Philamcare Health System vs.

CA
FACTS:

In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health
Systems, Inc. He was asked if he was ever treated for high blood, heart trouble, diabetes,
cancer, liver disease, asthma, or peptic ulcer; he answered no.
His application was approved and it was effective for one year. His coverage was subsequently
renewed twice for one year each. While the coverage was still in force in 1990, Ernani suffered
a heart attack for which he was hospitalized. The cost of the hospitalization amounted to
P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for the latter to pay the
hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to disclose the
fact that he was diabetic, hypertensive, and asthmatic. Julita ended up paying the hospital
expenses.
Ernani eventually died. In July 1990, Julita sued Philamcare for damages. Philamcare alleged
that the health coverage is not an insurance contract; that the concealment made by Ernani
voided the agreement.
ISSUE:
Whether or not Philamcare can avoid the health coverage agreement.
HELD:

No.
The health coverage agreement (health care agreement) entered upon by Ernani with
Philamcare is a non-life insurance contract and is covered by the Insurance Law. It 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.
There is no concealment on the part of Ernani. He answered the question with good faith. He
was not a medical doctor hence his statement in answering the question asked of him when he
was applying is an opinion rather than a fact.
Answers made in good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken the necessary
steps to void the health coverage agreement prior to the filing of the suit by Julita. Philamcare
never gave notice to Julita of the fact that they are voiding the agreement. Therefore,
Philamcare should pay the expenses paid by Julita.

Blue Cross Health Care Inc. vs. Olivares

Facts: Respondent Neomi T. Olivares applied for a health care program with petitioner Blue Cross
Health Care, Inc. She paid the amount of P11,117, she also availed of the additional service of
limitless consultations for an additional amount of P1,000. She paid these amounts in full on October
17, 2002.
 The application was approved on October 22, 2002. In the health care agreement, ailments due to
"pre-existing conditions" were excluded from the coverage. The health care 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. Hypertension and other Cardiovascular diseases, among others,
are considered pre-existing conditions including their complications when occurring during the first
year of a Member’s 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 Medical City. During her confinement, she
underwent several laboratory tests. She incurred hospital expenses amounting to P34,217.20.

Consequently, she requested from the representative of petitioner at Medical City a letter of
authorization in order to settle her medical bills. But petitioner refused to issue the letter and
suspended payment pending the submission of a certification from her attending physician that the
stroke she suffered was not caused by a pre-existing condition.

Thereafter, she demanded that petitioner pay her medical bill. When petitioner still refused, she and
her husband, respondent Danilo Olivares, were constrained to settle the bill.

They thereafter filed a complaint for collection of sum of money against petitioner. In its answer
petitioner maintained that it had not yet denied respondents' claim as it was still awaiting Dr. Saniel's
report.

In a letter to petitioner, Dr. Saniel stated that: Neomi T. Olivares is invoking patient-physician
confidentiality.

Thus, the Metc dismissed the complaint for lack of cause of action. The RTC reversed the Metc
ruling and ordered Blue Cross to pay P34,217.20 representing the medical bill in Medical City,
among others. The CA affirmed the RTC's decision.

ISSUE: Whether or not 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.

HELD: NO. 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.

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.

Suffice it to say that this presumption does not apply if the suppression is an exercise of a
privilege.

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.

FORTUNE MEDICARE INC vs. AMORIN

FACTS: David Robert U. Amorin (Amorin) was a cardholder/member of Fortune Medicare, Inc.
(Fortune Care). The terms of Amorin's medical coverage were provided in a Corporate Health
Program Contract  (Health Care Contract).
4

While on vacation in Hawaii, 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.

He attempted to recover from Fortune Care the full amount thereof 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.

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 which reads in part:

A. EMERGENCY CARE IN ACCREDITED HOSPITAL.

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”. 

B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL.

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. 

Still, Fortune Care denied Amorin’s request, prompting the latter to file a complaint  for breach of
7

contract with damages with the Regional Trial Court (RTC) of Makati City.

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.  Further, it argued that its liability to Amorin was extinguished upon the latter’s acceptance
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from the company of the amount of ₱12,151.36.

ISSUE: What is the proper interpretation of the phrase "approved standard charges", which shall be
the base for the allowable 80% benefit. 

