Insular Life v.

Feliciano 73 PHIL 201 Facts: Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. It appears that during that time, Evaristo was already suffering from tuberculosis. Such fact appeared during the medical exam, but the examiner and the companys agent ignored it. 3D SY 2004-2005 rhys alexei INSURANCE REVIEWER Atty. Quimson page 72 After that, Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. (Evaristo could not read and understand English) When Evaristo died, Insular life refused to pay the proceeds because of concealment. Issue: WON Insular Life was bound by their agents acts. Held: Yes. The insurance business has grown so vast and lucrative within the past century. Nowadays, even people of modest means enter into insurance contracts. Agents who solicit contracts are paid large commissions on the policies secured by them. They act as general representatives of insurance companies. IN the case at bar, the true state of health of the insured was concealed by the agents of the insurer. The insurers medical examiner approved the application knowing fully well that the applicant was sick. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. In this case, it is the one who drafted and accepted the policy and consummated the contract. It seems reasonable that as between the two of them, the one who employed and gave character to the third person as its agent should be the one to bear the loss. Hence, Insular is liable to the beneficiaries. Insular life v. Feliciano (repeat case # 57) 74 PHIL 4681 Facts: Insular life filed a motion for reconsideration of the decision in the preceding case. Issue: WON Insular Life was bound by their agents acts. Held: NO (what the f?) There was collusion between Evaristo and the agent and the medical examiner in making it appear that Evaristo was a fit subject for insurance. When Evaristo authorized them to write the answers for him, he made them his own agents for that purpose and he was responsible for their acts in that connection. If they falsified the answers for him, he could not evade liability for the falsification. He was not supposed to sign the application in blank. He knew that his answers would be the basis for the policy, and was required with his signature to vouch for their truth. The judgment rendered therefore in the preceding case is thus reversed, and Insular Life is absolved from liability.

Tan Chay Heng v. West Coast Life 51 Phil 80 Facts: In 1926, Tan Chay Heng sued West Coast on the policy allegedly issued to his uncle, Tan Caeng who died in 1925. He was the sole beneficiary thereof. West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go Chuilian, Francisco Sanchez and Dr. Locsin of West Coast. West Coast said that it was made to appear that Tan Caeng was single, a merchant, health and not a drug user, when in fact he was married, a laborer, suffering form tuberculosis and addicted to drugs. West Coast now denies liability based on these misrepresentations. Tan Chay contends that West Coast may not rescind the contract because an action for performance has already been filed. Trial court found for Tan Chay holding that an insurer cannot avoid a policy which has been procured by fraud unless he brings an action to rescind it before he is sued thereon. Issue: WON West Coasts action for rescission is therefore barred by the collection suit filed by Tan Chay. Held: NO. Precisely, the defense of West Cast was that through fraud in its execution, the policy is void ab initio, and therefore, no valid contract was ever made. Its action then cannot be fore rescission because an action to rescind is founded upon and presupposes the existence of the contract. Hence, West Coasts defense is not barred by Sec. 47. In the instant case, it will be noted that even in its prayer, the defendant does not seek to have the alleged insurance contract rescinded. It denies that it ever made any contract of insurance on the life of Tan Caeng, or that any such a contract ever existed, and that is the question which it seeks to have litigated by its special defense. In the very nature of things, if the defendant never made or entered into the contract in question, there is no contract to rescind, and, hence, section 47 upon which the lower court based its decision in sustaining the demurrer does not apply. As stated, an action to rescind a contract is founded upon and presupposes the existence of the contract which is sought to be rescinded. If all of the material matters set forth and alleged in the defendant's special plea are true, there was no valid contract of insurance, for the simple reason that the minds of the parties never met and never agreed upon the terms and conditions of the contract. We are clearly of the opinion that, if such matters are known to exist by a preponderance of the evidence, they would constitute a valid defense to plaintiff's cause of action. Upon the question as to whether or not they are or are not true, we do 3D SY 2004-2005 rhys alexei INSURANCE REVIEWER Atty. Quimson page 74 not at this time have or express any opinion, but we are clear that section 47 does not apply to the allegations made in the answer, and that the trial court erred in sustaining the demurrer.

