I. INTRODUCTION A. OVERVIEW In a contemporary age where people travel through air and water, use electronic machines, build high structures, cook with gas stove, and work in a heavy equipment factory – exposure to loss of something as valuable as life is inevitable. In one way or another, Insurance has been part of an average modern day individual. With the increase of hazard in almost every aspect of one’s life, may it be in business, property rights and interest, health, etc., a person finds it necessary to ensure the return of something that may have been lost due to some unforeseeable or certain events. It has been a common practice of an individual to safeguard his interests even if it means paying for such protection. While most people own at least one insurance policy, a great number of individuals do not know or understand what it truly means or how it operates. Where does the concept of insurance begin? In an uncertain world, death is one of the few things that life considers certain. Risk of dying depends on the lifestyle of an individual. The wife of a pilot concerns herself and prays hard for a safe journey of her husband during flight. The mother of a soldier could not sleep because
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Transcript
I. INTRODUCTION
A. OVERVIEW
In a contemporary age where people travel through air and water,
use electronic machines, build high structures, cook with gas stove, and
work in a heavy equipment factory – exposure to loss of something as
valuable as life is inevitable. In one way or another, Insurance has been
part of an average modern day individual. With the increase of hazard in
almost every aspect of one’s life, may it be in business, property rights
and interest, health, etc., a person finds it necessary to ensure the return
of something that may have been lost due to some unforeseeable or
certain events. It has been a common practice of an individual to
safeguard his interests even if it means paying for such protection. While
most people own at least one insurance policy, a great number of
individuals do not know or understand what it truly means or how it
operates.
Where does the concept of insurance begin?
In an uncertain world, death is one of the few things that life
considers certain. Risk of dying depends on the lifestyle of an individual.
The wife of a pilot concerns herself and prays hard for a safe journey of
her husband during flight. The mother of a soldier could not sleep
because of the peril that his son might come home injured if he did not
arrive dead from a battle. The son of a construction worker longs for a
harmless day’s work of his father. These people may be challenged with
greater danger than a regular student who comes to and from school
everyday. However, what are the chances that this student would get hit
by a car while crossing the street? Or even be struck by a lightning in the
comforts of his home? One could not be more optimistic than truthful.
Risk is everywhere – that is certain. With the ever increasing probability
of hazard in a modern society, people tend to cope up with these threats
by making sure that they are protected from great loss when these
tragedies happen.
How does one become protected when the life of a loved one has
been taken?
Protection with respect to the concept of insurance neither denotes
physical security nor shelter from harm. It simply means that while risk
is certain, the monetary damage of the loss could be covered up by way
of replacement. This replacement or otherwise called “insurance benefit”
works as the inducing factor why people get Insurance policy. Simply
put, in the contract of insurance, the insured pay premium and the
insurer promises to indemnify the former in case the thing insured is
lost. As a result of the need to manage risk, Insurance became a popular
tool since time immemorial to help individual cope up with misfortunes in
life.
As the population grows, more individuals are bound to grasp the
importance of insurance being a predestined fraction of a progressive
society. Thus, the state necessitates itself to promulgate laws in order to
regulate the affairs of Insurance companies and to make sure that the
public is not only protected from risks but also from fraudulent
machinations that puts up a facade of a legitimate insurer.
This paper will extensively discuss the concept of Insurance and
the laws that the legislatures enacted in order to better understand the
rights and obligations of the parties in an insurance contract.
B. SCOPE AND LIMITATIONS
The study has three main parts, to wit: principles of insurance;
special laws governing insurance with the corresponding Supreme Court
decisions relating to such laws; and the summary of the paper. The paper
shall also discuss pertinent information on what the readers should know
regarding the topic including its history and how it developed throughout
the years emphasizing on its evolution in the domestic territory.
The researchers will limit its discussion on Philippine legislations and
decisions only. Due to the number of legislations relating to insurance,
the authors picked, among others, those which are more basic and
general for academic purposes, to wit:
1. Insurance Code of 1978
2. Revised Government Security Insurance System Act of 1977
3. Social Security Act of 1954
4. Pre-need Code of 2009
5. The Home Guaranty Act of 2000
6. Philippine Deposit Bank Corporation
The provisions of the New Civil and other laws insofar as it may be
applied in the contract of insurance shall likewise be discussed in this
paper.
C. OBJECTIVES
The main objective of the paper is to discuss the concept of insurance
and its governing laws giving emphasis on its salient features and
characteristics. The importation of the Supreme Court decisions is
basically to enable the readers to fully understand insurance laws and to
facilitate in their minds a working idea on what insurance is all about.
At the end of the study, the authors shall give a summary or insight of
what has been discussed hoping to impart upon the readers a better
understanding on Philippine Insurance Laws and jurisprudence and its
importance to the society.
II. FUNDAMENTALS AND PRINCIPLES OF INSURANCE
A. HISTORY
Many insurance book authors suggest that the birth of insurance
dates back as early as time. During primitive economies where people
engage in barter or trade and the use of a financial instrument was still
inexistent, insurance is in a form of agreements of mutual aid. If one
family's house is destroyed the neighbours are committed to help
rebuild. Granaries housed another primitive form of insurance to
indemnify against famines. Often informal or formally intrinsic to local
religious customs, this type of insurance has survived to the present day
in some countries where modern money economy with its financial
instruments is not widespread. 1
Developing in the modern sense, the earliest persisting historical
forms of insurance were the so-called bottomry contracts on shipping,
1 http://en.wikipedia.org/wiki/insurance
which have been discovered in Babylonian records as early as the fourth
millennium BC. This type of insurance normally took the form of a loan to
a shipowner, the repayment of which was made contingent on the safe
completion of the voyage. The development of the bottomry contract into
full-fledged marine insurance and likewise its extension to land journeys
began in the late Middle Ages as a consequence of and spur to the
expansion of long distance trading. In this, it paralleled the spread of
other commercial innovations such as bills of exchange and other credit
mechanisms. 2
The evolution of insurance throughout the ages matured and
sprung in different dimensions. The Great Fire of 1666 opened the eyes
of many seeing insurance as a necessity rather than convenience. It was
not long enough when commercialists saw the potential of insurance as a
tool to invest and earn income.3 The Lloyd’s of London is one of the
prominent international insurance marketing associations in the world. It
started in the late 1680’s when Edward Lloyd kept a coffeehouse in
Tower Street, London, England. Merchants assembled there to transact
business informally. It became a popular meeting place for underwriters
– those who would accept insurance on ships for the payment of
premium. Since then, Edward Lloyd turned his humble shop into an
enormous marketplace for underwriters and insurers.4 At present,
Lloyd’s of London is the most distinguished insurance establishment in
the world.5
In the Philippines, insurance was inexistent during the Pre-Spanish
Era, every loss was borne by the person or family who suffered the
misfortune. When the Spaniards came, insurance was first introduced in
pay the amount. Simply stated, in a contract of insurance, one
undertakes for a consideration to indemnify another against loss,
damages or liability arising from an unknown or contingent event.
