Escolar Documentos
Profissional Documentos
Cultura Documentos
VASQUEZ, J.:
The question of law raised in this case that justified a direct appeal from a decision of
the Court of First Instance Rizal, Branch V, Quezon City, to be taken directly to the
Supreme Court is whether or not the acceptance by the private respondent insurance
corporation of the premium and the issuance of the corresponding certificate of
insurance should be deemed a waiver of the exclusionary condition of overage stated in
the said certificate of insurance.
The material facts are not in dispute. Sometime in April 1969, Carmen O, Lapuz
applied with respondent insurance corporation for insurance coverage against accident
and injuries. She filled up the blank application form given to her and filed the same
with the respondent insurance corporation. In the said application form which was
dated April 15, 1969, she gave the date of her birth as July 11, 1904. On the same
date, she paid the sum of P20.00 representing the premium for which she was issued
the corresponding receipt signed by an authorized agent of the respondent insurance
corporation. (Rollo, p. 27.) Upon the filing of said application and the payment of the
premium on the policy applied for, the respondent insurance corporation issued to
Carmen O. Lapuz its Certificate of Insurance No. 128866. (Rollo, p. 28.) The policy was
to be effective for a period of 90 days.
On May 31, 1969 or during the effectivity of Certificate of Insurance No. 12886,
Carmen O. Lapuz died in a vehicular accident in the North Diversion Road.
On June 7, 1969, petitioner Regina L. Edillon, a sister of the insured and who was the
named beneficiary in the policy, filed her claim for the proceeds of the insurance,
submitting all the necessary papers and other requisites with the private respondent.
Her claim having been denied, Regina L. Edillon instituted this action in the Court of
First Instance of Rizal on August 27, 1969.
In resisting the claim of the petitioner, the respondent insurance corporation relies on a
provision contained in the Certificate of Insurance, excluding its liability to pay claims
under the policy in behalf of "persons who are under the age of sixteen (16) years of
age or over the age of sixty (60) years ..." It is pointed out that the insured being over
sixty (60) years of age when she applied for the insurance coverage, the policy was
null and void, and no risk on the part of the respondent insurance corporation had
arisen therefrom.
The trial court sustained the contention of the private respondent and dismissed the
complaint; ordered the petitioner to pay attorney's fees in the sum of ONE THOUSAND
(P1,000.00) PESOS in favor of the private respondent; and ordered the private
respondent to return the sum of TWENTY (P20.00) PESOS received by way of premium
on the insurancy policy. It was reasoned out that a policy of insurance being a contract
of adhesion, it was the duty of the insured to know the terms of the contract he or she
is entering into; the insured in this case, upon learning from its terms that she could
not have been qualified under the conditions stated in said contract, what she should
have done is simply to ask for a refund of the premium that she paid. It was further
argued by the trial court that the ruling calling for a liberal interpretation of an
insurance contract in favor of the insured and strictly against the insurer may not be
applied in the present case in view of the peculiar facts and circumstances obtaining
therein.
We REVERSE the judgment of the trial court. The age of the insured Carmen 0. Lapuz
was not concealed to the insurance company. Her application for insurance coverage
which was on a printed form furnished by private respondent and which contained very
few items of information clearly indicated her age of the time of filing the same to be
almost 65 years of age. Despite such information which could hardly be overlooked in
the application form, considering its prominence thereon and its materiality to the
coverage applied for, the respondent insurance corporation received her payment of
premium and issued the corresponding certificate of insurance without question. The
accident which resulted in the death of the insured, a risk covered by the policy,
occurred on May 31, 1969 or FORTY-FIVE (45) DAYS after the insurance coverage was
applied for. There was sufficient time for the private respondent to process the
application and to notice that the applicant was over 60 years of age and thereby
cancel the policy on that ground if it was minded to do so. If the private respondent
failed to act, it is either because it was willing to waive such disqualification; or,
through the negligence or incompetence of its employees for which it has only itself to
blame, it simply overlooked such fact. Under the circumstances, the insurance
corporation is already deemed in estoppel. It inaction to revoke the policy despite a
departure from the exclusionary condition contained in the said policy constituted a
waiver of such condition, as was held in the case of "Que Chee Gan vs. Law Union
Insurance Co., Ltd.,", 98 Phil. 85. This case involved a claim on an insurance policy
which contained a provision as to the installation of fire hydrants the number of which
depended on the height of the external wan perimeter of the bodega that was insured.
