Florendo v. Philam Plans, Inc. et.al.; G.R. No 186983, Feb. 22, 2012

FACTS:

Manuel Florendo obtained a pension plan with Philam Plans. The plan had a pre-need price of P997,050.00, payable in 10 years, and had a maturity value of P2,890,000.00 after 20 years. Manuel signed the application and left to Perla the task of supplying the information needed in the application. Respondent Ma. Celeste Abcede, Perla’s daughter, signed the application as sales counselor. Under the master policy, Philam Life was to automatically provide life insurance coverage, including accidental death, to all who signed up for Philam Plans’ comprehensive pension plan. If the plan holder died before the maturity of the plan, his beneficiary was to instead receive the proceeds of the life insurance, equivalent to the pre-need price.

Eleven months later Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment of the benefits under her husband’s plan. Because Manuel died before his pension plan matured and his wife was to get only the benefits of his life insurance.  Philam declined the claim upon findings that Manuel was on maintenance medicine for his heart and had an implanted pacemaker. Further, he suffered from diabetes mellitus and was taking insulin.

Lourdes filed for an action against the pension plan company before the Regional Trial Court (RTC) of Quezon City. Lourdes argued that  (a) Philam Plans chose to approve the application even with unfilled spaces relating to Manuel’s medical history and now was not correct to raise concealment as a defense (b) Philam Plans never queried Manuel directly regarding the state of his health. Consequently, it could not blame him for not mentioning it (c) Manuel had concealed nothing since Perla, the soliciting agent, knew that Manuel had a pacemaker implanted on his chest.

The RTC ruled that Manuel was not guilty of concealing the state of his health from his pension plan application.  The  Court of Appeals (CA) reversed the RTC decision, holding that insurance policies are traditionally contracts uberrimae fidae or contracts of utmost good faith. As such, it required Manuel to disclose to Philam Plans conditions affecting the risk of which he was aware or material facts that he knew or ought to know.

ISSUES: 

1. WON Manuel is guilty of concealing his illness when he kept blank and did not answer questions in his pension plan application regarding the ailments he suffered from;

2. WON Manuel there was no concealment because the agent knew that the insured had  a pacemaker implanted 20 years before the application and must not be bound by the failure of them to declare the condition of Manuel’s health in the pension plan application; 

3. WON any defect or insufficiency in the information provided by his pension plan application should be deemed waived after the same has been approved, the policy has been issued, and the premiums have been collected.

RULING:

1.

YES. When Manuel signed the pension plan application, he adopted as his own the written representations and declarations embodied in it. It is clear from these representations that he concealed his chronic heart ailment and diabetes from Philam Plans. Since Manuel signed the application without filling in the details regarding his continuing treatments for heart condition and diabetes, the assumption is that he has never been treated for the said illnesses in the last five years preceding his application.

Lourdes’ argument that the application requires the disclosure of treatment for the heart condition in the last 5 years and that the pacemaker implant was  made about 20 years ago before he signed the application is misplaced. 

(c) I have never been treated for heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment in the last five years.

Manuel still had his pacemaker when he applied for a pension plan in October 1997 is an admission that he remained under treatment for irregular heartbeat within five years preceding that application. Besides, as already stated, Manuel had been taking medicine for his heart condition and diabetes when he submitted his pension plan application. These clearly fell within the five-year period. More, even if Perla’s knowledge of Manuel’s pacemaker may be applied to Philam Plans under the theory of imputed knowledge,  it is not claimed that Perla was aware of his two other afflictions that needed medical treatments. Pursuant to Section 27 of the Insurance Code, Manuel’s concealment entitles Philam Plans to rescind its contract of insurance with him.

2.

NO. The responsibility for preparing the application belonged to Manuel. Nothing in it implies that someone else may provide the information that Philam Plans needed. Manuel cannot sign the application and disown the responsibility for having it filled up. If he furnished Perla the needed information and delegated to her the filling up of the application, then she acted on his instruction, not on Philam Plans’ instruction.

Assuming that it was Perla who filled up the application form, Manuel is still bound by what it contains since he certified that he authorized her action. Manuel was made aware when he signed the pension plan application that, in granting the same, Philam Plans and Philam Life were acting on the truth of the representations contained in that application. 

Manuel, a civil engineer and manager of a construction company. He could be expected to know that one must read every document, especially if it creates rights and obligations affecting him, before signing the same. Manuel is not unschooled that the Court must come to his succor.

3.

NO. The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It states:

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any claim for insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or that you are not insurable at the time you bought this pension program by reason of age. If this Agreement lapses but is reinstated afterwards, the one (1) year contestability period shall start again on the date of approval of your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued on the ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance. Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her husband’s pension plan.

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