BAUD, Sittie Rainnie M.
11 The Insular Life Ass. Co., Ltd. v. Paz Y. Khu Ratio: Sec 48 of the Insurance Code provides:
Case Doctrine: an insurance contract is a contract of adhesion which must
be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the latter’s interest. Limitations of liability should be
regarded with extreme jealousy and must be construed in such a way as to
preclude the insurer from noncompliance with its obligations.
Fallo: WHEREFORE, the Petition is DENIED
Facts:
March 1997 – Felipe Khu, Sr. (Felipe) applied for a life insurance policy with
Insular Life under the latter’s Diamond Jubilee Insurance Plan. Felipe
accomplished the required medical questionnaire wherein he did not declare
any illness or adverse medical condition. This took effect on June 22, 1997.
June 1999 - Felipe’s policy lapsed due to non-payment of the premium
covering the period from June 22, 1999 to June 23, 2000.
September 1999 - Felipe applied for the reinstatement of his policy and paid
P25,020.00 as premium. Except for the change in his occupation of being
self-employed to being the Municipal Mayor of Binuangan, Misamis Oriental,
all the other information submitted by Felipe in his application for
reinstatement was virtually identical to those mentioned in his original policy.
Oct 1999 – Insular Life advised Felipe that his application for reinstatement
may only be considered if he agreed to certain conditions such as payment
of additional premium and the cancellation of the riders pertaining to
premium waiver and accidental death benefits. Felipe agreed to these
conditions and paid the agreed additional premium.
Jan 2000 – Insular Life reinstated Felipe’s policy and issued an
Endorsement stating:
This certifies that as agreed by the Insured, the reinstatement of this policy
has been approved by the Company on the understanding that the
following changes are made on the policy effective June 22, 1999…
Sept 2001 – Felipe died.
Paz Y. Khu, Felipe Y. Khu, Jr. and Frederick Y. Khu (Felipe’s beneficiaries
or respondents) filed with Insular Life a claim for benefit under the reinstated
policy.
Insular Life denied the claim. It rescinded the reinstated policy on the
grounds of concealment and misrepresentation by Felipe since he did not
disclose the ailments (Type 2 Diabetes Mellitus, Diabetes Nephropathy and
Alcoholic Liver Cirrhosis with Ascites) that he already had prior to his
application for reinstatement of his insurance policy; and that it would not
have reinstated the insurance policy had Felipe disclosed the material
information on his adverse health condition. It contended that when Felipe
died, the policy was still contestable.
Respondents instituted a complaint for specific performance with damages.
RTC and CA: ruled in favor of respondents
Issue: Whether Felipe’s reinstated life insurance policy is already
incontestable at the time of his death – YES.
…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 two
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 rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent.
The insurer is deemed to have the necessary facilities to discover such
fraudulent concealment or misrepresentation within a period of two (2) years.
It is not fair for the insurer to collect the premiums as long as the insured is
still alive, only to raise the issue of fraudulent concealment or
misrepresentation when the insured dies in order to defeat the right of the
beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last
reinstatement, the beneficiary is given the stability to recover under the
policy when the insured dies. The provision also makes clear when the two-
year period should commence in case the policy should lapse and is
reinstated, that is, from the date of the last reinstatement’.
In the Letter of Acceptance, Khu declared that he was accepting "the
imposition of an extra/additional premium of P5.00 a year per thousand of
insurance; effective June 22, 1999". It is true that the phrase as used in this
particular paragraph does not refer explicitly to the effectivity of the
reinstatement. But the Court notes that the reinstatement was conditioned
upon the payment of additional premium not only prospectively, that is, to
cover the remainder of the annual period of coverage, but also retroactively,
that is for the period starting June 22, 1999. Hence, by paying the amount of
P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had
earlier paid on September 7, 1999, Khu had paid for the insurance coverage
starting June 22, 1999. At the very least, this circumstance has engendered
a true lacuna.
In the Endorsement, the obscurity is patent. In the first sentence of the
Endorsement, it is not entirely clear whether the phrase "effective June 22,
1999" refers to the subject of the sentence, namely "the reinstatement of this
policy," or to the subsequent phrase "changes are made on the policy."
Given the obscurity of the language, the construction favorable to the
insured will be adopted by the courts.
Accordingly, the subject policy is deemed reinstated as of June 22, 1999.
Thus, the period of contestability has lapsed.
BPI & FGU Insurance vs. Laingo
FACTS:
On 20 July 1999, Rheozel Laingo (Rheozel), the son of respondent Yolanda
Laingo (Laingo), opened a "Platinum 2-in-1 Savings and Insurance" account
with petitioner Bank of the Philippine Islands (BPI) in its Claveria, Davao City
BAUD, Sittie Rainnie M.