When it was determined that the bodega should have eleven (11) fire hydrants in the
compound as required by the terms of the policy, instead of only two (2) that it had,
INSURANCE | August 15 |2
the claim under the policy was resisted on that ground. In ruling that the said deviation
from the terms of the policy did not prevent the claim under the same, this Court
stated the following:
We are in agreement with the trial Court that the appellant is barred
by waiver (or rather estoppel) to claim violation of the so-called fire
hydrants warranty, for the reason that knowing fully an that the
number of hydrants demanded therein never existed from the very
beginning, the appellant nevertheless issued the policies in question
subject to such warranty, and received the corresponding premiums.
It would be perilously close to conniving at fraud upon the insured to
allow appellant to claim now as void ab initio the policies that it had
issued to the plaintiff without warning of their fatal defect, of which it
was informed, and after it had misled the defendant into believing
that the policies were effective.
The insurance company was aware, even before the policies were
issued, that in the premises insured there were only two fire
hydrants installed by Que Chee Gan and two others nearby, owned
by the municipality of Tabaco, contrary to the requirements of the
warranty in question. Such fact appears from positive testimony for
the insured that appellant's agents inspected the premises; and the
simple denials of appellant's representative (Jamiczon) can not
overcome that proof. That such inspection was made it moreover
rendered probable by its being a prerequisite for the fixing of the
discount on the premium to which the insured was entitled, since the
discount depended on the number of hydrants, and the fire fighting
equipment available (See"'Scale of Allowances" to which the policies
were expressly made subject). The law, supported by a long line of
cases, is expressed by American Jurisprudence (Vol. 29, pp. 611612) to be as follows:
It is usually held that where the insurer, at the time
of the issuance of a policy of insurance, has
knowledge of existing facts which, if insisted on,
would invalidate the contract from its very
inception, such knowledge constitutes a waiver of
conditions in the contract inconsistent with the
known facts, and the insurer is stopped thereafter
from asserting the breach of such conditions. The
law is charitable enough to assume, in the absence
of any showing to the contrary, that an insurance
company intends to execute a valid contract in
return for the premium received; and when the
policy contains a condition which renders it
INSURANCE | August 15 |3
mode of payment, Capital Insurance is deemed to have accepted the
promissory note in payment of the premium. This rendered the policy
immediately operative on the date it was delivered. The view taken in
most cases in the United States:
... is that although one of conditions of an
insurance policy is that "it shall not be valid or
binding until the first premium is paid", if it is silent
as to the mode of payment, promissory notes
received by the company must be deemed to have
been accepted in payment of the premium. In other
words, a requirement for the payment of the first
or initial premium in advance or actual cash may be
waived by acceptance of a promissory note...
WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. In lieu
thereof, the private respondent insurance corporation is hereby ordered to pay to the
petitioner the sum of TEN THOUSAND (P10,000.00) PESOS as proceeds of Insurance
Certificate No. 128866 with interest at the legal rate from May 31, 1969 until fully
paid, the further sum of TWO THOUSAND (P2,000.00) PESOS as and for attorney's
fees, and the costs of suit.
SO ORDERED.
G.R. No. 125678
PHILAMCARE
HEALTH
SYSTEMS,
vs.
COURT OF APPEALS and JULITA TRINOS, respondents.
INC., petitioner,
YNARES-SANTIAGO, J.:
Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care
coverage with petitioner Philamcare Health Systems, Inc. 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). 1
The application was approved for a period of one year from March 1, 1988 to March 1,
1989. Accordingly, he was issued Health Care Agreement No. P010194. Under the
agreement, respondents husband 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.2
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, respondent tried to claim the benefits under the health
care agreement. However, petitioner denied her claim saying that the Health Care
Agreement was void. According to petitioner, there was a concealment regarding
Ernanis medical history. Doctors at the MMC allegedly discovered at the time of
Ernanis confinement that he was hypertensive, diabetic and asthmatic, contrary to his
answer in the application form. Thus, respondent paid 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. Due to
financial difficulties, however, respondent brought her husband home again. In the
morning of April 13, 1990, Ernani had fever and was feeling very weak. Respondent
was constrained to bring him back to the Chinese General Hospital where he died on
the same day.