The insured entities are therefore protected from risk for a fee,
with the fee being dependent upon the frequency and severity of the
event occurring. In order to be insurable, the risk insured against
must meet certain characteristics in order to be an insurable risk.
Insurance is a commercial enterprise and a major part of the financial
services industry, but individual entities can also self-insure through
saving money for possible future losses.8
Since the Insurance Code is adopted from the Insurace Act,
which was generally taken to the letter of the California Law on
Insurance, the local courts therefore apply the fundamental
construction laid down by the California Courts insofar as it may be
applied in the local setting. Such principle is in accordance with the
well-entrenched rule in statutory construction that when a statute has
been adopted from some other state, and said statute has previously
been construed by the courts of such state or country. The statute is
usually deemed to have been adopted with the construction so given.
In case of doubt or ambiguities in the interpretation of contracts, the
construction shall always be in strictly against the party that caused
them. More often than not, the insurance policy is prepared by the
insurer. Thus, the ambiguities shall be construed against it and in
favour of the insured.
C. Characteristics and Elements of Insurance Contract
8 http://en.wikipedia.org/wiki/Insurance
An insurance contract admits of several characteristics, among
others are the following:
1. Consensual Contract – it is perfected by the meeting of the
minds of parties;
2. Voluntary – It is a personal act. It is not compulsory and the
parties may incorporate such terms and conditions as they
deem convenient which will be binding so long as such
incorporation is not contrary to law or public policy;
3. Aleatory – An insurance contract is aleatory because it is
being dependent upon some unknown or contingent event.
4. Conditional – The conditions that the happening of the
unknown or contingent event, whether in the past or future,
and the payment of the premium had already been fully
satisfied should have first be met before the contract may be
enforced; and
5. Personal – each party in the contract have in view the
character, credit and conduct of each other.
Since insurance is a contract, it must also have all the three
basic elements of a contract – consent, object and consideration. The
parties who give their consent are the insured and the insurer. The
object of the contract pertains to the transfer or distribution of the
risk of loss, damage, liability or disability from the insured to the
insurer. The element of risk insured against must be present and shall
be explicitly stated in the policy. The Insurance Code provides that a
risk is any contingent or unknown event, whether past or future which
may indemnify a person. The consideration of an insurance contract is
the payment of premium which the insured gives the insurer. In
addition thereto, insurable interest is also a key element that is
worthy to note and understand in studying the law on insurance. It
means that the insured possesses an interest of some kind susceptible
of pecuniary estimation. It will be further discussed in Chapter III.
D. Parties
In a contract of insurance, there are two parties involved. These
are the following:
1. Insurer – the one who undertakes to indemnify the insured
against loss, damage or liability arising from any unknown or
contingent event.
2. Insured – is the party to be indemnifies upon the occurrence
of the loss. Sec. 7 of the Insurance Code states that anyone,
except a public enemy can be insured against
However, there may exist a third person who may not be a party
to the contract but is nevertheless mentioned and included in the
insurance policy. The beneficiary is the one who is called to receive
the insurance benefit. More often than not, the insured or the owner
of the policy and the beneficiary are one and the same. While, most of
the insured name themselves as the beneficiary, that is not always the
case as when the policy holders may institute any person to benefit
from the insurance proceeds so long as the requirement provided for
in the Code have been met.
Indemnification is an important concept in insurance. It must be
noted that in the contract of insurance, the insurer promises to
indemnify the insured in case of the latter’s loss, damage or liability.
What does indemnity mean in relation to the contract of insurance? –
Indemnity insurance compensates the beneficiaries of the policies for
their actual economic losses, up to the limiting amount of the
insurance policy. It generally requires the insured to prove the
amount of its loss before it can recover. Recovery is limited to the
amount of the provable loss even if the face amount of the policy is
higher. This is in contrast to, for example, life insurance, where the
amount of the beneficiary's economic loss is irrelevant. The death of
the person whose life is insured for reasons not excluded from the
policy obligate the insurer to pay the entire policy amount to the
beneficiary.9
While indemnification may be an obligation created by law
specially in cases of Delict or Quasi-delict whereby the offender has
the legal obligation to remunerate or compensate another for the
damage that the latter has caused, indemnity insurance differ in that,
the obligation does not arise from torts or criminal acts but rather
from contract. Thus, the insured is subrogated to the extent of the
amount paid by the insurer so that the latter may go after the culprit
or the person responsible to pay the indemnity, liability or damage.
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim, demand, or right, so that he
or she who is substituted succeeds to the rights of the other in
relation to the debt or claim, and its rights, remedies, or Securities.
There are two types of subrogation: legal and conventional. Legal
subrogation arises by operation of law, whereas conventional
subrogation is a result of a contract. The purpose of subrogation is to
compel the ultimate payment of a debt by the party who, in Equity and
good conscience, should pay it. This subrogation is an equitable
device used to avoid injustice. The right to subrogation accrues upon
payment of the debt. The subrogee is generally entitled to all the
creditor's rights, privileges, priorities, remedies, and judgments and is
subject only to whatever limitations and conditions were binding on
9 Adjusting Today The Extended Period of Indemnity Endorsement, William G. Rake SPPA Adjusters International
the creditor. He does not however, have any more extensive rights
than the creditor10. Typically an insurance company which pays its
insured client for injuries and losses then sues the party which the
injured person contends caused the damages to him/her.11
E. Classification of Insurance
Insurance contracts are classified in the Insurance Code as
follows:
1. Life Insurance
a. Individual (Section 179 – 183, 227)
b. Group Life (Section 50 - 228)
c. Industrial Life (Sec 229 - 231)
2. Non Life Insurance
a. Marina (Section 99 - 166)
b. Fire (Section 167 - 173)
c. Casualty (Section 174)
3. Contracts of Suretyship and Bonding
F. The Insurance Commission
The Insurance Act of July 1 1915 created the Office of the
Insurance Commissioner and made the Insular Treasurer as Insurance
Commissioner ex-officio. It was only in 1949 through RA 275 that the
Office of the Insurance Commissioner became an independent office
10 West's Encyclopedia of American Law, edition 2. 2008 The Gale Group, Inc11 Copyright 1981-2005 by Gerald N. Hill and Kathleen T. Hill (http://legal- dictionary.thefreedictionary.com)
and on Nov 20 1972, PD63 was promulgated amending certain
sections of the Insurance Act.12
The Commission is a government agency under the Department
of Finance. It supervises and regulated the operations of life and non-
life companies, mutual benefit associations and trusts for charitable
uses. It issues licenses to insurance agents, general agents, resident
agents, under writers, brokers, adjusters and actuaries. It has also the
authority to suspend or revoke such licenses.
More specifically, PD 63 provides:
1) It shall be the duty of the Insurance Commission to see that
all laws relating to insurance and insurance companies are
faithfully executed and to perform the duties imposed upon it
by this Act.
