J. Ynares-Santiago
Facts:
Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he or his family members were treated to heart trouble, asthma, diabetes, etc.
The application was approved for 1 year. He was also given hospitalization benefits and out-patient benefits. After the period expired, he was given an expanded coverage for Php 75,000. During the period, he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but the petitioner denied it saying that he concealed his medical history by answering no to the aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband subsequently passed away. She filed a case in the trial court for the collection of the amount plus damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted awards for damages. Hence, this appeal.
Issue: WON a health care agreement is not an insurance contract; hence the “incontestability clause” under the Insurance Code does not apply.
Held: No. Petition dismissed.
Ratio:
Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration. It contended that there was no indemnification unlike in insurance contracts. It supported this claim by saying that it is a health maintenance organization covered by the DOH and not the Insurance Commission. Lastly, it claimed that the Incontestability clause didn’t apply because two-year and not one-year effectivity periods were required.
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.”
Section 3 states: every person has an insurable interest in the life and health:
(1) of himself, of his spouse and of his children.
In this case, the husband’s health was the insurable interest. The health care agreement was in the nature of non-life insurance, which is primarily a contract of indemnity. The provider must pay for the medical expenses resulting from sickness or injury.
While petitioner contended that the husband concealed materialfact of his sickness, the contract stated that:
“that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime relative to any information acquired by him in his professional capacity upon any question affecting the eligibility for health care coverage of the Proposed Members.”
This meant that the petitioners required him to sign authorization to furnish reports about his medical condition. The contract also authorized Philam to inquire directly to his medical history.
Hence, the contention of concealment isn’t valid.
They can’t also invoke the “Invalidation of agreement” clause where failure of the insured to disclose information was a grounds for revocation simply because the answer assailed by the company was the heart condition question based on the insured’s opinion. He wasn’t a medical doctor, so he can’t accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated to make further inquiry.”
Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.
“Having assumed a responsibility under the agreement, petitioner is bound to answer the same 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 whenever he avails of the covered benefits which he has prepaid.”
Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of insurance.”
As to cancellation procedure- Cancellation requires certain conditions:
1. Prior notice of cancellation to insured;
2. Notice must be based on the occurrence after effective date of the policy of one or more of the grounds mentioned;
3. Must be in writing, mailed or delivered to the insured at the address shown in the policy;
4. Must state the grounds relied upon provided in Section 64 of the Insurance Code and upon request of insured, to furnish facts on which cancellation is based
None were fulfilled by the provider.
As to incontestability- The trial court said that “under the title Claim procedures of expenses, the defendant Philamcare Health Systems Inc. had twelve months from the date of issuance of the Agreement within which to contest the membership of the patient if he had previous ailment of asthma, and six months from the issuance of the agreement if the patient was sick of diabetes or hypertension. The periods having expired, the defense of concealment or misrepresentation no longer lie.”
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