1.

Great Pacific Life Assurance vs CA

FACTS:

A contract of group life insurance was executed between Great Pacific Life Assurance
Corporation Grepalife) and Development Bank of the Philippines (DBP)
o Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP
November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for
membership in the group life insurance plan
o Dr. Leuterio answered questions concerning his health condition as follows:

7. Have you ever had, or consulted, a physician for a heart condition, high blood
pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical
impairment?

Answer: No. If so give details ___________.

8. Are you now, to the best of your knowledge, in good health?

Answer: [ x ] Yes [ ] No.[4]

November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance coverage of Dr.
Leuterio, to the extent of his DBP mortgage indebtedness amounting to P86,200
August 6, 1984: Dr. Leuterio died due to massive cerebral hemorrhage.
o DBP submitted a death claim to Grepalife
Grepalife denied the claim alleging that Dr. Leuterio was not physically healthy
when he applied
RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable to pay DBP
(creditor of the insured Dr. Wilfredo Leuterio)
CA sustained

ISSUE:

1. W/N DBP has insurable interest as creditor - YES

2. W/N Grepalife should be held liable - YES

HELD:

1. YES

In this type of policy insurance, the mortgagee is simply an appointee of the insurance fund, such
loss-payable clause does not make the mortgagee a party to the contract
Section 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in his own name providing
that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the
insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the
original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will
have the same effect, although the property is in the hands of the mortgagee, but any act which, under the
contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor.

The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in the
insurance. When Grepalife denied payment, DBP collected the debt from the mortgagor and took
the necessary action of foreclosure on the residential lot of Dr. Wilfredo Leuterio
Insured may be regarded as the real party in interest, although he has assigned the policy for the
purpose of collection, or has assigned as collateral security any judgment he may obtain

2. YES

medical findings were not conclusive because Dr. Mejia did not conduct an autopsy
widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension
Grepalife failed to establish that there was concealment made by the insured, hence, it cannot
refuse payment of the claim
fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense
and the duty to establish such defense by satisfactory and convincing evidence rests upon the
insurer
The policy states that upon receipt of due proof of the Debtors death during the terms of this
insurance, a death benefit in the amount of P86,200.00 shall be paid. In the event of the debtors
death before his indebtedness with the creditor shall have been fully paid, an amount to pay the
outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if
there is any shall then be paid to the beneficiary/ies designated by the debtor.
DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors outstanding loan
o insurance proceeds shall inure to the benefit of the heirs of the deceased person or his
beneficiaries
o Equity dictates that DBP should not unjustly enrich itself at the expense of another
(Nemo cum alterius detrimenio protest). Hence, it cannot collect the insurance proceeds,
after it already foreclosed on the mortgage

2. SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF APPEALS G.R. No.

105135, 22 June 1995

FACTS:

Robert John Bacani procured a life insurance contract for himself from petitioner-company,
designating his mother Bernarda Bacani, herein private respondent, as the beneficiary. He was
issued a policy valued at P100,000.00 with double indemnity in case of accidental death.
Sometime after, the insured died in a plane crash. Bernarda filed a claim with petitioner, seeking
the benefits of the insurance policy taken by her son. However, said insurance company rejected
the claim on the ground that the insured did not disclose material facts relevant to the issuance of
the policy, thus rendering the contract of insurance voidable. Petitioner discovered that two weeks
prior to his application for insurance, the insured was examined and confined at the Lung Center
of the Philippines, where he was diagnosed for renal failure. The RTC, as affirmed by the CA,
this fact was concealed, as alleged by the petitioner. But the fact that was concealed was not the
cause of death of the insured and that matters relating to the medical history of the insured is
deemed to be irrelevant since petitioner waived the medical examination prior to the approval and
issuance of the insurance policy.
 ISSUE: Whether or not the concealment of such material fact, despite it not being the cause of
death of the insured, is sufficient to render the insurance contract voidable

HELD:

YES. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to
communicate to the other, in good faith, all facts within his knowledge which are material to the contract
and as to which he makes no warranty, and which the other has no means of ascertaining. Anent the
finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that
the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-
disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in
making inquiries. The SC, therefore, ruled that petitioner properly exercised its right to rescind the
contract of insurance by reason of the concealment employed by the insured. It must be emphasized that
rescission was exercised within the two-year contestability period as recognized in Section 48 of The
Insurance Code. WHEREFORE, the petition is GRANTED and the Decision of the Court of Appeals is
REVERSED and SET ASIDE.

