G.R. No.

L-31845 April 30, 1979

GREAT PACIFIC LIFE ASSURANCE COMPANY, petitioner,

vs.
HONORABLE COURT OF APPEALS, respondents.

G.R. No. L-31878 April 30, 1979

LAPULAPU D. MONDRAGON, petitioner,

vs.
HON. COURT OF APPEALS and NGO HING, respondents.

DE CASTRO, J.:

The two above-entitled cases were ordered consolidated by the Resolution of this Court dated April 29, 1970,
(Rollo, No. L-31878, p. 58), because the petitioners in both cases seek similar relief, through these petitions for
certiorari by way of appeal, from the amended decision of respondent Court of Appeals which affirmed in toto
the decision of the Court of First Instance of Cebu, ordering "the defendants (herein petitioners Great Pacific
Ligfe Assurance Company and Mondragon) jointly and severally to pay plaintiff (herein private respondent Ngo
Hing) the amount of P50,000.00 with interest at 6% from the date of the filing of the complaint, and the sum of
P1,077.75, without interest.

It appears that on March 14, 1957, private respondent Ngo Hing filed an application with the Great Pacific Life
Assurance Company (hereinafter referred to as Pacific Life) for a twenty-year endownment policy in the amount
of P50,000.00 on the life of his one-year old daughter Helen Go. Said respondent supplied the essential data
which petitioner Lapulapu D. Mondragon, Branch Manager of the Pacific Life in Cebu City wrote on the
corresponding form in his own handwriting (Exhibit I-M). Mondragon finally type-wrote the data on the
application form which was signed by private respondent Ngo Hing. The latter paid the annual premuim the sum
of P1,077.75 going over to the Company, but he reatined the amount of P1,317.00 as his commission for being
a duly authorized agebt of Pacific Life. Upon the payment of the insurance premuim, the binding deposit receipt
(Exhibit E) was issued to private respondent Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom
of the back page of the application form his strong recommendation for the approval of the insurance
application. Then on April 30, 1957, Mondragon received a letter from Pacific Life disapproving the insurance
application (Exhibit 3-M). The letter stated that the said life insurance application for 20-year endowment plan is
not available for minors below seven years old, but Pacific Life can consider the same under the Juvenile Triple
Action Plan, and advised that if the offer is acceptable, the Juvenile Non-Medical Declaration be sent to the
company.

The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by petitioner
Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again
strongly recommending the approval of the 20-year endowment insurance plan to children, pointing out that
since 1954 the customers, especially the Chinese, were asking for such coverage (Exhibit 4-M).

It was when things were in such state that on May 28, 1957 Helen Go died of influenza with complication of
bronchopneumonia. Thereupon, private respondent sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery of the same before the Court of First Instance of
Cebu, which rendered the adverse decision as earlier refered to against both petitioners.

The decisive issues in these cases are: (1) whether the binding deposit receipt (Exhibit E) constituted a
temporary contract of the life insurance in question; and (2) whether private respondent Ngo Hing concealed the
state of health and physical condition of Helen Go, which rendered void the aforesaid Exhibit E.

1. At the back of Exhibit E are condition precedents required before a deposit is considered a BINDING
RECEIPT. These conditions state that:

A. If the Company or its agent, shan have received the premium deposit ... and the insurance
application, ON or PRIOR to the date of medical examination ... said insurance shan be in force
and in effect from the date of such medical examination, for such period as is covered by the
deposit ..., PROVIDED the company shall be satisfied that on said date the applicant was
insurable on standard rates under its rule for the amount of insurance and the kind of policy
requested in the application.

D. If the Company does not accept the application on standard rate for the amount of insurance
and/or the kind of policy requested in the application but issue, or offers to issue a policy for a
different plan and/or amount ..., the insurance shall not be in force and in effect until the applicant
shall have accepted the policy as issued or offered by the Company and shall have paid the full
premium thereof. If the applicant does not accept the policy, the deposit shall be refunded.
 E. If the applicant shall not have been insurable under Condition A above, and the Company
declines to approve the application the insurance applied for shall not have been in force at any
time and the sum paid be returned to the applicant upon the surrender of this receipt. (Emphasis
Ours).

