RODRIGUEZ, GERICAH MAY

INSURANCE LAW
TOPIC: CONTRACT OF INSURANCE

MALAYAN INSURANCE CO., INC. VS EMMA CONCEPTION LIN

G.R. No. 207277
January 16, 2017

FACTS: Respondent, Emma Lin is a client of both RCBC and Malayan Insurance Co., Inc. Acquired through
various loans from RCBC, she had insured five of the properties which were six clustered warehouses
located at Plaridel, Bulacan to Malayan Insurance Co. The insurance was purposed specifically against
occurrence of fire for P 56 million and P2 million for the remaining warehouse. On February 24, 2008 five
warehouses were gutted by fire and 2 months after on April 8, 2008, the Bureau of Fire Protection (BFP)
issued a Fire Clearance Certification to respondent after having determined that the cause of fire was
accidental.

Despite the foregoing, her demand for payment of her insurance claim was denied since the
forensic investigators hired by Malayan claimed that the cause was arson instead of accident. Respondent
then sought assistance from the Insurance Commission (IC) which, after a reinvestigation into the cause
of fire, recommended that Malayan should pay Lin’s insurance claim to accord with BFP’s findings.
Nevertheless, Malayan still refused to do so. As against RCBC, Lin averred that notwithstanding of the
loss of mortgaged properties, the bank refused to go after Malayan and instead insisted that she herself
must pay the loans to the RCBC. The latter also added that foreclosure proceedings would ensue if the
former would not comply; to add insult to injury, RCBC has been compounding the interest on her loans,
despite the former’s refusal to after Malayan.

Following the aforementioned, respondent then filed a petition to order the petitioners to pay her
insurance claim plus interest on the amounts owing her; that the loans and mortgage to RCBC be enjoined
from foreclosing the mortgage on the properties put up as collaterals. Later on June 17, 2010, while the
case was being filed, Lin filed an administrative case before the Insurance Commission (IC) against the
Malayan represented by Yvonne, thus docketed as Administrative Case No. 431. The purpose is to put
Malayan under liability for unfair claim settlement practice under Section 241 in relation to Section 247
of the Insurance Code. Thus, alleging that Malayan’s license to operate as a non-life insurance company
should be revoked or suspended until it fully complies with the IC Resolution.

On August 17, 2010, Malayan filed a motion to dismiss Civil Case No. 10-122738 based on forum
shopping arguing that the administrative case’s purpose is to prompt IC into ordering the former to pay
her claim and that the elements of forum shopping are present; specifically the identity of parties shared
the same interests and were represented in both civil and administrative cases. Motion to dismiss the Civil
Case was denied by the RTC for lack of merit. Petitioners then sued out a petition for Certiorari and
Prohibition before the CA, whereas it upheld the decision of the RTC. Petitioner moved for a motion for
reconsideration which was also denied by CA. Hence, this petition.
ISSUE: Whether or not the CA erred in not dismissing the Civil Case on the ground of willful and deliberate
{forum shopping} despite the fact that the civil case and the administrative case both seek the payment
of the same fire insurance claim.

SC RULING: No. The SC held that the case at bar is to be governed by the case law rulings in the Go and
Almendras cases where it was stressed that an administrative case for unfair claim settlement practice
may proceed simultaneously with the civil case for collection of the insurance proceeds filed by at the
same claimant since a judgment in one will not amount to res judicata to the other, and vice versa, due
to the variance or differences in the issues, in the quantum of evidence, and in the procedure to be
followed in prosecuting the cases.

In the present case, petitioners basically insist that Lin committed willful and deliberate forum
shopping which warrants the dismissal of her civil case because it is not much different from the
administrative case in terms of the parties involved, the causes of action pleaded, and the reliefs prayed
for. Petitioners also posit that another ground warranting the dismissal of the civil case was Lin’s failure
to notify the RTC about the pendency of the administrative case within five days from the filing thereof.

These above-mentioned arguments will not avail. The proscription against forum shopping is
found in Section 5, Rule 7 of the Rules of Court which cover the very essence of forum shopping itself. It
is the filing of multiple suits involving the same parties for the same cause of action, either simultaneously,
for the purpose of obtaining a favorable judgment. It exists where the elements of litis pendentia are
present or where a final judgment in one case will amount to res judicata in another. The settled rule is
that criminal and civil cases are altogether different from administrative matters as postulated in
Almendras Mining Corporation v. Office of the Insurance Commission.