On July 24, 1990, respondent instituted with the Regional Trial Court of Manila, Branch
44, an action for damages against petitioner and its president, Dr. Benito Reverente,
which was docketed as Civil Case No. 90-53795. She asked for reimbursement of her
expenses plus moral damages and attorneys fees. After trial, the lower court ruled
against petitioners, viz:
WHEREFORE, in view of the forgoing, the Court renders judgment in favor of
the plaintiff Julita Trinos, ordering:
1. Defendants to pay and reimburse the medical and hospital coverage of the
late Ernani Trinos in the amount of P76,000.00 plus interest, until the amount
is fully paid to plaintiff who paid the same;
2. Defendants to pay the reduced amount of moral damages of P10,000.00 to
plaintiff;
3. Defendants to pay the reduced amount of P10,000.00 as exemplary
damages to plaintiff;
4. Defendants to pay attorneys fees of P20,000.00, plus costs of suit.
INSURANCE | August 15 |4
SO ORDERED.3
On appeal, the Court of Appeals affirmed the decision of the trial court but deleted all
awards for damages and absolved petitioner Reverente. 4 Petitioners motion for
reconsideration was denied.5 Hence, petitioner 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 6 does not
apply.1wphi1.nt
Petitioner argues that the agreement grants "living benefits," such as medical checkups 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. Petitioner also
points out 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. Moreover, since Health Care Agreements are only for
a period of one year, as compared to insurance contracts which last longer,7 petitioner
argues that the incontestability clause does not apply, as the same requires an
effectivity period of at least two years. 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.
(4) of any person upon whose life any estate or interest vested in him
depends.
(3) of any person under a legal obligation to him for the payment of money,
respecting property or service, of which death or illness might delay or
prevent the performance; and
In the case at bar, the insurable interest of respondents 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. 9 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.
Petitioner argues that respondents husband concealed a material fact in his
application. It appears that in the application for health coverage, petitioners required
respondents 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.10 Specifically, the Health Care Agreement signed by respondents husband
states:
We hereby declare and agree that all statement and answers contained herein
and in any addendum annexed to this application are full, complete and true
and bind all parties in interest under the Agreement herein applied for, that
there shall be no contract of health care coverage unless and until an
Agreement is issued on this application and the full Membership Fee according
to the mode of payment applied for is actually paid during the lifetime and
good health of proposed Members; that no information acquired by any
Representative of PhilamCare shall be binding upon PhilamCare unless set out
in writing in the application;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 and that the
acceptance of any Agreement issued on this application shall be a ratification
of any correction in or addition to this application as stated in the space for
Home Office Endorsement.11 (Underscoring ours)
INSURANCE | August 15 |5
In addition to the above condition, petitioner additionally required the applicant for
authorization to inquire about the applicants medical history, thus:
I hereby authorize any person, organization, or entity that has any record or
knowledge of my health and/or that of __________ to give to the PhilamCare
Health Systems, Inc. any and all information relative to any hospitalization,
consultation, treatment or any other medical advice or examination. This
authorization is in connection with the application for health care coverage
only. A photographic copy of this authorization shall be as valid as the
original.12 (Underscoring ours)
Petitioner 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.13
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 respondents 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. 14 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.15 (Underscoring ours)
The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. 16 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.17 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. 18
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. 19 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. 21 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.22
Anent the incontestability of the membership of respondents husband, we quote with
approval the following findings of the trial court:
(U)nder the title Claim procedures of expenses, the defendant Philamcare
Health Systems Inc. had twelve months from the date of issuance of the
INSURANCE | August 15 |6
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.23
Finally, petitioner alleges that respondent was not the legal wife of the deceased
member considering that at the time of their marriage, the deceased was previously
married to another woman who was still alive. The health care agreement is in the
nature of a contract of indemnity. Hence, payment should be made to the party who
incurred the expenses. It is not controverted that respondent paid all the hospital and
medical expenses. She is therefore entitled to reimbursement. The records adequately
prove the expenses incurred by respondent for the deceaseds hospitalization,
medication and the professional fees of the attending physicians. 24
WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed decision
of the Court of Appeals dated December 14, 1995 is AFFIRMED.
SO ORDERED.
Cabochan and Reyes Law Office for respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision of respondent Court of
Appeals * in CA-G.R. No. 41735-R, entitled "Pacific Banking Corporation vs. Oriental
Assurance Corporation", which set aside the decision of the Court of First Instance
(CFI) of Manila, ** which had in turn granted the complaint for a sum of money in Civil
Case No. 56889.
