Philamcare vs. CA
PHILAMCARE HEALTH SYSTEMS, INC., petitioner,
COURT OF APPEALS and JULITA TRINOS, respondents.
G.R. No. 125678
March 18, 2002
- the insurable interest of respondents husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.
- The question relating to an applicant’s medical history largely depends on opinion, rather than fact, especially coming from Ernani, who was not a medical doctor. Where matters of opinion are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.
Ernani Trinos, deceased, husband of respondent Julita Trinos applied for a health care coverage with petitioner Philamcare Health Systems Inc. In the application form, he answered “NO” to the question – “Have you or any family member ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?”
The application for was approved for a period of one year, from March 1, 1988 to March 1, 1989, and he was issued Health Care Agreement, wherein the husband Ernani was entitled to avail of hospitalization benefits; out patient benefits such as annual physical examinations and preventive health cared.
The agreement was extended with the coverage amount increasing to P75,000 per disability. During the period, Ernani suffered a heart attack and was confined in Manila Medical Center (MMC) for one month. While he was at the hospital, Julita tried to claim the benefits under the health care agreement, but Philamcare denied liability saying that such was void. Apparently, Ernani concealed his medical history since the Manila Medical doctors discovered that he was hypertensive, diabetic and asthmatic, which was contrary to his answer in the application form. Julita paid the expenses amounting to P76,000.
RTC: ruled in favor of Julita; ordered Philamcare to pay and reimburse the medical expenses + Moral Damages + exemplary damages.
CA: affirmed RTC decision in favor of Julita but removed the damages.
(1) Whether or not a health care agreement is an insurance contract.
(2) Whether or not the alleged concealment avoided the agreement.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. An insurance contract exists where the following elements concur:
- The insured has an insurable interest;
- The insured is subject to a risk of loss by the happening of the designated peril;
- The insurer assumes the risk;
- Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and
- In consideration of the insurers promise, the insured pays a premium
Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest against him, may be insured against. Every person has an insurable interest in the life and health of himself. Section 10 provides:
Every person has an insurable interest in the life and health:
- of himself, of his spouse and of his children;
- of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
- of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and
- of any person upon whose life any estate or interest vested in him depends.
In the case at bar, the insurable interest of respondents husband in obtaining the health care agreement was his own health. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. Once the member incurs hospital, medical or any other expense arising from sickness, injury or other stipulated contingent, the health care provider must pay for the same to the extent agreed upon under the contract.
The question relating to an applicant’s medical history largely depends on opinion, rather than fact, especially coming from Ernani, who was not a medical doctor. Where matters of opinion are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.
Thus, although false, a representation of the expectation, intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. There is a clear distinction between such a case and one in which the insured is fraudulently and intentionally states to be true, as a matter of expectation or belief, that which he then knows, to be actually untrue, or the impossibility of which is shown by the facts within his knowledge, since in such case the intent to deceive the insurer is obvious and amounts to actual fraud.
The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case, with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a responsibility under the agreement, petitioner is bound to answer the same to the extent agreed upon. In the end, the liability of the health care provider attaches once the member is hospitalized for the disease or injury covered by the agreement or whenever he avails of the covered benefits which he has prepaid.
Under Section 27 of the Insurance Code, a concealment entitles the injured party to rescind a contract of insurance. The right to rescind should be exercised previous to the commencement of an action on the contract. In this case, no rescission was made. Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the following conditions:
- Prior notice of cancellation to insured;
- Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;
- Must be in writing, mailed or delivered to the insured at the address shown in the policy;
- Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based
None of the above pre-conditions was fulfilled in this case. 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. This is equally applicable to Health Care Agreements. The phraseology used in medical or hospital service contracts, such as the one at bar, must be liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import should be strictly construed against the provider
As to incontestability:
Under the title Claim procedures of expenses, the Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.
As to Julita being the proper claimant:
Finally, petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time of their marriage, the deceased was previously married to another woman who was still alive. The health care agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who incurred the expenses. She paid all the hospital and medical expenses. She is therefore entitled to reimbursement.