The Office of the Ombudsman further reiterated and enunciated in the decision that a civil case
before the trial court involving recovery of payment of the insured’s insurance claim plus damages, can
proceed simultaneously with an administrative case before the I.C. As the afore cited cases are analogous
in many aspects to the present case, both in respect to their factual backdrop and in their jurisprudential
teachings, the case law ruling in the Almendras and in the Go cases must apply with implacable force to
the present case. Consistency alone demands----because of justice cannot be inconsistent, that the final
authoritative mandate in the cited cases must produce and end result not much different from the present
case. Petition is DENIED.

RODRIGUEZ, GERICAH MAY

INSURANCE LAW
TOPIC: CONTRACT OF INSURANCE

MAYER STEEL PIPE VS COURT OF APPEALS

GR NO. 124050
June 19, 1997

FACTS: Hong Kong Government Supplies Department contracted Mayer Steel Pipe Corporation to
manufacture and supply various steel pipes and fittings. Prior to the shipping, Mayer insured these pipes
and fittings against all risks with South Sea Surety and Insurance Co., Inc. and Charter Insurance Corp.,
with Industrial Inspection Inc. appointed as third-party inspector.
After examining the pipes and fittings, Industrial Inspection certified that they are in good order condition.
However, when the goods reached Hong Kong, it was discovered that a substantial portion thereof was
damaged.

The trial court found in favor of the insured. However, when the case was elevated to the CA, it set aside
the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the
action was barred under Sec. 3(6) of the Carriage of Goods by Sea Act (COGSA) since it was filed only on
April 17, 1986, more than two years from the time the goods were unloaded from the vessel.

ISSUE: Whether or not the action is barred by prescription

SC RULING: Sec. 3(6) of the COGSA 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. Under this provision, only the carrier’s liability is extinguished if
no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer’s
liability is based not on the contract of carriage but on the contract of insurance.

An 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. An “all risks” 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 “all risks” policies to Mayer, they bound themselves to indemnify the latter
in case of loss or damage to the goods insured. Such obligation prescribes in ten years, in accordance with
Article 1144 of the New Civil Code.

RODRIGUEZ, GERICAH MAY

INSURANCE LAW
TOPIC: DOING OR TRANSACTING INSURANCE BUSINESS

PHIL. HEALTH CARE PROVIDERS, INC vs. COMMISSIONER OF INTERNAL REVENUE

GR. NO. 1677330
September 18, 2009

FACTS: Petitioner is a domestic corporation whose primary purpose is to establish, maintain, conduct and
operate a prepaid group practice health care delivery system or a health maintenance organization to
take care of the sick and disabled persons enrolled in the health care plan and to provide for the
administrative, legal, and financial responsibilities of the organization. On January 27, 2000, respondent
CIR sent petitioner a formal deman letter and the corresponding assessment notices demanding the
payment of deficiency taxes, including surcharges and interest, for the taxable years 1996 and 1997 in the
total amount of P224,702,641.18. The deficiency assessment was imposed on petitioner’s health care
agreement with the members of its health care program pursuant to Section 185 of the 1997 Tax Code.
Petitioner protested the assessment in a letter dated February 23, 2000. As respondent did not act on the
protest, petitioner filed a petition for review in the Court of Tax Appeals (CTA) seeking the cancellation of
the deficiency VAT and DST assessments. On April 5, 2002, the CTA rendered a decision, ordering the
petitioner to PAY the deficiency VAT amounting to P22,054,831.75 inclusive of 25% surcharge plus 20%
interest from January 20, 1997 until fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive
of 25% surcharge plus 20% interest from January 20, 1998 until fully paid for the 1997 VAT deficiency.
Accordingly, VAT Ruling No. [231]-88 is declared void and without force and effect. The 1996 and 1997
deficiency DST assessment against petitioner is hereby CANCELLED AND SET ASIDE. Respondent is
ORDERED to DESIST from collecting the said DST deficiency tax. Respondent appealed the CTA decision to
the (CA) insofar as it cancelled the DST assessment. He claimed that petitioner’s health care agreement
was a contract of insurance subject to DST under Section 185 of the 1997 Tax Code.
On August 16, 2004, the CA rendered its decision which held that petitioner’s health care agreement was
in the nature of a non-life insurance contract subject to DST. Respondent is ordered to pay the deficiency
Documentary Stamp Tax. Petitioner moved for reconsideration but the CA denied it.