branch. The Platinum 2-in-1 Savings and Insurance account is a savings

account where depositors are automatically covered by an insurance policy REASON:
against disability or death issued by petitioner FGU Insurance Corporation
(FGU Insurance), now known as BPI/MS Insurance Corporation. BPI issued Petitioners contend that the words or language used in the insurance
Passbook No. 50298 to Rheozel corresponding to Savings Account No. contract, particularly under paragraph 15, is clear and plain or readily
2233-0251-11. A Personal Accident Insurance Coverage Certificate No. understandable by any reader which leaves no room for construction.
043549 was also issued by FGU Insurance in the name of Rheozel with Petitioners also maintain that ignorance about the insurance policy does not
Laingo as his named beneficiary. exempt respondent from abiding by the deadline and petitioners cannot be
faulted for respondent's failure to comply.
On 25 September 2000, Rheozel died due to a vehicular accident.
Respondent, on the other hand, insists that the insurance contract is
Laingo instructed the family's personal secretary, Alice Torbanos (Alice) to ambiguous since there is no provision indicating how the beneficiary is to be
go to BPI, Claveria, Davao City branch and inquire about the savings informed of the three calendar month claim period. Since petitioners did not
account of Rheozel. notify her of the insurance coverage of her son where she was named as
beneficiary in case of his death, then her lack of knowledge made it
Due to Laingo's credit standing and relationship with BPI, BPI impossible for her to fulfill the condition set forth in the insurance contract.
accommodated Laingo who was allowed to withdraw P995,000 from the
account of Rheozel. A certain Ms. Laura Cabico, an employee of BPI, went In the present case, the source of controversy stems from the alleged non-
to Rheozel's wake at the Cosmopolitan Funeral Parlor to verify some compliance with the written notice of insurance claim to FGU Insurance
information from Alice and brought with her a number of documents for within three calendar months from the death of the insured as specified in
Laingo to sign for the withdrawal of the P995,000. the insurance contract. Laingo contends that as the named beneficiary
entitled to the benefits of the insurance claim she had no knowledge that
More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn Rheozel was covered by an insurance policy against disability or death
Laingo-Concepcion, while arranging Rheozel's personal things in his room at issued by FGU Insurance that was attached to Rheozel's savings account
their residence in Ecoland, Davao City, found the Personal Accident with BPI. Laingo argues that she dealt with BPI after her son's death, when
Insurance Coverage Certificate No. 043549 issued by FGU Insurance. she was allowed to withdraw funds from his savings account in the amount
Rhealyn immediately conveyed the information to Laingo. of P995,000. However, BPI did not notify her of the attached insurance
policy. Thus, Laingo attributes responsibility to BPI and FGU Insurance for
Laingo sent two letters dated 11 September 2003 and 7 November 2003 to her failure to file the notice of insurance claim within three months from her
BPI and FGU Insurance requesting them to process her claim as beneficiary son's death.
of Rheozel's insurance policy.
FGU Insurance sent a reply-letter to Laingo denying her claim for failure of As the main proponent of the 2-in-1 deposit account, BPI tied up with its
claiming within three calendar months from the death of Rheozel as required affiliate, FGU Insurance, as its partner. Any customer interested to open a
under Paragraph 15 of the Personal Accident Certificate of Insurance. deposit account under this 2-in-1 product, after submitting all the required
documents to BPI and obtaining BPI's approval, will automatically be given
The trial court decided the case in favor of respondents. insurance coverage. Thus, BPI acted as agent of FGU Insurance with
CA reversed the decision of the Trial Court. respect to the insurance feature of its own marketed product.