As gathered from the records, the undisputed facts of this case are as follows:
On October 21,1963, Fire Policy No. F-3770 (Exhibit "A"), an open policy, was issued to
the Paramount Shirt Manufacturing Co. (hereinafter referred to as the insured, for
brevity), by which private respondent Oriental Assurance Corporation bound itself to
indemnify the insured for any loss or damage, not exceeding P61,000.00, caused by
fire to its property consisting of stocks, materials and supplies usual to a shirt factory,
including furniture, fixtures, machinery and equipment while contained in the ground,
second and third floors of the building situated at number 256 Jaboneros St., San
Nicolas, Manila, for a period of one year commencing from that date to October 21,
1964.
INSURANCE | August 15 |7
The insured was at the time of the issuance of the policy and is up to this time, a
debtor of petitioner in the amount of not less than Eight Hundred Thousand Pesos
(P800,000.00) and the goods described in the policy were held in trust by the insured
for the petitioner under thrust receipts (Record on Appeal, p. 4).
Said policy was duly endorsed to petitioner as mortgagee/ trustor of the properties
insured, with the knowledge and consent of private respondent to the effect that "loss
if any under this policy is payable to the Pacific Banking Corporation".
On January 4, 1964, while the aforesaid policy was in full force and effect, a fire broke
out on the subject premises destroying the goods contained in its ground and second
floors (Record on Appeal, p.5)
It will be noted that the defense of fraud and/or violation of Condition No. 3 in the
Policy, in the form of non-declaration of co-insurances which was not pleaded in the
answer was also not pleaded in the Motion to Dismiss.
On January 24, 1964, counsel for the petitioner sent a letter of demand to private
respondent for indemnity due to the loss of property by fire under the endorsement of
said policy (Brief for Plaintiff-Appellee, pp. 16-17).
At any rate, on June 30, 1967, the trial court denied private respondent's motion on
the ground that the defense of lack of proof of loss or defects therein was raised for
the first time after the commencement of the suit and that it must be deemed to have
waived the requirement of proof of loss (Sections 83 and 84, Insurance Act; Record on
Appeal, p. 61).
On January 28, 1964, private respondent informed counsel for the petitioner that it
was not yet ready to accede to the latter's demand as the former is awaiting the final
report of the insurance adjuster, H.H. Bayne Adjustment Company (Brief for PlaintiffAppellee, pp. 17-18).
On March 25, 1964, the said insurance adjuster notified counsel for the petitioner that
the insured under the policy had not filed any claim with it, nor submitted proof of loss
which is a clear violation of Policy Condition No.11, and for which reason,
determination of the liability of private respondent could not be had (Supra, pp. 1920).
On April 24, 1964, petitioner's counsel replied to aforesaid letter asking the insurance
adjuster to verify from the records of the Bureau of Customs the entries of
merchandise taken into the customs bonded warehouse razed by fire as a reliable proof
of loss (Supra, pp. 21-22). For failure of the insurance company to pay the loss as
demanded, petitioner (plaintiff therein) on April 28, 1 964, filed in the court a quo an
action for a sum of money against the private respondent, Oriental Assurance
Corporation, in the principal sum of P61,000.00 issued in favor of Paramount Shirt
Manufacturing Co. (Record on Appeal, pp. 1-36).
On May 25, 1964, private respondent raised the following defenses in its answer to wit:
(a) lack of formal claim by insured over the loss and (b) premature filing of the suit as
neither plaintiff nor insured had submitted any proof of loss on the basis of which
defendant would determine its liability and the amount thereof, either to the private
respondent or its ad . adjuster H.H. Bayne Adjustment Co., both in violation of Policy
Condition No.11 (Record on Appeal, pp. 37-38).
On September 9, 1967, the case was considered submitted for decision from which
order private respondent filed a motion for reconsideration to set the case or further
reception of private respondent's additional evidence, "in order to prove that 'insured
has committed a violation of condition No. 3 of the policy in relation to the other
Insurance Clause.' " (Record on Appeal, pp. 61-69).
On September 30,1967, the case was set for the continuation of the hearing for the
reception merely of the testimony of Alejandro Tan Gatue, Manager of the Adjustment
Co., over the vehement opposition of the petitioner (Record on Appeal, p. 129).