ISSUES:

(1) Whether or not Philippine Health Care Providers, Inc. engaged in insurance business.

(2) Whether or not the agreements between petitioner and its members possess all elements necessary
in the insurance contract.

SC RULING: NO. Health Maintenance Organizations are not engaged in the insurance business. The SC said
in June 12, 2008 decision that it is irrelevant that petitioner is an HMO and not an insurer because its
agreements are treated as insurance contracts and the DST is not a tax on the business but an excise on
the privilege, opportunity or facility used in the transaction of the business. Petitioner, however, submits
that it is of critical importance to characterize the business it is engaged in, that is, to determine whether
it is an HMO or an insurance company, as this distinction is indispensable in turn to the issue of whether
or not it is liable for DST on its health care agreements. Petitioner is admittedly an HMO. Under RA 7878
an HMO is “an entity that provides, offers or arranges for coverage of designated health services needed
by plan members for a fixed prepaid premium. The payments do not vary with the extent, frequency or
type of services provided. Section 2 (2) of PD 1460 enumerates what constitutes “doing an insurance
business” or “transacting an insurance business “which are making or proposing to make, as insurer, any
insurance contract; making 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 surety; doing any kind of
business, including a reinsurance business, specifically recognized as constituting the doing of an
insurance business within the meaning of this Code; doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

Overall, petitioner appears to provide insurance-type benefits to its members (with respect to its curative
medical services), but these are incidental to the principal activity of providing them medical care. The
“insurance-like” aspect of petitioner’s business is miniscule compared to its noninsurance activities.
Therefore, since it substantially provides health care services rather than insurance services, it cannot be
considered as being in the insurance business.

RODRIGUEZ, GERICAH MAY

INSURANCE LAW
TOPIC: CONTRACT OF ADHESION OR FINE PRINT RULE

ETERNAL GARDENS MEMORIAL PARK CORP VS PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
GR 166245
April 9, 2008

FACTS: Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with
petitioner Eternal Gardens Memorial Park Corporation (Eternal). Under the policy, the clients of Eternal
who purchased burial lots from it on installment basis would be insured by Philamlife. Among those
insured was John Chuang who died with a balance of payments pf PhP100,000.00. More than a year after
complying with the required documents, Philamlife had not furnished Eternal with any reply to the latter’s
insurance claim. This prom pted Eternal to demand from Philamlife the payment of the claim for PhP
100,000. Philamlife responded that the deceased was not covered by the Policy. The RTC said that since
the contract is a group life insurance, once proof of death is submitted, payment must follow. The CA
ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance
Code. Thus, the CA concluded, there being no application form, Chuang was not covered by Philamlifes
insurance.

ISSUE: WON the inaction of the insurer on the insurance application be considered approval of the
application?

SC RULING: Yes. As earlier stated, Philamlife and Eternal entered into an agreement denominated as
Creditor Group Life Policy No. P-1920 dated December 10, 1980. In the policy, it is provided that:
EFFECTIVE DATE OF BENEFIT. The insurance of any eligible Lot Purchaser shall be effective on the date he
contracts a loan with the Assured. However, there shall be no insurance if the application of the Lot
Purchaser is not approved by the Company. An examination of the above provision would show ambiguity
between its two sentences. The first sentence appears to state that the insurance coverage of the clients
of Eternal already became effective upon contracting a loan with Eternal while the second sentence
appears to require Philamlife to approve the insurance contract before the same can become effective. It
must be remembered that an insurance contract is a contract of adhesion which must be construed
liberally in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest.

In Malayan Insurance Corporation v. Court of Appeals, this Court held that: Indemnity and liability
insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in
favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance, being
a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer; in
other words, it should be construed liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as
to preclude the insurer from noncompliance with its obligations. In the more recent case of Philamcare
Health Systems, Inc. v. Court of Appeals, we reiterated the above ruling, stating that: When the terms of
insurance contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. 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 Insurance contracts are contracts of adhesion containing
technical terms and conditions of the industry, confusing if at all understandable to laypersons, that are
imposed on those who wish to avail of insurance. As such, insurance contracts are imbued with public
interest that must be considered whenever the rights and obligations of the insurer and the insured are
to be delineated. Hence, in order to protect the interest of insurance applicants, insurance companies
must be obligated to act with haste upon insurance applications, to either deny or approve the same, or
otherwise be bound to honor the application as a valid, binding, and effective insurance contract.

