SECOND DIVISION
Action or suit clause — If a claim be made and rejected and an action or
G.R. No. 89741             March 13, 1991
SUN INSURANCE OFFICE, LTD., petitioner,  arbitrators or umpire, then the claim shall for all purposes be deemed to have
vs.
COURT OF APPEALS and EMILIO TAN, respondents.
PARAS, J.:
This is a petition for review on certiorari of the June 20, 1989 decision 1 of the
Court of Appeals in CA-G.R. SP. Case No. 13848 affirming the November 3,
1987 and January 14, 1988 orders of the Regional Trial Court 2 of Iloilo,
Branch 27, in Civil Case No. 16817, denying the motion to dismiss and the
subsequent motion for reconsideration; and the August 22, 1989 resolution of
the same court denying the motion for reconsideration.
On August 15, 1983, herein private respondent Emilio Tan took from herein
petitioner a P300,000.00 property insurance policy to cover his interest in the
electrical supply store of his brother housed in a building in Iloilo City. Four (4)
days after the issuance of the policy, the building was burned including the
insured store. On August 20, 1983, Tan filed his claim for fire loss with
petitioner, but on February 29, 1984, petitioner wrote Tan denying the latter's
claim. On April 3, 1984, Tan wrote petitioner, seeking reconsideration of the
denial of his claim. On September 3, 1985, Tan's counsel wrote the Insurer
inquiring about the status of his April 3, 1984 request for reconsideration.
Petitioner answered the letter on October 11, 1985, advising Tan's counsel
that the Insurer's denial of Tan's claim remained unchanged, enclosing copies
of petitioners' letters of February 29, 1984 and May 17, 1985 (response to
petition for reconsideration). On November 20, 1985, Tan filed Civil Case No.
16817 with the Regional Trial Court of Iloilo, Branch 27 but petitioner filed a
motion to dismiss on the alleged ground that the action had already
prescribed. Said motion was denied in an order dated November 3, 1987; and
petitioner's motion for reconsideration was also denied in an order dated
January 14, 1988.
Petitioner went to the Court of Appeals and sought the nullification of the said
Nov. 3, 1987 and January 14, 1988 orders, but the Court of Appeals, in its
June 20, 1989 decision denied the petition and held that the court a quo may
continue until its final termination.
A motion for reconsideration was filed, but the same was denied by the Court
of Appeals in its resolution of August 22, 1989 (Rollo, pp. 42-43).
Hence, the instant petition.
The Second Division of this Court, in its resolution of December 18, 1989
resolved to give due course to the petition and to require the parties to submit
simultaneous memoranda (Ibid., p. 56).
Petitioner raised two (2) issues which may be stated in substance, as follows:
I WHETHER OR NOT THE FILING OF A MOTION FOR
RECONSIDERATION INTERRUPTS THE TWELVE (12) MONTHS
PRESCRIPTIVE PERIOD TO CONTEST THE DENIAL OF THE
INSURANCE CLAIM; and
II WHETHER OR NOT THE REJECTION OF THE CLAIM SHALL BE
DEEMED FINAL ONLY IF IT CONTAINS WORDS TO THE EFFECT THAT
THE DENIAL IS FINAL.
The answer to the first issue is in the negative.
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly
against the insurer company, yet, contracts of insurance, like other contracts,
are to be construed according to the sense and meaning of the terms which
the parties themselves have used. If such terms are clear and unambiguous,
they must be taken and understood in their plain, ordinary and popular sense
(Pacific Banking Corp. v. Court of Appeals, 168 SCRA 1 [1988]).
Condition 27 of the Insurance Policy, which is the subject of the conflicting
contentions of the parties, reads:
27.
suit be not commenced either in the Insurance Commission or in any court of
competent jurisdiction within twelve (12) months from receipt of notice of such
rejection, or in case of arbitration taking place as provided herein, within
twelve (12) months after due notice of the award made by the arbitrator or
been abandoned and shall not thereafter be recoverable hereunder.
As the terms are very clear and free from any doubt or ambiguity whatsoever,
it must be taken and understood in its plain, ordinary and popular sense
pursuant to the above-cited principle laid down by this Court.
Respondent Tan, in his letter addressed to the petitioner insurance company
dated April 3, 1984 (Rollo, pp. 50-52), admitted that he received a copy of the
letter of rejection on April 2, 1984. Thus, the 12-month prescriptive period
started to run from the said date of April 2, 1984, for such is the plain
meaning and intention of Section 27 of the insurance policy.
While the question of whether or not the insured was definitely advised of the
rejection of his claim through the letter (Rollo, pp. 48-49) of petitioner dated
February 29, 1984, may arise, the certainty of the denial of Tan's claim was
clearly manifested in said letter, the pertinent portion of which reads:
We refer to your claim for fire loss of 20th August, 1983 at Huervana St., La
Paz, Iloilo City.
We now have the report of our adjusters and after a thorough and careful
review of the same and the accompanying documents at hand, we are
rejecting, much to our regrets, liability for the claim under our policies for one
or more of the following reasons:
1. xxx xxx xxx
2. xxx xxx xxx
For your information, we have referred all these matters to our lawyers for
their opinion as to the compensability of your claim, particularly referring to
the above violations. It is their opinion and in fact their strong recomendation
to us to deny your claim. By this letter, we do not intend to waive or relinquish
any of our rights or defenses under our policies of insurance.
It is also important to note the principle laid down by this Court in the case
of Ang v. Fulton Fire Insurance Co., (2 SCRA 945 [1961]), to wit:
The condition contained in an insurance policy that claims must be presented
within one year after rejection is not merely a procedural requirement but an
important matter essential to a prompt settlement of claims against insurance
companies as it demands that insurance suits be brought by the insured while
the evidence as to the origin and cause of destruction have not yet
disappeared.
In enunciating the above-cited principle, this Court had definitely settled the
rationale for the necessity of bringing suits against the Insurer within one year
from the rejection of the claim. The contention of the respondents that the
one-year prescriptive period does not start to run until the petition for
reconsideration had been resolved by the insurer, runs counter to the
declared purpose for requiting that an action or suit be filed in the Insurance
Commission or in a court of competent jurisdiction from the denial of the
claim. To uphold respondents' contention would contradict and defeat the
very principle which this Court had laid down. Moreover, it can easily be used
by insured persons as a scheme or device to waste time until any evidence
which may be considered against them is destroyed.
It is apparent that Section 27 of the insurance policy was stipulated pursuant
to Section 63 of the Insurance Code, which states that:
Sec. 63. A condition, stipulation or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a period of less than
one year from the time when the cause of action accrues, is void.
The crucial issue in this case is: When does the cause of action accrue?
In support of private respondent's view, two rulings of this Court have been
cited, namely, the case of Eagle Star Insurance Co. vs. Chia Yu (96 Phil. 696
(1955]), where the Court held:

The right of the insured to the payment of his loss accrues from the
happening of the loss. However, the cause of action in an insurance contract
does not accrue until the insured's claim is finally rejected by the insurer. This
is because before such final rejection there is no real necessity for bringing
suit.

and the case of ACCFA vs. Alpha Insurance & Surety Co., Inc. (24 SCRA 151
[1968], holding that:

Since "cause of action" requires as essential elements not only a

legal right of the plaintiff and a correlated obligation of the
defendant in violation of the said legal right, the cause of action
does not accrue until the party obligated (surety) refuses,
expressly or impliedly, to comply with its duty (in this case to pay
the amount of the bond).

Indisputably, the above-cited pronouncements of this Court may be taken to

mean that the insured's cause of action or his right to file a claim either in the
Insurance Commission or in a court of competent jurisdiction commences
from the time of the denial of his claim by the Insurer, either expressly or
impliedly.

But as pointed out by the petitioner insurance company, the rejection referred
to should be construed as the rejection, in the first instance, for if what is
being referred to is a reiterated rejection conveyed in a resolution of a petition
for reconsideration, such should have been expressly stipulated.

Thus, to allow the filing of a motion for reconsideration to suspend the running
of the prescriptive period of twelve months, a whole new body of rules on the
matter should be promulgated so as to avoid any conflict that may be brought
by it, such as:

a) whether the mere filing of a plea for reconsideration of a denial is sufficient

or must it be supported by arguments/affidavits/material evidence;

b) how many petitions for reconsideration should be permitted?

While in the Eagle Star case (96 Phil. 701), this Court uses the phrase "final
rejection", the same cannot be taken to mean the rejection of a petition for
reconsideration as insisted by respondents. Such was clearly not the
meaning contemplated by this Court. The Insurance policy in said case
provides that the insured should file his claim, first, with the carrier and then
with the insurer. The "final rejection" being referred to in said case is the
rejection by the insurance company.

PREMISES CONSIDERED, the questioned decision of the Court of Appeals

is REVERSED and SET ASIDE, and Civil Case No. 16817 filed with the
Regional Trial Court is hereby DISMISSED.

SO ORDERED.

Melencio-Herrera, Padilla, Sarmiento and Regalado, JJ., concur.