2) Power to adjudicate claims and complaints involving any loss,
damage or liability for which an insurer may be answerable
under any kind of policy or contract of insurance or for which
each insurer may be liable under any contract of guaranty or
suretyship.
3) Issue certificate of authority to any foreign or domestic
insurance company to transact business in the Philippines
upon satisfactory compliance and examination by the
Commission.
4) Revoke certificate of authority if it is the opinion of the
insurance Commission that its condition or method of
business is hazardous to the public.
12 http://www. insurance.gov.ph
5) Apply for an order of liquidation any domestic insurance
company or a Philippine branch of a foreign insurance
company whenever it finds that the company cannot be
permitted to resume business with safety to its policy holder
or to its creditors.
6) An order to liquidate the business of an insurance company
shall direct the Insurance Commission to be vested by
operation of law with the title to all of the property,
contracts, rights of action and all of the books and records of
the insurance company.
PD 1460 or the Insurance Code of 1978 further empowers the
Insurance Commission to adjudicate insurance claims and complaints
involving any loss, damage or liability where the amount involved
does not exceed P100,000 for any single claim. Informal and
administrative complaints against malpractices of insurance
companies or agents may also be filed with the Commission. Decisions
or orders of the Commission may be appealed to the Appellate Courts.
Insurance regulation is affected with widespread public interest
as almost every individual, employees both in government and in the
civilian sector, business and industries essentially depend on
insurance as a protection to maintain the stability of our living
standards, our property rights and family relationships. It is for this
end that the Government views the regulation of the insurance
industry of paramount importance.
This regulatory function13 is available to the government
through legislative enactment, administrative action through the
Insurance Commissioner and through Court Action.
13 Insurance Code of the Philippines, Annotated 2006 Edition, De Leon, pp. 710-711
Administrative Action is exercised through the Insurance
Commissioner by his power of licensing, examination and
investigation.
Licensing is a check in the insurer’s financial condition to
ascertain that it has the required capital and surplus for the kind of
insurance permitted in the license. The Commissioner, upon his
determination can refuse to issue a license, suspend or revoke an
existing license or refuse issuance of a renewal license.
Examination of insurance companies once they have been
licensed includes checking of assets, liabilities, and reserves as well
as review of almost all underwriting, investment and claim practices
of the insurers. It must ne emphasized that most obligations of
insurers extend years into the future and the state should provide
supervision to see that the premises in the contract are fulfilled.
Investigation powers of the Commissioner extend to a wide
variety of powers to determine whether or not answers are complying
with the requirements of the law. PD 63 grants the Commissioner the
power either by itself or by its duly authorized representatives to
subpoena witnesses and to require the production of any books,
papers relevant to the inquiry. From there, he may issue such rulings,
instructions, circulars, orders and decisions as he may deem
necessary to secure the enforcement of the provisions of the Code.
Court action may most often be used in private action against
the Commissioner’s ruling through mandamus or injunction may be
petitioned to enforce the rulings or orders by the Commission.
In 1966, the High Court ruled in Lopez vs Filipinas Compania de
Seguros, “That there is nothing in the Insurance Law Act No 2427, as
amended nor in any of its allied legislations which empowers the
Insurance Commissioner to adjudicate or disputes relating to an
insurance company’s liability to an insured under a policy issued by
the former to the latter.”
The validity of an insured’s claim under a specific policy, its
amount and all such other matters as might involve the interpretation
and instruction of the insurance policy, are issues which only a
regular court of justice may resolve and settle.
Similarly in the High Court’s decision of July 26 1994 in
PHILAM LIFE vs Hon. Armando Ansaldo involving the issue whether
or not the resolution of the legality of the Contract of Agency falls
within the jurisdiction of the Insurance Commission, it held:
A plain reading of the above-quoted provisions show that the
Insurance Commissioner has the authority to regulate the business of
insurance, which is defined as follows:
The term “doing an insurance business” or “transacting an
insurance business,” within the meaning of this Code, shall include (a)
making or proposing to make, as insurer, any insurance contract; (b)
making, or proposing to make, as surety, any contract or suretyship as
a vocation and not as merely incidental to any other legitimate
business or activity of the surety; (c) 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; (d) doing or proposing to do any business in substance
equivalent to any of the foregoing in a manner designed to evade the
provisions of the Code.
Since the contract of agency entered into between Philamlife
and its agents is not included within the meaning of an insurance
business, Section 2 of the Insurance Code cannot be invoked to give
jurisdiction over the same to the Insurance Commissioner, Expression
unius est exclusion alterius.
With regard to private respondent’s contention that the quasi-
judicial power of the Insurance Commissioner under Section 416 of
the Insurance Code applies in his case, we likewise rule in the
negative. A reading of the Section 416 shows that the quasi-judicial
power of the Insurance Commissioner is limited by law “to claims and
complaints involving any loss, damage or liability for which an insurer
may be answerable under any kind of policy or contract of insurance, .
. . “Hence, this 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.
In an earlier case brought by Almendras Mining Corporation
against Country Bankers Insurance Corporation wherein the
petitioner sought revocation of the respondent’s Bankers Certificate
of Authority to engage in the insurance business. The petition was
dismissed due to absence in the record to show there was any unfair
claim settlement practice as would warrant revocation. Clearly,
therefore the Insurance Commissioner’s disputed Resolution and
Order was issued in the performance of administrative and regulatory
duties and function and should have been appealed by petitioner to
the Office of the Secretary of Finance.
Petitioner Almendras in effect invoked only the Commissioner’s
regulatory authority to determine whether or not private respondent
Bankers had violated provisions of the Insurance Code, as amended.
Petitioner had chosen to litigate the substantive aspects of its
insurance claim against Bankers in a different forum – a judicial one –
for it instituted a separate civil action for damages before the
Regional Trial Court of Pasay City, on 13 August 1985, that is, after
efforts at amicable settlement of Administrative Case No. 006 had
failed. Petitioner Almendras had in fact to go before a judicial forum
and to limit the proceedings before the Insurance Commissioner to
regulatory, non-judicial matters; the claim of petitioner Almendras
was in excess of P100,000.00 and, therefore, fen outside the quasi-
judicial jurisdiction of the Insurance Commissioner under Section 416
of the Insurance Code, as amended.
We conclude that petitioner Almendras remedy after its Motion
for reconsideration in Administrative Case NO. 006 had been denied
by public respondent Commission was to interpose an appeal to the
Secretary of Finance. The present Petition for certiorari is neither
proper nor an appropriate substitute for such an appeal.
The three cited cases exemplifies the extent of the powers of the
Insurance Commissioner, the adjudication of claims and complaints
against insurance companies. That it is an administrative agency of
government which is regulatory and quasi judicial in its functions.
