PHILAMCARE HEALTH SYSTEMS, INC. v.

COURT OF APPEALS

G.R. No. 125678

March 18, 2002

Ponente: Ynares-Santiago, J.

Facts:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage
with petitioner Philamcare Health Systems, Inc. In the standard application form, he answered no to the
following question: He answered in the negative when asked, “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? (If Yes, give details) “.

The application was approved for a period of one year. Accordingly, he was issued Health Care
Agreement No. P010194. Under the agreement, respondents’ husband 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 outpatient
services. Upon the termination of the agreement, the same was extended for another year. 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. Respondent tried to claim the benefits under the health care
agreement. However, petitioner denied her claim saying that the Health Care Agreement was void.
According to petitioner, there was a concealment regarding Ernanis 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, respondent paid 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. Due to financial difficulties, however,
respondent brought her husband home again. Respondent was constrained to bring him back to the
Chinese General Hospital where he died on the same day.

Respondent filed a case with the RTC for reimbursement of her expenses plus moral damages
and attorney’s fees. 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:
 Whether a health care agreement is not an insurance contract; hence the incontestability
clause under the Insurance Code does not apply.

Ruling:

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
otherexpense 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.

Petitioner cannot rely on the stipulation regarding Invalidation of agreement where failure of
the insured to disclose information was a ground for revocation simply because the answer to the
question asked was based on the opinion of the insured. He is not a medical doctor, so he cannot
accurately gauge his condition.

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: 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 of the above pre-conditions was fulfilled in this case.

Anent the incontestability of the membership of respondent’s husband, we quote with approval
the following findings of the trial court:

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.

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. It is not controverted that respondent
paid all the hospital and medical expenses. She is therefore entitled to reimbursement. The records
adequately prove the expenses incurred by respondent for the deceased’s hospitalization, medication
and the professional fees of the attending physicians.

FORTUNE MEDICARE, INC. v. AMORIN

G.R. No. 195872

March 12, 2014

Ponente: Reyes, J.

Facts:

While Amorin was on vacation in Hawaii, he underwent an emergency surgery, specifically

appendectomy, causing him to incur professional and hospitalization expenses of US$7,242.35 and
US$1,777.79, respectively. Being a cardholder of Fortune Medicare, Inc. (Fortune Care), a corporation
engaged in providing health maintenance services to its members, he attempted to recover the full
amount upon his return to Manila. However, the company merely approved a reimbursement of
P12,151.36, an amount that was based on the average cost of appendectomy, net of Medicare
deduction, if the procedure were performed in an accredited hospital in Metro Manila. Amorin received
under protest the approved amount, but asked for its adjustment to cover the total amount of
professional fees which he had paid, and eighty percent (80%) of the approved standard charges based
on “American standard”, considering that the emergency procedure occurred in the U.S.A., citing
provisions of the contract.

Issue:

Can a member of a health care provider recover to the extent agreed in the contract?

Ruling:

Yes. In the case at bar, the Supreme Court said that for purposes of determining the liability of a
health care provider to its members, jurisprudence holds that a health care agreement is 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. With regard the
ambiguities in the contract, settled is the rule that they should be interpreted against the party that
caused the ambiguity. “Any ambiguity in a contract whose terms are susceptible of different
interpretations must be read against the party who drafted it.” Furthermore, it affirmed the CA’s finding
that Fortune Care’s liability to Amorin under the subject Health Care Contract should be based on the
expenses for hospital and professional fees which he actually incurred, and should not be limited by the
amount that he would have incurred had his emergency treatment been performed in an accredited
hospital in the Philippines.

COMPARE THE SUPREME COURT’S RULING IN BOTH CASES

In Philamcare Health Systems v. Court of Appeals, the Supreme Court ruled that the contract
involved was an insurance contract rather than a pre-need plan. In the said case, the insurable interest
of respondent’s husband in obtaining the health care agreement was his own health. 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 the contract.

In Fortune Medicare, Inc. v. Amorin, the Supreme Court emphasized “that for purposes of
determining the liability of a health care provider to its members, jurisprudence holds that a health care
agreement is in the nature of non-life insurance, which is primarily a contract of indemnity”. The
arrangement is “the same when 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 the contract.”

To further reiterate, the issue in the first case is whether or not the Health Care Agreement
between the deceased, Ernani Trinos, the deceased husband of the private respondent Julita Trinos and
the petitioner falls under the scope of an insurance contract. Moreover, the issue is also about the
alleged concealment of the deceased, Ernani Trinos will invalidate the Agreement.

The court held that the Health Care Agreement between Trinos and the petitioner falls under
the scope of an insurance contract. In the case at bar, the insurable interest of the respondent’s
husband in obtaining the health care agreement was his health. Section 10 of the Insurance Code
clarifies that every person has an insurable interest in life and health. The health care agreement was
like 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 contingents, the health
care provider must pay for the same to the extent agreed upon under the contract.

Furthermore, this will not invalidate the Agreement in connection to the alleged concealment of
the Ernani Trinos. The account assailed by the petitioner was in response to the question relating to the
applicant's medical history. This case largely depends on opinion rather than fact, especially from the
respondents’ husband, who is 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.

In addition, although it is claimed 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.
However, the statement is material to the risk if the statement is preceding. In such a case, the insurer is
not justified in relying upon such a statement but is obligated to inquire further.

Thus, 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 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 prominent and amounts to actual fraud. Under Section 27
of the Insurance Code, concealment entitles the injured party to rescind an insurance contract. The right
to rescind should be exercised previous to the commencement of an action on the contract.

On the other hand, in the second case on whether or not Fortune Care is liable to pay the total
amount of professional fees which Amorin had paid and eighty percent (80%) of the approved standard
charges based on “American standard,” the court decided in affirmative.

The Supreme Court emphasized that for determining the liability of a health care provider to its
members, jurisprudence holds that a health care agreement is like 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 contingents, the health care provider must pay for the same to the
extent agreed upon under the contract.

To aid in the interpretation of health care agreements, the court laid down the following
guidelines in Philamcare Health Systems v. CA:

When the terms of an 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.

In this case, the court agrees with the CA that as may be gleaned from the Health Care Contract,
the parties to that contemplated the possibility of emergency care in a foreign country. As the contract
recognized Fortune Care’s liability for emergency treatments even in foreign territories, it expressly
limited its liability only insofar as the percentage of hospitalization and professional fees that must be
paid or reimbursed was concerned, pegged at a mere 80% of the approved standard charges.

The word “standard,” as used in the cited stipulation, was vague and ambiguous, as it could be
susceptible to different meanings. Settled is the rule that ambiguities in a contract are interpreted
against the party that caused the ambiguity.
 Moreover, the court finds no cogent reason to disturb the CA's finding that Fortune Care's
liability to Amorin under the subject Health Care Contract should be based on the expenses for hospital
and professional fees which he incurred and should not be limited by the amount that he would have
incurred had his emergency treatment been performed in an accredited hospital in the Philippines.

Hence, both cases were judged according to whether or not the plaintiff will receive insurance
from the defendant. The court favored the plaintiffs, namely, the late Ernani Trinos and his wife Julita
Trinos and David Robert U. Amorin. Both of the parties fall under the insurance policy of Philamcare
Health Systems, Inc and Fortune Medicare, Inc. Each of them will receive their reimbursements not
limited to the number of their expenses.