FIRST DIVISION
G.R. No. 195872               March 12, 2014
FORTUNE MEDICARE, INC., Petitioner, 
vs.
DAVID ROBERT U. AMORIN, Respondent.
DECISION
REYES, J.:
This is a petition for review on certiorari 1 under Rule 45 of the Rules of Court,
which challenges the Decision2 dated September 27, 2010 and
Resolution3 dated February 24, 2011 of the Court of Appeals (CA) in CA-G.R.
CV No. 87255.
The Facts
David Robert U. Amorin (Amorin) was a cardholder/member of Fortune
Medicare, Inc. (Fortune Care), a corporation engaged in providing health
maintenance services to its members. The terms of Amorin's medical
coverage were provided in a Corporate Health Program Contract 4 (Health
Care Contract) which was executed on January 6, 2000 by Fortune Care and
the House of Representatives, where Amorin was a permanent employee.
While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) in
May 1999, Amorin underwent an emergency surgery, specifically
appendectomy, at the St. Francis Medical Center, causing him to incur
professional and hospitalization expenses of US$7,242.35 and US$1,777.79,
respectively. He attempted to recover from Fortune Care the full amount
thereof upon his return to Manila, but the company merely approved a
reimbursement of ₱12,151.36, an amount that was based on the average
cost of appendectomy, net of medicare deduction, if the procedure were
performed in an accredited hospital in Metro Manila. 5 Amorin received under
protest the approved amount, but asked for its adjustment to cover the total
amount of professional fees which he had paid, and eighty percent (80%) of
the approved standard charges based on "American standard", considering
that the emergency procedure occurred in the U.S.A. To support his claim,
Amorin cited Section 3, Article V on Benefits and Coverages of the Health
Care Contract, to wit:
A. EMERGENCY CARE IN ACCREDITED HOSPITAL. Whether as an in-
patient or out-patient, the member shall be entitled to full coverage under the
benefits provisions of the Contract at any FortuneCare accredited hospitals
subject only to the pertinent provision of Article VII (Exclusions/Limitations)
hereof. For emergency care attended by non affiliated physician (MSU), the
member shall be reimbursed 80% of the professional fee which should have
been paid, had the member been treated by an affiliated physician. The
availment of emergency care from an unaffiliated physician shall not
invalidate or diminish any claim if it shall be shown to have been reasonably
impossible to obtain such emergency care from an affiliated physician.
B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the
total hospitalization cost including the professional fee (based on the total
approved charges) to a member who receives emergency care in a non-
accredited hospital. The above coverage applies only to Emergency
confinement within Philippine Territory. However, if the emergency
confinement occurs in a foreign territory, Fortune Care will be obligated to
reimburse or pay eighty (80%) percent of the approved standard charges
which shall cover the hospitalization costs and professional fees. x x x 6
Still, Fortune Care denied Amorin’s request, prompting the latter to file a
complaint7 for breach of contract with damages with the Regional Trial Court
(RTC) of Makati City.
For its part, Fortune Care argued that the Health Care Contract did not cover
hospitalization costs and professional fees incurred in foreign countries, as
the contract’s operation was confined to Philippine territory. 8 Further, it
argued that its liability to Amorin was extinguished upon the latter’s
acceptance from the company of the amount of ₱12,151.36.
The RTC Ruling
On May 8, 2006, the RTC of Makati, Branch 66 rendered its
Decision9 dismissing Amorin’s complaint. Citing Section 3, Article V of the
Health Care Contract, the RTC explained:
Taking the contract as a whole, the Court is convinced that the parties
intended to use the Philippine standard as basis. Section 3 of the Corporate
Health Care Program Contract provides that:
xxxx
On the basis of the clause providing for reimbursement equivalent to 80% of
the professional fee which should have been paid, had the member been
treated by an affiliated physician, the Court concludes that the basis for
reimbursement shall be Philippine rates. That provision, taken with Article V
of the health program contract, which identifies affiliated hospitals as only
those accredited clinics, hospitals and medical centers located "nationwide"
only point to the Philippine standard as basis for reimbursement.
The clause providing for reimbursement in case of emergency operation in a
foreign territory equivalent to 80% of the approved standard charges which
shall cover hospitalization costs and professional fees, can only be
reasonably construed in connection with the preceding clause on professional
fees to give meaning to a somewhat vague clause. A particular clause should
not be studied as a detached and isolated expression, but the whole and
every part of the contract must be considered in fixing the meaning of its
parts.10
In the absence of evidence to the contrary, the trial court considered the
amount of ₱12,151.36 already paid by Fortune Care to Amorin as equivalent
to 80% of the hospitalization and professional fees payable to the latter had
he been treated in an affiliated hospital. 11
Dissatisfied, Amorin appealed the RTC decision to the CA.
The CA Ruling
On September 27, 2010, the CA rendered its Decision 12 granting the appeal.
Thus, the dispositive portion of its decision reads:
WHEREFORE, all the foregoing premises considered, the instant appeal is
hereby GRANTED. The May 8, 2006 assailed Decision of the Regional Trial
Court (RTC) of Makati City, Branch 66 is hereby REVERSED and SET
ASIDE, and a new one entered ordering Fortune Medicare, Inc. to reimburse
[Amorin] 80% of the total amount of the actual hospitalization expenses of
$7,242.35 and professional fee of $1,777.79 paid by him to St. Francis
Medical Center pursuant to Section 3, Article V of the Corporate Health Care
Program Contract, or their peso equivalent at the time the amounts became
due, less the [P]12,151.36 already paid by Fortunecare.
SO ORDERED.13
In so ruling, the appellate court pointed out that, first, health care agreements
such as the subject Health Care Contract, being like insurance contracts,
must be liberally construed in favor of the subscriber. In case its provisions
are 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. 14 Second, the CA
explained that there was nothing under Article V of the Health Care Contract
which provided that the Philippine standard should be used even in the event
of an emergency confinement in a foreign territory. 15
Fortune Care’s motion for reconsideration was denied in a Resolution 16 dated
February 24, 2011. Hence, the filing of the present petition for review on
certiorari.
The Present Petition
Fortune Care cites the following grounds to support its petition:
I. The CA gravely erred in concluding that the phrase "approved standard
charges" is subject to interpretation, and that it did not automatically mean
"Philippine Standard"; and
II. The CA gravely erred in denying Fortune Care’s motion for
reconsideration, which in effect affirmed its decision that the American
Standard Cost shall be applied in the payment of medical and hospitalization
expenses and professional fees incurred by the respondent. 17
The Court’s Ruling
The petition is bereft of merit.
The Court finds no cogent reason to disturb the CA’s finding that Fortune
Care’s liability to Amorin under the subject Health Care Contract should be
based on the expenses for hospital and professional fees which he actually
incurred, and should not be limited by the amount that he would have
incurred had his emergency treatment been performed in an accredited
hospital in the Philippines.
We emphasize that for purposes of determining the liability of a health care
provider to its members, jurisprudence holds that a health care agreement is
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. 18
To aid in the interpretation of health care agreements, the Court laid down the
following guidelines in Philamcare Health Systems v. CA 19:
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. 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. 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.20 (Citations omitted and emphasis ours)
Consistent with the foregoing, we reiterated in Blue Cross Health Care, Inc. v.
Spouses Olivares21:
In Philamcare Health Systems, Inc. v. CA, we ruled that a health care
agreement is in the nature of a non-life insurance. It is an established rule in
insurance contracts that when their terms contain limitations on liability, they
should be construed strictly against the insurer. These are contracts of
adhesion the terms of which must be interpreted and enforced stringently
against the insurer which prepared the contract. This doctrine is equally
applicable to health care agreements.
xxxx
x x x [L]imitations of liability on the part of the insurer or health care provider
must be construed in such a way as to preclude it from evading its
obligations. Accordingly, they should be scrutinized by the courts with
"extreme jealousy" and "care" and with a "jaundiced eye." x x x. 22 (Citations
omitted and emphasis supplied)
In the instant case, the extent of Fortune Care’s liability to Amorin under the
attendant circumstances was governed by Section 3(B), Article V of the
subject Health Care Contract, considering that the appendectomy which the
member had to undergo qualified as an emergency care, but the treatment
was performed at St. Francis Medical Center in Honolulu, Hawaii, U.S.A., a
non-accredited hospital. We restate the pertinent portions of Section 3(B):
B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL
1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the
total hospitalization cost including the professional fee (based on the total
approved charges) to a member who receives emergency care in a non-
accredited hospital. The above coverage applies only to Emergency
confinement within Philippine Territory. However, if the emergency
confinement occurs in foreign territory, Fortune Care will be obligated to
reimburse or pay eighty (80%) percent of the approved standard charges
which shall cover the hospitalization costs and professional fees. x x
x23 (Emphasis supplied)
The point of dispute now concerns the proper interpretation of the phrase
"approved standard charges", which shall be the base for the allowable 80%
benefit. The trial court ruled that the phrase should be interpreted in light of
the provisions of Section 3(A), i.e., to the extent that may be allowed for
treatments performed by accredited physicians in accredited hospitals. As the
appellate court however held, this must be interpreted in its literal sense,
guided by the rule that any ambiguity shall be strictly construed against
Fortune Care, and liberally in favor of Amorin.
The Court agrees with the CA. As may be gleaned from the Health Care
Contract, the parties thereto contemplated the possibility of emergency care
in a foreign country. As the contract recognized Fortune Care’s liability for
emergency treatments even in foreign territories, it expressly limited its
liability only insofar as the percentage of hospitalization and professional fees
that must be paid or reimbursed was concerned, pegged at a mere 80% of
the approved standard charges.
The word "standard" as used in the cited stipulation was vague and
ambiguous, as it could be susceptible of different meanings. Plainly, the term
"standard charges" could be read as referring to the "hospitalization costs and
professional fees" which were specifically cited as compensable even when
incurred in a foreign country. Contrary to Fortune Care’s argument, from
nowhere in the Health Care Contract could it be reasonably deduced that
these "standard charges" referred to the "Philippine standard", or that cost
which would have been incurred if the medical services were performed in an
accredited hospital situated in the Philippines. The RTC ruling that the use of
the "Philippine standard" could be inferred from the provisions of Section
3(A), which covered emergency care in an accredited hospital, was
misplaced. Evidently, the parties to the Health Care Contract made a clear
distinction between emergency care in an accredited hospital, and that
obtained from a non-accredited hospital.1âwphi1 The limitation on payment
based on "Philippine standard" for services of accredited physicians was
expressly made applicable only in the case of an emergency care in an
accredited hospital.
The proper interpretation of the phrase "standard charges" could instead be correlated
with and reasonably inferred from the other provisions of Section 3(B), considering that
Amorin’s case fell under the second case, i.e., emergency care in a non-accredited
hospital. Rather than a determination of Philippine or American standards, the first part of
the provision speaks of the full reimbursement of "the total hospitalization cost including
the professional fee (based on the total approved charges) to a member who receives
emergency care in a non-accredited hospital" within the Philippines. Thus, for emergency
care in non-accredited hospitals, this cited clause declared the standard in the
determination of the amount to be paid, without any reference to and regardless of the
amounts that would have been payable if the treatment was done by an affiliated
physician or in an affiliated hospital. For treatments in foreign territories, the only
qualification was only as to the percentage, or 80% of that payable for treatments
performed in non-accredited hospital.
All told, in the absence of any qualifying word that clearly limited Fortune Care's liability to
costs that are applicable in the Philippines, the amount payable by Fortune Care should
not be limited to the cost of treatment in the Philippines, as to do so would result in the
clear disadvantage of its member. If, as Fortune Care argued, the premium and other
charges in the Health Care Contract were merely computed on assumption and risk
under Philippine cost and, that the American cost standard or any foreign country's cost
was never considered, such limitations should have been distinctly specified and clearly
reflected in the extent of coverage which the company voluntarily assumed. This was
what Fortune Care found appropriate when in its new health care agreement with the
House of Representatives, particularly in their 2006 agreement, the provision on
emergency care in non-accredited hospitals was modified to read as follows:
However, if the emergency confinement occurs in a foreign territory, Fortunecare will be
obligated to reimburse or pay one hundred (100%) percent under approved Philippine
Standard covered charges for hospitalization costs and professional fees but not to
exceed maximum allowable coverage, payable in pesos at prevailing currency exchange
rate at the time of availment in said territory where he/she is confined. x x x 24Settled is the
rule that ambiguities in a contract are interpreted against the party that caused the
ambiguity. "Any ambiguity in a contract whose terms are susceptible of different
interpretations must be read against the party who drafted it."25
WHEREFORE, the petition is DENIED. The Decision dated September 27, 2010 and
Resolution dated February 24, 2011 of the Court of Appeals in CA-G.R. CV No. 87255
are AFFIRMED.SO ORDERED.
 