III. INSURANCE LAWS AND JURISPRUDENCE
A. INSURANCE CODE OF 1978 (Presidential Decree No. 1460)
Contract of Insurance
Under Sec. 2 of the Insurance Code, a “contract of insurance” is
an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an
unknown or contingent event. Insurance is entered into by the parties
to secure protection against financial losses due to fortuitous events
or otherwise known as “risks”. A “risk” may be defined as “an
uncertainty regarding a loss. Risk must be distinguished from chance.
While risk entails a loss which may or may not happen, chance is
predicated upon the probability or desirability of profit or gain. While
a risk may be insured, Sec. 4 of the Insurance Code states that
insurance against the drawing of any lottery or for or against any
chance or ticket in a lottery drawing prize cannot be insured against.
Thus, contract of insurance is a contract of indemnity. Indemnity is
the reimbursement for a certain loss or damage. The claimable
amount of insurance proceeds cannot exceed the value of the thing
lost because the essence of insurance is only to indemnify a person
insured. It therefore follows that the insured cannot receive more
than the cost of damage.
“Risk” may likewise be referred to as any contingent or
unknown event, whether past or future, which may damnify a person
having insurable interest, or create a liability against the person
seeking for protection. This kind of risk as provided by law in Sec. 3 of
the Insurance Code is exclusive as to what may be insured. It can be
inferred from the given provision that this contingent or unknown
event is the subject of an insurance contract, without which the
agreement is void. It must also be noted that even a past event can be
insured against so long as the happening of such condition is yet to be
known. Unlike most of the contracts entered into by spouses, a
married woman need not get the consent of her husband when the
former insures her life or the life of her children.
As mentioned earlier, there are only two parties in the insurance
contract – the insurer and the insured. An insurer may be natural or
juridical person (i.e. partnership, association, corporation, etc.). The
law however provides that before a person transact or engage in
insurance business, the approval of the Insurance Commissioner must
first be solicited. An application for the issuance of Certificate of
Authority must be filed before the Commission. The latter may grant
the application if it sees that all the requirements have been met or
otherwise deny the same.
Under Sec. 8 of the Insurance Code, anyone except a public
enemy may be insured. The word “enemy” denotes a nation to which
the Philippines is currently at war with. The reason for the
importation of such exception is the fact that the purpose of war is to
cripple the power and exhaust the resources of the enemy, and it is
inconsistent that one country should destroy its enemy, and repay in
insurance the value of what has been destroyed.14
According to Sec. 10 of the Insurance Code, “Every person has
an insurable interest in the life and health:
1) Of himself, of his spouse and of his children;
2) Of any person on whom he depends wholly or in part for
education or support, or in whom he has a pecuniary interest;
14 6 Couch, Cyc. of Ins. Law, pp. 5352-5353, G.R. No. L-2294
3) Of any person under a legal obligation to him for the payment of
money, or respecting property or services, of which death or
illness might delay or prevent the performance; and
4) Of any person upon whose life any estate or interest vested in
him depends.”
Sec. 10 speaks only of insurable interest in life insurance. The
persons who intend to take hold of an insurance policy must have an
insurable interest in the subject matter of the contract. In general, a
person is deemed to have an insurable interest in the subject matter
insured where he has a relation or connection with or concern in it
that he will derive pecuniary benefit or advantage from its
preservation and will suffer pecuniary loss from its destruction,
termination or, injury by the happening of the event insured against.
It therefore follows that when a policy is issued to a person without
interest, the contract becomes a wagering policy and is void being
against public policy. In designating a beneficiary, it is not necessary
that the beneficiary has an insurable interest.
While there are only two parties in the contract of insurance,
there are instances when the insured designates a beneficiary other
than himself. “Beneficiary is the term ordinarily used in referring to
the person who is designated in a contract of life, death or accidental
insurance as the one who is entitled to receive the insurance
proceeds.15 Any person may be called to receive the life insurance
proceed as a beneficiary even though the latter has no insurable
interest in the life insured except those who are forbidden by law to
receive donations from the insured, such as:
15 44 AM Jur. 2nd. 639
1) Those made between persons who are guilty of adultery or
concubinage at the time of the donation;
2) Those made between persons found guilty of the same criminal
offense, in consideration thereof; and
3) Those made to a public officer or his wife, descendants,
ascendants, by reason of his office.
The law provides that the insured may change the designation
of the beneficiary unless the former expressly waives such right, in
which case the designation shall be irrevocable and can only be
modified upon the consent of the latter. Should the insured
discontinued paying premiums, the beneficiary may continue paying it
and is entitled to automatic extended term or paid up insurance
options. However, Sec. 12 provides that the interest of a beneficiary is
the principal accomplice, or accessory in wilfully bringing about the
death of the insured in which event, the nearest relative of the insured
shall receive the proceeds in the latter is not otherwise disqualified.
This rule shall discourage any attempt by the beneficiary on the life of
the insured.
Sec. 14 provides for the insurable interest in property. To wit:
1) An existing interest;
2) An inchoate interest founded on an existing interest; or
3) An expectancy, coupled with an existing interest in that
out of which the expectancy arises.
In property insurance, the person who sought protection from
the insured must positively ascertain the former’s interest in the
subject matter of the contract, otherwise, the contract shall be void. A
mere contingent or expected benefit, uncoupled with actual or legal
right will not support a contract of insurance. Thus, an expectant heir
cannot insure nor can a general creditor insure the property of his
debtor, even though destruction of said property is worthless any
judgment he might obtain.16
In property insurance, the measure of an insurable interest is
the extent to which the insured might be damnified by loss or injury
thereof. Sec. 17 reiterates the principle that Insurance is a contract of
indemnity. The insurance proceeds cannot exceed the value of the
thing lost, otherwise, the contract is not one of insurance but a
wagering contract.
The principle of indemnity is the basis of all contracts of
property insurance. Accordingly, an insurance taken out by a person
on property in which he has no insurable interest is not valid. The
existence of the insurable interest in life or health insurance must be
present when the insurance take effect, and when the loss occurs, but
need not exist in the meantime. On the other hand, the interest in life
and health insurance must exist when the insurance take effect, but
need not exist thereafter or when the loss occurs.
In property insurance, insurable interest should exist not only
on the date of the execution of the contract of insurance but on the
date of the occurrence of the risk or loss insured against. If a fire
occurs after the sale or alienation of the property insured, the former
owner cannot collect on the policy17. In property insurance, if the
person insured did not have any interest at the time of the loss, it
follows that it did not sustain any damage that may be indemnified by
the insurer, hence, the payment of insurance proceed would defeat
the very essence of insurance.
