INSURANCE LAW

The Insular Life Insurance Co. vs. Heirs of Alvarez

FACTS:

 The late Jose H. Alvarez, applied for and was granted a housing loan by Union Bank.
 The loan was secured by a promissory note, a real estate mortgage over a lot, and a
mortgage redemption insurance taken on the life of Alvarez with Union Bank as a
beneficiary.
 The bank said that Alvarez was qualified to be a debtor covered by the Group Mortgage
Redemption Insurance that Union Bank had with Insular Life.
 Alvarez died and subsequently the Union Bank filed with Insular Life a death claim under
Alvarez’s name pursuant to the Group Mortgage Redemption Insurance.
 Insular Life denied the claim after determining that Alvarez was not eligible for coverage
as he was supposedly more than 60 years old at the time of his loan’s approval.
 With the claim’s denial, the monthly amortizations of the loan stood unpaid.
 Subsequently, the lot was foreclosed and sold at a public auction with Union Bank as the
highest bidder.
 The Heirs of Alvarez filed a complaint for specific performance to demand against
Insular Life to fulfill its obligation as an insurer under the Group Mortgage Redemption
Insurance, and for nullification of foreclosure against Union Bank.
 Insular Life only relied on Alvarez’s Health Statement Form where he wrote “1942” as his
birth year.
 The RTC and CA ruled in favor of the Heirs of Alvarez.
 They noted that the errors assigned by Insular Life and Union Bank boiled down to the
issue of whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant
the rescission of the Group Mortgage Redemption Insurance obtained by Union Bank on
Alvarez’s life.
ISSUES:
1. Whether Insular Life is liable to Union Bank for the payment of the balance of Alvarez’s
loan given the misrepresentation. YES
2. Whether Insular was correct in putting forward the defense of concealment under Sec.
27 of the Insurance Code. NO. This is not a case of concealment but one of false
representation.
3. Whether Union Bank was correct in foreclosing the property following the insurance
company’s refusal to pay. NO
RULING:
Insular Life is liable to Union Bank for failure to prove the intent to defraud on the part of
Alvarez.
Insular Life puts forward the defense of concealment in order for the insurance company
to rescind the contract. However, the Supreme Court said that the case is not one of
concealment but rather a case of misrepresentation.
Concealment is the failure to communicate a material fact where the insured is ought or
obliged to communicate. A representation on the other hand is the communicating of a

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material fact where the purpose is to induce the insurer to accept the applicant as a good
risk.
Sec. 27 of the Code provides for the insurance company to rescind the contract of
insurance if the insured has concealed a material fact whether it be intentional or unintentional.
Although the Insular Life was correct in reading Sec. 27 of the Code, it has erroneously pleads
Sec. 27 as the proper defense in this case.

 Concealment, regardless of actual intent to defraud, is equivalent to false representation.

 As a ground, the neglect to communicate that which a party knows and ought to
communicate is a punishable offense.
 Concealment, whether intentional or unintentional, entitled the injured party to rescind
the contract of insurance.
What is involved in this case is an alleged false representation. Sec. 44 of the Code
provides than a representation is false when the facts fail to correspond with its stipulations in
the contract.

 Sec. 45 of the Code provides that fraud must be proven by clear and convincing
evidence.
 Consciousness in defraudation is imperative and it is for the insurer to show this fact.
 It is important in representation whether the fraud committed was with intent or
otherwise, which must be proven by clear and convincing evidence.
 Material misrepresentation entitles the insurer to rescind the contract.
 Mere misrepresentation will not suffice.
Insular Life basically relied on the Health Statement form personally accomplished by Jose
Alvarez wherein he wrote that his birth year was 1942. The Court said that Alvarez must have
accomplished and submitted many other documents when he applied for the housing loan like
the promissory note, real estate mortgage, and Group Mortgage Redemption Insurance. A
design to defraud would have demanded his consistency. He needed to maintain appearances
across all documents.
However, the best that Insular Life could come up with before the Regional Trial Court and
the Court of Appeals was a single document. The Court of Appeals pointed out that the most
basic document that Alvarez accomplished in relation to Insular Life must have been an
insurance application form. Strangely, Insular Life failed to adduce even this document — a
piece of evidence that was not only commonsensical, but also one which has always been in its
possession and disposal.