FIRST DIVISION
 
DBP POOL OF ACCREDITED G.R. NO. 147039
INSURANCE COMPANIES,
Petitioner,  Assignment of Errors
- versus –  THE HONORABLE COURT OF APPEALS ERRED WHEN IT
RADIO MINDANAO NETWORK,
INC., Promulgated:
Respondent. January 27, 2006
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
 
DECISION
 
AUSTRIA-MARTINEZ, J.:
 
This refers to the petition for certiorari under Rule 45 of the Rules of Court
seeking the review of the Decision[1] dated November 16, 2000 of the Court of
Appeals (CA) in CA-G.R. CV No. 56351,  the dispositive portion of which
reads:
 
Wherefore, premises considered, the appealed Decision of
the Regional Trial Court ofMakati City, Branch 138 in Civil Case
No. 90-602 is hereby AFFIRMED with MODIFICATION in that the
interest rate is hereby reduced to 6% per annum.
 
Costs against the defendants-appellants.
 
SO ORDERED.[2]
 
The assailed decision originated from Civil Case No. 90-602 filed by Radio
Mindanao Network, Inc. (respondent) against DBP Pool of Accredited
Insurance Companies (petitioner) and Provident Insurance Corporation
(Provident) for recovery of insurance benefits. Respondent owns several
broadcasting stations all over the country. Provident covered respondents
transmitter equipment and generating set for the amount of P13,550,000.00
under Fire Insurance Policy No. 30354, while petitioner covered respondents
transmitter, furniture, fixture and other transmitter facilities for the amount
of P5,883,650.00 under Fire Insurance Policy No. F-66860.
 
In the evening of July 27, 1988, respondents radio station located
in SSS Building,Bacolod City, was razed by fire causing damage in the
amount of P1,044,040.00.Respondent sought recovery under the two
insurance policies but the claims were denied on the ground that the cause of
loss was an excepted risk excluded under condition no. 6 (c) and (d), to wit:
 
6. This insurance does not cover any loss or damage occasioned
by or through or in consequence, directly or indirectly, of any of the
following consequences, namely:
 
(c) War, invasion, act of foreign enemy, hostilities, or warlike
operations (whether war be declared or not), civil war.
 