ISSUE: Articles 1884 and 1887 of the Civil Code state:

Whether or not Laingo, as named beneficiary who had no knowledge of the Art. 1884. The agent is bound by his acceptance to carry out the agency and
existence of the insurance contract, is bound by the three calendar month is liable for the damages which, through his non-performance, the principal
deadline for filing a written notice of claim upon the death of the insured. may suffer.

HELD: NO He must also finish the business already begun on the death of the principal,
BAUD, Sittie Rainnie M.
should delay entail any danger.
Art. 1887. In the execution of the agency, the agent shall act in accordance
with the instructions of the principal.
In default, thereof, he shall do all that a good father of a family would do, as
required by the nature of the business.
The provision is clear that an agent is bound to carry out the agency. The
relationship existing between principal and agent is a fiduciary one,
demanding conditions of trust and confidence. It is the duty of the agent to
act in good faith for the advancement of the interests of the principal. In this
case, BPI had the obligation to carry out the agency by informing the
beneficiary, who appeared before BPI to withdraw funds of the insured who
was BPI's depositor, not only of the existence of the insurance contract but
also the accompanying terms and conditions of the insurance policy in order
for the beneficiary to be able to properly and timely claim the benefit.
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HH Hollero Construction Inc vs GSIS
G.R. No. 152334 September 24, 2014
Facts: On April 26, 1988, the GSIS and petitioner entered into a Project
Agreement (Agreement) whereby the latter undertook the development of a
GSIS housing project known as Modesta Village Section B (Project).
Petitioner obligated itself to insurethe Project, including all the
improvements, upon the execution of the Agreement under a Contractors’ All
Risks (CAR) Insurance with the GSIS General Insurance Department for an
amount equal to its cost or sound value, which shall not be subject to any
automatic annual reduction. Pursuant to its undertaking, petitioner secured
CAR Policy No. 88/085 in the amount of P development, which was later
increased to P 1,000,000.00 for land 10,000,000.00, effective from May 2,
1988 to May 2, 1989. Petitioner likewise secured CAR Policy No. 88/086 in
the amount of P 1,000,000.00 for the construction of twenty (20) housing
units, which amount was later increased to P 17,750,000.00 from May 2,
1988 to June 1, 1989. to cover the construction of another 355 new units,
effective In turn, the GSIS reinsured CAR Policy No. 88/085 with respondent
Pool of Machinery Insurers (Pool). Under both policies, it was provided that:
(a) there must be prior notice of claim for loss, damage or liability within
fourteen (14) days from the occurrence of the loss or damage; (b) all
benefits thereunder shall be forfeited if no action is instituted within
twelve(12) months after the rejection of the claim for loss, damage or liability;
and (c) if the sum insured is found to be less than the amount required to be
insured, the amount recoverable shall be reduced tosuch proportion before
taking into account the deductibles stated in the schedule (average clause
provision). During the construction, three (3) typhoons hit the country,
namely, Typhoon Biring from June 1 to June 4, 1988, Typhoon Huaning on
July 29, 1988, and Typhoon Saling on October 11, 1989, which caused
considerable damage to the Project. Accordingly, petitioner filed several
claims for indemnity with the GSIS on June 30, 1988, August 25, 1988, and
October 18, 1989, respectively. In a letter dated April 26, 1990, the GSIS
rejected petitioner’s indemnity claims for the damages wrought by Typhoons
Biring and Huaning, finding that no amount is recoverable pursuant to the
average clause provision under the policies. In a letter dated June 21, 1990,
the GSIS similarly rejected petitioner’s indemnity claim for damages wrought
by Typhoon Saling on a “no loss” basis, it appearing from its records that the
policies were not renewed before the onset of the said typhoon.
Issue: Whether or not the petitioner is barred from filing a complaint before
the courts based on the insurance claim.
Held: Yes. Contracts of insurance, like other contracts, are to be construed
according to the sense and meaning of the terms which the parties
themselves have used. If such terms are clear and unambiguous, they must
be taken and understood in their plain, ordinary, and popular sense.
Section 10 of the General Conditions of the subject CAR Policies commonly
read:
10. If a claim is in any respect fraudulent, or if any false declaration is made
or used in support thereof, or if any fraudulent means or devices are used by
the Insured or anyone acting on his behalf to obtain any benefit under this
Policy, or if a claim is made and rejected and no action or suit is commenced
within twelve months after such rejectionor, in case of arbitration taking
place as provided herein, within twelve months after the Arbitrator or
Arbitrators or Umpire have made their award, all benefit under this Policy
shall be forfeited.
In this relation, case law illumines that the prescriptive period for the
insured’s action for indemnity should be reckoned from the “final rejection” of
the claim.
As correctly observed by the CA, “final rejection” simply means denial by the
insurer of the claims of the insured and not the rejection or denial by the
insurer of the insured’s motion or request for reconsideration. The rejection
referred to should be construed as the rejection in the first instance, as in the
two instances above-discussed.
The right of the insured to the payment of his loss accrues from the
happening of the loss. However, the cause of action in an insurance contract
does not accrue until the insured’s claim is finally rejected by the insurer.
This is because before such final rejection there is no real necessity for
bringing suit.
 BAUD, Sittie Rainnie M.

