#1 Insular Life Assurance Company vs.
Khu
FACTS:
March 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy
with Insular Life under the latter's Diamond Jubilee Insurance Plan. Felipe
accomplished the required medical questionnaire wherein he did not
declare any illness or adverse medical condition. Insular Life thereafter
issued him Policy.
June 1999, Felipe's policy lapsed due to non-payment of the premium.
September 1999, Felipe applied for the reinstatement of his policy. Except
for the change in his occupation of being self-employed to being the
Municipal Mayor of Binuangan, Misamis Oriental, all the other information
submitted by Felipe in his application for reinstatement was virtually
identical to those mentioned in his original policy.
September 2001, Felipe died.
Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y. Khu (collectively, Felipe's
beneficiaries or respondents) filed with Insular Life a claim for benefit
under the reinstated policy. This claim was denied. Instead, Insular Life
advised Felipe's beneficiaries that it had decided to rescind the reinstated
policy on the grounds of concealment and misrepresentation by Felipe.
Insular Life: Felipe did not disclose the ailments (viz., Type 2 Diabetes
Mellitus, Diabetes Nephropathy and Alcoholic Liver Cirrhosis with Ascites)
that he already had prior to his application for reinstatement of his
insurance policy; and that it would not have reinstated the insurance
policy had Felipe disclosed the material information on his adverse health
condition. It contended that when Felipe died, the policy was still
contestable.
RTC:
In ordering Insular Life to pay Felipe's beneficiaries, the RTC agreed with
the latter's claim that the insurance policy was reinstated on June 22,
1999.
The RTC cited the ruling in Malayan Insurance Corporation v. Court of
Appeals that any ambiguity in a contract of insurance should be resolved
strictly against the insurer upon the principle that an insurance contract is
a contract of adhesion.
The RTC also held that the reinstated insurance policy had already
become incontestable by the time of Felipe's death on September 22,
2001 since more than two years had already lapsed from the date of the
policy's reinstatement on June 22, 1999.
The RTC noted that' since it was Insular Life itself that supplied all the
pertinent forms relative to the reinstated policy, then it is barred from
taking advantage of any ambiguity/obscurity perceived therein
particularly as regards the date when the reinstated insurance policy
became effective.
CA:
The CA upheld the RTC's ruling on the non-contestability of the reinstated
insurance policy on the date the insured died.
ISSUE:
Whether Felipe's reinstated life insurance policy is already incontestable
at the time of his death.
RULING:
The Insurance Code pertinently provides that:
Sec. 48. Whenever a right to rescind a contract of insurance is given to
the insurer by any provision of this chapter, such right must be exercised
previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured
shall have been in force during the lifetime of the insured for a period of
two years from the date of its issue or of its last reinstatement, the
insurer cannot prove that the policy is void ab initio or is rescindible by
reason of the fraudulent concealment or misrepresentation of the insured
or his agent.
The Court therefore agrees fully with the appellate court's pronouncement
that-
'The insurer is deemed to have the necessary facilities to discover such
fraudulent concealment or misrepresentation within a period of two (2)
years. It is not fair for the insurer to collect the premiums as long as the
insured is still alive, only to raise the issue of fraudulent concealment or
misrepresentation when the insured dies in order to defeat the right of
the beneficiary to recover under the policy.
At least two (2) years from the issuance of the policy or its last
reinstatement, the beneficiary is given the stability to recover under the
policy when the insured dies. The provision also makes clear when the
two-year period should commence in case the policy should lapse and is
reinstated, that is, from the date of the last reinstatement'.
In the instant case, Eulogio's death rendered impossible full compliance
with the conditions for reinstatement of Policy No. 9011992. True, Eulogio,
before his death, managed to file his Application for Reinstatement and
deposit the amount for payment of his overdue premiums and interests
thereon with Malaluan; but Policy No. 9011992 could only be considered
reinstated after the Application for Reinstatement had been processed
and approved by Insular Life during Eulogio's lifetime and good health.
Thus, it is settled that the reinstatement of an insurance policy should be
reckoned from the date when the same was approved by the insurer.
In this case, the parties differ as to when the reinstatement was actually
approved. Insular Life claims that it approved the reinstatement only on
December 27, 1999. On the other hand, respondents contend that it was
on June 22, 1999 that the reinstatement took effect.
The resolution of this issue hinges on the following documents:
1) Letter of Acceptance; and
2) the Endorsement.
We find that the CA did not commit any error in holding that the subject
insurance policy be considered as reinstated on June 22, 1999. This
finding must be upheld not only because it accords with the evidence, but
also because this is favorable to the insured who was not responsible for
causing the ambiguity or obscurity in the insurance contract.
The CA expounded on this point thus -
The Court discerns a genuine ambiguity or obscurity in the language of
the two documents.