HELD: 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.

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.

ENRIQUEZ VS. SUN LIFE ASSURANCE OF CANADA

FACTS: On September 24, 1917, Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life annuity. Two days later he paid the
sum of P6,000 to the manager of the company's Manila office and was given a receipt.

The application was immediately forwarded to the head office of the company at Montreal,
Canada. On November 26, 1917, the head office gave notice of acceptance by cable to Manila.
The policy was then issued at Montreal. Subsequently Atty. Aurelio Torres wrote to the Manila
office of the company stating that Herrer desired to withdraw his application.

The following day the local office replied to Mr. Torres, stating that the policy had been issued,
and called attention to the notification of November 26, 1917. This letter was received by Mr.
Torres on the morning of December 21, 1917. Mr. Herrer died on December 20, 1917.

Rafael Enriquez (plaintiff), as administrator of the estate of the late Joaquin Ma. Herrer filed to
recover from Sun Life Assurance Company of Canada through its office in Manila for a life
annuity An action brought by the plaintiff as administrator of the estate of the late Joaquin Ma.
Herrer to recover from the defendant life insurance company the sum of pesos 6,000 paid by
the deceased for a life annuity.

The trial court gave judgment for the defendant Sunlife assurance. Plaintiff appeals.

ISSUE: Whether or not Mr. Herrera received notice of acceptance of his application thereby
perfecting his life annuity (insurance contract)
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 insurance, as the locus poenitentiae is ended when an
acceptance has passed beyond the control of the party.

In resume, therefore, the law applicable to the case is found to be the second paragraph of
article 1262 of the Civil Code providing that an acceptance made by letter shall not bind the
person making the offer except from the time it came to his knowledge. The pertinent fact is,
that according to the provisional receipt, three things had to be accomplished by the insurance
company before there was a contract: (1) There had to be a medical examination of the
applicant; (2) there had to be approval of the application by the head office of the company; and
(3) this approval had in some way to be communicated by the company to the applicant. (The
further admitted facts are that the head office in Montreal did accept the application, did cable
the Manila office to that effect, did actually issue the policy and did, through its agent in Manila,
actually write the letter of notification and place it in the usual channels for transmission to the
addressee. The fact as to the letter of notification thus fails to concur with the essential elements
of the general rule pertaining to the mailing and delivery of mail.) Dispositive portion: Judgment
is reversed, and the plaintiff shall have and recover from the defendant the sum of P6,000 with
legal interest from November 20, 1918, until paid, without special finding as to costs in either
instance. So ordered.

DBP vs CA

FACTS: Juan B. Dans, together with his wife Candida, his son and daughter-in-law,
applied for a loan of P500,000.00 with the Development Bank of the Philippine on May
1987. The loan was approved by the bank in August 1987 but in the reduced amount of
P300,000. As the principal mortgagor, Dans, then 76 years of age, was advised by DBP
to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption
Insurance Pool (DBP MRI Pool).

On September 3, 1987, Dans died of cardiac arrest. DBP MRI notified DBP was not
eligible for the coverage of the insurance for he was beyond the maximum age of 60.
The wife, Candida, filed a complaint to the RTC against DBP and DBP MRI pool for the
‘Collection of Sum of money with Damages’. Prior to that, DBP offered Mrs. Dans a
refund of the MRI payment but she refused for insisting that the family must receive the
amount equivalent of the loan. DBP also offered and ex gratia for a settlement worth
P30,000 but Mrs. Dans refused to take it.

ISSUE: Whether or not the DBP MRI Pool should be held liable on the ground that the contract was
already perfected.

HELD: No. DBP MRI Pool is not liable.

The MRI coverage shall take effect: (1) when the application shall be approved by the
insurance pool; and (2) when the full premium is paid during the continued good health
of the applicant. These two conditions, being joined conjunctively, must concur.

Though the power to approve the insurance is lodged to the pool, it did not approve the
application of Mr. Dans. Thus, there was no perfected contract between the insurance
pool and Mr. Dans.

In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the
second as an insurance agent. As an insurance agent, DBP made believed that the
family already fulfilled the requirements of the said insurance although DBP had a full
knowledge that the application would never be approved. DBP acted beyond the scope
of its authority for accepting applications for the MRI. If the third person who contracted
is unaware of the authority conferred by the principal on the agent and he has been
deceived, the latter is liable for damages.

