PEREZ V.

CA AND BF LIFEMAN INSURANCE CORPORATION, 2000

A contract of insurance, like all other contracts, must be assented to by both parties, either in person or
through their agents and so long as an application for insurance has not been either accepted or rejected,
it is merely a proposal or an offer to make a contract.

Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since 1980 for P20,000.00.
Sometime in October 1987, an agent of the insurance corporation, Rodolfo Lalog, visited Perez in
Guinayangan, Quezon and convinced him to apply for additional insurance coverage of P50,000.00, to
avail of the ongoing promotional discount of P400.00 if the premium were paid annually.

On October 20, 1987, Primitivo B. Perez accomplished an application form for the additional insurance
coverage of P50,000.00. On the same day, petitioner Virginia A. Perez, Primitivos wife, paid P2,075.00 to
Lalog.

The receipt issued by Lalog indicated the amount received was a "deposit.

Unfortunately, Lalog lost the application form accomplished by Perez and so on October 28, 1987, he
asked the latter to fill up another application form. On November 1, 1987, Perez was made to undergo
the required medical examination, which he passed.

On November 25, 1987, Perez died in an accident. He was riding in a banca which capsized during a storm.
At the time of his death, his application papers for the additional insurance of P50,000.00 were still with
the Gumaca office.

It was only on November 27, 1987 that said papers were received in Manila.

Without knowing that Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the
application and issued the corresponding policy for the P50,000.00 on December 2, 1987.

The insurance company refused to pay the claim under the additional policy coverage of P50,000.00, the
proceeds of which amount to P150,000.00 in view of a triple indemnity rider on the insurance policy.

Was the second insurance contract perfected?

Ruling: NO. Insurance is a contract whereby, for a stipulated consideration, one party undertakes to
compensate the other for loss on a specified subject by specified perils. A contract, on the other hand, is
a meeting of the minds between two persons whereby one binds himself, with respect to the other to
give something or to render some service. Consent must be manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute the contract. The offer must be
certain and the acceptance absolute.

When Primitivo filed an application for insurance, paid P2,075.00 and submitted the results of his medical
examination, his application was subject to the acceptance of private respondent BF Lifeman Insurance
Corporation. The perfection of the contract of insurance between the deceased and respondent
corporation was further conditioned upon compliance with the following requisites stated in the
application form: there shall be no contract of insurance unless and until a policy is issued on this
application and that the said policy shall not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We, am/are in good health.
When Primitivo died on November 25, 1987, his application papers for additional insurance coverage
were still with the branch office of respondent corporation in Gumaca and it was only two days later.
There was absolutely no way the acceptance of the application could have been communicated to the
applicant for the latter to accept inasmuch as the applicant at the time was already dead.

RUFINO ANDRES V. THE CROWN LIFE INSURANCE COMPANY, 1958

On October 20, 1949, Rufino and Severa G. Andres filed an application for insurance with CLIC. On
February 13, 1950, defendant isssued Crown Life Policy in the name of Rufino D. Andres, plaintiff, and
Severa G. Andres. The premiums are to be paid as called for in the policy semi-annually, and the amount
of P165.

But the premium for the third semester beginning November 25, 1950 to May 25, 1951 was not paid.

Crown Life wrote to Mr. and Mrs. Rufino D. Andres advising them that the said Policy lapsed on December
25, 1950 and the amount overdue was P165.15, giving them a period of sixty (60) days from the date of
lapse to file an application for reinstatement, which letter is made as common Exhibit.

In the month of February, 1951, Rufino executed a Statement of Health which is at the same time an
Application for Reinstatement of the aforesaid policy and Severa G. Andres also executed in the month of
February, 1951, an Application for Reinstatement.

On February 20, 1951, plaintiff wrote a letter to the defendant and enclosed therewith a money order for
P100, which letter was received by the defendant on February 26, 1951, wherein it is stated that the
balance unpaid is the sum of P65.15. On April 14, 1951, Crown Life wrote plaintiff advising him that the
Home Office has approved the reinstatement of the lapsed policy, subject to the payment of P65.15 due
on November, 1950 premium.

