Sunlife Assurance Company of Canada vs. Hon. Court of Appeals and Sps.

Rolando
Bacani, G.R. No. 105135, June 22, 1995
Facts

Robert John Bacani procured a life insurance for himself from petitioner valued at
P100,000 with double indemnity in case of accidental death. He designated his mother,
Bernarda Bacani, as her beneficiary.

Robert John died on June 26, 1987 in a plane crash. Therafter, Bernarda filed a claim to the
petitioner seeking the benefits of the insurance policy of her son. Petitioner denied any
claim.

Petitioner claimed that after the investigation, Robert John did not disclose MATERIAL
FACTS relevant to the issuance of the policy; hence, the policy is voidable. Petitioner
discoverd that two weeks prior to formers application for insurance, the insured was
examined and confined at the Lung Center of the Philippines, where he was diagnosed for
renal failure. During his confinement, the deceased was subjected to urinalysis, ultrasonography and hematology tests. This was not disclosed in his policy. Sps. Bacani alleged
that the same was done in good faith.

RTC- in favour of Sps. Bacani; it concluded that the facts concealed by the insured were
made in good faith and under a belief that they need not be disclosed. Moreover, it held
that the health history of the insured was immaterial since the insurance policy was "nonmedical.

CA- affirmed the decision of the RTC

ISSUE: WON there was concealment on the part of the insured regarding his state of health.
SCs RULING: YES.

The rule that factual findings of the lower court and the appellate court are binding on this
Court is not absolute and admits of exceptions, such as when the judgment is based on a
misappreciation of the facts.

Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance

to communicate to the other, in good faith, all facts within his knowledge which are
material to the contract and as to which he makes no warranty, and which the other has
no means of ascertaining. A neglect to communicate that which a party knows and
ought to communicate, is called concealment.

The terms of the contract are clear. The insured is specifically required to disclose to the
insurer matters relating to his health.

The information which the insured failed to disclose were material and relevant to the
approval and issuance of the insurance policy. The matters concealed would have
definitely affected petitioner's action on his application, either by approving it with the
corresponding adjustment for a higher premium or rejecting the same. Moreover, a
disclosure may have warranted a medical examination of the insured by petitioner in order
for it to reasonably assess the risk involved in accepting the application.

Thus, "goad faith" is no defense in concealment. The insured's failure to disclose the fact
that he was hospitalized for two weeks prior to filing his application for insurance, raises
grave doubts about his bonafides. It appears that such concealment was deliberate on his
part.

Anent the finding that the facts concealed had no bearing to the cause of death of the
insured, it is well settled that the insured need not die of the disease he had failed to

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disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming
his estimates of the risks of the proposed insurance policy or in making inquiries.

PhilAmCare Health System vs. CA and Julita Trinos, G.R. No. 125678, March 18, 2002
Facts

Ernani Trinos, husband of Julita Trinos, applied for a health care coverage with the
petitioner. In the application form he denied any treatment for high blood pressure, heart
trouble, diabetes, cancer, liver disease, asthma or peptic ulcer. Said application was
approved for a period of 1 year which was extended for another year.

During the period of the coverage, Ernani suffered heart attack and was confined at teh
Manila Medical Center for a month. Julita then claim the benefits under the health care
agreement. For some reason, petitioner denied her claim saying that the same is void as
there was concealment regarding Ernanis medical history. Therafter, Ernani died.

Julita filed an action for damages against petitioner. She alleged that she has paid P76,000
for her husbands hospitalization and her claim against the petitioner was denied without
valid grounds.

Petitioner claimed that agreement grants "living benefits," such as medical check-ups
and hospitalization which a member may immediately enjoy so long as he is alive upon
effectivity of the agreement until its expiration one-year thereafter. That that only medical
and hospitalization benefits are given under the agreement without any indemnification,
unlike in an insurance contract where the insured is indemnified for his loss. Petitioner
further argues that it is not an insurance company, which is governed by the Insurance
Commission, but a Health Maintenance Organization under the authority of the
Department of Health.

RTC ruled in favor of Julita; it ordered the petitioner to reimburse the medical and
hospital coverage of Ernani, plus moral damages for P10,000, exemplary damages also for
P10,000 and attorneys fee of 20,000.

CA affirmed the decision of the RTC but deleted all awards for damages.