(d) Mutiny, riot, military or popular rising, insurrection, rebellion,
revolution, military or usurped power.[3]
 
The insurance companies maintained that the evidence showed that the fire
was caused by members of the Communist Party of the Philippines/New
Peoples Army (CPP/NPA); and consequently, denied the claims. Hence,
respondent was constrained to file Civil Case No. 90-602 against petitioner
and Provident.
After trial on the merits, the Regional Trial Court of Makati, Branch 138,
rendered a decision in favor of respondent. The dispositive portion of the
decision reads:
 
IN VIEW THEREOF, judgment is rendered in favor of
plaintiff. Defendant Provident Insurance Corporation is directed to
pay plaintiff the amount of P450,000.00 representing the value of
the destroyed property insured under its Fire Insurance Policy plus
12% legal interest from March 2, 1990 the date of the filing of the
Complaint. Defendant DBP Pool Accredited Insurance Companies
is likewise ordered to pay plaintiff the sum of P602,600.00
representing the value of the destroyed property under its Fire
Insurance Policy plus 12% legal interest from March 2, 1990.
 
SO ORDERED.[4]
Both insurance companies appealed from the trial courts decision but the CA
affirmed the decision, with the modification that the applicable interest rate
was reduced to 6% per annum. A motion for reconsideration was filed by
petitioner DBP which was denied by the CA per its Resolution dated January
30, 2001.[5]
Hence, herein petition by DBP Pool of Accredited Insurance Companies,
[6]
 with the following assignment of errors:
 
HELD THAT THERE WERE NO SUFFICIENT EVIDENCE
SHOWING THAT THE APPROXIMATELY TENTY [sic] (20)
ARMED MEN WHO CUSED [sic] THE FIRE AT RESPONDENTS
RMN PROPERTY AT BACOLOD CITY WERE MEMBERS OF
THE CPP-NPA.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT
ADJUDGED THAT RESPONDENT RMN CANNOT BEHELD [sic]
FOR DAMAGES AND ATTORNEYS FEES FOR INSTITUTING
THE PRESENT ACTION AGAINST THE PETITIONER UNDER
ARTICLES 21, 2208, 2229 AND 2232 OF THE CIVIL CODE OF
THE PHILIPPINES.[7]
Petitioner assails the factual finding of both the trial court and the CA that its
evidence failed to support its allegation that the loss was caused by an
excepted risk, i.e., members of the CPP/NPA caused the fire. In upholding
respondents claim for indemnity, the trial court found that:
 
The only evidence which the Court can consider to determine if the
fire was due to the intentional act committed by the members of
the New Peoples Army (NPA), are the testimony [sic] of witnesses
Lt. Col. Nicolas Torres and SPO3 Leonardo Rochar who were
admittedly not present when the fire occurred. Their testimony [sic]
was [sic] limited to the fact that an investigation was conducted
and in the course of the investigation they were informed by
bystanders that heavily armed men entered the transmitter house,
poured gasoline in (sic) it and then lighted it. After that, they went
out shouting Mabuhay ang NPA (TSN, p. 12., August 2,
1995). The persons whom they investigated and actually saw the
burning of the station were not presented as witnesses. The
documentary evidence particularly Exhibits 5 and 5-C do not
satisfactorily prove that the author of the burning were members of
the NPA. Exhibit 5-B which is a letter released by the NPA merely
mentions some dissatisfaction with the activities of some people in
the media in Bacolod.There was no mention there of any threat on
media facilities.[8]
 
The CA went over the evidence on record and sustained the findings of the
trial court, to wit:
 
To recapitulate, defendants-appellants presented the following to
support its claim, to wit: police blotter of the burning of DYHB,
certification of the Negros Occidental Integrated National Police,
Bacolod City regarding the incident, letter of alleged NPA
members Celso Magsilang claiming responsibility for the burning
of DYHB, fire investigation report dated July 29, 1988, and the
testimonies of Lt. Col. Nicolas Torres and SFO III
Leonardo Rochas.We examined carefully the report on the police
blotter of the burning of DYHB, the certification issued by the
Integrated National Police of Bacolod City and the fire investigation
report prepared by SFO III Rochas and there We found
that none of them categorically stated that the twenty (20) armed
men which burned DYHB were members of the CPP/NPA. The
said documents simply stated that the said armed men
were believed to be or suspected of being members of the said
group. Even SFO III Rochas admitted that he was not sure that the
said armed men were members of the CPP-NPA, thus:
 
 
In fact the only person who seems to be so sure that that the CPP-
NPA had a hand in the burning of DYHB was Lt. Col. Nicolas
Torres. However, though We found him to be persuasive in his
testimony regarding how he came to arrive at his opinion, We
cannot nevertheless admit his testimony as conclusive proof that
the CPP-NPA was really involved in the incident considering that
he admitted that he did not personally see the armed men even as
he tried to pursue them. Note that when Lt. Col. Torres was
presented as witness, he was presented as an ordinary witness
only and not an expert witness. Hence, his opinion on the identity
or membership of the armed men with the CPP-NPA is not
admissible in evidence.
Anent the letter of a certain Celso Magsilang, who claims to be a
member of NPA-NIROC, being an admission of person which is
not a party to the present action, is likewise inadmissible in
evidence under Section 22, Rule 130 of the Rules of Court. The
reason being that an admission is competent only when the
declarant, or someone identified in legal interest with him, is a
party to the action.[9]
 
The Court will not disturb these factual findings absent compelling
or exceptional reasons. It should be stressed that a review by certiorari under
Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of
the Court is limited to reviewing only errors of law, not of fact. [10]  A witness can testify only to those facts which he knows of his
 
Moreover, when supported by substantial evidence, findings of fact
of the trial court as affirmed by the CA are conclusive and binding on the
parties,[11] which this Court will not review unless there are exceptional
circumstances. There are no exceptional circumstances in this case that
would have impelled the Court to depart from the factual findings of both the
trial court and the CA.
 
