SUN INSURANCE OFFICE, LTD., petitioner, vs. COURT OF APPEALS and EMILIO 27.
27. Action or suit clause — If a claim be made and rejected and an
TAN, respondents.
This is a petition for review on certiorari of the June 20, 1989 decision1 of the
Court of Appeals in CA-G.R. SP. Case No. 13848 affirming the November 3,
1987 and January 14, 1988 orders of the Regional Trial Court2 of Iloilo, Branch
27, in Civil Case No. 16817, denying the motion to dismiss and the subsequent
motion for reconsideration; and the August 22, 1989 resolution of the same
court denying the motion for reconsideration.
On August 15, 1983, herein private respondent Emilio Tan took from herein
petitioner a P300,000.00 property insurance policy to cover his interest in the
electrical supply store of his brother housed in a building in Iloilo City. Four (4)
days after the issuance of the policy, the building was burned including the
insured store. On August 20, 1983, Tan filed his claim for fire loss with
petitioner, but on February 29, 1984, petitioner wrote Tan denying the latter's
claim. On April 3, 1984, Tan wrote petitioner, seeking reconsideration of the
denial of his claim. On September 3, 1985, Tan's counsel wrote the Insurer
inquiring about the status of his April 3, 1984 request for reconsideration.
Petitioner answered the letter on October 11, 1985, advising Tan's counsel that
the Insurer's denial of Tan's claim remained unchanged, enclosing copies of
petitioners' letters of February 29, 1984 and May 17, 1985 (response to petition
for reconsideration). On November 20, 1985, Tan filed Civil Case No. 16817
with the Regional Trial Court of Iloilo, Branch 27 but petitioner filed a motion
to dismiss on the alleged ground that the action had already prescribed. Said
motion was denied in an order dated November 3, 1987; and petitioner's motion
for reconsideration was also denied in an order dated January 14, 1988.
Petitioner went to the Court of Appeals and sought the nullification of the said
Nov. 3, 1987 and January 14, 1988 orders, but the Court of Appeals, in its June
20, 1989 decision denied the petition and held that the court a quo may continue
until its final termination.
A motion for reconsideration was filed, but the same was denied by the Court
of Appeals in its resolution of August 22, 1989 (Rollo, pp. 42-43).
Hence, the instant petition.
The Second Division of this Court, in its resolution of December 18, 1989
resolved to give due course to the petition and to require the parties to submit
simultaneous memoranda (Ibid., p. 56).
Petitioner raised two (2) issues which may be stated in substance, as follows:
I of Ang v. Fulton Fire Insurance Co., (2 SCRA 945 [1961]), to wit:
WHETHER OR NOT THE FILING OF A MOTION FOR
RECONSIDERATION INTERRUPTS THE TWELVE (12)
MONTHS PRESCRIPTIVE PERIOD TO CONTEST THE
DENIAL OF THE INSURANCE CLAIM; and
II
WHETHER OR NOT THE REJECTION OF THE CLAIM SHALL
BE DEEMED FINAL ONLY IF IT CONTAINS WORDS TO THE
EFFECT THAT THE DENIAL IS FINAL.
The answer to the first issue is in the negative.
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly against
the insurer company, yet, 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 (Pacific Banking
Corp. v. Court of Appeals, 168 SCRA 1 [1988]).
Condition 27 of the Insurance Policy, which is the subject of the conflicting
contentions of the parties, reads:
action or suit be not commenced either in the Insurance Commission
or in any court of competent jurisdiction within twelve (12) months
from receipt of notice of such rejection, or in case of arbitration
taking place as provided herein, within twelve (12) months after due
notice of the award made by the arbitrator or arbitrators or umpire,
then the claim shall for all purposes be deemed to have been
abandoned and shall not thereafter be recoverable hereunder.
As the terms are very clear and free from any doubt or ambiguity whatsoever,
it must be taken and understood in its plain, ordinary and popular sense pursuant
to the above-cited principle laid down by this Court.
Respondent Tan, in his letter addressed to the petitioner insurance company
dated April 3, 1984 (Rollo, pp. 50-52), admitted that he received a copy of the
letter of rejection on April 2, 1984. Thus, the 12-month prescriptive period
started to run from the said date of April 2, 1984, for such is the plain meaning
and intention of Section 27 of the insurance policy.
While the question of whether or not the insured was definitely advised of the
rejection of his claim through the letter (Rollo, pp. 48-49) of petitioner dated
February 29, 1984, may arise, the certainty of the denial of Tan's claim was
clearly manifested in said letter, the pertinent portion of which reads:
We refer to your claim for fire loss of 20th August, 1983 at Huervana
St., La Paz, Iloilo City.
We now have the report of our adjusters and after a thorough and
careful review of the same and the accompanying documents at
hand, we are rejecting, much to our regrets, liability for the claim
under our policies for one or more of the following reasons:
1. xxx xxx xxx
2. xxx xxx xxx
For your information, we have referred all these matters to our
lawyers for their opinion as to the compensability of your claim,
particularly referring to the above violations. It is their opinion and
in fact their strong recomendation to us to deny your claim. By this
letter, we do not intend to waive or relinquish any of our rights or
defenses under our policies of insurance.
It is also important to note the principle laid down by this Court in the case
The condition contained in an insurance policy that claims must be
presented within one year after rejection is not merely a procedural
requirement but an important matter essential to a prompt settlement
of claims against insurance companies as it demands that insurance
suits be brought by the insured while the evidence as to the origin
and cause of destruction have not yet disappeared.
In enunciating the above-cited principle, this Court had definitely settled the
rationale for the necessity of bringing suits against the Insurer within one year
from the rejection of the claim. The contention of the respondents that the one-
year prescriptive period does not start to run until the petition for
reconsideration had been resolved by the insurer, runs counter to the declared
purpose for requiting that an action or suit be filed in the Insurance Commission
or in a court of competent jurisdiction from the denial of the claim. To uphold
respondents' contention would contradict and defeat the very principle which
this Court had laid down. Moreover, it can easily be used by insured persons as
a scheme or device to waste time until any evidence which may be considered
against them is destroyed.
It is apparent that Section 27 of the insurance policy was stipulated pursuant to
Section 63 of the Insurance Code, which states that:
1
 Sec. 63. A condition, stipulation or agreement in any policy of
insurance, limiting the time for commencing an action thereunder to
a period of less than one year from the time when the cause of action
accrues, is void.