In the Letter of Acceptance, Khu declared that he was accepting "the
imposition of an extra/additional x x x premium of P5.00 a year per
thousand of insurance; effective June 22, 1999". It is true that the phrase
as used in this particular paragraph does not refer explicitly to the
effectivity of the reinstatement. But the Court notes that the
reinstatement was conditioned upon the payment of additional premium
not only prospectively, that is, to cover the remainder of the annual
period of coverage, but also retroactively, that is for the period starting
June 22, 1999. Hence, by paying the amount of P3,054.50 on December
27, 1999 in addition to the P25,020.00 he had earlier paid on September
7, 1999, Khu had paid for the insurance coverage starting June 22, 1999.
At the very least, this circumstance has engendered a true lacuna.
In the Endorsement, the obscurity is patent. In the first sentence of the
Endorsement, it is not entirely clear whether the phrase "effective June
22, 1999" refers to the subject of the sentence, namely "the
reinstatement of this policy," or to the subsequent phrase "changes are
made on the policy."
Given the obscurity of the language, the construction favorable to the
insured will be adopted by the courts.
Accordingly, the subject policy is deemed reinstated as of June 22, 1999.
Thus, the period of contestability has lapsed.
Thus, in Malayan Insurance Corporation v. Court of Appeals, this Court
held that:
Indemnity and liability insurance policies are construed in accordance
with the general rule of resolving any ambiguity therein in favor of the
insured, where the contract or policy is prepared by the insurer. A
contract of insurance, being a contract of adhesion, par
excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the
insured and strictly against the insurer. 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.
#2 BPI & FGU Insurance Corp. vs. Laingo
FACTS:
Rheozel Laingo (Rheozel), the son of respondent Yolanda Laingo (Laingo),
opened a "Platinum 2-in-1 Savings and Insurance" account with petitioner
Bank of the Philippine Islands (BPI). The Platinum 2-in-1 Savings and
Insurance account is a savings account where depositors are
automatically covered by an insurance policy against disability or death
issued by petitioner FGU Insurance Corporation (FGU Insurance), now
known as BPI/MS Insurance Corporation.
BPI issued Passbook to Rheozel corresponding to Savings Account. A
Personal Accident Insurance Coverage Certificate was also issued by FGU
Insurance in the name of Rheozel with Laingo as his named beneficiary.
Rheozel died due to a vehicular.
More than two years later Rheozel's sister, Rhealyn Laingo-Concepcion,
found the Personal Accident Insurance Coverage Certificate issued by FGU
Insurance.
Laingo sent two letters to BPI and FGU Insurance requesting them to
process her claim as beneficiary of Rheozel's insurance policy. FGU
Insurance denied her claim. FGU Insurance stated that Laingo should
have filed the claim within three calendar months from the death of
Rheozel.
RTC:
The trial court decided the case in favor of respondents. The trial court
ruled that the prescriptive period of 90 days shall commence from the
time of death of the insured and not from the knowledge of the
beneficiary. Since the insurance claim was filed more than 90 days from
the death of the insured, the case must be dismissed.
CA:
Reversed the ruling of the trial court. The Court of Appeals ruled that
Laingo could not be expected to do an obligation which she did not know
existed. The appellate court added that Laingo was not a party to the
insurance contract entered into between Rheozel and petitioners. Thus,
she could not be bound by the 90-day stipulation.
ISSUE:
Whether or not Laingo, as named beneficiary who had no knowledge of
the existence of the insurance contract, is bound by the three calendar
month deadline for filing a written notice of claim upon the death of the
insured.
RULING:
BPI offered a deposit savings account with life and disability insurance
coverage to its customers called the Platinum 2-in-1 Savings and
Insurance account. As the main proponent of the 2-in-1 deposit account,
BPI tied up with its affiliate, FGU Insurance, as its partner. Any customer
interested to open a deposit account under this 2-in-1 product, after
submitting all the required documents to BPI and obtaining BPI's approval,
will automatically be given insurance coverage. Thus, BPI acted as agent
of FGU Insurance with respect to the insurance feature of its own
marketed product.
Under the law, an agent is one who binds himself to render some service
or to do something in representation of another. For an agency to arise, it
is not necessary that the principal personally encounter the third person
with whom the agent interacts. The law in fact contemplates impersonal
dealings where the principal need not personally know or meet the third
person with whom the agent transacts:
Precisely, the purpose of agency is to extend the personality of the
principal through the facility of the agent.
BPI, as agent of FGU Insurance, had the primary responsibility to ensure
that the 2-in-1 account be reasonably carried out with full disclosure to
the parties concerned, particularly the beneficiaries. Thus, it was
incumbent upon BPI to give proper notice of the existence of the
insurance coverage and the stipulation in the insurance contract for filing
a claim to Laingo, as Rheozel's beneficiary, upon the latter's death.