 Single piece of evidence hardly qualifies as a clear and convincing evidence. Its
contents could just as easily have been an isolated case.
Therefore, there was failure on the part of the insurance company to prove the intent to
defraud on the part of Alvarez through clear and convincing evidence when the company only
used one document and the note made by the staff of the bank.
Anent the issue of foreclosure. The foreclosure made by the bank was null and void. It
would be unfair for Union Bank to profit when in the first place, it is its fault for failure to apprise
Alvarez that he is disqualified for the insurance.

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 Union Bank contributed to setting in motion a course of events that culminated in the
unjust foreclosure of Alvarez’s mortgaged lot.
 As such a contributor, its profiting from the wrongful foreclosure cannot be condoned.
 Union Bank has all the necessary documents that would say that Alvarez was not
entitled to the Group Mortgage Redemption Insurance. However, it did not say anything
about the disqualification.
 Alvarez entered into the Group Mortgage Redemption Insurance entirely upon Union
Bank’s prodding. Bank clients are generally unaware of insurance policies such as a
mortgage redemption insurance unless brought to their knowledge by a bank.
 Union Bank approved Alvarez’s loan and real estate mortgage, and endorsed the
mortgage redemption insurance to Insular Life. Fully aware of considerations that could
have disqualified Alvarez, it nevertheless acted as though nothing was irregular. It itself
acted as if, and therefore represented that, Alvarez was qualified. Yet, when confronted
with Insular Life’s challenge, it readily abandoned the stance that it had earlier
maintained and capitulated to Insular Life’s assertion of fraud.
 Union Bank failed to observe the diligence required from it and hence, the foreclosure
must be nullified

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 INSURANCE LAW

Manila Bankers Life Insurance Corporation vs. Cresencia Aban

FACTS:

 Delia Sotero took a life insurance policy from Manila Bankers Life Insurance
Corporation.
 She designated her niece, Cresencia Aban, as her beneficiary.
 The policy was issued on August 30, 1993 after the requisite medical examination and
payment of the insurance premium.
 Thereafter, Sotero died on April 10, 1996 and Aban filed a claim for the insurance
proceeds on April 16, 1997. According to the court, the policy lasted for 3 years, 7
months, and 24 days.
 However, upon investigation of the insurance company, Sotero was illiterate thus it is
impossible for her to apply for the insurance, that she was sick since 1990, that Sotero
does not have financial capacity to pay the premiums, and that she did not sign the
policy and it was Aban who filed the insurance application.
 Therefore, the insurance company denied the claim and refunded the premiums paid.
The company instituted a civil case for rescission and/or annulment of the policy on the
ground of fraud or misrepresentation rendering it voidable.
 However, Aban filed for a motion to dismiss claiming that such action was barred by
prescription. Aban alleges the application of Section 48 of the Code or the
Incontestability clause.
 The RTC and CA ruled in favor of Aban and they disagree with the investigation and
allegations of the insurance company. The lower courts said that it was Sotero herself
who filed for the insurance application.
ISSUE:
Whether the policy could be rescinded by reason of the fraud made by the insured.
RULING:
NO. The SC did not depart from the findings of facts done by RTC and CA. This then
weakens the claim of the insurance company, if not, totally disproved.
In this case, there was failure on the part of the company to prove the fraudulent intent
on the part of the insured which must be established to entitle the insurer to rescind the
contract. Absence of such proof of fraudulent intent, no right to rescind shall arise.
Incontestability Clause is a provision in law that 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 2 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 fraudulent concealment or
misrepresentation of the insured or his agent.
Sec. 48 of the Insurance Code regulates both the actions of the insurers and prospective
takers of life insurance. It gives insurers enough time to inquire whether the policy was obtained
by fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming
individuals that their attempts at insurance fraud would be timely uncovered – thus deterring
them from venturing into such nefarious enterprise. At the same time, legitimate policy holders

