Philamcare Health Systems, Inc. v. Court of Appeals, 356 SCRA 379 (2002)

FACTS

Ernani, applied for health care coverage with petitioner Philamcare Health. In the standard application form he answered no to the following question: Have you or any of your family members ever consulted or been treated for high blood pressure, heart trouble, diabetes, cancer, liver disease, asthma or peptic ulcer?

The application was approved and Health Care Agreement was issued which entitles him to avail of hospitalization benefits, whether ordinary or emergency, “out-patient benefits” and services. During the period of his coverage, Ernani suffered a heart attack. Respondent, Julia, wife of Ernani, tried to claim the benefits under the health care agreement. However, petitioner denied her claim saying that the Health Care Agreement was void. According to the petitioner, there was a concealment regarding Ernani’s 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, the respondent paid the hospitalization expenses herself, amounting to about P76,000.00. Ernani died.

Julia filed an action for damages against the petitioner asking for reimbursement of her expenses plus moral damages and attorney’s fees. The RTC and CA ruled in favor of the respondent.

Petitioner argues that Health Care Agreements is not an insurance contract.

ISSUE

(a) WON health care agreement is not an insurance contract; 

(b) WON Ernani had concealed a material fact in his application thus under the  “Invalidation of agreement” shall apply. 

HELD

(a) NO. A health care agreement is in the nature of non-life insurance, which is primarily a contract of indemnity. In the case at bar, the insurable interest of respondent’s husband in obtaining the health care agreement was his own health. 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.

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. An insurance contract exists where the following elements concur:

1.The insured has an insurable interest;

2.The insured is subject to a risk of loss by the happening of the designated peril;

3.The insurer assumes the risk;

4.Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk; and

5.In consideration of the insurer’s promise, the insured pays a premium.

(b) NO. With regard to concealment, 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 in 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.

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.

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