The aforequoted provisions printed on Exhibit E show that the binding deposit receipt is intended to be merely a
provisional or temporary insurance contract and only upon compliance of the following conditions: (1) that the
company shall be satisfied that the applicant was insurable on standard rates; (2) that if the company does not
accept the application and offers to issue a policy for a different plan, the insurance contract shall not be binding
until the applicant accepts the policy offered; otherwise, the deposit shall be reftmded; and (3) that if the
applicant is not ble according to the standard rates, and the company disapproves the application, the insurance
applied for shall not be in force at any time, and the premium paid shall be returned to the applicant.

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely an
acknowledgment, on behalf of the company, that the latter's branch office had received from the applicant the
insurance premium and had accepted the application subject for processing by the insurance company; and that
the latter will either approve or reject the same on the basis of whether or not the applicant is "insurable on
standard rates." Since petitioner Pacific Life disapproved the insurance application of respondent Ngo Hing, the
binding deposit receipt in question had never become in force at any time.

Upon this premise, the binding deposit receipt (Exhibit E) is, manifestly, merely conditional and does not insure
outright. As held by this Court, where an agreement is made between the applicant and the agent, no liability
shall attach until the principal approves the risk and a receipt is given by the agent. The acceptance is merely
conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life
insurance, a "binding slip" or "binding receipt" does not insure by itself (De Lim vs. Sun Life Assurance Company
of Canada, 41 Phil. 264).

It bears repeating that through the intra-company communication of April 30, 1957 (Exhibit 3-M), Pacific Life
disapproved the insurance application in question on the ground that it is not offering the twenty-year
endowment insurance policy to children less than seven years of age. What it offered instead is another plan
known as the Juvenile Triple Action, which private respondent failed to accept. In the absence of a meeting of
the minds between petitioner Pacific Life and private respondent Ngo Hing over the 20-year endowment life
insurance in the amount of P50,000.00 in favor of the latter's one-year old daughter, and with the non-
compliance of the abovequoted conditions stated in the disputed binding deposit receipt, there could have been
no insurance contract duly perfected between thenl Accordingly, the deposit paid by private respondent shall
have to be refunded by Pacific Life.

As held in De Lim vs. Sun Life Assurance Company of Canada, supra, "a contract of insurance, like other
contracts, must be assented to by both parties either in person or by their agents ... The contract, to be binding
from the date of the application, must have been a completed contract, one that leaves nothing to be dione,
nothing to be completed, nothing to be passed upon, or determined, before it shall take effect. There can be no
contract of insurance unless the minds of the parties have met in agreement."

We are not impressed with private respondent's contention that failure of petitioner Mondragon to communicate
to him the rejection of the insurance application would not have any adverse effect on the allegedly perfected
temporary contract (Respondent's Brief, pp. 13-14). In this first place, there was no contract perfected between
the parties who had no meeting of their minds. Private respondet, being an authorized insurance agent of Pacific
Life at Cebu branch office, is indubitably aware that said company does not offer the life insurance applied for.
When he filed the insurance application in dispute, private respondent was, therefore, only taking the chance
that Pacific Life will approve the recommendation of Mondragon for the acceptance and approval of the
application in question along with his proposal that the insurance company starts to offer the 20-year
endowment insurance plan for children less than seven years. Nonetheless, the record discloses that Pacific Life
had rejected the proposal and recommendation. Secondly, having an insurable interest on the life of his one-
year old daughter, aside from being an insurance agent and an offense associate of petitioner Mondragon,
private respondent Ngo Hing must have known and followed the progress on the processing of such application
and could not pretend ignorance of the Company's rejection of the 20-year endowment life insurance
application.

At this juncture, We find it fit to quote with approval, the very apt observation of then Appellate Associate Justice
Ruperto G. Martin who later came up to this Court, from his dissenting opinion to the amended decision of the
respondent court which completely reversed the original decision, the following:

Of course, there is the insinuation that neither the memorandum of rejection (Exhibit 3-M) nor the
reply thereto of appellant Mondragon reiterating the desire for applicant's father to have the
application considered as one for a 20-year endowment plan was ever duly communicated to
Ngo; Hing, father of the minor applicant. I am not quite conninced that this was so. Ngo Hing, as
father of the applicant herself, was precisely the "underwriter who wrote this case" (Exhibit H-1).
The unchallenged statement of appellant Mondragon in his letter of May 6, 1957) (Exhibit 4-M),
specifically admits that said Ngo Hing was "our associate" and that it was the latter who "insisted
 that the plan be placed on the 20-year endowment plan." Under these circumstances, it is
inconceivable that the progress in the processing of the application was not brought home to his
knowledge. He must have been duly apprised of the rejection of the application for a 20-year
endowment plan otherwise Mondragon would not have asserted that it was Ngo Hing himself
who insisted on the application as originally filed, thereby implictly declining the offer to consider
the application under the Juvenile Triple Action Plan. Besides, the associate of Mondragon that
he was, Ngo Hing should only be presumed to know what kind of policies are available in the
company for minors below 7 years old. What he and Mondragon were apparently trying to do in
the premises was merely to prod the company into going into the business of issuing endowment
policies for minors just as other insurance companies allegedly do. Until such a definite policy is
however, adopted by the company, it can hardly be said that it could have been bound at all
under the binding slip for a plan of insurance that it could not have, by then issued at all.
(Amended Decision, Rollo, pp- 52-53).