3. Philamcare Health Systems vs CA

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
Ernanis 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 attorneys 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 respondents 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 respondents
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.
4. Vda Canilang v CA G.R. No. 92492 June 17, 1993

J. Feliciano

Facts:
Canilang was found to have suffered from sinus tachycardia then bronchitis after a check-up from his
doctor. The next day, he applied for a "non-medical" insurance policy with respondent Grepalife naming
his wife, Thelma Canilang, as his beneficiary. This was to the value of P19,700.
He died of "congestive heart failure," "anemia," and "chronic anemia." The widow filed a claim with
Great Pacific which the insurer denied on the ground that the insured had concealed material information
from it.
Petitioner then filed a complaint against Great Pacific for recovery of the insurance proceeds. Petitioner
testified that she was not aware of any serious illness suffered by her late husband and her husband had
died because of a kidney disorder. The doctor who gave the check up stated that he treated the deceased
for sinus tachycardia and "acute bronchitis."
Great Pacific presented a physician who testified that the deceased's insurance application had been
approved on the basis of his medical declaration. She explained that as a rule, medical examinations are
required only in cases where the applicant has indicated in his application for insurance coverage that he
has previously undergone medical consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal interest and P2,000.00 as
attorney's fees. On appeal by Great Pacific, the Court of Appeals reversed. It found that the failure of
Jaime Canilang to disclose previous medical consultation and treatment constituted material information
which should have been communicated to Great Pacific to enable the latter to make proper inquiries.
Hence this petition by the widow.

Issue: Won Canilang was guilty of misrepresentation

Held: Yes. Petition denied.

Ratio:
There was a right of the insurance company to rescind the contract if it was proven that the insured
committed fraud in not affirming that he was treated for heart condition and other ailments stipulated.
Apart from certifying that he didnt suffer from such a condition, Canilang also failed to disclose in the
that he had twice consulted a doctor who had found him to be suffering from "sinus tachycardia" and
"acute bronchitis."
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a
concealment.
Sec. 28. Each party to a contract of insurance must communicate to the other, in good faith, all factors
within his knowledge which are material to the contract and as to which he makes no warranty, and which
the other has not the means of ascertaining.
The information concealed must be information which the concealing party knew and should have
communicated. The test of materiality of such information is contained in Section 31:
Sec. 31. Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom the communication is due, in forming his estimate of the
disadvantages of the proposed contract, or in making his inquiries.
The information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to
estimate the probable risk he presented as a subject of life insurance. Had he disclosed his visits to his
doctor, the diagnosis made and medicines prescribed by such doctor, in the insurance application, it may
be reasonably assumed that Great Pacific would have made further inquiries and would have probably
refused to issue a non-medical insurance policy.
Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom
the communication should have been made, in assessing the risk involved in making or omitting to make
further inquiries and in accepting the application for insurance; that "probable and reasonable influence of
the facts" concealed must, of course, be determined objectively, by the judge ultimately.
The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain information
to the insurer was not "intentional" in nature, for the reason that Canilang believed that he was suffering
from minor ailment like a common cold. Section 27 stated that:
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract
of insurance.
The failure to communicate must have been intentional rather than inadvertent. Canilang could not have
been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted
a doctor twice in the two (2) months before applying for non-medical insurance. Indeed, the last medical
consultation took place just the day before the insurance application was filed. In all probability, Jaime
Canilang went to visit his doctor precisely because of the ailment.
Canilang's failure to set out answers to some of the questions in the insurance application constituted
concealment.

5. Tan v CA G.R. No. 48049 June 29, 1989

J. Gutierrez Jr.

Facts:
Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P 80,000.00 with
Philamlife. It was approved. Tan Lee Siong died of hepatoma. Petitioners then filed a claim for the
proceeds. The company denied petitioners' claim and rescinded the policy by reason of the alleged
misrepresentation and concealment of material facts. The premiums paid on the policy were refunded.
The petitioners filed a complaint in the Insurance Commission. The latter dismissed the complaint.
The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for
lack of merit. Hence, this petition.

