G.R. No. 138386-87 - People vs. Agudez

Case Summary (G.R. No. 138386-87)

Petitioner and Respondent

Petitioner: PhilamCare Health Systems, Inc. (a Health Maintenance Organization)
Respondents: Court of Appeals; Julita Trinos (widow of Ernani Trinos)

Key Dates

• Application approved: March 1, 1988–March 1, 1989 (renewed through June 1, 1990)
• Hospital confinement: March 9, 1990–approximately one month
• Death of Ernani Trinos: April 13, 1990
• Trial court decision: November 16, 1993
• Court of Appeals decision: December 14, 1995
• Supreme Court decision: March 18, 2002

Applicable Law

• 1987 Philippine Constitution
• P.D. No. 1460 (Insurance Code), particularly Sections 2, 3, 10, 27, 48, 64

Factual Background

Ernani Trinos applied for a one-year health care agreement, answering “No” to prior consultations or treatments for listed serious conditions. The agreement entitled him to hospitalization and outpatient benefits up to a specified limit. Coverage was renewed until June 1, 1990, with a P75,000 per-disability cap. In March 1990, he suffered a heart attack, was hospitalized, and accrued about P76,000 in expenses. PhilamCare denied the claim alleging concealment of hypertension, diabetes, and asthma. Respondent paid all expenses, then filed suit for reimbursement, moral and exemplary damages, and attorney’s fees.

Procedural History

• Trial Court (RTC Manila Branch 44) ruled in favor of Julita Trinos, awarding reimbursement of P76,000 plus interest, P10,000 moral damages, P10,000 exemplary damages, and P20,000 attorney’s fees.
• Court of Appeals affirmed but struck out all damages awards and absolved PhilamCare’s president from liability.
• Supreme Court review granted; petitioner argued the agreement was not an insurance contract and that the incontestability provision did not apply.

Issue

Whether the Health Care Agreement is a contract of insurance governed by the Insurance Code’s incontestability and rescission rules, and whether PhilamCare validly avoided liability for alleged concealment.

Nature of the Health Care Agreement

Under Section 2(1), an insurance contract indemnifies against loss for a premium. It requires insurable interest, risk assumption, and risk distribution among policyholders. Section 3 confirms health is insurable. The agreement provides indemnity for medical expenses upon prepayment of membership fees. Thus, it is non-life insurance in substance.

Concealment and Misrepresentation

PhilamCare alleged that Ernani’s denial of pre-existing conditions was a material misrepresentation warranting contract avoidance under an invalidation clause. However, representations of opinion or belief—not statements of objective fact—are not grounds for rescission absent fraudulent intent. No evidence proved that Ernani intentionally deceived PhilamCare.

Incontestability and Rescission

Section 48 (Insurance Code) limits contestation to the incontestability period (two years for life, shorter for specific conditions). Under the agreement, PhilamCare had twelve months for asthma and six months for diabetes or hypertension to contest. Those periods lapsed without rescission. Rescission must precede suit, comply with notice requirements under Section 64, and be in writing. P

Case Syllabus (G.R. No. 138386-87)

Facts of the Application and Coverage

Ernani Trinos applied for one-year health care coverage with Philamcare Health Systems, Inc. on March 1, 1988, answering “No” to prior consultation or treatment for specified serious illnesses.
Health Care Agreement No. P010194 approved coverage from March 1, 1988 to March 1, 1989; subsequently extended to March 1, 1990 and then to June 1, 1990, with coverage increased to ₱75,000 per disability.
Covered benefits included ordinary or emergency hospitalization, annual physical examinations, preventive care, and other outpatient services.

Facts of the Claim and Denial

On March 9, 1990, Ernani suffered a heart attack and was confined at Manila Medical Center for one month.
Philamcare denied Julita Trinos’s claim, asserting the Agreement was void for concealment of pre-existing conditions (hypertension, diabetes, asthma) discovered during hospitalization.
Respondent paid approximately ₱76,000 in hospital expenses out of pocket, then sought reimbursement.
Ernani was later treated at Chinese General Hospital and died on April 13, 1990.

Proceedings Below

July 24, 1990: Julita Trinos filed Civil Case No. 90-53795 for reimbursement, moral damages, exemplary damages, and attorney’s fees.
Regional Trial Court, Branch 44, Manila: rendered judgment in favor of Julita Trinos ordering reimbursement of ₱76,000 plus interest, moral damages of ₱10,000, exemplary damages of ₱10,000, attorney’s fees of ₱20,000, and costs.
Court of Appeals: affirmed the reimbursement and fee award but deleted all damages awards and absolved the corporate president, Dr. Reverente.
Petition for reconsideration denied; Philamcare elevated the case to the Supreme Court.

Issue

Whether the Health Care Agreement constitutes an insurance contract subject to the Insurance Code’s incontestability clause and related provisions on concealment and rescission.
Whether Philamcare validly avoided liability for the claimed benefits on grounds of alleged concealment or misrepresentation.
Whether Julita Trinos, as payor of th