On April 18, 1 968, the trial court rendered a decision adjudging private respondent
liable to the petitioner under the said contract of insurance, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered ordering the defendant to
pay the plaintiff P61,000.00, with interest at the rate of 8% per
annum from January 4, 1964, to April 28, 1964, and 12% from April
29, 1964, until the amount is fully paid, P6,100.00, as attorney's
fees, and the costs.
SO ORDERED. (Record on Appeal, pp. 140-141)
On appeal, the Court of Appeals reversed the decision of the trial court (Decision
promulgated on April 23, 1975, Rollo, pp. 21-33).
INSURANCE | August 15 |8
Petitioner filed a motion for reconsideration of the said decision of the respondent
Court of Appeals, but this was denied on July 3,1975 for lack of merit (Rollo, pp. 5467), resulting in this petition with the following assigned errors;
I
RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR OF
LAW IN CONCLUDING FRAUD FROM THE BARE FACT THAT THE
INSURED PARAMOUNT PROCURED ADDITIONAL INSURANCES OTHER
THAN THOSE STATED IN THE POLICY IN SPITE OF THE EXISTENCE
OF CONTRARY PRESUMPTIONS AND ADMITTED FACT AND
CIRCUMSTANCES WHICH NEGATE THE CORRECTNESS OF SAID
CONCLUSION.
(a) The respondent Court did not consider the legal
presumption against the existence of fraud, which
should be established with such quantum of proof
as is required for any crime.
(b) The record of the case is bereft of proof of such
fraud.
(c) The private respondent insurer did not even
plead or in anywise raise fraud as a defense in its
answer or motion to dismiss and, therefore, it
should have been considered waived.
(d) The total amount of insurance procured by the
insured from the different companies amounted to
hardly onehalf () of the value of the goods
insured.
II
RESPONDENT COURT ERRED IN NOT HOLDING THAT CONSIDERING
THE VOTING ON THE PARTICULAR QUESTION OF FRAUD, THE
FINDING OF THE TRIAL COURT THEREON SHOULD BE CONSIDERED
AFFIRMED.
III
THE CONCURRING OPINION OF MR. JUSTICE CHANCO IS LEGALLY
ERRONEOUS IN HOLDING THAT THE ACTION WAS PREMATURELY
BROUGHT BECAUSE THE REQUIRED CLAIM UNDER THE INSURANCE
INSURANCE | August 15 |9
Petitioner's contention that the allegation of fraud is but a mere inference or suspicion
is untenable. In fact, concrete evidence of fraud or false declaration by the insured was
furnished by the petitioner itself when the facts alleged in the policy under clauses "CoInsurances Declared" and "Other Insurance Clause" are materially different from the
actual number of co-insurances taken over the subject property. Consequently, "the
whole foundation of the contract fails, the risk does not attach and the policy never
becomes a contract between the parties. Representations of facts are the foundation of
the contract and if the foundation does not exist, the superstructure does not arise.
Falsehood in such representations is not shown to vary or add to the contract, or to
terminate a contract which has once been made, but to show that no contract has ever
existed (Tolentino, Commercial Laws of the Philippines, p. 991, Vol. II, 8th Ed.) A void
or inexistent contract is one which has no force and effect from the very beginning, as
if it had never been entered into, and which cannot be validated either by time or by
ratification Tongoy v. C.A., 123 SCRA 99 [1983]; Avila v. C.A. 145 SCRA [1986]).
As the insurance policy against fire expressly required that notice should be given by
the insured of other insurance upon the same property, the total absence of such
notice nullifies the policy (Sta. Ana v. Commercial Union Assurance Co., 55 Phil. 333
[1930]; Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc., 47 SCRA 276
[1972]; Pioneer Ins. & Surety Corp., v. Yap, 61 SCRA 432 [1974]).
The argument that notice of co-insurances may be made orally is preposterous and
negates policy condition No. 20 which requires every notice and other communications
to the insurer to be written or printed.
Petitioner points out that Condition No. 3 in the policy in relation to the "other
insurance clause" supposedly to have been violated, cannot certainly defeat the right of
the petitioner to recover the insurance as mortgagee/assignee. Particularly referring to
the mortgage clause of the policy, petitioner argues that considering the purpose for
which the endorsement or assignment was made, that is, to protect the
mortgagee/assignee against any untoward act or omission of the insured, it would be
absurd to hold that petitioner is barred from recovering the insurance on account of
the alleged violation committed by the insured (Rollo, Brief for the petitioner, pp, 3335).
