Philamcare v CA G.R. No. 125678.

March 18, 2002

J. Ynares-Santiago

Facts:

Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he
or his family members were treated to heart trouble, asthma, diabetes, etc.

The application was approved for 1 year. He was also given hospitalization benefits and out-patient
benefits. After the period expired, he was given an expanded coverage for Php 75,000. During the
period, he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but
the petitioner denied it saying that he concealed his medical history by answering no to the
aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband
subsequently passed away. She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted
awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability clause
under the Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio:

Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It
contended that there was no indemnification unlike in insurance contracts. It supported this claim by
saying that it is a health maintenance organization covered by the DOH and not the Insurance
Commission. Lastly, it claimed that the Incontestability clause didnt apply because two-year and not
one-year effectivity periods were required.

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.

Section 3 states: every person has an insurable interest in the life and health:

(1) of himself, of his spouse and of his children.

In this case, the husbands health was the insurable interest. The health care agreement was in the
nature of non-life insurance, which is primarily a contract of indemnity. The provider must pay for the
medical expenses resulting from sickness or injury.

While petitioner contended that the husband concealed materialfact of his sickness, the contract stated
that:

that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime
relative to any information acquired by him in his professional capacity upon any question affecting the
eligibility for health care coverage of the Proposed Members.

This meant that the petitioners required him to sign authorization to furnish reports about his medical
condition. The contract also authorized Philam to inquire directly to his medical history.

Hence, the contention of concealment isnt valid.

They cant also invoke the Invalidation of agreement clause where failure of the insured to disclose
information was a grounds for revocation simply because the answer assailed by the company was the
heart condition question based on the insureds opinion. He wasnt a medical doctor, so he cant
accurately gauge his condition.

Henrick v Fire- in such case the insurer is not justified in relying upon such statement, but is obligated
to make further inquiry.

Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.

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.

Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract of
insurance.

As to cancellation procedure- Cancellation requires certain conditions:

1. Prior notice of cancellation to insured;

2. Notice must be based on the occurrence after effective date of the policy of one or more of the
grounds mentioned;

3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;

4. 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 were fulfilled by the provider.

As to incontestability- The trial court said that under the title Claim procedures of expenses, the
defendant 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.