Both the trial court and the CA were correct in ruling that petitioner
failed to prove that the loss was caused by an excepted risk.
 
Petitioner argues that private respondent is responsible for proving
that the cause of the damage/loss is covered by the insurance policy, as
stipulated in the insurance policy, to wit:
 
Any loss or damage happening during the existence of abnormal
conditions (whether physical or otherwise) which are occasioned
by or through in consequence directly or indirectly, of any of the
said occurrences shall be deemed to be loss or damage which is
not covered by the insurance, except to the extent that the Insured
shall prove that such loss or damage happened independently of
the existence of such abnormal conditions.
 
In any action, suit or other proceeding where the Companies
allege that by reason of the provisions of this condition any loss or
damage is not covered by this insurance, the burden of proving
that such loss or damage is covered shall be upon the Insured. [12]
 
An insurance contract, being a contract of adhesion, should be so
interpreted as to carry out the purpose for which the parties entered into the
contract which is to insure against risks of loss or damage to the
goods. Limitations of liability should be regarded with extreme jealousy and
must be construed in such a way as to preclude the insurer from
noncompliance with its obligations.[13]
 
The burden of proof contemplated by the aforesaid provision
actually refers to the burden of evidence (burden of going forward). [14] As
applied in this case, it refers to the duty of the insured to show that the loss or
damage is covered by the policy. The foregoing clause notwithstanding, the
burden of proof still rests upon petitioner to prove that the damage or loss
was caused by an excepted risk in order to escape any liability under the
contract.
 
Burden of proof is the duty of any party to present evidence to
establish his claim or defense by the amount of evidence required by law,
which is preponderance of evidence in civil cases. The party, whether plaintiff
or defendant, who asserts the affirmative of the issue has the burden of proof
to obtain a favorable judgment. For the plaintiff, the burden of proof never
parts.[15] For the defendant, an affirmative defense is one which is not a denial
of an essential ingredient in the plaintiffs cause of action, but one which, if
established, will be a good defense i.e. an avoidance of the claim. [16]
 
Particularly, in insurance cases, where a risk is excepted by the
terms of a policy which insures against other perils or hazards, loss from such
a risk constitutes a defense which the insurer may urge, since it has not
assumed that risk, and from this it follows that an insurer seeking to defeat
a claim because of an exception or limitation in the policy has the
burden of proving that the loss comes within the purview of the
exception or limitation set up. If a proof is made of a loss apparently within
a contract of insurance, the burden is upon the insurer to prove that the loss
arose from a cause of loss which is excepted or for which it is not liable, or
from a cause which limits its liability.[17]
 
Consequently, it is sufficient for private respondent to prove the
fact of damage or loss. Once respondent makes out a prima facie case in its
favor, the duty or the burden of evidence shifts to petitioner to controvert
respondents prima facie case.[18] In this case, since petitioner alleged an
excepted risk, then the burden of evidence shifted to petitioner to prove such
exception. It is only when petitioner has sufficiently proven that the damage or
loss was caused by an excepted risk does the burden of evidence shift back
to respondent who is then under a duty of producing evidence to show why
such excepted risk does not release petitioner from any liability. Unfortunately
for petitioner, it failed to discharge its primordial burden of proving that the
damage or loss was caused by an excepted risk.
 
Petitioner however, insists that the evidence on record established
the identity of the author of the damage. It argues that the trial court and the
CA erred in not appreciating the reports of witnesses Lt. Col Torres and SFO
II Rochar that the bystanders they interviewed claimed that the perpetrators
were members of the CPP/NPA as an exception to the hearsay rule as part
of res gestae.
 
personal knowledge, which means those facts which are derived from his
perception.[19] A witness may not testify as to what he merely learned from
others either because he was told or read or heard the same. Such testimony
is considered hearsay and may not be received as proof of the truth of what
he has learned. The hearsay rule is based upon serious concerns about the
trustworthiness and reliability of hearsay evidence inasmuch as such
evidence are not given under oath or solemn affirmation and, more
importantly, have not been subjected to cross-examination by opposing
counsel to test the perception, memory, veracity and articulateness of the out-
of-court declarant or actor upon whose reliability on which the worth of the
out-of-court statement depends.[20]
 
Res gestae, as an exception to the hearsay rule, refers to those
exclamations and statements made by either the participants, victims, or
spectators to a crime immediately before, during, or after the commission of
the crime, when the circumstances are such that the statements were made
as a spontaneous reaction or utterance inspired by the excitement of the
occasion and there was no opportunity for the declarant to deliberate and to
fabricate a false statement. The rule in res gestae applies when the declarant
himself did not testify and provided that the testimony of the witness who
heard the declarant complies with the following requisites: (1) that the
principal act, the res gestae, be a startling occurrence; (2) the statements
were made before the declarant had the time to contrive or devise a
falsehood; and (3) that the statements must concern the occurrence in
question and its immediate attending circumstances. [21]
 
The Court is not convinced to accept the declarations as part of res
gestae. While it may concede that these statements were made by the bystanders during
a startling occurrence, it cannot be said however, that these utterances were
made spontaneously by the bystanders and before they had the time to contrive or
devise a falsehood. Both SFO III Rochar and Lt. Col. Torres received the bystanders
statements while they were making their investigations during and after the fire. It is
reasonable to assume that when these statements were noted down, the bystanders
already had enough time and opportunity to mill around, talk to one another and
exchange information, not to mention theories and speculations, as is the usual
experience in disquieting situations where hysteria is likely to take place. It cannot
therefore be ascertained whether these utterances were the products of truth. That the
utterances may be mere idle talk is not remote.
 