RODRIGUEZ, GERICAH MAY

INSURANCE LAW
TOPIC: CONTRACT OF ADHESION

WESTERN GUARANTY CORPORATION VS COURT OF APPEALS

G.R. No. 91666
July 20, 1990

FACTS: Priscilla Rodriguez was struck by a bus owned by De Dios. She was hospitalized and her face was
permanently disfigured. Western Guaranty, the insurance company of the bus line, was obliged to pay
due to the bodily injury caused by the bus. Rodriguez was able to earn a money judgment from the court
to the tune of 3000 for actual damages, 1500 for loss of earning capacity, and 20000 for moral damages
and attorney’s fees. De Dios filed a complaint against Western to indemnify the amount. Western lost
the case in the appellate court, hence this petition.

ISSUE: Is Western liable for paying loss of earnings, moral damages and attorney's fees even if these items
are not among those included in the Schedule of Indemnities set forth in the insurance policy.

SC RULING: Yes. Petition dismissed.

The policy states:

Section 1. Liability to the Public — Company will, subject to the Limits of Liability, pay all sums
necessary to discharge liability of the insured in respect of —
(a) death of or bodily injury to or damage to property of any passenger as
defined herein.

There was also a schedule of indemnities that specified a certain amount for a certain type of injury as
well as hospital service payments. In this case, the limits on the amount payable for certain kinds of
expenses were not considered by the court as “excluding liability for any other type of expense or damage
or loss even though actually sustained or incurred by the third party victim.”

The court noted that the limits of the liability was at 50,000 per person per accident. Construing this with
section 1 means that all kinds of damages allowable by law were also to be covered by the policy once it
was shown that liability has arisen. The schedule of indemnities was not a closed enumeration of the kinds
of damages Western can award. Western should have used far more specific language, not the “pay all
sums necessary to discharge liability” clause. Insurance contracts must be read by the courts with a
jaundiced eye to prevent the insurer from escaping from its obligation. Also, contracts of adhesion such
as policies must be construed against the party who made them, in this case western.
RODRIGUEZ, GERICAH MAY
INSURANCE LAW
TOPIC: PARTIES IN INSURANCE CONTRACT

GREAT PACIFIC LIFE INSURANCE COMPANY VS COURT OF APPEALS

316 SCRA 677 (1999)

FACTS: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance
with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible
housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form,
Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any
heart conditions and that he is in good health to the best of his knowledge.

However, after about a year, Dr. Leuterio died due to “massive cerebral hemorrhage.” When DBP
submitted a death claim to Grepalife, the latter denied the claim, alleging that Dr. Leuterio did not disclose
he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim. Hence, the widow of the late Dr. Leuterio
filed a complaint against Grepalife for “Specific Performance with Damages.” Both the trial court and the
Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP.

ISSUE: Whether the CA erred in holding Grepalife liable to DBP as beneficiary in a group life insurance
contract from a complaint filed by the widow of the decedent/mortgagor

SC RULING: The rationale of a group of insurance policy of mortgagors, otherwise known as the “mortgage
redemption insurance,” is a device for the protection of both the mortgagee and the mortgagor. On the
part of the mortgagee, it has to enter into such form of contract so that in the event of the unexpected
demise of the mortgagor during the subsistence of the mortgage contract, the proceeds from such
insurance will be applied to the payment of the mortgage debt, thereby relieving the heirs of the
mortgagor from paying the obligation. In a similar vein, ample protection is given to the mortgagor under
such a concept so that in the event of death, the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage indebtedness. In this type of policy insurance, the
mortgagee is simply an appointee of the insurance fund. Such loss-payable clause does not make the
mortgagee a party to the contract.

The insured, being the person with whom the contract was made, is primarily the proper person to bring
suit thereon. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in
part for the benefit of another person, such as a mortgagee.

And since a policy of insurance upon life or health may pass by transfer, will or succession to any person,
whether he has an insurable interest or not, and such person may recover it whatever the insured might
have recovered, the widow of the decedent Dr. Leuterio may file the suit against the insurer, Grepalife.