G.R. No.

125678      March 18, 2002

PHILAMCARE HEALTH SYSTEMS, INC., petitioner,
vs.
COURT OF APPEALS and JULITA TRINOS, respondents.

Facts:

Ernani Trinos, deceased husband of respondent Julita Trinos, applied for a health care coverage with petitioner
Philamcare Health Systems, Inc. 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? (If Yes, give details).

The application was approved for a period of one year from March 1, 1988 to March 1, 1989. Accordingly, he was
issued Health Care Agreement. Under the agreement, respondent’s husband was entitled to avail of hospitalization
benefits, whether ordinary or emergency, listed therein. He was also entitled to avail of "out-patient benefits" such as
annual physical examinations, preventive health care and other out-patient services.

Upon the termination of the agreement, the same was extended for another year March 1, 1989 to March 1, 1990,
then from March 1, 1990 to June 1, 1990.

During the period of his coverage, Ernani suffered a heart attack and was confined at the Manila Medical Center
(MMC) for one month. While her husband was in the hospital, respondent 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
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, respondent paid the hospitalization expenses herself, amounting to about P76,000.00. (Emani
later on died.)

Respondent instituted an action for damages against petitioner. She asked for reimbursement of her expenses plus
moral damages and attorney’s fees.

Petitioner argued that a health care agreement is not an insurance contract; hence the "incontestability clause" under
the Insurance Code does not apply.

Issue #1: W/N the incontestability clause under the insurance code is not applicable?
Issue #2: W/N there was a concealment of a material fact?

Held #1: No

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.

Under Section 27 of the Insurance Code, "a concealment entitles the injured party to rescind a contract of insurance."
The right to rescind should be exercised previous to the commencement of an action on the contract . In this case, no
rescission was made.

Note:

Besides, the cancellation of health care agreements as in insurance policies require the concurrence of the following
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 of the above pre-conditions was fulfilled in this case. When the terms of insurance contract contain limitations
on liability, courts should construe them in such a way as to preclude the insurer from non-compliance with his
obligation. 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. This is equally applicable to Health Care Agreements.

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.

Held #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 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. Thus, Although false, a representation of the expectation,
intention, belief, opinion, or judgment of the insured will not avoid the policy if there is no actual fraud in inducing the
acceptance of the risk, or its acceptance at a lower rate of premium, and this is likewise the rule although the
statement is material to the risk, if the statement is obviously of the foregoing character, since in such case the
insurer is not justified in relying upon such statement, but is obligated to make further inquiry.
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 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.

Note:

Finally, petitioner alleges that respondent was not the legal wife of the deceased member considering that at the time
of their marriage, the deceased was previously married to another woman who was still alive. The health care
agreement is in the nature of a contract of indemnity. Hence, payment should be made to the party who incurred the
expenses. It is not controverted that respondent paid all the hospital and medical expenses. She is therefore entitled
to reimbursement.

G.R. No. 195872               March 12, 2014

FORTUNE MEDICARE, INC., Petitioner,
vs.
DAVID ROBERT U. AMORIN, Respondent.

Facts:

David Robert U. Amorin was a cardholder/member of Fortune Medicare, Inc., a corporation engaged in providing
health maintenance services to its members. The terms of Amorin's medical coverage were provided in a Corporate
Health Program Contract (Health Care Contract) which was executed by Fortune Care and the House of
Representatives, where Amorin was a permanent employee.

While on vacation in Honolulu, Hawaii, United States of America (U.S.A.), 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, respectively. He attempted to recover from Fortune Care the full amount
thereof upon his return to Manila, 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:

A. EMERGENCY CARE IN ACCREDITED HOSPITAL. Whether as an in-patient or out-patient, the

member shall be entitled to full coverage under the benefits provisions of the Contract at any
FortuneCare accredited hospitals subject only to the pertinent provision of Article VII
(Exclusions/Limitations) hereof. 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. The availment of emergency care from an unaffiliated
physician shall not invalidate or diminish any claim if it shall be shown to have been reasonably
impossible to obtain such emergency care from an affiliated physician.

B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL

1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the total hospitalization cost
including the professional fee (based on the total approved charges) to a member who receives
emergency care in a non-accredited hospital. The above coverage applies only to Emergency
confinement within Philippine Territory. 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 contract with
damages.

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.

Issue: W/N the Health Care Contract did not cover hospitalization costs and professional fees incurred in foreign
countries?