The crucial issue in this case is: When does the cause of action accrue?

In support of private respondent's view, two rulings of this Court have been
cited, namely, the case of Eagle Star Insurance Co. vs. Chia Yu (96 Phil. 696
(1955]), where the Court held:

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.

and the case of ACCFA vs. Alpha Insurance & Surety Co., Inc. (24 SCRA 151
[1968], holding that:

Since "cause of action" requires as essential elements not only a

legal right of the plaintiff and a correlated obligation of the
defendant in violation of the said legal right, the cause of action does
not accrue until the party obligated (surety) refuses, expressly or
impliedly, to comply with its duty (in this case to pay the amount of
the bond).

Indisputably, the above-cited pronouncements of this Court may be taken to

mean that the insured's cause of action or his right to file a claim either in the
Insurance Commission or in a court of competent jurisdiction commences from
the time of the denial of his claim by the Insurer, either expressly or impliedly.

But as pointed out by the petitioner insurance company, the rejection referred
to should be construed as the rejection, in the first instance, for if what is being
referred to is a reiterated rejection conveyed in a resolution of a petition for
reconsideration, such should have been expressly stipulated.

Thus, to allow the filing of a motion for reconsideration to suspend the running
of the prescriptive period of twelve months, a whole new body of rules on the
matter should be promulgated so as to avoid any conflict that may be brought
by it, such as:

a) whether the mere filing of a plea for reconsideration of a denial is

sufficient or must it be supported by arguments/affidavits/material
evidence;

b) how many petitions for reconsideration should be permitted?

While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "final
rejection", the same cannot be taken to mean the rejection of a petition for
reconsideration as insisted by respondents. Such was clearly not the meaning
contemplated by this Court. The Insurance policy in said case provides that the
insured should file his claim, first, with the carrier and then with the insurer.
The "final rejection" being referred to in said case is the rejection by the
insurance company.

PREMISES CONSIDERED, the questioned decision of the Court of Appeals is

REVERSED and SET ASIDE, and Civil Case No. 16817 filed with the
Regional Trial Court is hereby DISMISSED.