2. Relative to the second issue of alleged concealment. this Court is of the firm belief that private respondent
had deliberately concealed the state of health and piysical condition of his daughter Helen Go. Wher private
regpondeit supplied the required essential data for the insurance application form, he was fully aware that his
one-year old daughter is typically a mongoloid child. Such a congenital physical defect could never be
ensconced nor disguished. Nonetheless, private respondent, in apparent bad faith, withheld the fact materal to
the risk to be assumed by the insurance compary. As an insurance agent of Pacific Life, he ought to know, as he
surely must have known. his duty and responsibility to such a material fact. Had he diamond said significant fact
in the insurance application fom Pacific Life would have verified the same and would have had no choice but to
disapprove the application outright.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and perfect
candor or openness and honesty; the absence of any concealment or demotion, however slight [Black's Law
Dictionary, 2nd Edition], not for the alone but equally so for the insurer (Field man's Insurance Co., Inc. vs. Vda
de Songco, 25 SCRA 70). Concealment is a neglect to communicate that which a partY knows aDd Ought to
communicate (Section 25, Act No. 2427). Whether intentional or unintentional the concealment entitles the
insurer to rescind the contract of insurance (Section 26, Id.: Yu Pang Cheng vs. Court of Appeals, et al, 105 Phil
930; Satumino vs. Philippine American Life Insurance Company, 7 SCRA 316). Private respondent appears
guilty thereof.

We are thus constrained to hold that no insurance contract was perfected between the parties with the
noncompliance of the conditions provided in the binding receipt, and concealment, as legally defined, having
been comraitted by herein private respondent.

WHEREFORE, the decision appealed from is hereby set aside, and in lieu thereof, one is hereby entered
absolving petitioners Lapulapu D. Mondragon and Great Pacific Life Assurance Company from their civil
liabilities as found by respondent Court and ordering the aforesaid insurance company to reimburse the amount
of P1,077.75, without interest, to private respondent, Ngo Hing. Costs against private respondent.

SO ORDERED.

Great Pacific Life Assurance Company vs Court of Appeals (1979)

In March 1957, Ngo Hing filed an application for a 20-year endowment policy for the life of his one-
year old daughter with the Great Pacific Life Assurance Company (Grepalife). Lapulapu Mondragon
was the insurance agent who assisted Ngo Hing. The insurance policy was for P50,000.00. The proper
form was filled out and Ngo Hing paid the insurance premium. He received a binding deposit receipt in
return. Said receipt however was subject to certain conditions, among which is the acceptance of
Grepalife.
Grepalife eventually denied the insurance application because the endowment plan by Grepalife is not
offered for minors below seven years old. Grepalife, instead made a counter-offer which Ngo Hing
failed to accept because Mondragon, instead of communicating the said denial to Ngo Hing, wrote a
letter to Grepalife trying to convince Grepalife to allow one-year olds to be covered by endowment
plans.
In May 1957, Ngo Hing’s one-year old daughter died. Ngo Hing tried to collect the insurance claim but
Grepalife refused as it claimed that the insurance contract was never perfected sans their acceptance.
ISSUE: Whether or not Grepalife should pay the insurance claim.
HELD: No. As properly ruled by the lower court as well as the Court of Appeals, the insurance contract
was never completed because Grepalife never accepted the insurance offer. The binding deposit
receipt issued to Ngo Hing is only acknowledgement of his application and receipt of his payment for
the insurance premium.
 The Supreme Court also noted that Ngo Hing failed to disclose the fact that his one-year old daughter
was a mongoloid. Such congenital defect was withheld by Ngo Hing with bad faith and such risk to be
assumed by the insurance company.
The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and
perfect candor or openness and honesty; the absence of any concealment or demotion, however slight
not for the insured alone but equally so for the insurer. Concealment is a neglect to communicate that
which a party knows and ought to communicate. Whether intentional or unintentional the concealment
entitles the insurer to rescind the contract of insurance.
ETERNAL GARDENS MEMORIAL PARK CORPORATION vs. THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY

