Title
Florendo vs. Philam Plans, Inc.
Case
G.R. No. 186983
Decision Date
Feb 22, 2012
Manuel Florendo concealed his health conditions in a pension plan application, leading to the denial of his wife’s claim after his death. The Supreme Court upheld the denial, ruling that Manuel’s concealment violated the duty of utmost good faith in insurance contracts.
widow
pension plan benefits
insurance company
A

Case Summary (G.R. No. 186983)

Factual Background

On October 23, 1997 Manuel Florendo applied for a comprehensive pension plan sold by Philam Plans, Inc. with a pre-need price of P997,050.00 payable in ten years and a maturity value of P2,890,000.00 after twenty years. Manuel signed the application but left the completion of the form to respondent Perla Abcede, and respondent Ma. Celeste Abcede signed as sales counselor. The plan carried life insurance coverage under a Group Master Policy issued by Philippine American Life Insurance Company to Philam Plans, under which life insurance proceeds equal to the pre-need price would be payable if the planholder died before maturity and unpaid premiums would be covered so the beneficiary would receive the maturity value. Manuel paid premiums for several quarters and died on September 15, 1998, eleven months after issuance. Petitioner Lourdes filed a claim for benefits, which Philam Plans referred to Philam Life; Philam Life discovered that Manuel had been on maintenance medicine for his heart, had an implanted pacemaker, and suffered from diabetes mellitus, and the claim was denied.

Trial Court Proceedings

Petitioner Lourdes sued Philam Plans, Perla, and Ma. Celeste before the Regional Trial Court of Quezon City. On March 30, 2006 the RTC rendered judgment in favor of Lourdes, finding that Manuel did not conceal his health conditions on the pension plan application, and ordering Philam Plans, Perla, and Ma. Celeste, jointly and severally, to pay Lourdes the benefits of Manuel’s pension plan—specifically P997,050.00 for the term insurance and P2,890,000.00 as lump-sum pension benefit upon maturity—plus P100,000.00 moral damages and costs.

Court of Appeals Decision

On December 18, 2007 the Court of Appeals reversed the RTC. The CA held that insurance contracts are contracts uberrimae fidae of utmost good faith, requiring the insured to disclose conditions affecting risk of which he was aware or ought to be aware. The CA concluded that Manuel concealed material facts concerning his heart condition and diabetes in the application and that such concealment entitled the insurer to rescind.

Issues Presented

The case presented three principal issues: whether the Court of Appeals erred in finding Manuel guilty of concealing his illnesses by leaving the medical-history questions blank; whether the CA erred in holding Manuel bound by the failure of respondents Perla and Ma. Celeste to declare his health condition on the application; and whether the CA erred in ruling that Philam Plans’ approval of the application and acceptance of premiums precluded it from denying petitioner’s claim.

Parties' Contentions

Petitioner Lourdes argued that Philam Plans should have returned the incomplete application for Manuel to complete it, that Philam Plans never directly questioned Manuel about his health, and that approval and premium acceptance waived any defects after issuance. Philam Plans contended that it had waived a medical examination and thus relied on Manuel’s written representations; that Manuel signed and thereby adopted and certified the declarations in the application asserting no treatment for specified illnesses in the last five years and that he was in good health; and that concealment of material facts entitled the insurer to rescind the contract under Section 27 of the Insurance Code. Philam Plans also relied on the certification clause in the application that the information was written by the applicant or under his direction to bind Manuel to omissions made by Perla.

Supreme Court's Ruling

The Supreme Court affirmed the Court of Appeals in its entirety. The Court held that Manuel concealed material facts concerning his chronic heart ailment and diabetes by signing the application without disclosing ongoing treatments and by adopting the written representations contained therein. The Court further held that Manuel was bound by the actions of the agent who completed the form under his direction, and that the insurer retained the right to rescind the insurance contract for concealment because the one-year incontestability clause had not yet taken effect at the time of Manuel’s death.

Legal Basis and Reasoning

The Court emphasized that the application contained explicit declarations: that the applicant had never been treated for heart condition, high blood pressure, cancer, diabetes, and other enumerated disorders in the last five years, and that the applicant was in good health; the form instructed applicants to give details if those statements were otherwise. Manuel’s signing adopted those representations and produced the legal presumption that the unfilled spaces meant the

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