The Insular Life Assurance Company vs Ebrado, 80 SCRA 181

Fact: On September 1, 1968, Buenaventura Ebrado issued by the Insular i!e "ssurance #olicy $o %%99&9 a 'hole(li!e plan 'ith a rider !or "ccidental )eath* Buenaventura desi+nated ,arponia Ebrado as the revocable bene!iciary in his policy* -e re!erred her as his 'i!e* On October &1, 1969, Buenaventura Ebrad died as a result o! an accident 'hen he 'as hit by a !allin+ tree* ,arponia !iled 'ith the insurer a claim !or the proceeds o! the policy as the desi+nated bene!iciary therein* "lthou+h she admits that she and the insured Buenaventura 'ere merely livin+ as husband and 'i!e 'ithout the bene!its o! marria+e* #ascuala de Ebrado, valid 'i!e, also !iled her claim as the 'ido' o! the deceased insured* Issue: ,an a common(la' 'i!e named as bene!iciary in the li!e insurance policy o! le+ally married man claim the proceeds thereo! in case o! death o! the latter. /ulin+: In essence, a li!e insurance is no di!!erent !rom a civil donation inso!ar as the bene!iciary is concerned* Both are !ounded upon the same consideration: liberality* " bene!iciary is li0e a donee because !rom the premiums o! the policy 'hich the insured pays out o! liberality, the bene!iciary 'ill receive the proceeds or pro!its o! said insurance* "s a conse1uence, the proscription in "rticle239 o! the $e' ,ivil ,ode should e1ually operate in li!e insurance contracts* 4he mandate o! "rticle &%1& cannot be laid aside: any person 'ho cannot receive a donation cannot be named a bene!iciary in the li!e insurance policy o! the persons 'ho cannot ma0e the donation* Note following Articles from the Civil Code: "rticle &%11 ( 54he contract o! insurance is +overned by special la's* 6atters not e7pressly provided !or in such special la's shall be re+ulated by this ,ode*5 "rticle &%1& ( 5"ny person 'ho in !orbidden !rom receivin+ any donation under "rticle 239 cannot be named bene!iciary o! a li!e insurance policy by the person 'ho cannot be ma0e a donation to him*5 "rticle 239( 54he donations shall be void: 1* 4hose made bet'een persons 'ho 'ere +uilty o! adultery or concubina+e at the title o! donation*77 In the case provided to in $o*1, the action !or declaration o! nullity may be brou+ht by the spouse o! the donor or donee8 and the +uilt o! the donee may be provided by preponderance o! evidence in same action*5

HEIRS OF LORETO C. MARAMAG, represented by surviving spouse VICE TA !A GILI A MARAMAG, Petitioners, vs. EVA VER A "E G#$MA MARAMAG, O"ESSA "E G#$MA MARAMAG, %ARL &RIA "E G#$MA MARAMAG, TRISHA A GELIE MARAMAG, THE I S#LAR LIFE ASS#RA CE COM!A ', LT"., (nd GREAT !ACIFIC LIFE ASS#RA CE COR!ORATIO , Respondents.

(1) petitioners were the legitimate wife and children of Loreto Maramag (Loreto), while respondents were Loretos illegitimate family; ( ) !va de "#$man Maramag (!va) was a conc#%ine of Loreto and a s#spect in the &illing of the latter, th#s, she is dis'#alified to receive any proceeds from his