2

DBP POOL OF ACCREDITED INSURANCE COMPANIES, Petitioner, - versus
- RADIO MINDANAO NETWORK,
INC., Respondent.
This refers to the petition for certiorari under Rule 45 of the Rules of Court
seeking the review of the Decision[1] dated November 16, 2000 of the Court of
Appeals (CA) in CA-G.R. CV No. 56351, the dispositive portion of which
reads:
Wherefore, premises considered, the appealed Decision of
the Regional Trial Court of Makati City, Branch 138 in Civil Case No. 90-602
is hereby AFFIRMED with MODIFICATION in that the interest rate is hereby
reduced to 6% per annum. Costs against the defendants-appellants. SO
ORDERED.[2]
The assailed decision originated from Civil Case No. 90-602 filed by Radio
Mindanao Network, Inc. (respondent) against DBP Pool of Accredited
Insurance Companies (petitioner) and Provident Insurance Corporation
(Provident) for recovery of insurance benefits. Respondent owns several
broadcasting stations all over the country.Provident covered respondents
transmitter equipment and generating set for the amount of P13,550,000.00
under Fire Insurance Policy No. 30354, while petitioner covered respondents
transmitter, furniture, fixture and other transmitter facilities for the amount
of P5,883,650.00 under Fire Insurance Policy No. F-66860.
In the evening of July 27, 1988, respondents radio station located
in SSS Building, Bacolod City, was razed by fire causing damage in the amount
of P1,044,040.00.Respondent sought recovery under the two insurance policies
but the claims were denied on the ground that the cause of loss was an excepted
risk excluded under condition no. 6 (c) and (d), to wit:
6. This insurance does not cover any loss or damage
occasioned by or through or in consequence, directly or
indirectly, of any of the following consequences,
namely:
(c) War, invasion, act of foreign enemy, hostilities, or
warlike operations (whether war be declared or not), civil
war.
(d) Mutiny, riot, military or popular rising, insurrection,
rebellion, revolution, military or usurped power.[3]
The insurance companies maintained that the evidence showed that the fire was
caused by members of the Communist Party of the Philippines/New Peoples
Army (CPP/NPA); and consequently, denied the claims. Hence, respondent
was constrained to file Civil Case No. 90-602 against petitioner and Provident.
After trial on the merits, the Regional Trial Court of Makati, Branch 138,
rendered a decision in favor of respondent. The dispositive portion of the
decision reads:
IN VIEW THEREOF, judgment is rendered in favor of plaintiff. Defendant
Provident Insurance Corporation is directed to pay plaintiff the amount
of P450,000.00 representing the value of the destroyed property insured under
its Fire Insurance Policy plus 12% legal interest from March 2, 1990 the date
of the filing of the Complaint. Defendant DBP Pool Accredited Insurance
Companies is likewise ordered to pay plaintiff the sum of P602,600.00
representing the value of the destroyed property under its Fire Insurance Policy
plus 12% legal interest from March 2, 1990. SO ORDERED.[4]
Both insurance companies appealed from the trial courts decision but the CA
affirmed the decision, with the modification that the applicable interest rate was
reduced to 6% per annum. A motion for reconsideration was filed by petitioner
DBP which was denied by the CA per its Resolution dated January 30, 2001.[5]
Hence, herein petition by DBP Pool of Accredited Insurance Companies,[6] with
the following assignment of errors:
Assignment of Errors
THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD
THAT THERE WERE NO SUFFICIENT EVIDENCE SHOWING THAT
THE APPROXIMATELY TENTY [sic] (20) ARMED MEN WHO CUSED
[sic] THE FIRE AT RESPONDENTS RMN PROPERTY AT BACOLOD
CITY WERE MEMBERS OF THE CPP-NPA.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT
ADJUDGED THAT RESPONDENT RMN CANNOT BEHELD [sic] FOR
DAMAGES AND ATTORNEYS FEES FOR INSTITUTING THE
PRESENT ACTION AGAINST THE PETITIONER UNDER ARTICLES 21,
2208, 2229 AND 2232 OF THE CIVIL CODE OF THE PHILIPPINES. [7]
Petitioner assails the factual finding of both the trial court and the CA that its
evidence failed to support its allegation that the loss was caused by an excepted
risk, i.e., members of the CPP/NPA caused the fire. In upholding respondents
claim for indemnity, the trial court found that:
The only evidence which the Court can consider to determine if the fire was
due to the intentional act committed by the members of the New Peoples Army
(NPA), are the testimony [sic] of witnesses Lt. Col. Nicolas Torres and SPO3
Leonardo Rochar who were admittedly not present when the fire
occurred. Their testimony [sic] was [sic] limited to the fact that an
investigation was conducted and in the course of the investigation they were
informed by bystanders that heavily armed men entered the transmitter house,
poured gasoline in (sic) it and then lighted it. After that, they went out shouting
Mabuhay ang NPA (TSN, p. 12., August 2, 1995). The persons whom they
investigated and actually saw the burning of the station were not presented as
witnesses. The documentary evidence particularly Exhibits 5 and 5-C do not
satisfactorily prove that the author of the burning were members of the
NPA. Exhibit 5-B which is a letter released by the NPA merely mentions some
dissatisfaction with the activities of some people in the media
in Bacolod. There was no mention there of any threat on media facilities.[8]
The CA went over the evidence on record and sustained the findings of the trial
court, to wit:
To recapitulate, defendants-appellants presented the following to support its
claim, to wit: police blotter of the burning of DYHB, certification of the
Negros Occidental Integrated National Police, Bacolod City regarding the
incident, letter of alleged NPA members Celso Magsilang claiming
responsibility for the burning of DYHB, fire investigation report dated July
29, 1988, and the testimonies of Lt. Col. Nicolas Torres and SFO III
Leonardo Rochas. We examined carefully the report on the police blotter of
the burning of DYHB, the certification issued by the Integrated National
Police of Bacolod City and the fire investigation report prepared by SFO
III Rochas and there We found that none of them categorically stated that the
twenty (20) armed men which burned DYHB were members of the
CPP/NPA. The said documents simply stated that the said armed men
were believed to be or suspected of being members of the said group. Even
SFO III Rochas admitted that he was not sure that the said armed men were
members of the CPP-NPA, thus:
In fact the only person who seems to be so sure that that the CPP-NPA had a
hand in the burning of DYHB was Lt. Col. Nicolas Torres. However, though
We found him to be persuasive in his testimony regarding how he came to
arrive at his opinion, We cannot nevertheless admit his testimony as
conclusive proof that the CPP-NPA was really involved in the incident
considering that he admitted that he did not personally see the armed men even
as he tried to pursue them. Note that when Lt. Col. Torres was presented as
witness, he was presented as an ordinary witness only and not an expert
witness. Hence, his opinion on the identity or membership of the armed men
with the CPP-NPA is not admissible in evidence.
Anent the letter of a certain Celso Magsilang, who claims to be a member of
NPA-NIROC, being an admission of person which is not a party to the present
action, is likewise inadmissible in evidence under Section 22, Rule 130 of
the Rules of Court. The reason being that an admission is competent only
when the declarant, or someone identified in legal interest with him, is a party
to the action.[9]
The Court will not disturb these factual findings absent compelling
or exceptional reasons. It should be stressed that a review by certiorari under
Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of
the Court is limited to reviewing only errors of law, not of fact.[10]
Moreover, when supported by substantial evidence, findings of fact
of the trial court as affirmed by the CA are conclusive and binding on the
parties,[11] which this Court will not review unless there are exceptional
circumstances. There are no exceptional circumstances in this case that would
have impelled the Court to depart from the factual findings of both the trial court
and the CA.
3