G.R. No. 166245 09 April 2008

Facts:

Respondent Philamlife entered into an agreement denominated as Creditor Group Life Policy with petitioner. Under
the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by
Philamlife. Among those insured was John Chuang who died with a balance of payments pf PhP100,000.00. More
than a year after complying with the required documents, Philamlife had not furnished Eternal with any reply to the
latter’s insurance claim. This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000
on April 25, 1986. Only then did Philamlife respond that the deceased was not covered by the Policy.

The RTC said that since the contract is a group life insurance, once proof of death is submitted, payment must follow.
The CA ruled that the non-accomplishment of the submitted application form violated Section 26 of the Insurance
Code. Thus, the CA concluded, there being no application form, Chuang was not covered by Philamlifes insurance.

Issue: May the inaction of the insurer on the insurance application be considered approval of the application?

Ruling:

Yes. As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy
No. P-1920 dated December 10, 1980. In the policy, it is provided that:

EFFECTIVE DATE OF BENEFIT.

The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with the Assured.
However, there shall be no insurance if the application of the Lot Purchaser is not approved by the Company.

An examination of the above provision would show ambiguity between its two sentences. A contract of insurance,
being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the insurer.
Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured; it
cannot be interpreted as a termination of the insurance contract. The termination of the insurance contract by the
insurer must be explicit and unambiguous.

Enriquez v. SunLife- Insurance Policy

41 PHIL 269

Facts:
> On Sept. 24 1917, Herrer made an application to SunLife through its office in Manila for life annuity.
> 2 days later, he paid the sum of 6T to the company’s anager in its Manila office and was given a receipt.
> On Nov. 26, 1917, the head office gave notice of acceptance by cable to Manila. On the same date, the
Manila office prepared a letter notifying Herrer that his application has been accepted and this was placed in the
ordinary channels of transmission, but as far as known was never actually mailed and never received by
Herrer.
> Herrer died on Dec. 20, 1917. The plaintiff as administrator of Herrer’s estate brought this action to recover
the 6T paid by the deceased.

Issue:
Whether or not the insurance contract was perfected.

Held:
 NO.
The contract for life annuity was NOT perfected because it had NOT been proved satisfactorily that the
acceptance of the application ever came to the knowledge of the applicant. An acceptance of an offer of
insurance NOT actually or constructively communicated to the proposer does NOT make a contract of insurane,
as the locus poenitentiae is ended when an acceptance has passed beyond the control of the party.

NOTE: Life annuity is the opposite of a life insurance. In life annuity, a big amount is given to the insurance
company, and if after a certain period of time the insured is stil living, he is entitled to regular smaller amounts
for the rest of his life. Examples of Life annuity are pensions. Life Insurance on the other hand, the insured
during the period of the coverage makes small regular payments and upon his death, the insurer pays a big
amount to his beneficiaries.
Philamcare v CA 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 out-patient 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
Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio:

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 didn’t 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 husband’s 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 materialfact 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 isn’t valid.

They can’t 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 insured’s opinion. He wasn’t a medical doctor, so he can’t accurately gauge his condition.

Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated to make
further inquiry.”
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.”

PHILAMCARE HEALTH SYSTEMS, INC. vs. COURT OF

APPEALS
July 2, 2014 § Leave a comment

G.R. No. 125678, March 18, 2002 (YNARES-SANTIAGO, J.)

FACTS:

Ernani Trinos applied for a health care coverage with Philamcare Health Systems, Inc. To the 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?’, Ernani answered ‘No’. Under the agreement, Ernani is entitled to avail of
hospitalization benefits and out-patient benefits. The coverage was approved for a period of one year from March 1,
1988 to March 1, 1989. The agreement was however extended yearly until June 1, 1990 which increased the amount of
coverage to a maximum sum of P75,000 per disability.

During the period of said coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center
(MMC) for one month. While in the hospital, his wife Julita tried to claim the benefits under the health care agreement.
However, the Philamcare denied her claim alleging that the agreement was void because Ernani concealed his medical
history. Doctors at the MMC allegedly discovered at the time of Ernani’s confinement that he was hypertensive, diabetic
and asthmatic, contrary to his answer in the application form. Thus, Julita paid for all the hospitalization expenses.

