Insurance Case Digest: Philamcare Health Systems, Inc. v. CA (2002)

G.R. No. 125678      March 18, 2002
Lessons Applicable: 
  • Elements (Insurance)
  • Blood Relationship (Insurance)

FACTS:
  • Ernani Trinos, deceased husband of Julita Trinos, applied for a health care coverage with Philamcare Health Systems, Inc. 
  • He answered the standard application form: 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). - NO
    • the application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was issued Health Care Agreement No. P010194
      • Under the agreement, respondent’s 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 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 1 month beginning March 9, 1990. 
    • While her husband was in the hospital, Julina Trinos tried to claim the benefits under the health care agreement.
      • Philamcare denied her claim saying that the Health Care Agreement was void for concealing Ernani’s medical history so she paid the hospitalization expenses of P76,000.00 herself.
        • 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.  
  • After being 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, he was brought home again. 
  • April 13, 1990 morning: Ernani had fever and was feeling very weak
    • He was brought to Chinese General Hospital where he died 
  • July 24, 1990: She brought action for damages against Philamcare Health Systems Inc. and its president, Dr. Benito Reverente
  • RTC: Philamcare and Dr. Benito Reverent to pay and reimburse P76k plus interest, moral damages, exemplary damages, attorney's fees and cost of suit
  • CA: affirmed the decision of RTC but deleted all awards for damages and absolved Philamcare
  • Philamcare brought an instant petition for review arguing that:
    • health care agreement is not an insurance contract; hence the "incontestability clause" under the Insurance Code does not apply.
    • grants "living benefits," such as medical check-ups and hospitalization which a member may immediately enjoy so long as he is alive upon effectivity of the agreement until its expiration one-year thereafter
    • only medical and hospitalization benefits are given under the agreement without any indemnification, unlike in an insurance contract where the insured is indemnified for his loss
    • since Health Care Agreements are only for a period of one year, as compared to insurance contracts which last longer; incontestability clause does not apply, as the same requires an effectivity period of at least two years
    • insurance company is governed by the Insurance Commission, but a Health Maintenance Organization under the authority of the Department of Health
ISSUE: 

  1. W/N the health care agreement is a contract of insurance. - YES
  2. W/N the spouse being "not" legal wife can claim - YES

HELD: Petition is DENIED. CA AFFIRMED.

 1. YES.
P.D. 612 Insurance Code
Sec. 2 (1)
(1) A "contract of insurance" is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.
Sec. 3
Sec. 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.

The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor's estate or the minor's father, mother, husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy.

  • In the case at bar, the insurable interest of respondent's husband in obtaining the health care agreement was his own health. 
  • 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.
  • The answer in response to the question relating to the medical history of the applicant 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. 
P.D. 612 Insurance Code
Sec. 27
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.
  • cancellation of health care agreements as in insurance policies require the concurrence of the following conditions: - none of these was made
    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.
  • 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 an insurance contract are to be construed strictly against the party which prepared the contract - the insurer.
  • (U)nder 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.
2. YES.

P.D. 612 Insurance Code
Sec. 10
Sec. 10. Every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children;
(2) of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;
(3) of any person under a legal obligation to him for the payment of money, respecting property or service, of which death or illness might delay or prevent the performance; and
(4) of any person upon whose life any estate or interest vested in him depends.

  • not the legal wife (deceased was previously married to another woman who was still alive) 
    • health care agreement is in the nature of a contract of indemnity.
      • payment should be made to the party who incurred the expenses