Held: No

To aid in the interpretation of health care agreements, the Court laid down the following guidelines in Philamcare
Health Systems v. CA

When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as to
preclude the insurer from non-compliance with his obligation. 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.

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. Contrary to
Fortune Care’s argument, from nowhere in the Health Care Contract could it be reasonably deduced that these
"standard charges" referred to the "Philippine standard", or that cost which would have been incurred if the medical
services were performed in an accredited hospital situated in the Philippines.

The proper interpretation of the phrase "standard charges" could instead be correlated with and reasonably inferred
from the other provisions of Section 3(B), considering that Amorin’s case fell under the second case, i.e., emergency
care in a non-accredited hospital. Rather than a determination of Philippine or American standards, the first part of
the provision speaks of the full reimbursement of "the total hospitalization cost including the professional fee (based
on the total approved charges) to a member who receives emergency care in a non-accredited hospital" within the
Philippines. Thus, for emergency care in non-accredited hospitals, this cited clause declared the standard in the
determination of the amount to be paid, without any reference to and regardless of the amounts that would have been
payable if the treatment was done by an affiliated physician or in an affiliated hospital. For treatments in foreign
territories, the only qualification was only as to the percentage, or 80% of that payable for treatments performed in
non-accredited hospital.

In the absence of any qualifying word that clearly limited Fortune Care's liability to costs that are applicable in the
Philippines, the amount payable by Fortune Care should not be limited to the cost of treatment in the Philippines, as
to do so would result in the clear disadvantage of its member.

If, as Fortune Care argued, the premium and other charges in the Health Care Contract were merely computed on
assumption and risk under Philippine cost and, that the American cost standard or any foreign country's cost was
never considered, such limitations should have been distinctly specified and clearly reflected in the extent of
coverage which the company voluntarily assumed.

G.R. No. 175773               June 17, 2013

MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION (MMPSEU), Petitioner,
vs.
MITSUBISHI MOTORS PHILIPPINES CORPORATION, Respondent.

Facts:

The parties’ CBA provides for the hospitalization insurance benefits for the covered dependents.

Under the contract, the hospitalization expenses must be covered by actual hospital and doctor’s bills and any
amount in excess of the level of benefits will be for the account of the employee.

On separate occasions, three members of MMPSEU, namely, Ernesto Calida (Calida), Hermie Juan Oabel (Oabel)
and Jocelyn Martin (Martin), filed claims for reimbursement of hospitalization expenses of their dependents. The case
had been settled through voluntary arbitration.

MMPSEU alleged that there is nothing in the CBA which prohibits an employee from obtaining other insurance or
declares that medical expenses can be reimbursed only upon presentation of original official receipts. MMPSEU
added that its members had legitimate claims under the CBA and that any doubt as to any of its provisions should be
resolved in favor of its members. Moreover, any ambiguity should be resolved in favor of labor.

On the other hand, MMPC argued that the reimbursement of the entire amounts being claimed by the covered
employees, including those already paid by other insurance companies, would constitute double indemnity or double
insurance, which is circumscribed under the Insurance Code. Moreover, a contract of insurance is a contract of
indemnity and the employees cannot be allowed to profit from their dependents’ loss.

The Voluntary Arbitrator based his ruling on the opinion of Atty. Funk that the employees may recover benefits from
different insurance providers without regard to the amount of benefits paid by each. According to him, this view is
consistent with the theory of the collateral source rule.

Issue: W/N the employees may recover benefits from different insurance providers without regard to the amount of
benefits paid by each?

Held: No

The collateral source rule is designed to strike a balance between two competing principles of tort law: (1) a plaintiff is
entitled to compensation sufficient to make him whole, but no more; and (2) a defendant is liable for all damages that
proximately result from his wrong. A plaintiff who receives a double recovery for a single tort enjoys a windfall; a
defendant who escapes, in whole or in part, liability for his wrong enjoys a windfall. Because the law must sanction
one windfall and deny the other, it favors the victim of the wrong rather than the wrongdoer.

Thus, the tortfeasor is required to bear the cost for the full value of his or her negligent conduct even if it results in a
windfall for the innocent plaintiff.