ins#rance policies from (ns#lar Life )ss#rance *ompany, Ltd. ((ns#lar) + and "reat Pacific Life )ss#rance *orporation ("repalife); , (-) the illegitimate children of Loreto./dessa, 0arl 1rian, and 2risha )ngelie.were entitled only to one3half of the legitime of the legitimate children, th#s, the proceeds released to /dessa and those to %e released to 0arl 1rian and 2risha )ngelie were inofficio#s and sho#ld %e red#ced; and (+) petitioners co#ld not %e deprived of their legitimes, which sho#ld %e satisfied first. (ns#lar admitted that Loreto misrepresented !va as his legitimate wife and /dessa, 0arl 1rian, and 2risha )ngelie as his legitimate children, and that they filed their claims for the ins#rance proceeds of the ins#rance policies; that when it ascertained that !va was not the legal wife of Loreto, it dis'#alified her as a %eneficiary and divided the proceeds among /dessa, 0arl 1rian, and 2risha )ngelie, as the remaining designated %eneficiaries; and that it released /dessas share as she was of age, %#t withheld the release of the shares of minors 0arl 1rian and 2risha )ngelie pending s#%mission of letters of g#ardianship. (n reply, %oth (ns#lar and "repalife co#ntered that the ins#rance proceeds %elong e4cl#sively to the designated %eneficiaries in the policies, not to the estate or to the heirs of the ins#red. "repalife also reiterated that it had dis'#alified !va as a %eneficiary when it ascertained that Loreto was legally married to 5icenta Pangilinan Maramag. HEL") (n this case, it is clear from the petition filed %efore the trial co#rt that, altho#gh petitioners are the legitimate heirs of Loreto, they were not named as %eneficiaries in the ins#rance policies iss#ed %y (ns#lar and "repalife. 2he %asis of petitioners claim is that !va, %eing a conc#%ine of Loreto and a s#spect in his m#rder, is dis'#alified from %eing designated as %eneficiary of the ins#rance policies, and that !vas children with Loreto, %eing illegitimate children, are entitled to a lesser share of the proceeds of the policies. 2hey also arg#ed that p#rs#ant to 6ection 1 of the (ns#rance *ode,17 !vas share in the proceeds sho#ld %e forfeited in their favor, the former having %ro#ght a%o#t the death of Loreto. 2h#s, they prayed that the share of !va and portions of the shares of Loretos illegitimate children sho#ld %e awarded to them, %eing the legitimate heirs of Loreto entitled to their respective legitimes. (t is evident from the face of the complaint that petitioners are not entitled to a favora%le 8#dgment in light of )rticle 911 of the *ivil *ode which e4pressly provides that ins#rance contracts shall %e governed %y special laws, i.e., the (ns#rance *ode. 6ection ,- of the (ns#rance *ode states. 6!*2(/: ,-. 2he ins#rance proceeds shall %e applied e4cl#sively to the proper interest of the person in whose name or for whose %enefit it is made #nless otherwise specified in the policy. P#rs#ant thereto, it is o%vio#s that the only persons entitled to claim the ins#rance proceeds are either the ins#red, if still alive; or the %eneficiary, if the ins#red is already deceased, #pon the mat#ration of the policy. 9 2he e4ception to this r#le is a sit#ation where the ins#rance contract was intended to %enefit third persons who are not parties to the same in the form of favora%le stip#lations or indemnity. (n s#ch a case, third parties may directly s#e and claim from the ins#rer. 1 Petitioners are third parties to the ins#rance contracts with (ns#lar and "repalife and, th#s, are not entitled to the proceeds thereof. )ccordingly, respondents (ns#lar and "repalife have no legal o%ligation to t#rn over the ins#rance proceeds to petitioners. 2he revocation of !va as a %eneficiary in one policy and her dis'#alification as s#ch in another are of no moment considering that the designation of the illegitimate children as %eneficiaries in Loretos ins#rance policies remains valid. 1eca#se no legal proscription e4ists in naming as %eneficiaries the children of illicit relationships %y