It is obvious that petitioner has missed all together the import of subject mortgage
clause which specifically provides:
Mortgage Clause
Loss, if any, under this policy, shall be payable to the PACIFIC
BANKING CORPORATION Manila mortgagee/trustor as its interest
may appear, it being hereby understood and agreed that this
insurance as to the interest of the mortgagee/trustor only herein,
shall not be invalidated by any act or neglectexcept fraud or
It appearing that insured has violated or failed to perform the conditions under No. 3
and 11 of the contract, and such violation or want of performance has not been waived
by the insurer, the insured cannot recover, much less the herein petitioner. Courts are
not permitted to make contracts for the parties; the function and duty of the courts is
simply to enforce and carry out the contracts actually made (Young v. Midland Textile
Ins. Co., 30 Phil. 617 [1915]; Union Manufacturing Co. Inc. v. Phil. Guaranty Co. Inc.,
p. 276 supra).
Finally, the established rule in this jurisdiction that findings of fact of the Court of
Appeals when supported by substantial evidence, are not reviewable on appeal by
certiorari, deserves reiteration. Said findings of the appellate court are final and cannot
be disturbed by the Supreme Court except in certain cases Lereos v. CA, 117 SCRA
395 [1985]; Dalida v. CA, 117 SCRA 480 [1982] Director of Lands v. CA, 117 SCRA
346 [1982]; Montesa v. CA, 117 SCRA 770 [1982]; Sacay v. Sandiganbayan, 142
SCRA 609 [1986]; Guita v. CA, 139 SCRA 576 [1985]; Manlapaz v. CA, 147 SCRA 238239 [1987]).
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit, and the decision
appealed from is AFFIRMED. No costs.
SO ORDERED.
Assured did not knock at the door of the insurer to buy insurance. He
was the object of solicitations and visits.
Assured was a man of means. He could have obtained a bigger
insurance, not just P 80,000.00. If his purpose were to misrepresent
and to conceal his ailments in anticipation of death during the twoyear period, he certainly could have gotten a bigger insurance. He
did not.
Insurer Philamlife could have presented as witness its Medical
Examiner Dr. Urbano Guinto. It was he who accomplished the
application, Part II, medical. Philamlife did not.
Philamlife could have put to the witness stand its Agent Bienvenido
S. Guinto, a relative to Dr. Guinto, Again Philamlife did not. (pp.
138139, Rollo)
xxx xxx xxx
This Honorable Supreme Court has had occasion to denounce the
pressure and practice indulged in by agents in selling insurance. At
one time or another most of us have been subjected to that
pressure, that practice. This court took judicial cognizance of the
whirlwind pressure of insurance selling-especially of the agent's
practice of 'supplying the information, preparing and answering the
application, submitting the
application
to
their
companies, concluding the transactions and otherwisesmoothing out
all difficulties.
We call attention to what this Honorable Court said in Insular Life v. Feliciano, et al., 73
Phil. 201; at page 205:
It is of common knowledge that the selling of insurance today is
subjected to the whirlwind pressureof modern salesmanship.
Insurance companies send detailed instructions to their agents to
solicit and procure applications.
These agents are to be found all over the length and breadth of the
land. They are stimulated to more active efforts by contests and by
the keen competition offered by the other rival insurance companies.
is
the
The insurer has two years from the date of issuance of the insurance contract or of its
last reinstatement within which to contest the policy, whether or not, the insured still
lives within such period. After two years, the defenses of concealment or
misrepresentation, no matter how patent or well founded, no longer lie. Congress felt
this was a sufficient answer to the various tactics employed by insurance companies to
avoid liability. The petitioners' interpretation would give rise to the incongruous
situation where the beneficiaries of an insured who dies right after taking out and
paying for a life insurance policy, would be allowed to collect on the policy even if the
insured fraudulently concealed material facts.
The petitioners argue that no evidence was presented to show that the medical terms
were explained in a layman's language to the insured. They state that the insurer
should have presented its two medical field examiners as witnesses. Moreover, the
petitioners allege that the policy intends that the medical examination must be
conducted before its issuance otherwise the insurer "waives whatever imperfection by
ratification."