16 Martin’s Philippine Commercial Law, Vol. II p. 20, citing Vancouver Nat. Bank v. Law Union and Crowns Insurance Co., 153 F. 440; Baldwin Insurance, Co. 60 Iowa 497, 15 N.W. 30017 Ibid. page 21
Concealment
A neglect to communicate that which a party knows and ought
to communicate is called concealment. Whether concealment is
intentional or unintentional, the party injured is entitled to the
rescission of insurance contract. The parties to a contract is entitled
to communicate to the other in good faith, all the facts within its
knowledge which are material to the contract, to which he has no
warranty and the other has no means of ascertaining. Materiality is to
be determined by the probable and reasonable influence of the facts
upon the party to whom the communication is due in forming the his
estimate of disadvantages of the proposed contract or in making his
inquiries.
Reperesentation
Representation is defined as the statements given to the insurer
to induce the latter to enter in the contract of insurance. A
representation may be oral or written and may be made at the time or
before the issuance of the policy. Any alteration or withdrawal of the
representation after the insurance has been effected cannot be made.
On the other hand, misrepresentation is a statement which the
insured has knowledge of its untruthfulness or which the latter
positively states as true without knowing it to be true or which has the
tendency to mislead where such fact is material to the risk.
Representation cannot qualify as the exact provision of in a
contract but may be considered an implied warranty. If the
representation fails to correspond with its assertions or stipulations,
such representation is deemed to be false. The materiality of
representation is the same as the materiality in concealment.
Whenever a right to rescind a contract of insurance is given to the
insurer by any provision of this chapter, such right must be exercised
previous to the commencement of an action on the contract.
Policy
The written instrument in which a contract of insurance is set
forth is called the policy of insurance. It is a formal document which
provides an evidence of such contract. The policy must contain
statements of offer, acceptance and consideration.
The receipt of a policy by the insured without objection binds
the acceptor or insured to the terms thereof. It is his duty to read the
policy and it will be assumed that he did so. Where the holder,
discovering a mistake, the agent attaching a wrong rider to his
application elects to retain the policy as issued, he thereby accepts
the terms.18
While it is a cardinal principle of insurance law that a policy or
contract of insurance is to be construed liberally in favour of the
insured and strictly against the insurer company, yet, contracts of
insurance, like other contracts are to be construed according to the
sense and meaning of the terms which the parties themselves have
used. If such terms are clear and unambiguous, they must be taken
and understood in their plain ordinary and popular sense19.
“Rider” and “endorsement” are used interchangeably. They are
agreements not contained in the policy, but written on or attached to
it. A rider is a printed typed stipulation contained on a slip of paper
attached to the policy because they constitute additional stipulation
between the parties.
18 Ang Giok Chip vs. Springfield Fire and Marine Insurance co., 56 Phil. 37519 Pacific Banking Corporation vs. Court of Appeals, 168 SCRA 1988
“Warranties are inserted or attached to a policy to eliminate
specific potential increases of hazard during the policy term owing to
actions of the insured, or conditions property.
“Clauses” are agreements between the parties on certain
matters relating to the liability of the insurer in case of loss.
Incontestability clauses in life insurance policies stipulating that the
policy shall be incontestable after a stated period. Sec. 48 par. 2
requires that the incontestability of a life insurance policy starts after
the lapse of two years that the insurance was in force during the
lifetime of the insured. This is to dive the insurer a reasonable
opportunity to investigate the statements which the applicant makes
in procuring his policy and that the definite period, the insurer should
not be permitted to question the validity of the policy either by
affirmative action or by defense to a suit brought on the life policy by
the beneficiary. As to the insured, such clauses give assurance to the
policy holder that his beneficiaries would receive payment without
question as to the validity of the policy or the existence of the
coverage once the period of contestability passes. These are the
requisites of incontestability:
1) The policy is a life insurance policy
2) It is payable on the death of the insured;
3) It has been in force during the lifetime of the insured for at
least two years from its date of issue or of its last
reinstatement.
Whereas the Code specifically provided for the information
required to be stated in the policy insurance. It includes the following:
1) The parties between whom the contract is made;
2) The amount to be insured;
3) The premium, or if the insurance is of a character where the
exact premium is only determinable upon the termination of
the contract, a statement of the basis and rated upon which
the final premium is to be determined;
4) The property or life insured;
5) The interest of the insured in property insured, if he is not
the absolute owner thereof;
6) The risks insured against; and
7) The period during which the insurance is to continue.
Under Sec. 52. Cover notes may be issued to bind insurance
temporarily pending the issuance of the policy. Within sixty days after
the issue of the cover note, a policy shall be issued in lieu thereof,
including within its terms the identical insurance bound under the
cover note and the premium therefor.
Cover notes may be extended or renewed beyond such sixty
days with the written approval of the Commissioner if he determines
that such extension is not contrary to and is not for the purpose of
violating any provisions of this Code. The Commissioner may
promulgate rules and regulations governing such extensions for the
purpose of preventing such violations and may by such rules and
regulations dispense with the requirement of written approval by him
in the case of extension in compliance with such rules and
regulations.
The cover note is merely a written memorandum of the most
important terms of the preliminary contract of insurance, intended to
give temporary protection pending the investigation of the risk by the
insurer, or until the issuance of a formal policy, provided that it is
later determined that the applicant was insurable at the time it was
given.
Sec. 53 stated that the insurance proceeds shall be applied
exclusively to the proper interest of the person in whose name or for
whose benefit it is made unless otherwise specified in the policy. A
policy may be framed that it may inure to the benefit of whomsoever,
during the continuance of the risk, may become the owner of the
interested insured. The mere transfer of a thing insured does not
transfer the policy, but suspends it until the same person becomes the
owner of both the policy and the thing insured. The importation of
such provision that a policy is a personal contract with the insured
and does not run with the insured property unless so expressly
stipulated, and in the absence of an assignment of the policy with the
insurer’s consent, the purchaser of the interest of the property
requires no privity with the insurer.
Classes of Insurance
Marine Insurance
Marine Insurance cover the loss or damage of vessels at sea or on
inland waterways, and of cargo in transit, regardless of the method of
transit. When the owner of the cargo and the carrier are separate
corporations, marine cargo insurance typically compensates the
owner of cargo for losses sustained from fire, shipwreck, etc., but
excludes losses that can be recovered from the carrier or the carrier's
insurance. Many marine insurance underwriters will include "time
element" coverage in such policies, which extends the indemnity to
cover loss of profit and other business expenses attributable to the
delay caused by a covered loss.20
20 www.wikipedia.com
Fire Insurance
It is a type of property insurance and as provided for in Sec. 167 of
the Insurance Code includes insurance against loss by fire, lightning,
windstorm, tornado and earthquakes and all allied risk, when such
risks are covered by extension to fire insurance policies or under
separate policies. The loss or damage must be caused directly by fire.
The loss may not be due to fire but the proximate cause thereof must
be by reason of fire.
Casualty Insurance
Sec. 174 of the Insurance Code provides for the coverage of
casualty insurance. It covers the loss or liability arising from accident
or mishap, excluding certain types of loss which by law or custom are
considered as falling exclusively within the scope of other types of
insurance such as fire or marine. It includes but not limited to,
member shall be paid a daily maternity benefit equivalent to one hundred
percent (100%) of her average daily salary credit for sixty (60) days or
seventy-eight (78) days in case of caesarian delivery.