the ins#red, the shares of !va in the ins#rance proceeds, whether forfeited %y the co#rt in view of the prohi%ition on donations #nder )rticle ;-7 of the *ivil *ode or %y the ins#rers themselves for reasons %ased on the ins#rance contracts, m#st %e awarded to the said illegitimate children, the designated %eneficiaries, to the e4cl#sion of petitioners. (t is only in cases where the ins#red has not designated any %eneficiary, - or when the designated %eneficiary is dis'#alified %y law to receive the proceeds, + that the ins#rance policy proceeds shall redo#nd to the %enefit of the estate of the ins#red. (n this regard, the assailed <#ne 1=, 99, Resol#tion of the trial co#rt sho#ld %e #pheld. (n the same light, the >ecision of the *) dated <an#ary ?, 99? sho#ld %e s#stained. (ndeed, the appellate co#rt had no 8#risdiction to ta&e cogni$ance of the appeal; the iss#e of fail#re to state a ca#se of action is a '#estion of law and not of fact, there %eing no findings of fact in the first place. ,

FILIPINO MERCHANTS V. CAINSURABLE INTEREST

179 SCRA 638

Facts:
> The Chao Tiek Seng a consignee of the shipment of fishmeal loaded on board the vessel SS Bougainville and unloaded at the Port of Manila on or about December 11, 1976 and seeks to recover from Filipino the amount of P51,568.62 representing damages to said shipment which has been insured by Filipino. > Filipino brought a third party complaint against Compagnie Maritime Des Chargeurs Reunis and/or E. Razon, Inc. seeking judgment against the third party defendants in case judgment is rendered against it. > It appears from the evidence presented that Chao insured said shipment with Filipino for the sum of P267,653.59 for the goods described as 600 metric tons of fishmeal in gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms. > Actually, what was imported was 59.940 metric tons not 600 tons at $395.42 a ton. > The fishmeal in 666 gunny bags were unloaded from the ship on December 11, 1976 at Manila unto the arrastre contractor E. Razon, Inc. and Filipinos surveyor ascertained and certified that in such discharge 105 bags were in bad order condition as jointly surveyed by the ship's agent and the arrastre contractor. > Based on said computation the Chao made a formal claim against the Filipino for P51,568.62. A formal claim statement was also presented by the plaintiff against the vessel, but the Filipino refused to pay the claim.

Issues & Resolutions:

Filipino contends that an "all risks" marine policy has a technical meaning in insurance in that before a claim can be compensable it is essential that there must be "some fortuity," "casualty" or "accidental cause" to which the alleged loss is attributable and the failure of herein private respondent, upon whom lay the burden, to adduce evidence showing that the alleged loss to the cargo in question was due to a fortuitous event precludes his right to recover from the insurance policy.

SC did not uphold this contention. An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of any kind. The terms "accident" and "accidental", as used in insurance contracts, have not acquired any technical meaning. They are construed by the courts in their ordinary and common acceptance. Thus, the terms have been taken to mean that which happens by chance or fortuitously, without intention and design, and which is unexpected, unusual and unforeseen. An accident is an event that takes place without one's foresight or expectation; an event that proceeds from an unknown cause, or is an unusual effect of a known cause and, therefore, not expected.

Coverage under an "all risks" provision of a marine insurance policy creates a special type of insurance which extends coverage to risks not usually contemplated and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's coverage; the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from coverage. A marine insurance policy providing that the insurance was to be "against all risks" must be construed as creating a special insurance and extending to other risks than are usually contemplated, and covers all losses except such as arise from the fraud of the insured. The burden of the insured, therefore, is to prove merely that the goods he transported have been lost, destroyed or deteriorated. Thereafter, the burden is shifted to the insurer to prove that the loss was due to excepted perils. To impose on the insured the burden of proving the precise cause of the loss or damage would be inconsistent with the broad protective purpose of "all risks" insurance.

In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is liable under the policy

Filipino contends that Chao does not have insurable interest, being only a consignee of the goods.

Anent the issue of insurable interest, SC upheld the ruling of the CA that Chao, as consignee of the goods in transit under an invoice containing the terms under "C & F Manila," has insurable interest in said goods.

Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. In principle, anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property. Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.