We agree with the Court of Appeals which ruled:
On the other hand, petitioners argue that no evidence was presented
by respondent company to show that the questions appearing in Part
MALCOLM, J.:
This is an appeal by plaintiff from an order of the Court of First Instance of Zamboanga
sustaining a demurrer to plaintiff's complaint upon the ground that it fails to state a
cause of action.
As the demurrer had the effect of admitting the material facts set forth in the
complaint, the facts are those alleged by the plaintiff. On July 6, 1917, Luis Lim y
Garcia of Zamboanga made application to the Sun Life Assurance Company of Canada
for a policy of insurance on his life in the sum of P5,000. In his application Lim
designated his wife, Pilar C. de Lim, the plaintiff herein, as the beneficiary. The first
premium of P433 was paid by Lim, and upon such payment the company issued what
was called a "provisional policy." Luis Lim y Garcia died on August 23, 1917, after the
issuance of the provisional policy but before approval of the application by the home
office of the insurance company. The instant action is brought by the beneficiary, Pilar
C. de Lim, to recover from the Sun Life Assurance Company of Canada the sum of
P5,000, the amount named in the provisional policy.
The "provisional policy" upon which this action rests reads as follows:
Received (subject to the following stipulations and agreements) the sum of
four hundred and thirty-three pesos, being the amount of the first year's
premium for a Life Assurance Policy on the life of Mr. Luis D. Lim y Garcia of
Zamboanga for P5,000, for which an application dated the 6th day of July,
1917, has been made to the Sun Life Assurance Company of Canada.
PILAR
C.
DE
LIM, plaintiff-appellant,
vs.
SUN LIFE ASSURANCE COMPANY OF CANADA, defendant-appellee.
Sanz
and
Cohn and Fisher for appellee.
Luzuriaga
for
appellant.
[SEAL.]
(Sgd.) A. F. Peters, Agent.
(Sgd.)
T.
B.
MACAULAY,
President.
Our duty in this case is to ascertain the correct meaning of the document above
quoted. A perusal of the same many times by the writer and by other members of the
court leaves a decided impression of vagueness in the mind. Apparently it is to be a
provisional policy "for four months only from the date of this application." We use the
term "apparently" advisedly, because immediately following the words fixing the four
The two cases most nearly in point come from the federal courts and the Supreme
Court of Arkansas.
In the case of Steinle vs. New York Life Insurance Co. ([1897], 81 Fed., 489} the facts
were that the amount of the first premium had been paid to an insurance agent and a
receipt given therefor. The receipt, however, expressly declared that if the application
was accepted by the company, the insurance shall take effect from the date of the
application but that if the application was not accepted, the money shall be returned.
The trite decision of the circuit court of appeal was, "On the conceded facts of this
case, there was no contract to life insurance perfected and the judgment of the circuit
court must be affirmed."
In the case of Cooksey vs. Mutual Life Insurance Co. ([1904], 73 Ark., 117) the person
applying for the life insurance paid and amount equal to the first premium, but the
application and the receipt for the money paid, stipulated that the insurance was to
become effective only when the application was approved and the policy issued. The
court held that the transaction did not amount to an agreement for preliminary or
temporary insurance. It was said:
It is not an unfamiliar custom among life insurance companies in the operation of the
business, upon receipt of an application for insurance, to enter into a contract with the
applicant in the shape of a so-called "binding receipt" for temporary insurance pending
the consideration of the application, to last until the policy be issued or the application
rejected, and such contracts are upheld and enforced when the applicant dies before
the issuance of a policy or final rejection of the application. It is held, too, that such
contracts may rest in parol. Counsel for appellant insists that such a preliminary
contract for temporary insurance was entered into in this instance, but we do not think
so. On the contrary, the clause in the application and the receipt given by the solicitor,
which are to be read together, stipulate expressly that the insurance shall become
effective only when the "application shall be approved and the policy duly signed by
the secretary at the head office of the company and issued." It constituted no
agreement at all for preliminary or temporary insurance; Mohrstadt vs. Mutual Life Ins.
Co., 115 Fed., 81, 52 C. C. A., 675; Steinle vs. New York Life Ins. Co., 81 Fed., 489, 26
C. C. A., 491." (See further Weinfeld vs. Mutual Reserve Fund Life Ass'n. [1892], 53
Fed, 208' Mohrstadt vs. Mutual Life Insurance Co. [1902], 115 Fed., 81; Insurance co.
vs. Young's Administrator [1875], 90 U. S., 85; Chamberlain vs. Prudential Insurance
Company of America [1901], 109 Wis., 4; Shawnee Mut. Fire Ins. Co. vs. McClure
[1913], 39 Okla., 509; Dorman vs. Connecticut Fire Ins. Co. [1914], 51 contra, Starr
vs. Mutual Life Ins. Co. [1905], 41 Wash., 228.)