Both the trial court and the CA were correct in ruling that petitioner
failed to prove that the loss was caused by an excepted risk.
Petitioner argues that private respondent is responsible for proving
that the cause of the damage/loss is covered by the insurance policy, as
stipulated in the insurance policy, to wit:
Any loss or damage happening during the existence of abnormal conditions
(whether physical or otherwise) which are occasioned by or through in
consequence directly or indirectly, of any of the said occurrences shall be
deemed to be loss or damage which is not covered by the insurance, except to
the extent that the Insured shall prove that such loss or damage happened
independently of the existence of such abnormal conditions.
In any action, suit or other proceeding where the Companies allege that by
reason of the provisions of this condition any loss or damage is not covered by
this insurance, the burden of proving that such loss or damage is covered shall
be upon the Insured.[12]
An insurance contract, being a contract of adhesion, should be so
interpreted as to carry out the purpose for which the parties entered into the
contract which is to insure against risks of loss or damage to the
goods. 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.[13]
The burden of proof contemplated by the aforesaid provision
actually refers to the burden of evidence (burden of going forward). [14] As
applied in this case, it refers to the duty of the insured to show that the loss or
damage is covered by the policy. The foregoing clause notwithstanding, the
burden of proof still rests upon petitioner to prove that the damage or loss was
caused by an excepted risk in order to escape any liability under the contract.
Burden of proof is the duty of any party to present evidence to
establish his claim or defense by the amount of evidence required by law, which
is preponderance of evidence in civil cases. The party, whether plaintiff or
defendant, who asserts the affirmative of the issue has the burden of proof to
obtain a favorable judgment. For the plaintiff, the burden of proof never
parts.[15] For the defendant, an affirmative defense is one which is not a denial
of an essential ingredient in the plaintiffs cause of action, but one which, if
established, will be a good defense i.e. an avoidance of the claim.[16]
Particularly, in insurance cases, where a risk is excepted by the terms
of a policy which insures against other perils or hazards, loss from such a risk
constitutes a defense which the insurer may urge, since it has not assumed that
risk, and from this it follows that an insurer seeking to defeat a claim because
of an exception or limitation in the policy has the burden of proving that
the loss comes within the purview of the exception or limitation set up. If a
proof is made of a loss apparently within a contract of insurance, the burden is
upon the insurer to prove that the loss arose from a cause of loss which is
excepted or for which it is not liable, or from a cause which limits its liability. [17]
Consequently, it is sufficient for private respondent to prove the fact
of damage or loss. Once respondent makes out a prima facie case in its favor,
the duty or the burden of evidence shifts to petitioner to controvert
respondents prima facie case.[18] In this case, since petitioner alleged an
excepted risk, then the burden of evidence shifted to petitioner to prove such
exception. It is only when petitioner has sufficiently proven that the damage or
loss was caused by an excepted risk does the burden of evidence shift back to
respondent who is then under a duty of producing evidence to show why such
excepted risk does not release petitioner from any liability.Unfortunately for
petitioner, it failed to discharge its primordial burden of proving that the damage
or loss was caused by an excepted risk.
Petitioner however, insists that the evidence on record established
the identity of the author of the damage. It argues that the trial court and the CA
erred in not appreciating the reports of witnesses Lt. Col Torres and SFO II
Rochar that the bystanders they interviewed claimed that the perpetrators were
members of the CPP/NPA as an exception to the hearsay rule as part of res
gestae.
A witness can testify only to those facts which he knows of his
personal knowledge, which means those facts which are derived from his
perception.[19] A witness may not testify as to what he merely learned from
others either because he was told or read or heard the same. Such testimony is
considered hearsay and may not be received as proof of the truth of what he has
learned. The hearsay rule is based upon serious concerns about the
trustworthiness and reliability of hearsay evidence inasmuch as such evidence
are not given under oath or solemn affirmation and, more importantly, have not
been subjected to cross-examination by opposing counsel to test the perception,
memory, veracity and articulateness of the out-of-court declarant or actor upon
whose reliability on which the worth of the out-of-court statement depends.[20]
Res gestae, as an exception to the hearsay rule, refers to those
exclamations and statements made by either the participants, victims, or
spectators to a crime immediately before, during, or after the commission of the
crime, when the circumstances are such that the statements were made as a
spontaneous reaction or utterance inspired by the excitement of the occasion
and there was no opportunity for the declarant to deliberate and to fabricate a
false statement. The rule in res gestae applies when the declarant himself did
not testify and provided that the testimony of the witness who heard the
declarant complies with the following requisites: (1) that the principal act,
the res gestae, be a startling occurrence; (2) the statements were made before
the declarant had the time to contrive or devise a falsehood; and (3) that the
statements must concern the occurrence in question and its immediate attending
circumstances.[21]
The Court is not convinced to accept the declarations as part of res
gestae. While it may concede that these statements were made by the bystanders
during a startling occurrence, it cannot be said however, that these utterances
were made spontaneously by the bystanders and before they had the time to
contrive or devise a falsehood. Both SFO III Rochar and Lt. Col. Torres
received the bystanders statements while they were making their investigations
during and after the fire. It is reasonable to assume that when these statements
were noted down, the bystanders already had enough time and opportunity to
mill around, talk to one another and exchange information, not to mention
theories and speculations, as is the usual experience in disquieting situations
where hysteria is likely to take place. It cannot therefore be ascertained whether
these utterances were the products of truth. That the utterances may be mere
idle talk is not remote.
At best, the testimonies of SFO III Rochar and Lt. Col. Torres that
these statements were made may be considered as independently relevant
statements gathered in the course of their investigation, and are admissible not
as to the veracity thereof but to the fact that they had been thus uttered.[22]
Furthermore, admissibility of evidence should not be equated with
its weight and sufficiency.[23] Admissibility of evidence depends on its
relevance and competence, while the weight of evidence pertains to evidence
already admitted and its tendency to convince and persuade.[24] Even assuming
that the declaration of the bystanders that it was the members of the CPP/NPA
who caused the fire may be admitted as evidence, it does not follow that such
declarations are sufficient proof.These declarations should be calibrated vis--
vis the other evidence on record. And the trial court aptly noted that there is a
need for additional convincing proof, viz.:
The Court finds the foregoing to be insufficient to establish that the cause of
the fire was the intentional burning of the radio facilities by the rebels or an
act of insurrection, rebellion or usurped power. Evidence that persons who
burned the radio facilities shouted Mabuhay ang NPA does not furnish logical
conclusion that they are member [sic] of the NPA or that their act was an act
of rebellion or insurrection. Additional convincing proof need be
submitted. Defendants failed to discharge their responsibility to present
adequate proof that the loss was due to a risk excluded.[25]
While the documentary evidence presented by petitioner, i.e., (1) the
police blotter; (2) the certification from the Bacolod Police Station; and (3) the
Fire Investigation Report may be considered exceptions to the hearsay rule,
being entries in official records, nevertheless, as noted by the CA, none of these
documents categorically stated that the perpetrators were members of the
CPP/NPA.[26] Rather, it was stated in the police blotter that: a group of persons
accompanied by one (1) woman all believed to be CPP/NPA more or less 20
persons suspected to be CPP/NPA,[27] while the certification from the Bacolod
Police station stated that some 20 or more armed men believed to be members
of the New Peoples Army NPA,[28] and the fire investigation report concluded
that (I)t is therefore believed by this Investigating Team that the cause of the
fire is intentional, and the armed men suspected to be members of the
CPP/NPA where (sic) the ones responsible [29] All these documents show that
indeed, the suspected executor of the fire were believed to be members of the
CPP/NPA. But suspicion alone is not sufficient, preponderance of evidence
being the quantum of proof.
4
 All told, the Court finds no reason to grant the present petition.