ISSUE: WON the insured concealed a material fact in his application.

SCs RULING: NO.

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.

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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. 20 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 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.

Perla Compania de Seguros vs. CA and Sps. Herminio Lim, G.R. No. 96452, May 7,
1992
Facts
Perla Compania- insurer
Sps. Lim insured their Ford vehicle which they mortagage to Supercars
FCP Credit Corporation assignee of Supercars

Sps. Lim executed a promissory note in favor of Supercars in the sum of P77,940.00,
payable in monthly instalment, they also secured by a chattel mortgage over a brand new
Ford Laser with Perla Compania.

Supercars assigned to FCP Credit its rights, title and interest on the said promissory note
and chattel mortgage.

On November 9, 1982 (around 2:30 PM), the said vehicle was carnapped. It was Evelyn
Lim, wife, who was driving he said car before it was carnapped. The incident was reported
to the Philippine Constabulary-Anti- Carnapping Unit. Thereafter, Sps. Lim filed a claim for
loss with the Perla Compania but said claim was denied.

Perla alleged that when the subject vehicle was carnapped, it was in possession of Evelyn
who, at that moment, had an EXPIRED DRIVERs LICENSE, which in violation of the
AUTHORIZED DRIVER CLAUSE OF THE INSURANCE POLICY.

On the other hand, FCP denied the request of Sps. Lim for a suspension of payment on the
monthly amortization agreed upon due to the loss of the vehicle, since the carnapped
vehicle insured with petitioner Perla, said insurance company should be made to pay the
remaining balance of the promissory note and the chattel mortgage contract.

Trial Court ordered Sps. Lim to pay FCP; it also ruled that there was no violation of the
insurance contract because the AUTHORIZED DRIVER CLAUSE is not applicable but the
THEFT CLAUSE of the said contract.

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ISSUE: WON the authorized driver clause in the insurance policy is applicable.

SCs RULING:
No. It is the THEFT CLAUSE in the insurance policy which is applicable.

The comprehensive motor car insurance policy issued by petitioner Perla undertook to
indemnify the private respondents against loss or damage to the car (a) by accidental
collision or overturning, or collision or overturning consequent upon mechanical
breakdown or consequent upon wear and tear; (b) by fire, external explosion, self-ignition
or lightning or burglary, housebreaking or theft; and (c) by malicious act.

Where a car is admittedly, as in this case, unlawfully and wrongfully taken without the
owner's consent or knowledge, such taking constitutes theft, and, therefore, it is the
"THEFT"' clause, and not the "AUTHORIZED DRIVER" clause that should apply.

The risk against accident is distinct from the risk against theft. The "authorized
driver clause" in a typical insurance policy is in contemplation or anticipation of accident in
the legal sense in which it should be understood, and not in contemplation or anticipation
of an event such as theft.

The distinction - often seized upon by insurance companies in resisting claims from their
assureds - between death occurring as a result of accident and death occurring as a result
of intent may, by analogy, apply to the case at bar.

Thus, if the insured vehicle had figured in an accident at the time she drove it with an
expired license, then, appellee Perla Compania could properly resist appellants' claim for
indemnification for the loss or destruction of the vehicle resulting from the accident. But in
the present case. The loss of the insured vehicle did not result from an accident where
intent was involved; the loss in the present case was caused by theft, the commission of
which was attended by intent.

It is worthy to note that there is no causal connection between the possession of a valid
driver's license and the loss of a vehicle. To rule otherwise would render car insurance
practically a sham since an insurance company can easily escape liability by citing
restrictions which are not applicable or germane to the claim, thereby reducing indemnity
to a shadow.

The chattel mortgage constituted over the automobile is merely an accessory contract to
the promissory note. Being the principal contract, the promissory note is unaffected by
whatever befalls the subject matter of the accessory contract. Therefore, the unpaid
balance on the promissory note should be paid, and not just the installments due and
payable before the automobile was carnapped.

The insurance policy was therefore meant to be an additional security to the principal
contract, that is, to insure that the promissory note will still be paid in case the automobile
is lost through accident or theft. It is clear from the abovementioned provision that upon
the loss of the insured vehicle, the insurance company Perla undertakes to pay directly to
the mortgagor or to their assignee, FCP, the outstanding balance of the mortgage at the
time of said loss under the mortgage contract.

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