The Act also provides for the non-transferability of benefit. Thus, Sec.
15 of the Social Security Code states that:
SEC. 15. Non-transferability of benefit. - The system shall pay the benefits provided for in this Act to such persons as may be entitled thereto in accordance with the provisions of this Act. Such benefits are not transferable, and no power of attorney or other document executed by those entitled thereto in favor of any agent, attorney, or any other individual for the collection thereof in their behalf shall be recognized except when they are physically and legally unable to collect personally such benefits: Provided, however, That in the case of death benefits, if no beneficiary has been designated or the designation there of is void, said benefits shall be paid to the legal heirs in accordance with the laws of succession. (Rep. Act 2658, amending Rep. Act 1161.)
In short, if there is a named beneficiary and the designation is not
invalid (as it is not so in this case), it is not the heirs of the employee who
are entitled to receive the benefits (unless they are the designated
beneficiaries themselves). It is only when there is no designated
beneficiaries or when the designation is void, that the laws of succession
are applicable. And we have already held that the Social Security Act is
not a law of succession.23
C. REVISED GOVERNMENT SERVICE INSURANCE ACT OF 1977
History and Related Laws of GSIS Act of 197724
23 SSS vs. Davac Et Al, G.R. No. L-21642 July 30, 196624 http:www.gsis.gov.ph
Commonwealth Act 186 of November 14, 1936 created the GSIS as
a social insurance fund for all employees of the Philippine Government
providing life insurance; retirement insurance giving entitlement to a life
annuity of five (5) years and thereafter as long as the employee lives;
disability benefit and survivors benefit.
Republic Act No. 660 of June 16 1951, an amendment of CA 186
provides retirement option also known as “magic 87” which provides that
after 30 years of service and attainment of the age of 57 years old, an
employee is given the option to retire.
Republic Act No.1616 a retirement option of GSIS popularly known
as “The Take All Option” provides for a gratuity benefit for retiring
members who will qualify under this retirement mode giving them
entitlement to a refund of premiums paid, personal share with interest
and government shares without interest.
Republic Act 3593 of June 22 1963 – amended CA 186 to provide
immediate life insurance coverage and compulsory membership as well
as increase additional life insurance coverage to all government
employees.
Republic Act 4968 of June 17 1967 amended again CA 186 to
further define life insurance, retirement insurance, compulsory
membership and rates of premium contributions.
Republic Act 611 of Aug 4 1969 established the Philippine Medical
Care Plan and created the Philippine Medical Care Commission. The Plan
consists of Program I for the members of SSS and GSIS and Program II
for those not covered in Program I. Those beneficiaries under Program I
are entitled to medical care benefits.
Presidential Decree 626 of January 1 1975 amended PD 492 or the
Labor Code of the Philippines to effect adjustments needed to coordinate
grant of social security benefits.
Presidential Decree 1368 of May 1 1978 amended Book IV of the
Labor Code of the Philippines and defined the coverage of the
Employee’s Compensation program. Presidential Decree 1519 of 11 June
1978 revised the Philippine Medical Care Act to provide total medical
services to the people of the Philippines through a comprehensive and
coordinated care plan. The plan covers legal dependents of SSS and
GSIS members.
Presidential Decree 1641 of 1 January 1980 further amended the
Employee’s Compensation Program and State Insurance Fund of the
Labor Code of the Philippines and upgraded the benefits structure for all
covered employees.
Republic Act 7699 of May 1 1994 also known as Portability Law
which allows the addition of all creditable services or periods of
contributions made continuously or in the aggregate of a worker under
either the GSIS or SSS for eligibility and computation of benefits.
Republic Act 8291 of May 30 1997 otherwise known as the
Government Insurance Act of 1997 which amended the 26 year old
revised charter of the GSIS known as Presidential Decree 1146, to
expand and increase the coverage and benefits of the GSIS and introduce
institutional reforms to have more flexibility and thus perform its mission
and providing security protection more effectively.
The Implementing Rules and Regulations of GSIS Act 8291
The creation of the Government Service Insurance System is part
of the States’ social legislation to provide meaningful protection to
workers in government against the perils of disability, hazards of work
related illness through compulsory and optional life insurance,
retirement separation and employees compensation.
Membership in the GSIS is compulsory for all employees receiving
compensation who have not reached the compulsory retirement age
irrespective of employment status except members of the AFP and the
PNP.
Contributions to the System shall be mandatory from both the
employee and the Agency-employer in equal amounts ranging from 9-
12% of the average monthly compensation of the employee. The Agency
contribution is part of their annual appropriations which is to be remitted
to GSIS together with the salary deducted from the employee.
The GSIS provides the following benefits:
1) Monthly pension equivalent to 37.5% of monthly compensation after 15 years of service and
adjusted 2.5% for every year if service in excess of 15 years payable for life after 60 years of age.
2) Separation benefits – cash payment equivalent to average monthly compensation for each year
of service when employee resigns after less than 15 years of service.
3) Permanent Disability Benefits – a member who suffers permanent disability for reasons not due
to his grave misconduct, notorious negligence, habitual intoxication or willful intention to kill
himself or another, shall receive a monthly income benefit for life equal to the basic monthly
pension.
4) Permanent Partial Disability Benefit – if the disability is partial he shall receive a cash payment in
accordance with a schedule of disabilities prescribed by GSIS e.g. loss of any finger, toe, arm, leg,
ears, etc.
5) Temporary Partial Disability Benefit – An employee is entitled to 75% of his current daily
compensation for each day of temporary disability but not exceeding 120 days in one calendar
year.
6) Survivorship Benefits – when a member or pensioner dies, the beneficiaries shall be entitled to
receive 50% of the basic monthly pension.
7) Funeral Benefits – equivalent to P12,000 for an active member, a pensioner or a retiree.
8) Life Insurance Benefits
Funds of the GSIS
All contributions payable to the System together with the earnings
and accruals thereon shall constitute the GSIS Social Insurance Fund. It
shall be used to finance the benefits administered by the GSIS under this
Act. The funds shall not be used for purposes other than what are
provided for under this Act. No portion of the General Fund of the
national government and its political subdivisions, instrumentalities and
other agencies including government owned and controlled corporations
except as maybe allowed by this Act. A maximum expense loading of 12%
of the yearly revenues from all sources may be disbursed for
administrative and operational expenses except as maybe otherwise
approved by the President of the Philippines.
The funds which are not needed to meet the current obligations
maybe invested under such terms and conditions and rules and
regulations as maybe prescribed by the Board. Provided, that
investments shall satisfy the requirements of liquidity, safety and
security in order to ensure the actuarial solvency of the funds of the
GSIS.