Chao, as vendee/consignee of the goods in transit has such existing interest therein as may be the subject of a valid contract of insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before he performed the conditions of the sale. The contract of shipment, whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of whether the vendee has an insurable interest or not in the goods in transit. The perfected contract of sale even without delivery vests in the vendee an equitable title, an existing interest over the goods sufficient to be the subject of insurance

VICENTE ONG LIM SING, JR., vs. FEB LEASING & FINANCE CORPORATION G.R. No. 168115

n !arch ", 1""#, $E% Leasin& and $inance Corpora'ion ($E%) en'ered in'o a lease*+, of e-uipmen' and mo'or vehicles .i'h /0L $ood 1roduc's (/0L)2 n 'he same da'e, 0icen'e n& Lim Sin&, /r2 (Lim) e3ecu'ed an Individual 4uaran'y A&reemen'*5, .i'h $E% 'o &uaran'ee 'he promp' and fai'hful performance of 'he 'erms and condi'ions of 'he aforesaid lease a&reemen'2 Correspondin& Lease

Schedules .i'h 6elivery and Accep'ance Cer'ifica'es *#, over 'he e-uipmen' and mo'or vehicles formed par' of 'he a&reemen'2 7nder 'he con'rac', /0L .as obli&ed 'o pay $E% an a&&re&a'e &ross mon'hly ren'al of ne 8undred Seven'y Thousand $our 8undred 9ine'y:$our 1esos (11;0,5"5200)2 /0L defaul'ed in 'he paymen' of 'he mon'hly ren'als2 As of /uly +1, <000, 'he amoun' in arrears, includin& penal'y char&es and insurance premiums, amoun'ed 'o Three !illion $our 8undred $our'een Thousand $our 8undred Si3'y: Ei&h' and ;#=100 1esos (1+,515,5>82;#)2 n Au&us' <+, <000, $E% sen' a le''er 'o /0L demandin& paymen' of 'he said amoun'2 8o.ever, /0L failed 'o pay2*>, n 6ecember >, <000, $E% filed a Complain' *;, .i'h 'he Re&ional Trial Cour' of !anila, doc?e'ed as Civil Case 9o2 00:""5#1, for sum of money, dama&es, and replevin a&ains' /0L, Lim, and /ohn 6oe2 In 'he Amended Ans.er,*8, /0L and Lim admi''ed 'he e3is'ence of 'he lease a&reemen' bu' asser'ed 'ha' i' is in reali'y a sale of e-uipmen' on ins'allmen' basis, .i'h $E% ac'in& as 'he financier2 /0L and Lim claimed 'ha' 'his in'en'ion .as apparen' from 'he fac' 'ha' 'hey .ere made 'o believe 'ha' .hen full paymen' .as effec'ed, a 6eed of Sale .ill be e3ecu'ed by $E% as vendor in favor of /0L and Lim as vendees2*", $E% purpor'edly assured 'hem 'ha' documen'in& 'he 'ransac'ion as a lease a&reemen' is @us' an indus'ry prac'ice and 'ha' 'he proper documen'a'ion .ould be effec'ed as soon as full paymen' for every i'em .as made2 They also con'ended 'ha' 'he lease a&reemen' is a con'rac' of adhesion and should, 'herefore, be cons'rued a&ains' 'he par'y .ho prepared i', i.e2, $E%2 HELD: The s'ipula'ion in Sec'ion 15*<8, of 'he lease con'rac', 'ha' 'he e-uipmen' shall be insured a' 'he cos' and e3pense of 'he lessee a&ains' loss, dama&e, or des'ruc'ion from fire, 'hef', acciden', or o'her insurable ris? for 'he full 'erm of 'he lease, is a bindin& and valid s'ipula'ion2 1e'i'ioner, as a lessee, has an insurable in'eres' in 'he e-uipmen' and mo'or vehicles leased2 Sec'ion 1; of 'he Insurance Code provides 'ha' 'he measure of an insurable in'eres' in proper'y is 'he e3'en' 'o .hich 'he insured mi&h' be damnified by loss or in@ury 'hereof2 I' canno' be

denied 'ha' /0L .ill be direc'ly damnified in case of loss, dama&e, or des'ruc'ion of any of 'he proper'ies leased2

