DELFIN NARIO vs.

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY

G.R. No. L-22796, June 26, 1967

FACTS:
Mrs. Alejandra Santos-Mario was, upon application, issued, on June 12, 1959, by the Philippine
American Life Insurance Co., a life insurance policy under a 20-year endowment plan, with a
face value of P5,000.00. She designated thereon her husband, Delfin Nario, and their
unemancipated minor son, Ernesto Nario, as her irrevocable beneficiaries.
About the middle of June, 1963, she then applied for a loan on the above policy with
PHILAMLIFE to w/c she is entitled to as policy holder when the policy has been in force for
more than three years. The purpose of such loan was for the school expenses of Ernesto.
The application bore the written signature and consent of Delfin Nario in two capacities first, as
one of the irrevocable beneficiaries of the policy; and the other, as the father-guardian of said
minor son and irrevocable beneficiary, Ernesto Nario, and as the legal administrator of the
minors properties, pursuant to Article 320 of the Civil Code of the Philippines. PHILAMLIFE
denied the loan application contending that written consent of the minor son must not only be
given by his father as legal guardian but it must also be authorized by the court in a competent
guardianship proceeding.
Mrs. Nario then signified her decision to surrender her policy and demand its cash value which
then amounted to P 520. The Insurance Company also denied the surrender of the policy on the
same ground as that given in disapproving the loan application. Mrs. Nario sued PHILAMLIFE
praying that the latter grant their loan application and/or accept the surrender of said policy in
exchange for its cash value. On September 10, 1963, Mrs. Nario and her husband, Delfin, sued
PHILAMLIFE praying that the latter grant their loan application and/or accept the surrender of
said policy in exchange for its cash value. Defendant PHILAMLIFE contends that the loan
application and the surrender of the policy involved acts of disposition and alienation of the
property rights of the minor, said acts are not within the power of administrator granted under
Art. 320 in relation to art. 326 CC, hence, mere written consent given by the father-guardian, for
and in behalf of the minor son, without any court authority therefor, was not a sufficient
compliance of the law. The lower court ruled agreeing with defendants contention, sustained
defendants affirmative defense, and rendered, on January 28, 1964, its decision dismissing
plaintiffs complaint. Unable to secure reconsideration of the trial Courts ruling, petitioner
appealed directly to this Court, contending that the minors interest amounted to only one-half of
the policys cash surrender value of P520.00; that under Rule 96, Section 2 of the Revised Rules

of Court, payment of the wards debts is within the powers of the guardian, where no realty is
involved; hence, there is no reason why the father may not validly agree to the proposed
transaction on behalf of the minor without need of court authority.
ISSUE:
Whether or not PHILAMLIFE was justified in refusing to grant the loan application and the
surrender of the policy.
HELD:
YES. The decision appealed from is affirmed. Costs against appellants Nario. The appeal is
unmeritorious.
SC agreed with the lower court that the vested interest or right of the beneficiaries in the policy
should be measured on its full face value and not on its cash surrender value, for in case of death
of the insured, said beneficiaries are paid on the basis of its face value and in case the insured
should discontinue paying premiums, the beneficiaries may continue paying it and are entitled to
automatic extended term or paid-up insurance options, etc. and that said vested right under the
policy cannot be divisible at any given time. SC likewise agreed with the conclusion of the lower
court that the proposed transactions in question constitute acts of disposition or alienation of
property rights and not merely of management or administration because they involve the
incurring or termination of contractual obligations. The full face value of the policy is P5,000.00
and the minors vested interest therein, as one of the two (2) irrevocable beneficiaries, consists of
one-half () of said amount or P2,500.00. Applying laws (CC and rules of Court),the father a
must file a petition for guardianship and post a guardianship bond.
In the case at bar, the father did not file any petition for guardianship nor post a guardianship
bond, and as such cannot possibly exercise the powers vested on him as legal administrator of
the minors property. The consent gives for and in behalf of the son without prior court
authorization to the loan application and the surrender was insufficient and ineffective and
PHILAMLIFE was justified in disapproving the said applications. Assuming that the property of
the ward was less than P2,000, the effect would be the same, since the parents would only be
exempted from filing a bond and judicial authorization, but their acts as legal administrators are
only limited to acts of management or administration and not to acts of encumbrance or
disposition.