Powers and Functions of the GSIS
The GSIS shall exercise the following powers and functions:
1) To formulate, adopt, amend and rescind such rules and regulations as maybe necessary to carry
out the provisions and purposes of this Act as well as the effective exercise of the powers and
functions and the discharge of the duties and responsibilities of the GSIS, its officers and
employees.
2) To invest the funds of the GSIS, directly or indirectly.
3) To acquire, utilize or dispose of in any manner recognized by law, real or personal property in
the Philippines or elsewhere necessary to carry out the purposes of this Act.
4) To invest, own or otherwise participate in equity in any establishment, firm or entity.
5) To be able to float proper instrument to liquefy long term maturity by pooling funds for short
term secondary market.
Social Security Guaranteed by GSIS
On January 25, 2008, GSIS President and General Manager
Winston Garcia announced the availability of $5 Billion for investment in
fixed income, equities and properties here and abroad apparently to
prove to its members the liquidity of the system and its capability to
meet its obligations. Two years later, members to the System, public
school teacher, retirees and pensioners were up in arms against policies
implemented by the Board of Trustees which they branded as anti-
member.
GSIS Policy and Procedural Guidelines No. 171-0325 amended the
definition of Creditable Service under RA 8291 which provides :the
computation of service for determining the amount of benefits payable
shall be from the date of original appointment/election. In its guidelines
GSIS defined Creditable Service as the computed period of service of a
regular member while in government service where the corresponding
25 http://noynoyaquino.org.ph
compulsory premium contributions were actually paid and remitted to
the GSIS for such period. The situation gives rise to the non inclusion of
the years of service when an employee was still contractual with unpaid
premium.
A second modification of the law by GSIS is the restructuring of the
survivorship pension policy by terminating the granting of survivorship
pension to the primary beneficiary after having benefited the same for 5
years, and /or if the beneficiary is not totally dependent for support on
the pensioner, or has a source of income other than the income of the
pensioner, is currently employed, and a pensioner of GSIS or other
institutions.
The Court of Appeals had upheld the constitutionality of the
premium-based policy but the Supreme Court still has to rule on the
annulment of the policies and a writ of prohibition on the enforcement of
these unjust rules prejudicial to the interest of GSIS members is to be
pleaded.
Another provision of the GSIS Act that is sought to be amended is
Section 3526 which provides for a twelve percent (12%) maximum
expense loading of the yearly revenues for administrative and
operational expenses. The amendment is reduction to eight (8%) in order
to safeguard the mandated contribution of government employer to the
system.
The reduction of the operational expenses for the system would
release more of the Depositors Insurance Funds for investments that can
generate more benefits for its depositors and government employee-
members.
26 Ibid.
The GSIS Act empowers the Board of Trustee to decide on how the
funds of the GSIS shall be invested provided that it shall satisfy the
requirements of liquidity safety/security and yield in order to ensure
actuarial solvency of the funds of the GSIS. Yet, in the case GSIS vs
Court of Appeals and Jose Salonga, the GSIS was rebuked by the High
Court for its failure to exercise due diligence in ascertaining the real
owners of the mortgaged properties in consideration of P14.360 M loan
granted. The Court emphasized that the funds of the GSIS come from the
monthly contributions of its members, Thus, its business is to keep in
trust money belonging to its members being allowed to engage in
financing, the GSIS should therefore exercise care and prudence in
investing its funds such as in granting loans.
The System is also empowered to collect monthly contributions
from the members and their employer and that all its assets, revenues,
including accruals there-to and benefits paid shall be exempt from all
taxes, assessments, fees, charges and duties of all kinds. This exemption
is highlighted in the Supreme Court’s decision in GSIS vs COA dtd Nov
10 2004, when GSIS collected COA disallowances against the retirement
benefits of its employees, It repeated earlier decision in Cruz vs.
Tantuico “ that the exemption should be liberally construed in favor of
the pensioner. Pension in this case is a bounty flowing from the
graciousness of the Government intended to reward past services and, at
the same time, to provide the pensioner with the means with which to
support himself and his family. Unless otherwise clearly provided, the
pension should inure wholly to the benefit of the pensioner.
The latest GSIS enactment, RA 8291, 29 provides for a more
detailed and wider range of exemptions under Section 39, Aside from
exempting benefits from judicial processes, it likewise unconditionally
exempts benefits from quasi-judicial and administrative processes,
including COA disallowances, as well as all financial obligations of the
member, the latter includes any pecuniary accountability of the member
which arose out of the exercise or performance of his official functions or
duties or incurred relative to his position or work, The only exception to
such pecuniary accountability is when the same is in favor of the GSIS.
Thus, monetary liability in favor of GSIS refers to indebtedness
of the member to the System other than those which fall under the
categories of pecuniary accountabilities exempted under the law. Such
liability may include unpaid social insurance premiums and balances on
loans obtained by the retiree from the System, which do not arise in the
performance of his duties and are not incurred relative to his work. The
general policy, as reflected in our retirement laws and from outstanding
obligations of the member to the system, This is to ensure maintenance
of the GSIS fund reserves in order to guarantee fulfillment of all its
obligations under RA 8291.
Several other cases involving benefit claims against the System
has also arisen wherein the Supreme Court had repeatedly invoked the
nature of its function in relation to the salutary intentions of the law in
favor of the worker.
In GSIS vs CA and Rosa Balais the private respondent was
granted permanent partial disability after she underwent craniotomy.
Since she could not perform her job as she usually did, she retired and
requested for her classification as permanent total disability. It was
denied by ECC and GSIS.
The High Court rules that “disability should not be understood
more on its medical significance but on the loss of earning capacity.”
Judicial precedents likewise show that disability is intimately
related to one’s earning capacity. It has been a consistent
pronouncement of this Court that “permanent total disability means
disablement of an employee to earn wages in the same kind of work, or
work of a similar nature that she was trained for or accustomed to
perform, or any kind of work which a person of her mentality attainment
could do.” “It does not mean state of absolute helplessness, but inability
to do substantially all material acts necessary to prosecution of an
occupation for remuneration or profit in substantially customary and
usual manner.”
The Court has construed permanent total disability as the “lack
of ability to follow continuously some substantially gainful occupation
without serious discomfort or pain and without material injury or danger
to life.” It is, therefore, clear from established jurisprudence that the loss
of one’s earning capacity determines the disability compensation one is
entitled to.
One final note, the GSIS and ECC should be commended for
their vigilance against unjustified claims that will deplete the funds
intended to be disbursed for the benefit only of deserving disabled
employees. Nevertheless, we should caution them against a too strict
interpretation of the rules lest it result in the withholding of full
assistance from those whose capabilities have been diminished, if not
completely impaired, as a consequence of their dedicated service in the
government. A humanitarian impulse, dictated by no less than the
Constitution itself under the social justice policy, calls for a liberal and
sympathetic approach to the legitimate appeals of disables public
servants like the herein private respondent. Compassion for them is not a
doleout but a right.