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are absolutely protected from unwarranted denial of their claims or delay in the collection of
insurance proceeds occasioned by allegations of fraud, concealment, or misrepresentation by
insurers, claims which may no longer be set up after the two-year period expires as ordained
under the law.

 Policy was issued on August 30, 1993

 Insured died on April 10, 1996,
 Claim was denied on April 16, 1997
 The insurance policy was thus in force for a period of 3 years, 7 months, and 24 days.
Considering that the insured died after the two-year period, the Manila Bankers is,
therefore, barred from proving that the policy is void ab initio by reason of the insured’s
fraudulent concealment or misrepresentation or want of insurable interest on the part of the
beneficiary, Aban.

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 INSURANCE LAW

Great Pacific Life Assurance vs. Court of Appeals

FACTS:

 Dr. Wilfredo Leuterio is a housing debtor of DBP.

 He applied for membership in the group insurance plan of DBP in partnership with Great
Pacific Life Assurance Corp.
 The purpose of the insurance is to provide protection for both the mortgagors and
mortgagee that in the event of unexpected demise of the mortgagor during the
subsistence of the mortgage contract, the proceeds from such insurance will be applied
to the payment of the mortgage debts, thereby relieving the heirs of the mortgagor from
paying the obligation.
 In the application form for the insurance, Dr. Wilfredo said no when he was asked if he
had been consulted for any health conditions and he said that he is in his good health to
the best of his knowledge.
 GrePa Life issued him a policy to the extent of his mortgage indebtedness.
 A year later, Dr. Wilfredo dies due to massive cerebral hemorrhage.
 DBP submitted a claim to the insurance company but the claim was denied.
 GrePa Life alleges that Dr. Leuterio did not disclose that he had been suffering from
hypertension, which caused his death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim.
 Medarda, the widow of the deceased doctor, filed a complaint with the RTC against
GrePa Life for Specific Performance with Damages.
 In the trial, Dr. Mejia, who issued the death certificate, was called to testify.
 Dr. Mejia’s findings, based partly from the information given by the widow, stated that Dr.
Leuterio complained of headaches presumably due to high blood pressure.
 However, the inference was not conclusive because Dr. Leuterio was not autopsied,
hence, other causes were not ruled out.
 On 22 February 1988, the trial court rendered a decision in favor of the widow and
against GrePa Life. CA affirmed the decision.
 Hence, this appeal.
ISSUE:
Whether the failure to disclose on the part of Dr. Wilfredo that he had hypertension,
which might had caused his death, could be considered as concealment and that it can be
interposed by GrePa Life as a defense to annul the contract of insurance.
RULING:
No. GrePa Life was liable. There was no conclusive evidence provided and no autopsy
was conducted. GrePa Life has failed to establish that there was concealment made by the
insured. Fraudulent intent on the part of the insured must be established to entitle the insurer to
rescind the contract.
Concealment exists where the assured had knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the assured, but
he designedly and intentionally withholds the same.

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GrePa Life failed to establish that there was concealment made by the insured, hence, it
cannot refuse payment of the claim. Fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the contract. 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
GrePa Life merely relied on the testimony of the attending physician, Dr. Hernando
Mejia, as supported by the information given by the widow of the decedent. GrePa Life asserts
that Dr. Mejia’s technical diagnosis of the cause of death of Dr. Leuterio was a duly documented
hospital record, and that the widow’s declaration that her husband had "possible hypertension
several years ago" should not be considered as hearsay, but as part of res gestae. On the
contrary, the medical findings were not conclusive because Dr. Mejia did not conduct an
autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had
no knowledge of Dr. Leuterio’s any previous hospital confinement. Dr. Leuterio’s death
certificate stated that hypertension was only "the possible cause of death." The widow’s
statement, as to the medical history of her husband, was due to her unreliable recollection of
events. Hence, the statement of the physician was properly considered by the trial court as
hearsay.
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. Contrary to
Grepalife’s allegations, there was no sufficient proof that the insured had suffered from
hypertension.