In this case, BPI had the obligation to carry out the agency by informing
the beneficiary, who appeared before BPI to withdraw funds of the insured
who was BPI's depositor, not only of the existence of the insurance
contract but also the accompanying terms and conditions of the
insurance policy in order for the beneficiary to be able to properly and
timely claim the benefit.
Upon Rheozel's death, which was properly communicated to BPI by his
mother Laingo, BPI, in turn, should have fulfilled its duty, as agent of FGU
Insurance, of advising Laingo that there was an added benefit of
insurance coverage in Rheozel's savings account. An insurance company
has the duty to communicate with the beneficiary upon receipt of notice
of the death of the insured. This notification is how a good father of a
family should have acted within the scope of its business dealings with its
clients. BPI is expected not only to provide utmost customer satisfaction
in terms of its own products and services but also to give assurance that
its business concerns with its partner entities are implemented
accordingly.
There is a rationale in the contract of agency, which flows from the
"doctrine of representation," that notice to the agent is notice to the
principal. Here, BPI had been informed of Rheozel's death by the latter's
family. Since BPI is the agent of FGU Insurance, then such notice of death
to BPI is considered as notice to FGU Insurance as well. FGU Insurance
cannot now justify the denial of a beneficiary's insurance claim for being
filed out of time when notice of death had been communicated to its
agent within a few days after the death of the depositor-insured. In short,
there was timely notice of Rheozel's death given to FGU Insurance within
three months from Rheozel's death as required by the insurance
company.
The records show that BPI had ample opportunity to inform Laingo,
whether verbally or in writing, regarding the existence of the insurance
policy attached to the deposit account. First, Rheozel's death was
headlined in a daily major newspaper a day after his death. Second, not
only was Laingo, through her representative, able to inquire about
Rheozel's deposit account with BPI two days after his death but she was
also allowed by BPI's Claveria, Davao City branch to withdraw from the
funds in order to help defray Rheozel's funeral and burial expenses.Lastly,
an employee of BPI visited Rheozel's wake and submitted documents for
Laingo to sign in order to process the withdrawal request. These
circumstances show that despite being given many opportunities to
communicate with Laingo regarding the existence of the insurance
contract, BPI neglected to carry out its duty.
Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the
existence of the insurance policy, Laingo had no means to ascertain that
she was entitled to the insurance claim. It would be unfair for Laingo to
shoulder the burden of loss when BPI was remiss in its duty to properly
notify her that she was a beneficiary.
#3 HH Hollero Construction Inc vs. GSIS & Pool of Machinery
Insurers
FACTS:
GSIS and petitioner entered into a Project Agreement (Agreement)
whereby the latter undertook the development of a GSIS housing project
known as Modesta Village Section B (Project).
Petitioner obligated itself to insure the Project, including all the
improvements, upon the execution of the Agreement under a Contractors
All Risks (CAR) Insurance with the GSIS General Insurance Department for
an amount equal to its cost or sound value, which shall not be subject to
any automatic annual reduction.
Pursuant to its undertaking, petitioner secured 2 CAR Policies, 88/085 and
88/086 for land development and for the construction of housing units,
respectively. In turn, the GSIS reinsured CAR Policy 88/085 with
respondent Pool of Machinery Insurers (Pool).
During the construction, 3 typhoons hit the country, namely, Typhoon
Biring, Typhoon Huaning and Typhoon Saling, which caused considerable
damage to the Project. Accordingly, petitioner filed several claims for
indemnity with the GSIS on June 30, 1988, August 25, 1988, and October
18, 1989, respectively.
April 26, 1990, GSIS rejected petitioners indemnity claims for the
damages wrought by Typhoons Biring and Huaning, finding that no
amount is recoverable pursuant to the average clause provision under the
policies.
June 21, 1990, GSIS similarly rejected petitioners indemnity claim for
damages wrought by Typhoon Saling on a no loss basis, it appearing
from its records that the policies were not renewed before the onset of
the said typhoon.
September 27, 1991, petitioner filed a Complaint for Sum of Money and
Damages which was opposed by the GSIS through a Motion to Dismiss on
the ground that the causes of action stated therein are barred by the
twelve-month limitation provided under the policies, i.e., the complaint
was filed more than one (1) year from the rejection of the indemnity
claims.
Subsequently, the GSIS filed a Third Party Complaint 31 for indemnification
against Pool, the reinsurer.
RTC:
RTC granted petitioners indemnity claims. It held that: (a) the average
clause provision in the policies which did not contain the assent or
signature of the petitioner cannot limit the GSIS liability, for being
inefficacious and contrary to public policy; (b) petitioner has established
that the damages it sustained were due to the peril insured against; and
(c) CAR Policy No. 88/086 was deemed renewed when the GSIS withheld
the amount corresponding to the premium payable, from the retentions it
released to petitioner.
It further dismissed for lack of merit GSISs counterclaim and third party
complaint.