WHEREFORE, the petition is DISMISSED. The Court of Appeals

Decision dated November 16, 2000 and Resolution dated January 30,
2001 rendered in CA-G.R. CV No. 56351 are AFFIRMED in toto.

5
BLUE CROSS HEALTH CARE, INC., Petitioner, NEOMI* and DANILO OLIVARES, program for being caused by a pre-existing condition. It was not able to
Respondents. discharge that burden.[15]

This is a petition for review on certiorari[1] of a decision[2] and resolution[3] of
the Court of Appeals (CA) dated July 29, 2005 and September 21, 2005,
respectively, in CA-G.R. SP No. 84163 which affirmed the decision of the
Regional Trial Court (RTC), Makati City, Branch 61 dated February 2, 2004 in
Civil Case No. 03-1153,[4]which in turn reversed the decision of the
Metropolitan Trial Court (MeTC), Makati City, Branch 66 dated August 5,
2003 in Civil Case No. 80867.[5]
Aggrieved, petitioner filed a petition for review under Rule 42 of the Rules of
Court in the CA. In a decision promulgated on July 29, 2005, the CA affirmed
the decision of the RTC. It denied reconsideration in a resolution promulgated
on September 21, 2005. Hence this petition which raises the following issues:
(1) whether petitioner was able to prove that respondent Neomi's stroke was
caused by a pre-existing condition and therefore was excluded from the
coverage of the health care agreement and (2) whether it was liable for moral
and exemplary damages and attorney's fees.

Respondent Neomi T. Olivares applied for a health care program with petitioner The health care agreement defined a pre-existing condition as:
Blue Cross Health Care, Inc., a health maintenance firm. For the period October
16, 2002 to October 15, 2003,[6] she paid the amount of P11,117. For the same x x x a disability which existed before the commencement date of membership
period, she also availed of the additional service of limitless consultations for whose natural history can be clinically determined, whether or not the Member
an additional amount of P1,000. She paid these amounts in full on October 17, was aware of such illness or condition. Such conditions also include
2002. The application was approved on October 22, 2002. In the health care disabilities existing prior to reinstatement date in the case of lapse of an
agreement, ailments due to pre-existing conditions were excluded from the Agreement. Notwithstanding, the following disabilities but not to the
coverage.[7] exclusion of others are considered pre-existing conditions including their
On November 30, 2002, or barely 38 days from the effectivity of her health complications when occurring during the first year of a Members coverage:
insurance, respondent Neomi suffered a stroke and was admitted at the Medical
City which was one of the hospitals accredited by petitioner. During her I. Tumor of Internal Organs
confinement, she underwent several laboratory tests. On December 2, 2002, her II. Hemorrhoids/Anal Fistula
attending physician, Dr. Edmundo Saniel,[8] informed her that she could be III. Diseased tonsils and sinus conditions requiring surgery
discharged from the hospital. She incurred hospital expenses amounting IV. Cataract/Glaucoma
to P34,217.20. Consequently, she requested from the representative of V. Pathological Abnormalities of nasal septum or turbinates
petitioner at Medical City a letter of authorization in order to settle her medical VI. Goiter and other thyroid disorders
bills. But petitioner refused to issue the letter and suspended payment pending VII. Hernia/Benign prostatic hypertrophy
the submission of a certification from her attending physician that the stroke VIII. Endometriosis
she suffered was not caused by a pre-existing condition.[9] IX. Asthma/Chronic Obstructive Lung disease
X. Epilepsy
She was discharged from the hospital on December 3, 2002. On XI. Scholiosis/Herniated disc and other Spinal column
December 5, 2002, she demanded that petitioner pay her medical bill. When abnormalities
petitioner still refused, she and her husband, respondent Danilo Olivares, were XII. Tuberculosis
constrained to settle the bill.[10] They thereafter filed a complaint for collection XIII. Cholecysitis
of sum of money against petitioner in the MeTC on January 8, 2003. [11] In its XIV. Gastric or Duodenal ulcer
answer dated January 24, 2003, petitioner maintained that it had not yet denied XV. Hallux valgus
respondents' claim as it was still awaiting Dr. Saniel's report. XVI. Hypertension and other Cardiovascular diseases
XVII. Calculi
In a letter to petitioner dated February 14, 2003, Dr. Saniel stated that: XVIII. Tumors of skin, muscular tissue, bone or any form of blood
dyscracias
This is in response to your letter dated February 13, 2003. [Respondent] XIX. Diabetes Mellitus
Neomi T. Olivares called by phone on January 29, 2003. She stated that she is XX. Collagen/Auto-Immune disease
invoking patient-physician confidentiality. That she no longer has any
relationship with [petitioner]. And that I should not release any medical After the Member has been continuously covered for 12
information concerning her neurologic status to anyone without her months, this pre-existing provision shall no longer be
approval. Hence, the same day I instructed my secretary to inform your office applicable except for illnesses specifically excluded by an
thru Ms. Bernie regarding [respondent's] wishes. endorsement and made part of this Agreement.[16]

xxx xxx xxx[12]