Gaisano v Insurance G.R. No. 147839 June 8, 2006

<. Martine$ @actsA (M* and Levi 6tra#ss (Phils.) (nc. (L6P() separately o%tained from respondent fire ins#rance policies with %oo& de%t endorsements. 2he ins#rance policies provide for coverage on B%oo& de%ts in connection with ready3made clothing materials which have %een sold or delivered to vario#s c#stomers and dealers of the (ns#red anywhere in the Philippines.B 2he policies defined %oo& de%ts as the B#npaid acco#nt still appearing in the 1oo& of )cco#nt of the (ns#red +, days after the time of the loss covered #nder this Policy.B 2he policies also provide for the following conditionsA 1. Carranted that the *ompany shall not %e lia%le for any #npaid acco#nt in respect of the merchandise sold and delivered %y the (ns#red which are o#tstanding at the date of loss for a period in e4cess of si4 (=) months from the date of the covering invoice or act#al delivery of the merchandise whichever shall first occ#r. . Carranted that the (ns#red shall s#%mit to the *ompany within twelve (1 ) days after the close of every calendar month all amo#nt shown in their %oo&s of acco#nts as #npaid and th#s %ecome receiva%le item from their c#stomers and dealers. "aisano is a c#stomer and dealer of the prod#cts of (M* and L6P(. /n @e%r#ary ,, 1771, the "aisano 6#perstore *omple4 in *agayan de /ro *ity, owned %y petitioner, was cons#med %y fire. (ncl#ded in the items lost or destroyed in the fire were stoc&s of ready3made clothing materials sold and delivered %y (M* and L6P(. (ns#rance of )merica filed a complaint for damages against "aisano. (t alleges that (M* and L6P( were paid for their claims and that the #npaid acco#nts of petitioner on the sale and delivery of ready3made clothing materials with (M* was P ,117, 9,.99 while with L6P( it was P,-,,=1-.99. 2he R2* rendered its decision dismissing (ns#ranceDs complaint. (t held that the fire was p#rely accidental; that the ca#se of the fire was not attri%#ta%le to the negligence of the petitioner. )lso, it said that (M* and L6P( retained ownership of the delivered goods and m#st %ear the loss. 2he *) rendered its decision and set aside the decision of the R2*. (t ordered "aisano to pay (ns#rance the P million and the P ,99,999 the latter paid to (M* and Levi 6tra#ss. Eence this petition. (ss#esA 1. C/: the *) erred in constr#ing a fire ins#rance policy on %oo& de%ts as one covering the #npaid acco#nts of (M* and L6P( since s#ch ins#rance applies to loss of the ready3made clothing materials sold and delivered to petitioner