ANG KA YU vs. PHOENIX ASSURANCE CO. LTD.

1 CAR 704
28 September 1961

FACTS:
Ang Ka Yu, herein petitioner, was engaged in the business of dyeing and washing clothes. This
would require his clients to deliver and deposit to the petitioner such clothes that would require
his service. He acquired from Phoenix Assurance Co. Ltd., herein respondent, a policy insuring
the effects of his business. When the clothes he had in his possession were lost, Ang Ka Yu
sought to recover from Phoenix Assurance. However, the latter refused the claim and denied
liability on the ground that the petitioner was a mere possessor of said items, and therefore did
not have any insurable interest to the same.
ISSUE:
Whether or not the petitioner, allegedly being a mere possessor, has an insurable interest in the
property of concern.
HELD:
Yes. A person to whom clothes are delivered for dyeing or washing has insurable interest on
such clothes, because destruction of the textiles will mean pecuniary loss to him as he will be
deprived of the compensation he would be entitled to for dyeing the same, not to mention his
pecuniary liability for labour and expenses.
A person who is interested in the safety and preservation of materials in his possession belonging
to third parties because he stands either to benefit from their continued existence or to be
prejudiced by their destruction, has an insurable interest thereon which is not necessarily limited
to the extent of his liability to the owners thereof. A person having mere right of possession of
property may insure it to its full value and in his own name, even when he is not responsible for
its safekeeping.

Philamcare Health Systems vs. Court of Appeals,

G.R. No. 125678, March 18, 2002
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question
asking if he or his family members were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and outpatient benefits. After the period expired, he was given an expanded coverage for Php 75,000.
During the period, he suffered from heart attack and was confined at MMC. The wife tried to
claim the benefits but the petitioner denied it saying that he concealed his medical history by
answering no to the aforementioned question. She had to pay for the hospital bills amounting to
76,000. Her husband subsequently passed away. She filed a case in the trial court for the
collection of the amount plus damages. She was awarded 76,000 for the bills and 40,000 for
damages. The CA affirmed but deleted awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the incontestability
clause under the InsuranceCode does not apply.
Held: No. Petition dismissed.
Petitioner claimed that it granted benefits only when the insured is alive during the one-year
duration. It contended that there was no indemnification unlike in insurance contracts. It
supported this claim by saying that it is a health maintenance organization covered by the DOH
and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didnt apply
because two-year and not one-year effectivity periods were required.
Section 2 (1) of the Insurance Code defines a contract of insurance as an agreement whereby
one undertakes for a consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event.
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husbands health was the insurable interest. The health care agreement was in the
nature of non-life insurance, which is primarily a contract of indemnity. The provider must pay
for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed material fact of his sickness, the contract
stated that:
that any physician is, by these presents, expressly authorized to disclose or give testimony at
anytime relative to any information acquired by him in his professional capacity upon any
question affecting the eligibility for health care coverage of the Proposed Members.
This meant that the petitioners required him to sign authorization to furnish reports about
his medical condition. The contract also authorized Philam to inquire directly to his medical
history.
Hence, the contention of concealment isnt valid.
They cant also invoke the Invalidation of agreement clause where failure of the insured to
disclose information was a grounds for revocation simply because the answer assailed by the
company was the heart condition question based on the insureds opinion. He wasnt a medical
doctor, so he cant accurately gauge his condition.
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
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.
Section 27 of the Insurance Code- a concealment entitles the injured party to rescind a contract
of insurance.
As to cancellation procedure- Cancellation requires certain 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 were fulfilled by the provider.

As to incontestability- The trial court said that under the title Claim procedures of expenses, the
defendant Philamcare Health Systems Inc. had twelve months 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.