Issue:
WON Philam didnt have the right to rescind the contract of insurance as rescission must allegedly be
done during the lifetime of the insured within two years and prior to the commencement of action.

Held: No. Petition dismissed.

Ratio:
The Insurance Code states in Section 48:
Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this
chapter, such right must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force during
the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement,
the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
The so-called "incontestability clause" in the second paragraph prevents the insurer from raising the
defenses of false representations insofar as health and previous diseases are concerned if the insurance has
been in force for at least two years during the insured's lifetime.
The policy was in force for a period of only one year and five months. Considering that the insured died
before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the
policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation.
The "incontestability clause" added by the second paragraph of Section 48 is in force for two years. After
this, the defenses of concealment or misrepresentation no longer lie.
The petitioners argue that no evidence was presented to show that the medical terms were explained in a
layman's language to the insured. They also argue that no evidence was presented by respondent company
to show that the questions appearing in Part II of the application for insurance were asked, explained to
and understood by the deceased so as to prove concealment on his part. This couldnt be accepted because
the insured signed the form. He affirmed the correctness of all the entries.
The company records show that the deceased was examined by Dr. Victoriano Lim and was found to be
diabetic and hypertensive. He was also found to have suffered from hepatoma. Because of the
concealment made by the deceased, the company was thus misled into accepting the risk and approving
his application as medically fit.

6. Prudential Guarantee Assurance Inc. vs. Trans Asia Shipping Lines

G.R. No. 151890 June 20, 2006

Facts:

Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee and Assurance Inc. insured
said vessel for loss/damage of the hull and machinery arising from perils of fire and explosion beginning
from the period of July 1, 1993 until July 1, 1994. While the policy was in force, a fire broke out. Trans
Asia file its notice of claim for damages sustained by the vessel. It also reserved its right to subsequently
notify Prudential as to the full amount of the claim upon final survey and determination by the average
adjuster Richard Hogg International of the damage sustained by the reason of fire. Trans Asia executed a
document denominated "Loan and Trust Receipt" amounting to Php 3,000,000. Prudential Guarantee and
Assurance Inc. denied the former's claim and requested for the return of the said amount. The insurance
company contends that there was a breach in the policy conditions, specifically, "Warranted Vessel
Classed and Class Maintained". The trial court held that Trans Asia failed to prove its compliance with
the terms of the warranty. It further explained that the concealment made by Trans Asia is sufficient to
avoid the policy. Prudential, as the injured party, is entitled to rescind to rescind the contract. The trial
court dismissed the complaint and directed Trans Asia to return the "loan" extended by Prudential. The
Court of Appeals reversed the decision of the trial court. It contends that Prudential had the burden to
show that there was a breach in the warranty and which it failed to do so. The Court considered
Prudential's admission that, at the time the insurance contract was entered into, the vessel was properly
classed by the Bureau Veritas, a classification recignized by the industry. It further contends that then
subject warranty was in a form of a rider, hence, such contract should be counstrued against Prudential.
Finally, it interpreted the transaction between the parties as one of subrogation, instead of a loan. Thus,
the amount given to Trans Asia was considered to be a partial payment to its claim under the policy.

Issue/s:

1.) WON there was a breach in the warranty of the contract.

2.) WON such contract partakes the nature of a loan.

Held: The Supreme Court held that:

1.) Prudential failed to establish that Trans Asia had violated and breached the policy condition provided
in the insurance contract. The latter was able to establish proof of loss and coverage of the loss. Prudential
also made a categorical admission at the time of the procurement of the insurance contract that the vessel
was properly classified by the Bureau Veritas. Assuming that there was a breach in the policy, the
renewal of the insurance policy for two consecutive years after the loss is deemed as a waiver on the part
of Prudential. Breach of a warranty or of a condition renders the contract defeasible at the option of the
insurer; but if he so elects, he may waive his privilege and power to rescind by the mere expression of an
intention so to do.

2.) the amount granted by Prudential to Trans Asia, evidenced by a document denominated as a "Loan
and Trust Receipt", constitued partial payment on the policy. Under said agreement, Prudential is
obligated to hand over to Trans Asia "whatever recovery the latter may make" and the latter to deliver to
the former "all document necessary to prove its interest in the said property." Prudential was given the
right of subrogation to whatever net recovery Trans Asia may obtain from third parties resulting from the
fire. PETITION DENIED.