. C/: (M* %ears the ris& of loss %eca#se it e4pressly reserved ownership of the goods %y stip#lating in the sales invoices that BFiGt is f#rther agreed that merely for p#rpose of sec#ring the payment of the p#rchase price the a%ove descri%ed merchandise remains the property of the vendor #ntil the p#rchase price thereof is f#lly paid.B -. C/: petitioner is lia%le for the #npaid acco#nts +. C/: it has %een esta%lished that petitioner has o#tstanding acco#nts with (M* and L6P(. EeldA :o. Hes. Hes. Hes %#t acco#nt with L6P( #ns#%stantiated. Petition partly granted. RatioA 1. :owhere is it provided in the '#estioned ins#rance policies that the s#%8ect of the ins#rance is the goods sold and delivered to the c#stomers and dealers of the ins#red. 2h#s, what were ins#red against were the acco#nts of (M* and L6P( with petitioner which remained #npaid +, days after the loss thro#gh fire, and not the loss or destr#ction of the goods delivered. . 2he present case clearly falls #nder paragraph (1), )rticle 1,9+ of the *ivil *odeA )R2. 1,9+. Inless otherwise agreed, the goods remain at the sellerDs ris& #ntil the ownership therein is transferred to the %#yer, %#t when the ownership therein is transferred to the %#yer the goods are at the %#yerDs ris& whether act#al delivery has %een made or not, e4cept thatA (1) Chere delivery of the goods has %een made to the %#yer or to a %ailee for the %#yer, in p#rs#ance of the contract and the ownership in the goods has %een retained %y the seller merely to sec#re performance %y the %#yer of his o%ligations #nder the contract, the goods are at the %#yerDs ris& from the time of s#ch delivery 2h#s, when the seller retains ownership only to ins#re that the %#yer will pay its de%t, the ris& of loss is %orne %y the %#yer. Petitioner %ears the ris& of loss of the goods delivered. (M* and L6P( had an ins#ra%le interest #ntil f#ll payment of the val#e of the delivered goods. Inli&e the civil law concept of res perit domino, where ownership is the %asis for consideration of who %ears the ris& of loss, in property ins#rance, oneDs interest is not determined %y concept of title, %#t whether ins#red has s#%stantial economic interest in the property. 6ection 1- of o#r (ns#rance *ode defines ins#ra%le interest as Bevery interest in property, whether real or personal, or any relation thereto, or lia%ility in respect thereof, of s#ch nat#re that a contemplated peril might directly damnify the ins#red.B Parenthetically, #nder 6ection 1+ of the same *ode, an ins#ra%le interest in property may consist inA (a) an e4isting interest; (%) an inchoate interest fo#nded on e4isting interest; or (c) an e4pectancy, co#pled with an e4isting interest in that o#t of which the e4pectancy arises. )nyone has an ins#ra%le interest in property who derives a %enefit from its e4istence or wo#ld s#ffer loss from its destr#ction. (ndeed, a vendor or seller retains an ins#ra%le interest in the property sold so long as he has any interest therein, in other words, so long as he wo#ld s#ffer %y its destr#ction, as where he has a vendorDs lien. (n this case, the ins#ra%le interest of (M* and L6P( pertain to the #npaid acco#nts appearing in their 1oo&s of )cco#nt +, days after the time of the loss covered %y the policies. -. PetitionerDs arg#ment that it is not lia%le %eca#se the fire is a fort#ito#s event #nder )rticle 11;+of the *ivil *ode is misplaced. )s held earlier, petitioner %ears the loss #nder )rticle 1,9+ (1) of the *ivil *ode. Moreover, it m#st %e stressed that the ins#rance in this case is not for loss of goods %y fire %#t for petitionerDs acco#nts with (M* and L6P( that remained #npaid +, days after the fire. )ccordingly,

petitionerDs o%ligation is for the payment of money. )s correctly stated %y the *), where the o%ligation consists in the payment of money, the fail#re of the de%tor to ma&e the payment even %y reason of a fort#ito#s event shall not relieve him of his lia%ility. 2he rationale for this is that the r#le that an o%ligor sho#ld %e held e4empt from lia%ility when the loss occ#rs thr# a fort#ito#s event only holds tr#e when the o%ligation consists in the delivery of a determinate thing and there is no stip#lation holding him lia%le even in case of fort#ito#s event. (t does not apply when the o%ligation is pec#niary in nat#re. Inder )rticle 1 =- of the *ivil *ode, BFiGn an o%ligation to deliver a generic thing, the loss or destr#ction of anything of the same &ind does not e4ting#ish the o%ligation.B 2his r#le is %ased on the principle that the gen#s of a thing can never perish. )n o%ligation to pay money is generic; therefore, it is not e4c#sed %y fort#ito#s loss of any specific property of the de%tor. +. Cith respect to (M*, the respondent has ade'#ately esta%lished its claim. 2he P - m claim has %een proven. 2he s#%rogation receipt, %y itself, is s#fficient to esta%lish not only the relationship of respondent as ins#rer and (M* as the ins#red, %#t also the amo#nt paid to settle the ins#ranceclaim. 2he right of s#%rogation accr#es simply #pon payment %y the ins#rance company of the ins#rance claim RespondentDs action against petitioner is s'#arely sanctioned %y )rticle 9; of the *ivil *ode which providesA )rt. 9;. (f the plaintiffDs property has %een ins#red, and he has received indemnity from the ins#rance company for the in8#ry or loss arising o#t of the wrong or %reach of contract complained of, the ins#rance company shall %e s#%rogated to the rights of the ins#red against the wrongdoer or the person who has violated the contract. )s to L6P(, respondent failed to present s#fficient evidence to prove its ca#se of action. 2here was no evidence that respondent has %een s#%rogated to any right which L6P( may have against petitioner. @ail#re to s#%stantiate the claim of s#%rogation is fatal to petitionerDs case for recovery of P,-,,=1-.99.