After Ernani 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.

Julita filed an action for damages and reimbursement of her expenses plus moral damages attorney’s fees against
Philamcare and its president, Dr. Benito Reverente. The Regional Trial court or Manila rendered judgment in favor of
Julita. On appeal, the decision of the trial court was affirmed but deleted all awards for damages and absolved
petitioner Reverente. Hence, this 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 does not apply.

ISSUES:

(1) Whether or not the health care agreement is not an insurance contract

(2) Whether or not there is concealment of material fact made by Ernani

HELD:

(1)YES. Section2 (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 of the Insurance Code states that any contingent or unknown event, whether past or future, which my
damnify a person having an insurable against him, may be insured against. Every person has an insurable interest in
the life and health of himself.

Section 10 provides that every person has an insurable interest in the life and health (1) of himself, of his spouse and
of his children.

The insurable interest of respondent’s 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. 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.

(2) NO. 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 respondent’s husband who was not
a medical doctor. Where matters of opinion or judgment are called for answers made I good faith and without intent to
deceive will not avoid a policy even though they are untrue.

The fraudulent intent on the part of the insured must be established to warrant rescission of the insurance contract.
Concealment as a defense for the health care provider or insurer to avoid liability is an affirmative defense and the
duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In any case,
with or without the authority to investigate, petitioner is liable for claims made under the contract. Having assumed a
responsibility under the agreement, petitioner is bound to answer 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 wherever he avails of the covered benefits which he has prepaid.

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. By reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in favor
of the insured, especially to avoid forfeiture. This is equally applicable to Health Care Agreements.

Blue Cross v Olivares G.R. No. 169737, February 12, 2008

J. Corona

Facts:
Neomi Olivares applied for a health care program with Blue Cross for the amount of 12,000 pesos. 38 days after
she applied, she suffered from a stroke. Ailments due to “pre-existing conditions” were excluded from the
coverage. She was confined in Medical City and discharged with a bill of Php 34,000. Blue Cross refused to pay
unless she had her physician’s certification that she was suffering from a pre-existing condition. When Blue
Cross still refused to pay, she filed suit in the MTC. The health care company rebutted by saying that the
physician didn’t disclose the condition due to the patient’s invocation of the doctor-client privilege. The MTC
dismissed for a lack of cause of action because the physician didn’t disclose the condition. In the RTC, the
spouses were awarded the amount of the hospital bills plus 60,000 in damages. This was under the ratio that
the burden to prove that Neomi had a pre-existing condition was under Blue Cross. The CA denied the motion
for reconsideration of the health care company.

Issues:
1. Whether petitioner was able to prove that respondent Neomi's stroke was caused by a pre-existing condition
and therefore was excluded from the coverage of the health care agreement.
2. Whether it was liable for moral and exemplary damages and attorney's fees.

Held: No. Yes. Petition dismissed.

Ratio:
1. “Philamcare Health Systems, Inc. v. CA- 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.”
The agreement defined a pre-existing condition as:
“a disability which existed before the commencement date of membership whose natural history can be clinically
determined, whether or not the Member was aware of such illness or condition. Such conditions also include
disabilities existing prior to reinstatement date in the case of lapse of an Agreement.”
“Under this provision, disabilities which existed before the commencement of the agreement are excluded from
its coverage if they become manifest within one year from its effectivity.”
Petitioners still averred that the non-disclosure of the pre-existing condition made a presumption in its favor.
Respondents still maintained that the petitioner had the duty to prove its accusation.
Petitioner never presented evidence to prove its presumption that the Doctor’s report would work against Neomi.
They only perceived that the invocation of the privilege made the report adverse to Neomi and such was a
disreputable presumption. They should have made an independent assessment of Neomi’s condition when it
failed to obtain the report. They shouldn’t have waited for the attending physician’s report to come out.
Section 3 (e), Rule 131 of the Rules of Court states:
Under the rules of court, Rule 131, Sec. 3.
Disputable presumptions. ― The following presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:
(e) That evidence willfully suppressed would be adverse if produced.
The exception on presenting evidence applies when the suppression is an exercise of a privilege.
Hence, Neomi had the privilege not to present the Doctor’s report under the doctor-client privilege.
2. The court quoted the CA and RTC decision stating that “ the refusal of petitioner to pay respondent Neomi's
bills smacks of bad faith, as its refusal [was] merely based on its own perception that a stroke is a pre-existing
condition.” Also, there was factual bases in the RTC and CA for the award of the damages.