At best, the testimonies of SFO III Rochar and Lt. Col. Torres that these
statements were made may be considered as independently relevant statements
gathered in the course of their investigation, and are admissible not as to the veracity
thereof but to the fact that they had been thus uttered.[22]
Furthermore, admissibility of evidence should not be equated with its weight
and sufficiency.[23] Admissibility of evidence depends on its relevance and competence,
while the weight of evidence pertains to evidence already admitted and its tendency to
convince and persuade.[24] Even assuming that the declaration of the bystanders that it
was the members of the CPP/NPA who caused the fire may be admitted as evidence, it
does not follow that such declarations are sufficient proof. These declarations should be
calibrated vis--vis the other evidence on record. And the trial court aptly noted that there
is a need for additional convincing proof, viz.:
 
The Court finds the foregoing to be insufficient to establish that the cause of
the fire was the intentional burning of the radio facilities by the rebels or an
act of insurrection, rebellion or usurped power. Evidence that persons who
burned the radio facilities shouted Mabuhay angNPA does not furnish logical
conclusion that they are member [sic] of the NPA or that their act was an act
of rebellion or insurrection. Additional convincing proof need be
submitted.Defendants failed to discharge their responsibility to present
adequate proof that the loss was due to a risk excluded.[25]
 
While the documentary evidence presented by petitioner, i.e., (1) the police
blotter; (2) the certification from the Bacolod Police Station; and (3) the Fire Investigation
Report may be considered exceptions to the hearsay rule, being entries in official records,
nevertheless, as noted by the CA, none of these documents categorically stated that the
perpetrators were members of the CPP/NPA. [26] Rather, it was stated in the police blotter
that: a group of persons accompanied by one (1) woman all believed to be CPP/NPA
more or less 20 persons suspected to be CPP/NPA, [27] while the certification from the
Bacolod Police station stated that some 20 or more armed men believed to be members
of the New Peoples Army NPA,[28] and the fire investigation report concluded that (I)t is
therefore believed by this Investigating Team that the cause of the fire is intentional, and
the armed men suspected to be members of the CPP/NPA where (sic) the ones
responsible [29] All these documents show that indeed, the suspected executor of the fire
were believed to be members of the CPP/NPA. But suspicion alone is not sufficient,
preponderance of evidence being the quantum of proof.
 
All told, the Court finds no reason to grant the present petition.
 
WHEREFORE, the petition is DISMISSED. The Court of Appeals Decision
dated November 16, 2000 and Resolution dated January 30, 2001 rendered in CA-G.R.
CV No. 56351 are AFFIRMED in toto.SO ORDERED.
FIRST DIVISION by her attending physician that the stroke she suffered was not
  due to pre-existing conditions could she demand entitlement to the
BLUE CROSS HEALTH CARE, G.R. No. 169737 benefits of her policy.[13]
INC.,  
Petitioner  
 JJ. On appeal, the RTC, in a decision dated February 2, 2004,
  reversed the ruling of the MeTC and ordered petitioner to pay respondents
DANILO OLIVARES, the following amounts: (1) P34,217.20 representing the medical bill in Medical
Respondents. Promulgated: City and P1,000 as reimbursement for consultation fees, with legal interest
  from the filing of the complaint until fully paid; (2) P20,000 as moral damages;
February 12, 2008 (3) P20,000 as exemplary damages; (4) P20,000 as attorney's fees and (5)
  costs of suit.[14] The RTC held that it was the burden of petitioner to prove that
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x the stroke of respondent Neomi was excluded from the coverage of the health
  care program for being caused by a pre-existing condition. It was not able to
  discharge that burden.[15]
DECISION  
  Aggrieved, petitioner filed a petition for review under Rule 42 of the Rules of
CORONA, J.: Court in the CA. In a decision promulgated on July 29, 2005, the CA affirmed
  the decision of the RTC.It denied reconsideration in a resolution promulgated
  on September 21, 2005. Hence this petition which raises the following issues:
This is a petition for review on certiorari [1] of a decision[2] and resolution[3] of (1) whether petitioner was able to prove that respondent Neomi's stroke was
the Court of Appeals (CA) dated July 29, 2005 and September 21, 2005, caused by a pre-existing condition and therefore was excluded from the
respectively, in CA-G.R. SP No. 84163 which affirmed the decision of the coverage of the health care agreement and (2) whether it was liable for moral
Regional Trial Court (RTC), Makati City, Branch 61 dated February 2, 2004 in and exemplary damages and attorney's fees.
Civil Case No. 03-1153,[4] which in turn reversed the decision of the  
Metropolitan Trial Court (MeTC), Makati City, Branch 66 dated August 5, The health care agreement defined a pre-existing condition as: 
2003 in Civil Case No. 80867.[5]  
  x x x a disability which existed before the commencement date of
Respondent Neomi T. Olivares applied for a health care program with membership whose natural history can be clinically determined,
petitioner Blue Cross Health Care, Inc., a health maintenance firm. For the whether or not the Member was aware of such illness or condition.
period October 16, 2002 to October 15, 2003, [6] she paid the amount Such conditions also include disabilities existing prior to
of P11,117. For the same period, she also availed of the additional service of reinstatement date in the case of lapse of an Agreement.
limitless consultations for an additional amount of P1,000. She paid these Notwithstanding, the following disabilities but not to the exclusion
amounts in full on October 17, 2002. The application was approved on of others are considered pre-existing conditions including their
October 22, 2002. In the health care agreement, ailments due to pre-existing complications when occurring during the first year of a Members
conditions were excluded from the coverage.[7] coverage:
On November 30, 2002, or barely 38 days from the effectivity of her health  
insurance, respondent Neomi suffered a stroke and was admitted at the I.                    Tumor of Internal Organs
Medical City which was one of the hospitals accredited by petitioner. During II.                  Hemorrhoids/Anal Fistula
her confinement, she underwent several laboratory tests. On December 2, III.                Diseased tonsils and sinus
2002, her attending physician, Dr. Edmundo Saniel, [8]informed her that she conditions requiring surgery
could be discharged from the hospital. She incurred hospital expenses IV.                Cataract/Glaucoma
amounting to P34,217.20. Consequently, she requested from the V.                  Pathological Abnormalities of
representative of petitioner at Medical City a letter of authorization in order to nasal septum or turbinates
settle her medical bills. But petitioner refused to issue the letter and VI.                Goiter and other thyroid
suspended payment pending the submission of a certification from her disorders
attending physician that the stroke she suffered was not caused by a pre- VII.              Hernia/Benign prostatic
existing condition.[9] hypertrophy
  VIII.            Endometriosis
She was discharged from the hospital on December 3, 2002. On IX.                Asthma/Chronic Obstructive
December 5, 2002, she demanded that petitioner pay her medical bill. When Lung disease
petitioner still refused, she and her husband, respondent Danilo Olivares, X.                  Epilepsy
were constrained to settle the bill. [10] They thereafter filed a complaint for XI.                Scholiosis/Herniated disc and
collection of sum of money against petitioner in the MeTC on January 8, other Spinal column abnormalities
2003.[11] In its answer dated January 24, 2003, petitioner maintained that it XII.              Tuberculosis
had not yet denied respondents' claim as it was still awaiting Dr. Saniel's XIII.            Cholecysitis
report. XIV.            Gastric or Duodenal ulcer
  XV.              Hallux valgus
In a letter to petitioner dated February 14, 2003, Dr. Saniel stated that: XVI.            Hypertension and other
Cardiovascular diseases
This is in response to your letter dated February 13, XVII.          Calculi
2003. [Respondent] Neomi T. Olivares called by phone on January XVIII.        Tumors of skin, muscular tissue,
29, 2003. She stated that she is invoking patient-physician bone or any form of blood
confidentiality. That she no longer has any relationship with dyscracias
[petitioner]. And that I should not release any medical information XIX.           Diabetes Mellitus
concerning her neurologic status to anyone without her XX.             Collagen/Auto-Immune disease
approval. Hence, the same day I instructed my secretary to inform  
your office thru Ms. Bernie regarding [respondent's] wishes. After the Member has been continuously covered for 12 months,
  this pre-existing provision shall no longer be applicable except for
xxx xxx xxx[12] illnesses specifically excluded by an endorsement and made part
  of this Agreement.[16]
   