PHILAMCARE V. CA- HEALTH CARE AGREEMENT

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) > 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.

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. 2. Prior notice of cancellation to insured; Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned; 3. 4. Must be in writing, mailed or delivered to the insured at the address shown in the policy; 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 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.

G.R.

o. *+,-+. Febru(ry //, /0*/

MA. LO#R"ES S. FLORE "O, Petitioner,vs. !HILAM !LA S, I C., !ERLA A&CE"E MA. CELESTE A&CE"E, Respondents. FACTS) Man#el @lorendo filed an application for comprehensive pension plan with respondent PhilamPlans, (nc. (Philam Plans) Man#el signed the application and left to Perla the tas& of s#pplying the information needed in the application. Respondent Ma. *eleste )%cede, Perlas da#ghter, signed the application as sales co#nselor. Philam Plans iss#ed Pension Plan )greement to Man#el, with petitioner Ma. Lo#rdes 6. @lorendo, his wife, as %eneficiary. (n time, Man#el paid his '#arterly premi#ms. !leven months later, Man#el died of %lood poisoning. 6#%se'#ently, Lo#rdes filed a claim with Philam Plans for the payment of the %enefits #nder her h#s%ands plan %#t Philam Plans declined her claim prompting her to file the present action against the pension plan company %efore the Regional 2rial *o#rt (R2*) of J#e$on *ity and r#led in favor of Ma. Lo#rdes. Eowever, the *o#rt of )ppeals then reversed the R2* decision. Eence this appeal. ISS#E) Chether or not Ma. Lo#rdes co#ld claim %enefits as the %eneficiary of her h#s%and #nder the ins#rance plan despite consideration that her h#s%and Man#el concealed the tr#e condition of his health. R#LI G) 2he 6#preme *o#rt answers this to the negative and the )@@(RM!> in its entirety the decision of the *o#rt of )ppeals. 2he comprehensive pension plan that Philam Plans iss#ed contains a one3year incontesta%ility period. (t statesA VIII. I CO TESTA&ILIT' )fter this )greement has remained in force for one (1) year, we can no longer contest f or health reasons any claim for ins#rance #nder this )greement, e4cept for the reason that installment has not %een paid (lapsed), or that yo# are not ins#ra%le at the time yo# %o#ght this pension program %y reason of age. (f this )greement lapses %#t is reinstated afterwards, the one (1) year contesta%ility period shall start again on the date of approval of yo#r re'#est for reinstatement. 2he a%ove in1ontest(bi2ity 12(use precl#des the ins#rer from disowning lia%ility #nder thepolicy it iss#ed on the gro#nd of concealment or misrepresentation regarding the health of theins#red after a year of its iss#ance. 6ince M(nue2 died on t3e e2event3 4ont3 following the iss#ance of his plan, the one year incontesta%ility period has not yet set in. *onse'#ently, Philam Plans was not %arred from '#estioning Lo#rdes entitlement to the %enefits of her h#s%ands pension plan.