In the case GSIS vs CA and Romeo Bella, the High Court
clarified that if the sickness of the employee made him unable to perform
any gainful occupation for a continuous period exceeding 120 days, thus
entitles him to permanent total disability benefits.
Clearly, the position taken by the GSIS and the ECC runs
counter to the avowed policy of the State to construe social legislations
liberally in favor of the beneficiaries. The Court takes this occasion to
stress once more its abiding concern for the welfare of the government
workers, especially the humble rank and file, whose patience, industry
and dedication to duty have often gone unheralded, but who, in spite of
every little recognition, plod on dutifully to perform their appointed
tasks. It is for this reason that the sympathy of the law on social security
is toward its beneficiaries, and the law, by its own terms, requires a
construction of utmost liberality in their favor.
The main issue in other benefit claims is whether ailments suffered
by employees or members which are not listed under present laws are
compensable. In a September 1987 decision by the Supreme Court
(Tanedors vs ECC and GSIS) it reiterated that a compensable sickness is
any illness definitely accepted as an occupational disease listed by the
Commission or any illness caused by employment subject to proof by the
employee that the risk of contracting the same is increased by working
conditions. For this the ECC has determined the approved occupational
diseases and work-related illnesses that maybe considered compensable
based on the peculiar hazards of employment. It is clear that in order
that sickness and the resulting disability or death be compensable, the
claimant must show either:
1) That it is the result of an occupational disease listed by ECC
rules with the conditions therein satisfied
2) If not so listed, that the risk of contracting the disease is
increased by the working conditions.
GSIS denied a claim for income benefits on the ground that end
state renal disease and diabetic nephropathy are not among the
compensable occupational diseases listed by ECC or PD 626. The
claimant was a driver-mechanic and would not be under tremendous
tension and pressure in his work conditions. The Court in this case
(Barrios vs ECC and GSIS) stated “the law does not require that the
connection be established with absolute certainty or that a direct causal
relation be shown. It is enough that the theory upon which the claim is
based is probable. Probability, not certainty is the touchstone”. Under
these circumstances, we must apply the avowed policy of the State to
construe social legislation liberally in favor of the beneficiaries, in line
with Art.166 of PD 626 which reads “The State shall promote and
develop a tax-exempt employee’s compensation program whereby
employees and their dependents, in the event of work connected
disability or death may promptly secure adequate income benefit and
medical or related benefits”.
Chronic Glomerulo Nephritis is not an occupational disease, GSIS
contends in the case of GSIS vs Maria Teresa Cordero but the Supreme
Court once more reversed the GSIS decision as it stated that what the
laws requires is a reasonable work-connection and not a direct causal
relation. It is sufficient that the hypothesis on which the workmen’s claim
is based is probable since probability, not certainty is the touchstone.
Osteosarcoma is not listed as an occupational disease in the
amended rules on Employees Compensation and the claimant failed to
present evidence to establish that the development of his ailment was
traceable to his working condition in the Philippine Navy and the PNP.
Nonetheless, the Supreme Court agreed with the Appellate Court’s
ruling that petitioners failure to present positive evidence of a causal
relation of the illness and his working conditions is due to the pure and
simple lack of available proof to be offered in evidence. Verily, to deny
compensation to osteosarcoma victims who will definitely be unable to
produce a single piece of proof to that effect, is unrealistic, illogical and
unfair. At the very least, on a very exceptional circumstance, the rule on
compensability should be relaxed and be allowed to apply to such
situations. To disallow the benefit will even more add up to the suffering,
this time, for the ignorance of the inability of mankind to discover the
real truth about cancer. Respondent is entitled to compensation
consistent with the social legislations intended beneficial purpose.
The GSIS must not therefore loss sight of its primary purpose to
give full force and effect to the policy of the State of giving maximum aid
and protection to workers in government.
D. PRE-NEED ACT (Republic Act No. 9829)
The Legislatures passed into law the Republic Act No. 9829
otherwise known as the Pre-Need Code of the Philippines. It took effect
last December 3, 2009, and issued its Implementing Rules and
Regulations 8 March 8, 2010.
The legislatures laid down the policies of the state in enacting the
Pre-Need Code. Thus, as provided for in Sec. 2 of the Code, the
government seeks to (1) standardize the institution of pre-need
companies and secure their operations on sound and stable basis for
optimum advantage, and to (2) prevent such practices as are prejudicial
to plan holders and public interest.
To attain such policies, the law transferred the regulation and
supervision of all pre-need companies to the Insurance Commission (IC)
from the Philippine Securities and Exchange Commission (SEC). Such
transfer is due to the recognition of the pre-need contracts as an
insurance product rather than securities. The IC is given the authority to
prescribe, pass upon and review the qualifications and disqualifications
of directors and officers of pre-need companies.
The law vested the Insurance Commission, among others, the
following powers and functions:
1) Approve, amend, renew or deny any license, registration or
certificate issued under this Code;
2) Fix and assess fees and/or charges as it may find reasonable in
the exercise of regulation;
3) Regulate, supervise and monitor the operations and
management of pre-need companies
4) Issue cease and desist orders, subpoena duces tecum and ad
testificandum, order the examination, search and seizure of
documents, papers, files, tax returns, books of accounts and
other records, in whatever form, of any entity or person under
investigation;
5) Take over pre-need companies which fail to comply with this
Code, related laws, rules, regulations and orders issued
pursuant thereto, either through the appointment of a
conservator, receiver or liquidator;
6) Formulate policies and recommendations on issues concerning
the pre-need industry, including proposed legislations;
Under the Pre-Need Code, a pre-need plan refers to any contract,
agreement, deed or plan for the benefit of a planholder, which provides
for the performance of future services payment of monetary
considerations, or delivery of other benefits at the time of actual need or
agreed maturity date, in exchange for cash or installment amounts. It
includes life, pension, education, interment and any other plan,
instrument, contract or deed, as determined by the IC. A pre-need
company is any corporation registered with the SEC and licensed by the
IC to sell or offer to sell pre-need plans. It also covers schools, memorial
chapels, banks, non-bank financial institutions and other entities licensed
by the IC to sell or offer to sell pre-need plans.
Licensing and Incorporation of Pre-need Companies
The Securities and Exchange Commission shall not approve any
pre-need company for the application of its incorporation unless a
favourable recommendation was given by the Insurance Commission.
The law sets forth the requisites for the incorporation of pre-need
companies. Such regulations are imported to provide better security to
the plan holders and standardize the growth of pre-need companies.
The minimum paid-up capital of P100 million Pesos is required of
any pre-need company wishing to incorporate. The existing pre-need
companies should comply with the following minimum unimpaired paid-
up capital: (a) 100 Million Pesos for companies selling at least three
types of plan; (b) 75 Million Pesos for companies selling two types of
plan; and (c) 50 Million Pesos for companies selling a single type of plan.
A plan may be educational, pension, life or memorial. Mindful of their
key role in the pre-need industry, the law requires existing pre-need
companies with traditional education plans to have a minimum