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Philamcare Health Systems Inc vs CA

GR No 125678
18 March 2002
FACTS
Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the question Have you
or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes,
cancer, liver disease, asthma or peptic ulcer?, Ernani answered No. Under the agreement, Ernani is entitled to
avail of hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year
from March 1, 1988 to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which
increased the amount of coverage to a maximum sum of P75,000 per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center
(MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care
agreement. However, the Philamcare denied her claim alleging that the agreement was void because Ernani
concealed his medical history. Doctors at the MMC allegedly discovered at the time of Ernanis confinement that
he was hypertensive, diabetic and asthmatic, contrary to his answer in the application form. Thus, Julita paid for
all the hospitalization expenses.

After Ernani was discharged from the MMC, he was attended by a physical therapist at home. Later, he was
admitted at the Chinese General Hospital. Due to financial difficulties, however, respondent brought her husband
home again. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent was
constrained to bring him back to the Chinese General Hospital where he died on the same day.
Julita filed an action for damages and reimbursement of her expenses plus moral damages attorneys fees
against Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered
judgment in favor of Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for
damages and absolved petitioner Reverente. Hence, this petition for review raising the primary argument that a
health care agreement is not an insurance contract; hence the incontestability clause under the Insurance Code
does not apply.

ISSUES
1.

Whether the health care agreement is not an insurance contract

2.

Whether there is concealment of material fact made by Ernani

HELD
1.

YES. Section2 (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.

Section 3 of the Insurance Code states that any contingent or unknown event, whether past or future, which my
damnify a person having an insurable against him, may be insured against. Every person has an insurable

interest in the life and health of himself. Section 10 provides that every person has an insurable interest in the life
and health (1) of himself, of his spouse and of his children.

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.

2.

NO. 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 respondents
husband who was not a medical doctor. Where matters of opinion or judgment are called for answers
made I 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 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 wherever he avails of the covered benefits which he has prepaid.
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.