Philamcare v. CA- Health Care Agreement

379 SCRA 356 (2002)


>  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. Prior notice of cancellation to insured;
  2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;
  3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
  4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based.

None of the above pre-conditions was fulfilled in this case. When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to preclude the insurer from 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.