the position of a real party to the master policy, and even in a non-contri utory plan, the payment y the employer of the entire premium is a part of the total compensation paid for the services of the employee. 2- AES Ratio Re'ar#le$$ of t%e al&e of t%e &"ema"cipate# commo" c%il#($ property, t%e fat%er a"# mot%er ip$o C&re become t%e le'al '&ar#ia" of t%e c%il#($ property- Eo!e er, if t%e mar7et al&e of t%e property or t%e a""&al i"come of t%e c%il# e4cee#$ +5=,===,==, a bo"# %a$ to be po$te# by t%e pare"t$ co"cer"e# to '&ara"tee t%e performa"ce of t%e obli'atio"$ of a 'e"eral '&ar#ia"Reasoning - S#c ./0' In&ur!nc# Co)#1 (I" t%e ab$e"ce of a C&#icial '&ar#ia", t%e fat%er, or i" t%e latter($ ab$e"ce or i"capacity, t%e mot%er of a"y mi"or, !%o i$ a" i"$&re# or a be"eficiary &"#er a co"tract of life, %ealt% or acci#e"t i"$&ra"ce, may e4erci$e, i" be%alf of $ai# mi"or, a"y ri'%t &"#er t%e policy, !it%o&t "ece$$ity of co&rt a&t%ority or t%e 'i i"' of a bo"# !%ere t%e i"tere$t of t%e mi"or i" t%e partic&lar act i" ol e# #oe$ "ot e4cee# t!e"ty t%o&$a"# pe$o$ F ) 9repeale# by Art- 225, >amily Co#eD FAR1- 225- 1%e fat%er a"# t%e mot%er $%all Coi"tly e4erci$e le'al '&ar#ia"$%ip o er t%e property of t%eir &"ema"cipate# commo" c%il# !it%o&t t%e "ece$$ity of a co&rt appoi"tme"t- I" ca$e of #i$a'reeme"t, t%e fat%er($ #eci$io" $%all pre ail, &"le$$ t%ere i$ C&#icial or#er to t%e co"trary?%ere t%e mar7et al&e of t%e property or t%e a""&al i"come of t%e c%il# e4cee#$ +5=,===, t%e pare"t co"cer"e# $%all be re<&ire# to f&r"i$% a bo"# i" $&c% amo&"t a$ t%e co&rt may #etermi"e, b&t "ot le$$ t%a" te" per ce"t&m .1=G/ of t%e al&e of t%e property or a""&al i"come, to '&ara"tee t%e performa"ce of t%e obli'atio"$ pre$cribe# for 'e"eral '&ar#ia"$-F )2%!r3#t ,! u# o$ t"# prop#rty or t"# !nnu! inco%# o$ t"# c"i )21 t%e a''re'ate of t%e c%il#($ property or a""&al i"come; if t%i$ e4cee#$ +5=,===-==, a bo"# i$ re<&ire# ) 1%ere i$ "o e i#e"ce t%at t%e $%are of eac% of t%e mi"or$ i" t%e procee#$ of t%e 'ro&p policy i" <&e$tio" i$ t%e mi"or($ o"ly property- ?it%o&t $&c% e i#e"ce, it !o&l# "ot be $afe to co"cl&#e t%at, i"#ee#, t%at i$ %i$ o"ly propertyDisposition t%e i"$ta"t petitio" i$ 3RA21ED- 1%e Deci$io" of 1= @ctober 1991 a"# t%e Re$ol&tio" of 19 ,ay 1992 of t%e p&blic re$po"#e"t i" CA) 3-R- S+ 2o- 2295= are SE1 ASIDE a"# t%e Deci$io" of t%e I"$&ra"ce Commi$$io" i" IC Ca$e 2o- RD)=5* i$ REI2S1A1ED- Co$t$ a'ai"$t t%e pri ate re$po"#e"t- S@ @RDERED-