CA:
CA set aside and reversed the RTC Judgment, thereby dismissing the
complaint. It ruled that the complaint filed on September 27, 1991 was
barred by prescription, having been commenced beyond the twelve-
month limitation provided under the policies, reckoned from the final
rejection of the indemnity claims on April 26, 1990 and June 21, 1990.
ISSUE:
Whether or not the CA committed reversible error in dismissing the
complaint on the ground of prescription.
RULING:
Contracts of insurance, like other contracts, are to be construed according
to the sense and meaning of the terms which the parties themselves have
used. If such terms are clear and unambiguous, they must be taken and
understood in their plain, ordinary, and popular sense.
Section 10 of the General Conditions of the subject CAR Policies
commonly read:
10. If a claim is in any respect fraudulent, or if any false declaration is
made or used in support thereof, or if any fraudulent means or devices
are used by the Insured or anyone acting on his behalf to obtain any
benefit under this Policy, or if a claim is made and rejected and no
action or suit is commenced within twelve months after such
rejection or, in case of arbitration taking place as provided herein, within
twelve months after the Arbitrator or Arbitrators or Umpire have made
their award, all benefit under this Policy shall be
forfeited. (Emphases supplied)
In this relation, case law illumines that the prescriptive period for the
insureds action for indemnity should be reckoned from the final
rejection of the claim.
A perusal of the letter dated April 26, 1990 shows that the GSIS denied
petitioners indemnity claims wrought by Typhoons Biring and Huaning, it
appearing that no amount was recoverable under the policies. While the
GSIS gave petitioner the opportunity to dispute its findings, neither of the
parties pursued any further action on the matter; this logically shows that
they deemed the said letter as a rejection of the claims. Lest it cause any
confusion, the statement in that letter pertaining to any queries petitioner
may have on the denial should be construed, at best, as a form of notice
to the former that it had the opportunity to seek reconsideration of the
GSISs rejection. Surely, petitioner cannot construe the said letter to be a
mere tentative resolution. In fact, despite its disavowals, petitioner
admitted in its pleadings44 that the GSIS indeed denied its claim through
the aforementioned letter, but tarried in commencing the necessary
action in court.
The same conclusion obtains for the letter 45 dated June 21, 1990 denying
petitioners indemnity claim caused by Typhoon Saling on a no loss
basis due to the non-renewal of the policies therefor before the onset of
the said typhoon. The fact that petitioner filed a letter 46 of reconsideration
therefrom dated April 18, 1991, considering too the inaction of the GSIS
on the same similarly shows that the June 21, 1990 letter was also a final
rejection of petitioners indemnity claim.
As correctly observed by the CA, final rejection simply means denial by
the insurer of the claims of the insured and not the rejection or denial by
the insurer of the insureds motion or request for reconsideration. The
rejection referred to should be construed as the rejection in the first
instance, as in the two instances above-discussed.
The crucial issue in this case is: When does the cause of action accrue?
In support of private respondents view, two rulings of this Court have
been cited, namely, the case of Eagle Star Insurance Co. vs. Chia Yu
([supra note 41]), 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 insureds 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 insureds cause of action or his right to file a claim
either in the Insurance Commission or in a court of competent jurisdiction
[as in this case] 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.
In light of the foregoing, it is thus clear that petitioners causes of action
for indemnity respectively accrued from its receipt of the letters dated
April 26, 1990 and June 21, 1990, or the date the GSIS rejected its claims
in the first instance. Consequently, given that it allowed more than twelve
(12) months to lapse before filing the necessary complaint before the RTC
on September 27, 1991, its causes of action had already prescribed.
#4 Fortune Medicare Inc vs. Amorin
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 Contract
(Health Care Contract) which was executed by Fortune Care and the
House of Representatives, where Amorin was a permanent employee.
While on vacation in Honolulu, Hawaii in May 1999, Amorin underwent an
emergency surgery, specifically appendectomy, 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 P12,151.36, 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.
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.
Fortune Care denied Amorins request. Fortune Care argued that the
Health Care Contract did not cover hospitalization costs and professional
fees incurred in foreign countries, as the contracts operation was
confined to Philippine territory. Further, it argued that its liability to
Amorin was extinguished upon the latters acceptance from the company
of the amount of P12,151.36.
RTC:
Dismissed Amorins complaint. Taking the contract as a whole, the Court
is convinced that the parties intended to use the Philippine standard as
basis.
In the absence of evidence to the contrary, the trial court considered the
amount of P12,15[1].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.
CA:
Reversed and set aside RTCs decision. CA 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.
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.
ISSUE:
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.
RULING:
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.
In the instant case, the extent of Fortune Cares liability to Amorin 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 x
(Emphasis supplied)
The trial court ruled that the phrase approved standard charges, 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.
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 Cares 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 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 Amorins 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.