Professional Documents
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Great Pacific Life Assurance Corp
Great Pacific Life Assurance Corp
A contract of group life insurance was executed between petitioner Great Pacific Life
Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter
DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP.
On November 11, 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP
applied for membership in the group life insurance plan. In an application form, Dr. Leuterio
answered questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?
Answer: No. If so give details ___________.
8. Are you now, to the best of your knowledge, in good health?
Answer: [ x ] Yes [
] No.[4]
On November 15, 1983, Grepalife issued Certificate No. B-18558, as insurance coverage of
Dr. Leuterio, to the extent of his DBP mortgage indebtedness amounting to eighty-six thousand, two
hundred (P86,200.00) pesos.
On August 6, 1984, Dr. Leuterio died due to massive cerebral hemorrhage. Consequently,
DBP submitted a death claim to Grepalife. Grepalife denied the claim alleging that Dr. Leuterio was
not physically healthy when he applied for an insurance coverage on November 15, 1983. Grepalife
insisted 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.
The insured, Dr. Leuterio, had answered in his insurance application that he was in good health
and that he had not consulted a doctor or any of the enumerated ailments, including hypertension;
when he died the attending physician had certified in the death certificate that the former died of
cerebral hemorrhage, probably secondary to hypertension. From this report, the appellant
insurance company refused to pay the insurance claim. Appellant alleged that the insured had
concealed the fact that he had hypertension.
Contrary to appellants allegations, there was no sufficient proof that the insured had suffered from
hypertension. Aside from the statement of the insureds widow who was not even sure if the
medicines taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced
any witness who could attest to Dr. Leuterios medical history...
xxx
Appellant insurance company had failed to establish that there was concealment made by the
insured, hence, it cannot refuse payment of the claim.[17]
The fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract.[18] Misrepresentation as a defense of the insurer to avoid liability is an
affirmative defense and the duty to establish such defense by satisfactory and convincing evidence
rests upon the insurer.[19] In the case at bar, the petitioner failed to clearly and satisfactorily establish
its defense, and is therefore liable to pay the proceeds of the insurance.
Under the title Claim procedures of expenses, Philamcare. had 12 mos 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.
Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads:
> The application was approved for a period of one year from March 1, 1988 to March 1, 1989. He
was issued Health Care Agreement, and under such, he was entitled to avail of hospitalization
benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient
benefits" such as annual physical examinations, preventive health care and other out-patient
services.
> Upon the termination of the agreement, the same was extended for another year from March 1,
1989 to March 1, 1990, then from March 1, 1990 to June 1, 1990. The amount of coverage was
increased to a maximum sum of P75,000.00 per disability.
> During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila
Medical Center (MMC) for one month beginning March 9, 1990.
> While her husband was in the hospital, Julita tried to claim the benefits under the health care
agreement. However, Philamcare denied her claim saying that the Health Care Agreement was void.
> According to Philamcare, there was concealment regarding Ernani's medical history.
Doctors at the MMC allegedly discovered at the time of Ernani's confinement that he was
hypertensive, diabetic and asthmatic, contrary to his answer in the application form.
> Julita had no choice but to pay the hospitalization expenses herself, amounting to about
P76,000.00
> After her husband was discharged from the MMC, he was attended by a physical therapist at
home. Later, he was admitted at the Chinese General Hospital (CGH). Due to financial difficulties,
Julita brought her husband home again. In the morning of April 13, 1990, Ernani had fever and was
feeling very weak. Julita was constrained to bring him back to the CGH where he died on the same
day.
Failure to disclose or misrepresentation of any material information by the member in the application
or medical examination, whether intentional or unintentional, shall automatically invalidate the
Agreement from the very beginning and liability of Philamcare shall be limited to return of all
Membership Fees paid. An undisclosed or misrepresented information is deemed material if its
revelation would have resulted in the declination of the applicant by Philamcare or the assessment
of a higher Membership Fee for the benefit or benefits applied for.