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 INSURANCE LAW

Sun Life Assurance Co. of Canada vs. CA

FACTS:

 Robert John Bacani took a life insurance contract for himself from Sun Life Assurance.
 He designated his mother, Bernarda as his beneficiary.
 He was issued a policy with double indemnity in case of accidental death.
 The following year, John, the insured, died in a plain crash.
 This promoted his mother to file for a claim in the insurance company.
 The claim was denied after the insurer conducted an investigation and it turned out that
John failed to communicate material facts with Sun Life.
 Sun Life discovered that 2 weeks prior to his application, John was examined and
confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.
During his confinement, he was subjected to urinalysis, ultrasonography and hematology
tests. However, he did not reveal such facts in his application.
 Sun Life informed the mother through a letter that John has failed to disclose material
facts relevant to the issuance of the policy. This rendered the contract voidable.
 A check was issued reimbursing the total premiums paid which was attached to the
letter.
 Aggrieved, the mother and her husband filed an action for specific performance against
Sun Life.
 RTC ruled for Bernarda holding that the facts concealed by the insured were made in
good faith and under the belief that they need not be disclosed. Moreover, it held that the
health history of the insured was immaterial since the insurance policy was "non-
medical."
 The CA affirmed the decision of the RTC.
ISSUE:
Whether Bernarda can claim despite the concealment.
RULING:
NO. Section 26 of the Insurance Code is explicit in requiring a party to a contract of
insurance to communicate to the other, in good faith, all facts within his knowledge which are
material1 to the contract and as to which he makes no warranty, and which the other has no
means of ascertaining.
The terms of the contract are clear. The insured is specifically required to disclose to the
insurer matters relating to his health. The information which the insured failed to disclose were
material and relevant to the approval and the issuance of the insurance policy.
The matters concealed would have definitely affected petitioner's action on his
application, either by approving it with the corresponding adjustment for a higher premium or
rejecting the same. Moreover, a disclosure may have warranted a medical examination of the
insured by petitioner in order for it to reasonably assess the risk involved in accepting the
application.
1
Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts
upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract
or in making his inquiries. (Sec. 31, Ins. Code)

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 Good faith is no defense in concealment.

 The waiver of medical examination in a non-medical insurance contract renders even
more material the information required of the applicant concerning previous condition of
health and diseases suffered, for such information necessarily constitutes an important
factor which the insurer takes into consideration in deciding whether to issue the policy
or not.
 The insured need not die of the disease he had failed to disclose.
 It is sufficient that his non-disclosure misled the insurer in forming his estimates to the
risks of the proposed insurance policy or in making inquiries.

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 INSURANCE LAW

Philamcare Health Systems Inc. vs. CA

FACTS:

 Ernani Trinos applied for a health care coverage with Philamcare .

 He was asked in the application form a question pertaining to his or any of his family
members’ health matters, whether they have consulted or have ever been treated for
high blood pressure, heart troubles, diabetes, cancer, liver disease, asthma, or peptic
ulcer.
 He answered no to the question.
 During the period of his coverage, Ernani suffered a heart attack.
 His wife, Julita, tried to claim benefits under the health care agreement but the claim was
denied.
 Philamcare avers that the agreement was void because of concealment by Ernani in his
medical history.
 The 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.
ISSUES:
1. Whether Ernanni’s answer warrants the rescission of the agreement. NO
2. Whether Philamcare is liable to Julita for the hospital expenses. NO
RULING:
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 in good faith and without intent to deceive will not avoid
a policy even though they are untrue. In such case the insurer is not justified in relying upon
such statement, but is obligated to make further inquiry. 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 provide.
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:
i. Prior notice of cancellation to insured;
ii. Notice must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned;
iii. Must be in writing, mailed or delivered to the insured at the address shown in the
policy;
iv. 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