In a decision dated August 5, 2003, the MeTC dismissed the complaint for lack
of cause of action. It held:
xxx the best person to determine whether or not the stroke she suffered was
not caused by pre-existing conditions is her attending physician Dr. Saniel
who treated her and conducted the test during her confinement. xxx But since
the evidence on record reveals that it was no less than [respondent Neomi]
herself who prevented her attending physician from issuing the required
certification, petitioner cannot be faulted from suspending payment of her
claim, for until and unless it can be shown from the findings made by her
attending physician that the stroke she suffered was not due to pre-existing
conditions could she demand entitlement to the benefits of her policy. [13]
Under this provision, disabilities which existed before the
commencement of the agreement are excluded from its coverage if they become
manifest within one year from its effectivity. Stated otherwise, petitioner is not
liable for pre-existing conditions if they occur within one year from the time the
agreement takes effect.
Petitioner argues that respondents prevented Dr. Saniel from
submitting his report regarding the medical condition of Neomi. Hence, it
contends that the presumption that evidence willfully suppressed would be
adverse if produced should apply in its favor.[17]
Respondents counter that the burden was on petitioner to prove that
Neomi's stroke was excluded from the coverage of their agreement because it
was due to a pre-existing condition. It failed to prove this.[18]

We agree with respondents.

On appeal, the RTC, in a decision dated February 2, 2004, reversed
the ruling of the MeTC and ordered petitioner to pay respondents the following
amounts: (1) P34,217.20 representing the medical bill in Medical City
and P1,000 as reimbursement for consultation fees, with legal interest from the
filing of the complaint until fully paid; (2) P20,000 as moral damages;
(3) P20,000 as exemplary damages; (4) P20,000 as attorney's fees and (5) costs
of suit.[14] The RTC held that it was the burden of petitioner to prove that the
stroke of respondent Neomi was excluded from the coverage of the health care
In Philamcare Health Systems, Inc. v. CA,[19] we ruled that a health
care agreement is in the nature of a non-life insurance.[20] It is an established
rule in insurance contracts that when their terms contain limitations on liability,
they should be construed strictly against the insurer. These are contracts of
adhesion the terms of which must be interpreted and enforced stringently
against the insurer which prepared the contract. This doctrine is equally
applicable to health care agreements.[21]

6
Petitioner never presented any evidence to prove that respondent Neomi's stroke
was due to a pre-existing condition. It merely speculated that Dr. Saniel's report
would be adverse to Neomi, based on her invocation of the doctor-patient
privilege. This was a disputable presumption at best.

Section 3 (e), Rule 131 of the Rules of Court states:

Sec. 3. Disputable presumptions. ― The following

presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:
xxx xxx xxx

(e) That evidence willfully suppressed would be adverse

if produced.

Suffice it to say that this presumption does not apply if (a) the evidence is at the
disposal of both parties; (b) the suppression was not willful; (c) it is merely
corroborative or cumulative and (d) the suppression is an exercise of a
privilege.[22] Here, respondents' refusal to present or allow the presentation of
Dr. Saniel's report was justified. It was privileged communication between
physician and patient.

Furthermore, as already stated, limitations of liability on the part of the insurer

or health care provider must be construed in such a way as to preclude it from
evading its obligations. Accordingly, they should be scrutinized by the courts
with extreme jealousy[23] and care and with a jaundiced eye.[24] Since
petitioner had the burden of proving exception to liability, it should have made
its own assessment of whether respondent Neomi had a pre-existing condition
when it failed to obtain the attending physician's report. It could not just
passively wait for Dr. Saniel's report to bail it out. The mere reliance on a
disputable presumption does not meet the strict standard required under our
jurisprudence.

Next, petitioner argues that it should not be held liable for moral and
exemplary damages, and attorney's fees since it did not act in bad faith in
denying respondent Neomi's claim. It insists that it waited in good faith for Dr.
Saniel's report and that, based on general medical findings, it had reasonable
ground to believe that her stroke was due to a pre-existing condition,
considering it occurred only 38 days after the coverage took effect. [25]

We disagree.

The RTC and CA found that there was a factual basis for the
damages adjudged against petitioner. They found that it was guilty of bad faith
in denying a claim based merely on its own perception that there was a pre-
existing condition:

[Respondents] have sufficiently shown that [they] were forced to engage in a

dispute with [petitioner] over a legitimate claim while [respondent Neomi
was] still experiencing the effects of a stroke and forced to pay for her medical
bills during and after her hospitalization despite being covered by [petitioners]
health care program, thereby suffering in the process extreme mental anguish,
shock, serious anxiety and great stress. [They] have shown that because of the
refusal of [petitioner] to issue a letter of authorization and to pay [respondent
Neomi's] hospital bills, [they had] to engage the services of counsel for a fee
of P20,000.00. Finally, the refusal of petitioner to pay respondent Neomi's
bills smacks of bad faith, as its refusal [was] merely based on its own
perception that a stroke is a pre-existing condition. (emphasis supplied)

This is a factual matter binding and conclusive on this Court.[26] We

see no reason to disturb these findings.

WHEREFORE, the petition is hereby DENIED. The July 29, 2005

decision and September 21, 2005 resolution of the Court of Appeals in CA-G.R.
SP No. 84163 are AFFIRMED.