In a decision dated August 5, 2003, the MeTC dismissed the complaint for  
lack of cause of action. It held: Under this provision, disabilities which existed before the
  commencement of the agreement are excluded from its coverage if they
xxx the best person to determine whether or not the stroke she become manifest within one year from its effectivity. Stated otherwise,
suffered was not caused by pre-existing conditions is her attending petitioner is not liable for pre-existing conditions if they occur within one year
physician Dr. Saniel who treated her and conducted the test during from the time the agreement takes effect.
her confinement. xxx But since the evidence on record reveals that  
it was no less than [respondent Neomi] herself who prevented her Petitioner argues that respondents prevented Dr. Saniel from
attending physician from issuing the required certification, submitting his report regarding the medical condition of Neomi. Hence, it
petitioner cannot be faulted from suspending payment of her contends that the presumption that evidence willfully suppressed would be
claim, for until and unless it can be shown from the findings made adverse if produced should apply in its favor. [17]
  SO ORDERED.
Respondents counter that the burden was on petitioner to prove
that Neomi's stroke was excluded from the coverage of their agreement
because it was due to a pre-existing condition. It failed to prove this.[18]
 
We agree with respondents.
 
In Philamcare Health Systems, Inc. v. CA,[19] we ruled that a health
care agreement is in the nature of a non-life insurance. [20] 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. [21]
 
Petitioner never presented any evidence to prove that respondent Neomi's
stroke was due to a pre-existing condition. It merely speculated that Dr.
Saniel's report would be adverse to Neomi, based on her invocation of the
doctor-patient privilege. This was a disputable presumption at best.
 
Section 3 (e), Rule 131 of the Rules of Court states:
 
Sec. 3. Disputable presumptions. ― The following
presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:
xxx xxx xxx
 
(e) That evidence willfully suppressed would be adverse
if produced.
 
Suffice it to say that this presumption does not apply if (a) the evidence is at
the disposal of both parties; (b) the suppression was not willful; (c) it is merely
corroborative or cumulative and (d) the suppression is an exercise of a
privilege.[22] Here, respondents' refusal to present or allow the presentation of
Dr. Saniel's report was justified. It was privileged communication between
physician and patient.
 
Furthermore, as already stated, limitations of liability on the part of the insurer
or health care provider must be construed in such a way as to preclude it
from evading its obligations. Accordingly, they should be scrutinized by the
courts with extreme jealousy[23] and care and with a jaundiced eye.[24] Since
petitioner had the burden of proving exception to liability, it should have made
its own assessment of whether respondent Neomi had a pre-existing
condition when it failed to obtain the attending physician's report. It could not
just passively wait for Dr. Saniel's report to bail it out. The mere reliance on a
disputable presumption does not meet the strict standard required under our
jurisprudence.
 
Next, petitioner argues that it should not be held liable for moral
and exemplary damages, and attorney's fees since it did not act in bad faith
in denying respondent Neomi's claim. It insists that it waited in good faith for
Dr. Saniel's report and that, based on general medical findings, it had
reasonable ground to believe that her stroke was due to a pre-existing
condition, considering it occurred only 38 days after the coverage took effect.
[25]

 
We disagree.
 
The RTC and CA found that there was a factual basis for the
damages adjudged against petitioner. They found that it was guilty of bad
faith in denying a claim based merely on its own perception that there was a
pre-existing condition:

[Respondents] have sufficiently shown that [they] were forced to

engage in a dispute with [petitioner] over a legitimate claim while [respondent
Neomi was] still experiencing the effects of a stroke and forced to pay for her
medical bills during and after her hospitalization despite being covered by
[petitioners] health care program, thereby suffering in the process extreme
mental anguish, shock, serious anxiety and great stress. [They] have shown
that because of the refusal of [petitioner] to issue a letter of authorization and
to pay [respondent Neomi's] hospital bills, [they had] to engage the services
of counsel for a fee of P20,000.00.Finally, 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.
(emphasis supplied) This is a factual matter binding and conclusive on this Court.
[26] 
We see no reason to disturb these findings.
 
WHEREFORE, the petition is hereby DENIED. The July 29, 2005
decision and September 21, 2005 resolution of the Court of Appeals in CA-G.R. SP
No. 84163 are AFFIRMED. 
 
Treble costs against petitioner.