On May 5, 1951, plaintiff sent a letter to the defendant and enclosed therewith a Money Order in the
amount of P65.00 for the balance due on the Crown Life Policy.

On June 7, 1951, plaintiff presented his Death Claim as survivor-beneficiary of the deceased Severa G.
Andres which has been received in the office of the defendant on June 11, 1951.

Mrs. Severa G. Andres died on May 3, 1951 of dystocia, second degree, contracted pelvis.

Was the contract of reinstatement perfected?

Ruling: NO. The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon
written application does not give the insured absolute right to such reinstatement by the mere filing of an
application. The Company has the right to deny the reinstatement if it is not satisfied as to the insurability
of the insured and if the latter does no pay all overdue premium and all other indebtedness to the
Company. After the death of the insured the insurance Company cannot be compelled to entertain an
application for reinstatement of the policy because the conditions precedent to reinstatement can no
longer be determined and satisfied.

The conditions set forth in the policy for reinstatement are the following: (a) application shall be made
within three years from the date of lapse; (b) there should be a production of evidence of the good health
of the insured: (c) if the rate of premium depends upon the age of the Beneficiary, there should likewise
be a production of evidence of his or her good health; (d) there should be presented such other evidence
of insurability at the date of application for reinstatement; (e) there should be no change which has taken
place in such good health and insurability subsequent to the date of such application and before the policy
is reinstated; and (f) all overdue premiums and other indebtedness in respect of the policy, together
with interest at six per cent, compounded annually, should first be paid.

The plaintiff-appellant did not comply with the last condition; for he only paid P100 (on account of the
overdue semi-annual premium of P165.15) on February 20, 1951, before his wife's death and, despite the
Company's reminders on April 14 and 27, he remitted the balance of P65 on May 5, 1951 (received by the
Company's agency on May 11), two days after his wife died. On the face of such facts, the Company had
the right to treat the contract as lapsed and refuse payment of the policy.

SUNLIFE ASSURANCE COMPANY OF CANADA V. CA AND SPOUSES ROLANDO AND BERNARDA BACANI, 1995

On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself from petitioner. He
was issued Policy valued at P100,000.00, with double indemnity in case of accidental death. The
designated beneficiary was his mother, respondent Bernarda Bacani.

On June 26, 1987, the insured died in a plane crash.

Respondent Bernarda Bacani filed a claim with petitioner, seeking the benefits of the insurance policy
taken by her son. Petitioner conducted an investigation and its findings prompted it to reject the claim. In
its letter, petitioner informed respondent Bernarda Bacani, that the insured did not disclose material facts
relevant to the issuance of the policy, thus rendering the contract of insurance voidable.

Petitioner: The deceased answered question No. 5(a) in the affirmative but limited his answer to a
consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986,
for cough and flu complications. The other questions were answered in the negative.

Two weeks prior to his 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, ultra-sonography and hematology tests.

Can the insurance contract be rescinded?

Ruling: YES. 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. Materiality is
to be determined not by the event, but solely by the probable and reasonable influence of the facts upon
the party to whom communication is due, in forming his estimate of the disadvantages of the proposed
contract or in making his inquiries.

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.

Good 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 bona fides. It
appears that such concealment was deliberate on his part.

Moreover, the waiver of a medical examination [in a non-medical insurance contract] renders even more
material the information required of the applicant concerning previous condition of health and diseases
suffered, for such information necessarily constitutes an important factor which the insurer takes into
consideration in deciding whether to issue the policy or not.

The insured need not die of the disease he had failed to 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 SYSTEMS, INC. V. CA AND JULITA TRINOS, 2002

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?

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.

Is Philamcare free from liability?

Ruling: NO. 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.

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.

Although 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.