7
FORTUNE MEDICARE, INC., Petitioner, vs. DAVID ROBERT U.
AMORIN, Respondent.
This is a petition for review on certiorari1 under Rule 45 of the Rules of
Court, which challenges the Decision2 dated September 27, 2010 and
Resolution3 dated February 24, 2011 of the Court of Appeals (CA) in CA-
G.R. CV No. 87255.
The Facts
David Robert U. Amorin (Amorin) was a cardholder/member of Fortune
Medicare, Inc. (Fortune Care), a corporation engaged in providing health
maintenance services to its members. The terms of Amorin's medical coverage
were provided in a Corporate Health Program Contract4 (Health Care Contract)
which was executed on January 6, 2000 by Fortune Care and the House of
Representatives, where Amorin was a permanent employee.
While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) in
May 1999, Amorin underwent an emergency surgery, specifically
appendectomy, at the St. Francis Medical Center, causing him to incur
professional and hospitalization expenses of US$7,242.35 and US$1,777.79,
respectively. He attempted to recover from Fortune Care the full amount thereof
upon his return to Manila, but the company merely approved a reimbursement
of ₱12,151.36, an amount that was based on the average cost of appendectomy,
net of medicare deduction, if the procedure were performed in an accredited
hospital in Metro Manila.5 Amorin received under protest the approved amount,
but asked for its adjustment to cover the total amount of professional fees which
he had paid, and eighty percent (80%) of the approved standard charges based
on "American standard", considering that the emergency procedure occurred in
the U.S.A. To support his claim, Amorin cited Section 3, Article V on Benefits
and Coverages of the Health Care Contract, to wit:
A. EMERGENCY CARE IN ACCREDITED HOSPITAL. Whether as an in-
patient or out-patient, the member shall be entitled to full coverage under the
benefits provisions of the Contract at any FortuneCare accredited hospitals
subject only to the pertinent provision of Article VII (Exclusions/Limitations)
hereof. For emergency care attended by non affiliated physician (MSU), the
member shall be reimbursed 80% of the professional fee which should have
been paid, had the member been treated by an affiliated physician. The
availment of emergency care from an unaffiliated physician shall not invalidate
or diminish any claim if it shall be shown to have been reasonably impossible
to obtain such emergency care from an affiliated physician.
B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the total
hospitalization cost including the professional fee (based on the total approved
charges) to a member who receives emergency care in a non-accredited
hospital. The above coverage applies only to Emergency confinement within
Philippine Territory. However, if the emergency confinement occurs in a
foreign territory, Fortune Care will be obligated to reimburse or pay eighty
(80%) percent of the approved standard charges which shall cover the
hospitalization costs and professional fees. x x x6
Still, Fortune Care denied Amorin’s request, prompting the latter to file a
complaint7 for breach of contract with damages with the Regional Trial Court
(RTC) of Makati City.
For its part, Fortune Care argued that the Health Care Contract did not cover
hospitalization costs and professional fees incurred in foreign countries, as the
contract’s operation was confined to Philippine territory.8 Further, it argued that
its liability to Amorin was extinguished upon the latter’s acceptance from the
company of the amount of ₱12,151.36.
The RTC Ruling
On May 8, 2006, the RTC of Makati, Branch 66 rendered its
Decision9 dismissing Amorin’s complaint. Citing Section 3, Article V of the
Health Care Contract, the RTC explained:
Taking the contract as a whole, the Court is convinced that the parties intended
to use the Philippine standard as basis. Section 3 of the Corporate Health Care
Program Contract provides that:
xxxx
On the basis of the clause providing for reimbursement equivalent to 80% of
the professional fee which should have been paid, had the member been treated
by an affiliated physician, the Court concludes that the basis for reimbursement
shall be Philippine rates. That provision, taken with Article V of the health
program contract, which identifies affiliated hospitals as only those accredited
clinics, hospitals and medical centers located "nationwide" only point to the
Philippine standard as basis for reimbursement.
The clause providing for reimbursement in case of emergency operation in a
foreign territory equivalent to 80% of the approved standard charges which
shall cover hospitalization costs and professional fees, can only be reasonably
construed in connection with the preceding clause on professional fees to give
meaning to a somewhat vague clause. A particular clause should not be studied
as a detached and isolated expression, but the whole and every part of the
contract must be considered in fixing the meaning of its parts. 10
In the absence of evidence to the contrary, the trial court considered the amount
of ₱12,151.36 already paid by Fortune Care to Amorin as equivalent to 80% of
the hospitalization and professional fees payable to the latter had he been treated
in an affiliated hospital.11
Dissatisfied, Amorin appealed the RTC decision to the CA.
The CA Ruling
On September 27, 2010, the CA rendered its Decision12 granting the appeal.
Thus, the dispositive portion of its decision reads:
WHEREFORE, all the foregoing premises considered, the instant appeal is
hereby GRANTED. The May 8, 2006 assailed Decision of the Regional Trial
Court (RTC) of Makati City, Branch 66 is hereby REVERSED and SET
ASIDE, and a new one entered ordering Fortune Medicare, Inc. to reimburse
[Amorin] 80% of the total amount of the actual hospitalization expenses of
$7,242.35 and professional fee of $1,777.79 paid by him to St. Francis Medical
Center pursuant to Section 3, Article V of the Corporate Health Care Program
Contract, or their peso equivalent at the time the amounts became due, less the
[P]12,151.36 already paid by Fortunecare. SO ORDERED.13
In so ruling, the appellate court pointed out that, first, health care agreements
such as the subject Health Care Contract, being like insurance contracts, must
be liberally construed in favor of the subscriber. In case its provisions are
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.14 Second, the CA
explained that there was nothing under Article V of the Health Care Contract
which provided that the Philippine standard should be used even in the event of
an emergency confinement in a foreign territory.15
Fortune Care’s motion for reconsideration was denied in a Resolution 16 dated
February 24, 2011. Hence, the filing of the present petition for review on
certiorari.
The Present Petition
Fortune Care cites the following grounds to support its petition:
I. The CA gravely erred in concluding that the phrase "approved standard
charges" is subject to interpretation, and that it did not automatically mean
"Philippine Standard"; and
II. The CA gravely erred in denying Fortune Care’s motion for reconsideration,
which in effect affirmed its decision that the American Standard Cost shall be
8
applied in the payment of medical and hospitalization expenses and professional
fees incurred by the respondent.17
The Court’s Ruling
The petition is bereft of merit.
The Court finds no cogent reason to disturb the CA’s finding that Fortune
Care’s liability to Amorin under the subject Health Care Contract should be
based on the expenses for hospital and professional fees which he actually