The answer assailed by petitioner was in response to the question relating to the medical history of
the applicant. This largely depends on opinion rather than fact, especially coming from respondent's
husband who was not a medical doctor. Where matters of opinion or judgment are called for,
answers made in good faith and without intent to deceive will not avoid a policy even though they
are untrue.
The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract. Concealment as a defense for the health care provider or insurer to avoid liability
is an affirmative defense and the duty to establish such defense by satisfactory and convincing
evidence rests upon the provider or insurer. In any case, with or without the authority to investigate,
petitioner is liable for claims made under the contract. Having assumed a responsibility under the
agreement, petitioner is bound to answer 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.
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.
beneficiary of the insured, filed a claim with Great Pacific which the insurer denied upon the ground
that the insured had concealed material information from it. Hence, Thelma filed a complaint against
Great Pacific with the Insurance Commission for recovery of the insurance proceeds.
ISSUE: Whether or not the non-disclosure of certain facts about the insureds previous health
conditions is material to warrant the denial of the claims of Thelma Canilang
HELD: YES. The SC agreed with the Court of Appeals that the information which Jaime Canilang
failed to disclose was material to the ability of Great Pacific to estimate the probable risk he
presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the
diagnosis made and medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Great Pacific would have made further inquiries and would have probably
refused to issue a non-medical insurance policy or, at the very least, required a higher premium for
the same coverage. The materiality of the information withheld by Great Pacific did not depend upon
the state of mind of Jaime Canilang. A mans state of mind or subjective belief is not capable of proof
in our judicial process, except through proof of external acts or failure to act from which inferences
as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the
actual or physical events which ensure. Materiality relates rather to the probable and reasonable
influence of the facts upon the party to whom the communication should have been made, in
assessing the risk involved in making or omitting to make further inquiries and in accepting the
application for insurance; that probable and reasonable influence of the facts concealed must, of
course, be determined objectively, by the judge ultimately.
Tan v CA G.R. No. 48049 June 29, 1989
Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P 80,000.00 with
Philamlife. It was approved. Tan Lee Siong died of hepatoma. Petitioners then filed a claim for the
proceeds. The company denied petitioners' claim and rescinded the policy by reason of the alleged
misrepresentation and concealment of material facts. The premiums paid on the policy were
refunded. The petitioners filed a complaint in the Insurance Commission. The latter dismissed the
complaint.
The Court of Appeals dismissed the petitioners' appeal from the Insurance Commissioner's decision
for lack of merit.
Issue:
WON Philam didnt have the right to rescind the contract of insurance as rescission must allegedly
be done during the lifetime of the insured within two years and prior to the commencement of action.
Held: No. Petition dismissed.
Ratio:
The Insurance Code states in Section 48:
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.
After a policy of life insurance made payable on the death of the insured shall have been in force
during the lifetime of the insured for a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of
the fraudulent concealment or misrepresentation of the insured or his agent.
The so-called "incontestability clause" in the second paragraph prevents the insurer from raising the
defenses of false representations insofar as health and previous diseases are concerned if
the insurance has been in force for at least two years during the insured's lifetime.
The policy was in force for a period of only one year and five months. Considering that the insured
died before the two-year period had lapsed, respondent company is not, therefore, barred from
proving that the policy is void ab initio by reason of the insured's fraudulent concealment or
misrepresentation.
The "incontestability clause" added by the second paragraph of Section 48 is in force for two years.
After this, the defenses of concealment or misrepresentation no longer lie.
The petitioners argue that no evidence was presented to show that the medical terms were
explained in a layman's language to the insured. They also argue that no evidence was presented
by respondent company to show that the questions appearing in Part II of the application for
insurance were asked, explained to and understood by the deceased so as to prove concealment on
his part. This couldnt be accepted because the insured signed the form. He affirmed the
correctness of all the entries.
The company records show that the deceased was examined by Dr. Victoriano Lim and was found
to be diabetic and hypertensive. He was also found to have suffered from hepatoma. Because of the
concealment made by the deceased, the company was thus misled into accepting the risk and
approving his application as medically fit.