Philamcare v. CA 379 SCRA 356 (2002) Facts: Ernani Trinos, applied for a health care coverage with Philamcare. In the standard application form, he answered NO to the following 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? (If Yes, give details) 3D SY 2004-2005 rhys alexei INSURANCE REVIEWER Atty. Quimson page 11 The application was approved for a period of one year from March 1, 1988 to March 1, 1989. He was a issued Health Care Agreement, and under such, he 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 one month beginning March 9, 1990. While her husband was in the hospital, Julita tried to claim the benefits under the health care agreement. However, Philamcare denied her claim saying that the Health Care Agreement was void. According to Philamcare, there was concealment regarding Ernani's medical history. o 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. Julita had no choice but to pay 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 (CGH). Due to financial difficulties, Julita brought her husband home again. In the morning of April 13, 1990, Ernani had fever and was feeling very weak. Julita was constrained to bring him back to the CGH where he died on the same day. Julita instituted, an action for damages against Philamcare. She asked for reimbursement of her expenses plus moral damages and attorney's fees. RTC decided in favor of Julita. CA affirmed. Issues and Resolutions: Philamcare brought the instant 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 Title 6, Sec. 48 does not apply. SC held that in the case at bar, the insurable interest of respondent's 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. Under the title Claim procedures of expenses, Philamcare. had 12 mos 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. Petitioner argues that respondent's husband concealed a material fact in his application. It appears that in the application for health coverage, petitioners required respondent's husband to sign an express authorization for any person, organization or entity that has any record or knowledge of his health to furnish any and all information relative to any hospitalization, consultation, treatment or any other medical advice or examination. Philamcare cannot rely on the stipulation regarding "Invalidation of agreement" which reads: 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 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 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. Thus, (A)lthough 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 although the statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry. 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 actually 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 obvious and amounts to actual fraud. 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. When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from noncompliance 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. 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. The phraseology used in medical or hospital service contracts, such as the one at bar, must be liberally construed in favor of the subscriber, and if doubtful or reasonably susceptible of two interpretations the construction conferring coverage is to be adopted, and exclusionary clauses of doubtful import should be strictly construed against the provider.

Argente v. West Coast Life Insurance Co. 51 PHIL 725 Facts: A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of premium, by West Coast. On Nov. 18, 1925, during the effectivity of the policy, Vicenta died of cerebral apoplexy. Thereafter,

Bernardo claimed payment but was refused. It is admitted that in the Medical Examiners report, Vicenta, in response to the question asked by the medical examiner, her replies were as follows: o How frequently do you use beer, wine, spirits and other intoxicants? she answered beer only in small quantities. o What physician have you consulted or been treated by within the last 5 years and for wh at illness or ailment? she answered none It is however, not disputed that in 1924, Vicenta was taken to a hospital for what was first diagnosed as alcoholism and later changed to manic-depressive psychosis and then again changed to pscyhonuerosis. Issue: WON on the bais of the misrepresentations of Vicenta, Bernardo is barred from recovery. Held: YES. The court found that the representations made by Vicenta in his application for life insurance were false with respect to her state of health and that she knew and was aware that the representations so made by her were false. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth or falsity of the answer becomes the determining factor. If the policy was procured by fraudulent misrepresentations, the contract of insurance apparently set forth therein was never legally existent. It can be fairly assumed that had the true facts been disclosed by the insured, the insurance would never have been granted.

Ng Gan Zee v. Asian Crusader LIfe 122 SCRA 61 Facts: In 1962, Kwon Nam applied for a 20yr endowment insurance on his life with his wife, Ng Gan Zee as the beneficiary. He stated in his application that he was operated on for tumor of the stomach associated with ulcer. In 1963, Kwong died of cancer of the liver with metastasis. Asian refused to pay on the ground of alse information. It was found that prior to his application, Kwong was diagnosed to have peptic ulcers, and that during the operation what was removed from Kwongs body was actually a portion of the stomach and not tumor. Issue: WON the contract may be rescinded on the ground of the imperfection in the application form. Held: NO. Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. His statement therefore was made in good faith. Asian should have made an inquiry as to the illness and operation of Kwong when it appeared on the face of the application that a question appeared to be imperfectly answered. Asians failure to inquire constituted a waiver of the imperfection in the answer.