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an insurance contract are to be construed strictly against the party insurer which prepared the
contract.
Even Julita was not the legal wife, it must be noted that the health care agreement is in
the nature of a contract of indemnity. Therefore, the payment should be made to the party who
incurred the expenses. Since it was not contested that Julita was the one who incurred the
expenses, hence she is entitled to reimbursement.
Notes:

 The health care agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity.
 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 under the contract.
Concealment / Misrepresentation as a defense
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 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.

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 INSURANCE LAW

Thelma Vda. De Canilang vs. CA and GrePa Life

FACTS:

 Jaime Canilang, husband of the respondent, was found to have been suffering from
sinus tachycardia and acute bronchitis after check-up from Dr. Wilfredo Claudio, their
family doctor.
 After one of his check-ups, Jaime went to apply for a non-medical insurance policy with
GrePa Life naming Thelma, his wife, as his beneficiary.
 A year after, Jaime died of congestive heart failure, anemia, and chronic anemia.
 Thelma filed a claim with GrePa Life but the claim was denied on the ground that the
insured had concealed material information.
 Howver, Thelma testified that she was not aware of any serious illness suffered by her
late husband and her husband had died because of a kidney disorder.
 Dr. Claudio who gave the check up stated that he treated the deceased for “sinus
tachycardia” and "acute bronchitis."
 Great Pacific presented a physician who testified that the deceased's insurance
application had been approved on the basis of his medical declaration. She explained
that as a rule, medical examinations are required only in cases where the applicant has
indicated in his application for insurance coverage that he has previously undergone
medical consultation and hospitalization.
 However, the Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal
interest and P2,000.00 as attorney's fees.
 On appeal by Great Pacific, the Court of Appeals reversed. It found that the failure of
Jaime Canilang to disclose previous medical consultation and treatment constituted
material information which should have been communicated to Great Pacific to enable
the latter to make proper inquiries. Hence this petition by the Thelma.
ISSUE:
Whether the non-disclosure of certain facts about the insured’s previous health
conditions is material to warrant the denial of the claims of Thelma.
RULING:
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 man’s 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

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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.
There was a right of the insurance company to rescind the contract if it was proven that
the insured committed fraud in not affirming that he was treated for heart condition and other
ailments stipulated. Apart from certifying that he didn’t suffer from such a condition, Canilang
also failed to disclose in the that he had twice consulted a doctor who had found him to be
suffering from "sinus tachycardia" and "acute bronchitis." Under the Insurance Code, Sec. 26. A
neglect to communicate that which a party knows and ought to communicate, is called a
concealment.

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 INSURANCE LAW

Tan vs. CA
FACTS:

 On September 23, 1973, Tan Lee Siong, father of herein petitioners, applied for life
insurance in the amount of P80,000 with PHILAM which was approved and with
petitioners as the beneficiaries.
 On April 26, 1975, Tan Lee Siong died of hepatoma and the petitioners then claimed the
proceeds of the life insurance policy.
 However, PHILAM denied petitioners’ claim and rescinded the policy by reason of the
alleged misrepresentation and concealment of material facts made by the deceased Tan
Lee Siong in his application for insurance.
 The premiums paid on the policy were refunded.
 The petitioners alleges that PHILAM’s refusal to pay them the proceeds of the policy was
unjustified and unreasonable. They also contend that PHILAM has no right to rescind the
contract of insurance as rescission must allegedly be done during the lifetime of the
insured within 2 years and prior to the commencement of action.
ISSUE:
Whether or not the respondent company has the right to rescind the policy when the
insured is already dead.
RULING:
Yes. According to Section 48 of Insurance Code, “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 2 years from the date of its issue or of its last reinstatement, the
insurer cannot prove that the policy is void ab ignition or is rescindable by reason of the
fraudulent concealment or misrepresentation of the insured or his agent”.
The so-called “incontestability clause” precludes the insurer from raising the defenses of
false representations or concealment of material facts insofar as health and previous diseases
are concerned if the insurance has been in force for at least 2 years during the insured’s
lifetime. The phrase “during the lifetime” means that the policy is no longer considered in force
after the insured has died. The key phrase in the 2nd par of Sec 48 is “for period of 2 years”.
The policy was in force for a period of only 1 year and 5 months, the insured died before
the 2-year period had lapsed, respondent company is not barred from proving that the policy is
void ab initio by reason of the insured’s fraudulent concealment or misrepresentation. Also, the
evidence of the respondent company shows that the insured was diabetic for 5 years. Because
of the concealment made by the deceased of his consultations and treatments for hypertension,
diabetes and liver disorders, respondent company was thus misled into accepting the risk and
approving his application. For as long as no adverse medical history is revealed in the
application form, an applicant for insurance is presumed to be healthy and physically fit and no
further medical investigation or examination is conducted by respondent company.

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 INSURANCE LAW

Florendo vs. Philam Plans

FACTS:

 Manuel Florendo filed an application for comprehensive pension plan with respondent
Philam Plans after some convincing by respondent Perla Abcede.
 The plan had a pre-need price of P997,050.00, payable in 10 years, and had a maturity
value of P2,890,000.00 after 20 years.
 Manuel signed the application and left to Perla the task of supplying the information
needed in the application.
 The comprehensive pension plan also provided life insurance coverage to Florendo.
This was covered by a Group Master Policy that Philippine American Life Insurance
Company (Philam Life) issued to Philam Plans.
 Under the master policy, Philam Life was to automatically provide life insurance
coverage, including accidental death, to all who signed up for Philam Plans
comprehensive pension plan.
 If the plan holder died before the maturity of the plan, his beneficiary was to instead
receive the proceeds of Manuel signed the application and left the life insurance,
equivalent to the pre-need price.
 Eleven months later or on September 15, 1998, Manuel died of blood poisoning. In
denying the claim of petitioner Lourdes Florendo, Philam Life raised that it found out
Manuel was on maintenance medicine for his heart and had an implanted pacemaker.
 Further, he suffered from diabetes mellitus and was taking insulin.
ISSUE:
Whether Lourdes Florendo is entitled to any claim.
RULING:
No. First, since Manuel signed the application without filling in the details regarding his
continuing treatments for heart condition and diabetes, the assumption is that he has never
been treated for the said illnesses in the last five years preceding his application. The fault
cannot be attributed to Perla. The responsibility for preparing the application belonged to
Manuel. Nothing in it implies that someone else may provide the information that Philam Plans
needed. Manuel cannot sign the application and disown the responsibility for having it filled up.
If he furnished Perla the needed information and delegated to her the filling up of the
application, then she acted on his instruction, not on Philam Plans instruction.
Second, Manuel is a civil engineer and manager of a construction company. He could be
expected to know that one must read every document, especially if it creates rights and
obligations affecting him, before signing the same. Manuel is not unschooled that the Court
must come to his succor. It could reasonably be expected that he would not trifle with something
that would provide additional financial security to him and to his wife in his twilight years.
Lastly, the comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. The incontestability clause precludes the insurer from disowning liability
under the policy it issued on the ground of concealment or misrepresentation regarding the
health of the insured after a year of its issuance. However, Manuel died on the eleventh month
following the issuance of his plan, the one year incontestability period has not yet set in.

©RCNUson | 2021
 INSURANCE LAW

Consequently, Philam Plans was not barred from questioning Lourdes entitlement to the
benefits of her husbands pension plan

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