As seen, the collateral source rule applies in order to place the responsibility for losses on the party causing them. Its
application is justified so that "'the wrongdoer should not benefit from the expenditures made by the injured party or
take advantage of contracts or other relations that may exist between the injured party and third persons ." Thus, it
finds no application to cases involving no-fault insurances under which the insured is indemnified for losses by
insurance companies, regardless of who was at fault in the incident generating the losses. Here, it is clear that MMPC
is a no-fault insurer. Hence, it cannot be obliged to pay the hospitalization expenses of the dependents of its
employees which had already been paid by separate health insurance providers of said dependents.

The Voluntary Arbitrator therefore erred in adopting Atty. Funk’s view that the covered employees are entitled to full
payment of the hospital expenses incurred by their dependents, including the amounts already paid by other health
insurance companies based on the theory of collateral source rule.
The conditions set forth in the CBA provision indicate an intention to limit MMPC’s liability only to actual expenses
incurred by the employees’ dependents, that is, excluding the amounts paid by dependents’ other health insurance
providers.

The condition that payment should be direct to the hospital and doctor implies that MMPC is only liable to pay
medical expenses actually shouldered by the employees’ dependents. It follows that MMPC’s liability is limited, that
is, it does not include the amounts paid by other health insurance providers. This condition is obviously intended to
thwart not only fraudulent claims but also double claims for the same loss of the dependents of covered employees.

Note:

It is well to note at this point that the CBA constitutes a contract between the parties and as such, it should be strictly
construed for the purpose of limiting the amount of the employer’s liability. The terms of the subject provision are
clear and provide no room for any other interpretation. As there is no ambiguity, the terms must be taken in their
plain, ordinary and popular sense. Consequently, MMPSEU cannot rely on the rule that a contract of insurance is to
be liberally construed in favor of the insured. Neither can it rely on the theory that any doubt must be resolved in favor
of labor.

To allow reimbursement of amounts paid under other insurance policies shall constitute double recovery which is not
sanctioned by law.

G.R. No. 143313               June 21, 2005

PANDIMAN PHILIPPINES, INC., petitioner,
vs.
MARINE MANNING MANAGEMENT CORPORATION and ROSITA D.R. SINGHID, respondents.

Facts:

Respondent Rosita Singhid’s deceased husband Benito Singhid was hired by Fullwin Maritime Limited, through its
local agent, respondent Marine Manning and Management Corporation (MMMC), as chief cook on board the
vessel MV Sun Richie Five for a term of twelve (12) months.

The vessel and its crew were insured with Ocean Marine Mutual Insurance Association Limited (OMMIAL), a
Protection and Indemnity Club (P&I Club) of which the Sun Richie Five Bulkers S.A., owner of the vessel Sun Richie
Five, is a member. OMMIAL transacted business in the Philippines through its local correspondent, herein
petitioner Pandiman Philippines, Inc. (PPI).

While the vessel was on its way to Shanghai, China from Ho Chih Minh City, Vietnam Benito suffered a heart attack,
and subsequently died. His widow Rosita filed a claim for death benefits with MMMC, which, however, referred her to
herein petitioner PPI. Upon Rosita’s submission of all the required documents, petitioner approved the claim and
recommended payment thereof in the amount of US$79,000.00. But, despite said recommendation, Rosita’s death
claims remained unpaid.
Hence, Rosita filed with the Labor Arbiter a complaint for recovery of death benefits, moral and exemplary damages
and attorney’s fees.

Issue: W/N petitioner PPI may be held liable for Rosita’s claim for death benefits as Benito’s widow?

Held: No

Payment for claims arising from the peril insured against, to which the insurer is liable, is definitely not one of the
liabilities of an insurance agent. Thus, there is no legal basis whatsoever for holding petitioner solidarily liable with
insurer OMMIAL for Rosita’s claim for death benefits on account of her husband’s demise while under the employ of
MMMC’s principal, Fullwin.

Besides, even under the principle of "relativity of contracts", petitioner PPI cannot be held liable for the same death
benefits claims. The insurance contract between the insurer and the insured, under Article 1311 of the Civil Code, is
binding only upon the parties (and their assigns and heirs) who execute the same. With the reality, as borne by the
records, that petitioner PPI is not a party to the insurance contract in question, no liability or obligation arising
therefrom, may be imposed upon it.

Note:

There is nothing in the records to show that an insurance contract in this case was in fact negotiated between the
insured Sun Richie Five and the insurer OMMIAL, through petitioner as insurance agent which will make petitioner an
insurance agent under the aforequoted Section 300 of the Insurance Code. Thus, the SC held that petitioner PPI is
not an insurance agent under the circumstances.