incurred, and should not be limited by the amount that he would have incurred
had his emergency treatment been performed in an accredited hospital in the
Philippines.
We emphasize that for purposes of determining the liability of a health care
provider to its members, jurisprudence holds that a health care agreement is 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.18
To aid in the interpretation of health care agreements, the Court laid down the
following guidelines in Philamcare Health Systems v. CA19:
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. 20 (Citations omitted
and emphasis ours)
Consistent with the foregoing, we reiterated in Blue Cross Health Care, Inc. v.
Spouses Olivares21:
In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement
is in the nature of a non-life insurance. It is an established rule in insurance
contracts that when their terms contain limitations on liability, they should be
construed strictly against the insurer. These are contracts of adhesion the terms
of which must be interpreted and enforced stringently against the insurer which
prepared the contract. This doctrine is equally applicable to health care
agreements.
xxxx
x x x [L]imitations of liability on the part of the insurer or health care provider
must be construed in such a way as to preclude it from evading its obligations.
Accordingly, they should be scrutinized by the courts with "extreme jealousy"
and "care" and with a "jaundiced eye." x x x.22 (Citations omitted and emphasis
supplied)
In the instant case, the extent of Fortune Care’s liability to Amorin under the
attendant circumstances was governed by Section 3(B), Article V of the subject
Health Care Contract, considering that the appendectomy which the member
had to undergo qualified as an emergency care, but the treatment was performed
at St. Francis Medical Center in Honolulu, Hawaii, U.S.A., a non-accredited
hospital. We restate the pertinent portions of Section 3(B):
B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the total
hospitalization cost including the professional fee (based on the total approved
charges) to a member who receives emergency care in a non-accredited
hospital. The above coverage applies only to Emergency confinement within
Philippine Territory. However, if the emergency confinement occurs in foreign
territory, Fortune Care will be obligated to reimburse or pay eighty (80%)
percent of the approved standard charges which shall cover the hospitalization
costs and professional fees. x x x23 (Emphasis supplied)
The point of dispute now concerns the proper interpretation of the phrase
"approved standard charges", which shall be the base for the allowable 80%
benefit. The trial court ruled that the phrase should be interpreted in light of the
provisions of Section 3(A), i.e., to the extent that may be allowed for treatments
performed by accredited physicians in accredited hospitals. As the appellate
court however held, this must be interpreted in its literal sense, guided by the
rule that any ambiguity shall be strictly construed against Fortune Care, and
liberally in favor of Amorin.
The Court agrees with the CA. As may be gleaned from the Health Care
Contract, the parties thereto contemplated the possibility of emergency care in
a foreign country. As the contract recognized Fortune Care’s liability for
emergency treatments even in foreign territories, it expressly limited its liability
only insofar as the percentage of hospitalization and professional fees that must
be paid or reimbursed was concerned, pegged at a mere 80% of the approved
standard charges.
The word "standard" as used in the cited stipulation was vague and ambiguous,
as it could be susceptible of different meanings. Plainly, the term "standard
charges" could be read as referring to the "hospitalization costs and professional
fees" which were specifically cited as compensable even when incurred in a
foreign country. Contrary to Fortune Care’s argument, from nowhere in the
Health Care Contract could it be reasonably deduced that these "standard
charges" referred to the "Philippine standard", or that cost which would have
been incurred if the medical services were performed in an accredited hospital
situated in the Philippines. The RTC ruling that the use of the "Philippine
standard" could be inferred from the provisions of Section 3(A), which covered
emergency care in an accredited hospital, was misplaced. Evidently, the parties
to the Health Care Contract made a clear distinction between emergency care
in an accredited hospital, and that obtained from a non-accredited
hospital.1âwphi1 The limitation on payment based on "Philippine standard" for
services of accredited physicians was expressly made applicable only in the
case of an emergency care in an accredited hospital.
The proper interpretation of the phrase "standard charges" could instead be
correlated with and reasonably inferred from the other provisions of Section
3(B), considering that Amorin’s case fell under the second case, i.e., emergency
care in a non-accredited hospital. Rather than a determination of Philippine or
American standards, the first part of the provision speaks of the full
reimbursement of "the total hospitalization cost including the professional fee
(based on the total approved charges) to a member who receives emergency
care in a non-accredited hospital" within the Philippines. Thus, for emergency
care in non-accredited hospitals, this cited clause declared the standard in the
determination of the amount to be paid, without any reference to and regardless
of the amounts that would have been payable if the treatment was done by an
affiliated physician or in an affiliated hospital. For treatments in foreign
territories, the only qualification was only as to the percentage, or 80% of that
payable for treatments performed in non-accredited hospital.
All told, in the absence of any qualifying word that clearly limited Fortune
Care's liability to costs that are applicable in the Philippines, the amount payable
by Fortune Care should not be limited to the cost of treatment in the Philippines,
as to do so would result in the clear disadvantage of its member. If, as Fortune
Care argued, the premium and other charges in the Health Care Contract were
merely computed on assumption and risk under Philippine cost and, that the
American cost standard or any foreign country's cost was never considered,
such limitations should have been distinctly specified and clearly reflected in
the extent of coverage which the company voluntarily assumed. This was what
Fortune Care found appropriate when in its new health care agreement with the
House of Representatives, particularly in their 2006 agreement, the provision
on emergency care in non-accredited hospitals was modified to read as follows:
However, if the emergency confinement occurs in a foreign territory,
Fortunecare will be obligated to reimburse or pay one hundred (100%) percent
under approved Philippine Standard covered charges for hospitalization costs
and professional fees but not to exceed maximum allowable coverage, payable
9
in pesos at prevailing currency exchange rate at the time of availment in said
territory where he/she is confined. x x x24

Settled is the rule that ambiguities in a contract are interpreted against the party
that caused the ambiguity. "Any ambiguity in a contract whose terms are
susceptible of different interpretations must be read against the party who
drafted it."25

WHEREFORE, the petition is DENIED. The Decision dated September

27, 2010 and Resolution dated February 24, 2011 of the Court of
Appeals in CA-G.R. CV No. 87255 are AFFIRMED.

10