The DBP’s liability, however, cannot be for the entire value of the insurance policy. To
assume that were it not for DBP’s concealment of the limits of its authority, Dans would
have secured an MRI from another insurance company, and therefore would have been
fully insured by the time he died, is highly speculative. Considering his advanced age,
there is no absolute certainty that Dans could obtain an insurance coverage from
another company. It must also be noted that Dans died almost immediately, i.e., on the
nineteenth day after applying for the MRI, and on the twenty-third day from the date of
release of his loan.

Wherefore, petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of

Juan B. Dans the amount of P1,476.00 with legal interest from the date of the filing of
the complaint until fully paid; and (2) to PAY said Estate the amount of Fifty Thousand
Pesos (P50,000.00) as moral damages and the amount of Ten Thousand Pesos
(P10,000.00) as attorney’s fees. With costs against petitioner.

LIM vs. SUN LIFE ASSURANCE OF CANADA

FACTS: Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000. He
designated his wife, Pilar, as beneficiary.

The first premium of P433 was paid by Lim, then the company issued a "provisional
policy." The "provisional policy" reads as follows: The above-mentioned life is to be
assured in accordance with the terms and conditions contained or inserted by the
Company in the policy which may be granted by it in this particular case for four months
only from the date of the application, provided that the Company shall confirm this
agreement by issuing a policy on said application when the same shall be submitted to
the Head Office in Montreal. Should the Company not issue such a policy, then this
agreement shall be null and void ab initio, and the Company shall be held not to have
been on the risk at all, but in such case the amount herein acknowledged shall be
returned.

Lim died after the issuance of the provisional policy but before approval of the
application. Pilar brought an action to recover from Sun Life the sum of P5,000, the
amount named in the provisional policy. She lost in the trial court hence this appeal.

ISSUE: WON there was a perfected contract of insurance.

HELD: No. The policy for four months is expressly made subjected to the affirmative
condition that "the company shall confirm this agreement by issuing a policy on said
application when the same shall be submitted to the head office in Montreal." Should
the company not issue such a policy, then this agreement shall be null and void ab
initio, and the company shall be held not to have been on the risk."

This means that the agreement should not go into effect until the home office of the
company should confirm it by issuing a policy. The provisional policy amounts to nothing
but an acknowledgment on behalf of the company, that it has received from the person
named therein the sum of money agreed upon as the first year's premium upon a policy
to be issued upon the application, if the application is accepted by the company.

There can be no contract of insurance unless the minds of the parties have met in
agreement.

In this case, the contract of insurance was not consummated by the parties. The
general rule concerning the agent's receipt pending approval or issuance of policy is in
several points, according to Joyce: 2. Where an agreement is made between the
applicant and the agent whether by signing an application containing such condition, or
otherwise, that no liability shall attach until the principal approves the risk and a receipt
is given buy the agent, such acceptance is merely conditional, and it subordinated to the
act of the company in approving or rejecting;

so in life insurance a "binding slip" or "binding receipt" does not insure of itself.

The court held that this second point applied to the case. American jurisprudence tells
us of such examples. Steinle vs. New York Life Insurance Co.- the amount of the first
premium had been paid to an insurance agent and a receipt was given. The paper
declared that if the application was accepted by the company, the insurance shall take
effect from the date of the application but that if the application was not accepted, the
money shall be returned. The court held that there was no perfection of the contract.
Cooksey vs. Mutual Life Insurance Co.- the person applying for the life insurance paid
and amount equal to the first premium, but the application and the receipt for the money
paid, stipulated that the
insurance was to become effective only when the application was approved and the
policy issued. There was also no perfection.
A binding receipt is a custom where temporary insurance pending the consideration of
the application was given until the policy be issued or the application rejected, and such
contracts are upheld and enforced when the applicant dies before the issuance of a
policy or final rejection of the application. However, there was no perfected contract
because of the clause in the application and the receipt stipulate expressly that the
insurance shall become effective only when the "application shall be approved and the
policy duly signed by the secretary at the head office of the company and issued." The
premium of 433 must be returned.