G.R. No. 167330             June 12, 2008

PHILIPPINE HEALTH CARE PROVIDERS, INC., petitioner,
vs.
COMMISSIONER OF INTERNAL
REVENUE,

Facts: 
Petitioner is a domestic corporation whose primary purpose is "to establish, maintain, conduct and operate a prepaid
group practice health care delivery system or a health maintenance organization to take care of the sick and disabled
persons enrolled in the health care plan and to provide for the administrative, legal, and financial responsibilities of
the organization." Individuals enrolled in its health care programs pay an annual membership fee and are entitled to
various preventive, diagnostic and curative medical services provided by its duly licensed physicians, specialists and
other professional technical staff participating in the group practice health delivery system at a hospital or clinic
owned, operated or accredited by it.

Respondent Commissioner of Internal Revenue sent petitioner a formal demand letter and the corresponding
assessment notices demanding the payment of deficiency taxes. The deficiency DST assessment was imposed on
petitioner's health care agreement with the members of its health care program pursuant to Section 185 of the 1997
Tax Code.

Petitioner essentially argues that its health care agreement is not a contract of insurance but a contract for the
provision on a prepaid basis of medical services, including medical check-up, that are not based on loss or damage.
Petitioner also insists that it is not engaged in the insurance business. It is a health maintenance organization
regulated by the Department of Health, not an insurance company under the jurisdiction of the Insurance
Commission. For these reasons, petitioner asserts that the health care agreement is not subject to DST.

Issue: W/N petitioner is not engaged an insurance business?

Held: No

Under the law, a contract of insurance is an agreement whereby one undertakes for a consideration to indemnify
another against loss, damage or liability arising from an unknown or contingent event. The event insured against
must be designated in the contract and must either be unknown or contingent.

Petitioner's health care agreement is primarily a contract of indemnity. And in the recent case of Blue Cross
Healthcare, Inc. v. Olivares, this Court ruled that a health care agreement is in the nature of a non-life insurance
policy.

Contrary to petitioner's claim, its health care agreement is not a contract for the provision of medical services.
Petitioner does not actually provide medical or hospital services but merely arranges for the same  and pays for them
up to the stipulated maximum amount of coverage. It is also incorrect to say that the health care agreement is not
based on loss or damage because, under the said agreement, petitioner assumes the liability and indemnifies its
member for hospital, medical and related expenses (such as professional fees of physicians). The term "loss or
damage" is broad enough to cover the monetary expense or liability a member will incur in case of illness or injury.

Under the health care agreement, the rendition of hospital, medical and professional services to the member in case
of sickness, injury or emergency or his availment of so-called "out-patient services" is the contingent event which
gives rise to liability on the part of the member. In case of exposure of the member to liability, he would be entitled to
indemnification by petitioner.

Furthermore, the fact that petitioner must relieve its member from liability by paying for expenses arising from the
stipulated contingencies belies its claim that its services are prepaid. The expenses to be incurred by each member
cannot be predicted beforehand, if they can be predicted at all. Petitioner assumes the risk of paying for the costs of
the services even if they are significantly and substantially more than what the member has "prepaid." Petitioner does
not bear the costs alone but distributes or spreads them out among a large group of persons bearing a similar risk,
that is, among all the other members of the health care program. This is insurance.

Note:

Petitioner's health care agreement is substantially similar to that involved in Philamcare Health Systems, Inc.  v.
CA. The health care agreement in that case entitled the subscriber to avail of the hospitalization benefits, whether
ordinary or emergency, listed therein. It also provided for "out-patient benefits" such as annual physical examinations,
preventive health care and other out-patient services. This Court ruled in Philamcare Health Systems, Inc.:

The insurable interest of the subscriber 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 contingency, the health care
provider must pay for the same to the extent agreed upon under the contract.

Similarly, the insurable interest of every member of petitioner's health care program in obtaining the health care
agreement is his own health. Under the agreement, petitioner is bound to indemnify any member who incurs hospital,
medical or any other expense arising from sickness, injury or other stipulated contingency to the extent agreed upon
under the contract.

Petitioner's contention that it is a health maintenance organization and not an insurance company is irrelevant.
Contracts between companies like petitioner and the beneficiaries under their plans are treated as insurance
contracts.