We are of the opinion that the trial court committed no error in sustaining the
demurrer and dismissing the case. It is to be noted, however, that counsel for appellee
admits the liability of the company for the return of the first premium to the estate of
the deceased. It is not to be doubted but that the Sun Life Assurance Company of
DE CASTRO, ** J.:
This petition seeks the review of the decision of the Court of Appeals reversing the
decision of the Court of First Instance of Manila in favor of petitioner and against
private respondent which ordered the latter to pay the sum of Pll,042.04 with interest
at the rate of 12% interest from receipt of notice of loss on April 15, 1963 up to the
complete payment, the sum of P3,000.00 as attorney's fees and the costs 1 thereby
dismissing petitioner s complaint with costs. 2
The findings of the of fact of the Court of Appeals, which are generally binding upon
this Court, Except as shall be indicated in the discussion of the opinion of this Court the
substantial correctness of still particular finding having been disputed, thereby raising a
question of law reviewable by this Court 3 are as follows:
March 19, l963, the plaintiff secured temporary insurance from the
defendant for its exportation of 1,250,000 board feet of Philippine
Lauan and Apitong logs to be shipped from the Diapitan. Bay, Quezon
Province to Okinawa and Tokyo, Japan. The defendant issued on said
date Cover Note No. 1010, insuring the said cargo of the plaintiff
"Subject to the Terms and Conditions of the WORKMEN'S INSURANCE
COMPANY, INC. printed Marine Policy form as filed with and approved
by the Office of the Insurance Commissioner (Exhibit A).
At any rate, it is not disputed that petitioner paid in full all the premiums as called for
by the statement issued by private respondent after the issuance of the two regular
marine insurance policies, thereby leaving no account unpaid by petitioner due on the
insurance coverage, which must be deemed to include the Cover Note. If the Note is to
be treated as a separate policy instead of integrating it to the regular policies
subsequently issued, the purpose and function of the Cover Note would be set at
naught or rendered meaningless, for it is in a real sense a contract, not a mere
application for insurance which is a mere offer. 6
It may be true that the marine insurance policies issued were for logs no longer
including those which had been lost during loading operations. This had to be so
because the risk insured against is not for loss during operations anymore, but for loss
during transit, the logs having already been safely placed aboard. This would make no
difference, however, insofar as the liability on the cover note is concerned, for the
number or volume of logs lost can be determined independently as in fact it had been
so ascertained at the instance of private respondent itself when it sent its own adjuster
to investigate and assess the loss, after the issuance of the marine insurance policies.
The adjuster went as far as submitting his report to respondent, as well as its
computation of respondent's liability on the insurance coverage. This coverage could
not have been no other than what was stipulated in the Cover Note, for no loss or
damage had to be assessed on the coverage arising from the marine insurance
policies. For obvious reasons, it was not necessary to ask petitioner to pay premium on
the Cover Note, for the loss insured against having already occurred, the more
practical procedure is simply to deduct the premium from the amount due the
petitioner on the Cover Note. The non-payment of premium on the Cover Note is,
therefore, no cause for the petitioner to lose what is due it as if there had been
payment of premium, for non-payment by it was not chargeable against its fault. Had
all the logs been lost during the loading operations, but after the issuance of the Cover
Note, liability on the note would have already arisen even before payment of premium.
This is how the cover note as a "binder" should legally operate otherwise, it would
serve no practical purpose in the realm of commerce, and is supported by the doctrine
that where a policy is delivered without requiring payment of the premium, the
presumption is that a credit was intended and policy is valid. 7
2. The defense of delay as raised by private respondent in resisting the claim cannot be
sustained. The law requires this ground of delay to be promptly and specifically
asserted when a claim on the insurance agreement is made. The undisputed facts show
that instead of invoking the ground of delay in objecting to petitioner's claim of
recovery on the cover note, it took steps clearly indicative that this particular ground
for objection to the claim was never in its mind. The nature of this specific ground for
resisting a claim places the insurer on duty to inquire when the loss took place, so that
it could determine whether delay would be a valid ground upon which to object to a
claim against it.