FORTUNE MEDICARE, INC. vs. DAVID ROBERT U. AMORIN G.R. No. 2.) Yes. With regard the ambiguities in the contract, settled is the rule that th
195872, 12 March 2014 ey should be interpreted against the party that caused the ambiguity. “Any a
mbiguity in a contract whose terms are susceptible of different interpretation
FACTS: s must be read against the party who drafted it.” Furthermore, it affirmed the
While Amorin was on vacation in Hawaii, he underwent an emergency surge CA’s finding that Fortune Care’s liability to Amorin under the subject Health
ry, specifically appendectomy, causing him to incur professional and hospital Care Contract should be based on the expenses for hospital and profession
ization expenses of US$7,242.35 and US$1,777.79, respectively. Being a ca al fees which he actually incurred, and should not be limited by the amount t
rdholder/member of Fortune Medicare, Inc. (Fortune Care), a corporation en hat he would have incurred had his emergency treatment been performed in
gaged in providing health maintenance services to its members, he attempte an accredited hospital in the Philippines.
d to recover the full amount upon his return to Manila. However, the compan
y merely approved a reimbursement of P12,151.36, an amount that was bas
ed on the average cost of appendectomy, net of medicare deduction, if the p
rocedure were performed in an accredited hospital in Metro Manila. Amorin r
eceived under protest the approved amount, but asked for its adjustment to
cover the total amount of professional fees which he had paid, and eighty pe
rcent (80%) of the approved standard charges based on “American standard
”, considering that the emergency procedure occurred in the U.S.A., citing pr
ovisions of the contract.
He then filed a complaint for breach of contract with damages but this was di
smissed by the RTC. It said that the parties intended to use the Philippine st
andard as basis. However, this was reversed by the CA. The appellate court
pointed out that, first, health care agreements such as the subject Health Ca
re Contract, being like insurance contracts, must be liberally construed in fav
or of the subscriber. In case its provisions are doubtful or reasonably suscep
tible of two interpretations, the construction conferring coverage is to be ado
pted and exclusionary clauses of doubtful import should be strictly construed
against the provider. Second, the CA explained that there was nothing unde
r the Health Care Contract which provided that the Philippine standard shoul
d be used even in the event of an emergency confinement in a foreign territo
ry.

ISSUE:
 Whether or not a member of a health care provider can recover to the extent
agreed in the contract.
 Whether or not ambiguities should be taken in favor of the member.

HELD:
1.)Yes. In the case at bar, the Supreme Court said that for purposes of deter
mining the liability of a health care provider to its members, jurisprudence hol
ds that a health care agreement is in the nature of non-
life insurance, which is primarily a contract of indemnity. Once the member i
ncurs hospital, medical or any other expense arising from sickness, injury or
other stipulated contingent, the health care provider must pay for the same t
o the extent agreed upon under the contract.