TOPIC Concealment

CASE TITLE MA. LOURDES S. FLORENDO vs. PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE
ABCEDE
CASE NO. 39
GR NO. 186983 DATE: February 22, 2012
DOCTRINE:
By its tenor, the responsibility for preparing the application belonged to Manuel. Nothing in it implies that someone else
may provide the information that Philam Plans needed. Manuel cannot sign the application and disown the
responsibility for having it filled up. If he furnished Perla the needed information and delegated to her the filling up of the
application, then she acted on his instruction, not on Philam Plans’ instruction. Manuel forgot that in signing the pension
plan application, he certified that he wrote all the information stated in it or had someone do it under his direction.
Manuel, a civil engineer and manager of a construction company, could be expected to know that one must read every
document, especially if it creates rights and obligations affecting him, before signing the same. Manuel is not
unschooled that the Court must come to his succor.
FACTS:
On October 23, 1997 Manuel Florendo filed an application for comprehensive pension plan with respondent Philam
Plans after some convincing by respondent Perla Abcede. The plan had a pre-need price of ₱997,050.00, payable in
10 years, and had a maturity value of ₱2,890,000.00 after 20 years. Manuel signed the application and left to Perla the
task of supplying the information needed in the application. Respondent Ma. Celeste Abcede, Perla’s daughter, signed
the application as sales counselor.
Aside from pension benefits, the comprehensive pension plan also provided life insurance coverage to Florendo. This
was covered by a Group Master Policy that Philam Life issued to Philam Plans. Under the master policy, Philam Life
was to automatically provide life insurance coverage, including accidental death, to all who signed up for Philam Plans’
comprehensive pension plan. If the plan holder died before the maturity of the plan, his beneficiary was to instead
receive the proceeds of the life insurance, equivalent to the pre-need price. Further, the life insurance was to take care
of any unpaid premium until the pension plan matured, entitling the beneficiary to the maturity value of the pension
plan.

On October 30, 1997 Philam Plans issued a Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S.
Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly premiums.
Eleven months later or on September 15, 1998, Manuel died of blood poisoning. Subsequently, Lourdes filed a claim
with Philam Plans for the payment of the benefits under her husband’s plan. Because Manuel died before his pension
plan matured and his wife was to get only the benefits of his life insurance, Philam Plans forwarded her claim to Philam
Life.

On May 3, 1999 Philam Plans wrote Lourdes a letter, declining her claim. Philam Life found that Manuel was on
maintenance medicine for his heart and had an implanted pacemaker. He also suffered from diabetes mellitus and was
taking insulin. Lourdes renewed her demand for payment under the plan but Philam Plans rejected it, prompting her to
file the present action against the pension plan company before the Regional Trial Court (RTC) of Quezon City.

The RTC rendered judgment, ordering Philam Plans, Perla and Ma. Celeste, solidarily, to pay Lourdes all the benefits
from her husband’s pension plan, namely: ₱997,050.00, the proceeds of his term insurance, and ₱2,890,000.00 lump
sum pension benefit upon maturity of his plan; ₱100,000.00 as moral damages; and to pay the costs of the suit. The
RTC ruled that Manuel was not guilty of concealing the state of his health from his pension plan application.

The Court of Appeals (CA) reversed the RTC decision, holding that insurance policies are traditionally contracts
uberrimae fidae or contracts of utmost good faith. As such, it required Manuel to disclose to Philam Plans conditions
affecting the risk of which he was aware or material facts that he knew or ought to know.
ISSUE:
Whether or not the CA erred in finding Manuel guilty of concealing his illness when he kept blank and did not answer
questions in his pension plan application regarding the ailments he suffered from
HELD:
NO. Lourdes points out that, seeing the unfilled spaces in Manuel’s pension plan application relating to his medical history, Philam
Plans should have returned it to him for completion. Since Philam Plans chose to approve the application just as it was, it cannot cry
concealment on Manuel’s part. Further, Lourdes adds that Philam Plans never queried Manuel directly regarding the state of his
health. But Lourdes is shifting to Philam Plans the burden of putting on the pension plan application the true state of Manuel’s health.
Since Philam Plans waived medical examination for Manuel, it had to rely largely on his stating the truth regarding his health in his
application. For, after all, he knew more than anyone that he had been under treatment for heart condition and diabetes for more
than five years preceding his submission of that application. But he kept those crucial facts from Philam Plans. When Manuel signed
the pension plan application, he adopted as his own the written representations and declarations embodied in it. It is clear from these
representations that he concealed his chronic heart ailment and diabetes from Philam Plans.
Since Manuel signed the application without filling in the details regarding his continuing treatments for heart condition and diabetes,
the assumption is that he has never been treated for the said illnesses in the last five years preceding his application. This is implicit
from the phrase "If your answer to any of the statements above (specifically, the statement: I have never been treated for heart
condition or diabetes) reveal otherwise, please give details in the space provided for." But this is untrue since he had been on
"Coumadin," a treatment for venous thrombosis, and insulin, a drug used in the treatment of diabetes mellitus, at that time.

Lourdes insists that Manuel had concealed nothing since Perla, the soliciting agent, knew that Manuel had a pacemaker implanted
on his chest in the 70s or about 20 years before he signed up for the pension plan. But by its tenor, the responsibility for preparing
the application belonged to Manuel. Nothing in it implies that someone else may provide the information that Philam Plans needed.
Manuel cannot sign the application and disown the responsibility for having it filled up. If he furnished Perla the needed information
and delegated to her the filling up of the application, then she acted on his instruction, not on Philam Plans’ instruction.

Lourdes next points out that it made no difference if Manuel failed to reveal the fact that he had a pacemaker implant in the early 70s
since this did not fall within the five-year timeframe that the disclosure contemplated. But a pacemaker is an electronic device
implanted into the body and connected to the wall of the heart, designed to provide regular, mild, electric shock that stimulates the
contraction of the heart muscles and restores normalcy to the heartbeat. That Manuel still had his pacemaker when he applied for a
pension plan in October 1997 is an admission that he remained under treatment for irregular heartbeat within five years preceding
that application.

Manuel had been taking medicine for his heart condition and diabetes when he submitted his pension plan application. These clearly
fell within the five-year period. More, even if Perla’s knowledge of Manuel’s pacemaker may be applied to Philam Plans under the
theory of imputed knowledge, it is not claimed that Perla was aware of his two other afflictions that needed medical treatments.
Pursuant to Section 27 of the Insurance Code, Manuel’s concealment entitles Philam Plans to rescind its contract of insurance with
him.

Lourdes contends that the mere fact that Manuel signed the application in blank and let Perla fill in the required details did not make
her his agent and bind him to her concealment of his true state of health. Since there is no evidence of collusion between them,
Perla’s fault must be considered solely her own and cannot prejudice Manuel.

But Manuel forgot that in signing the pension plan application, he certified that he wrote all the information stated in it or had
someone do it under his direction. Assuming that it was Perla who filled up the application form, Manuel is still bound by what it
contains since he certified that he authorized her action. Philam Plans had every right to act on the faith of that certification.

Lourdes could not seek comfort from her claim that Perla had assured Manuel that the state of his health would not hinder the
approval of his application and that what is written on his application made no difference to the insurance company. But, indubitably,
Manuel was made aware when he signed the pension plan application that, in granting the same, Philam Plans and Philam Life were
acting on the truth of the representations contained in that application.

As the Court said in New Life Enterprises v. Court of Appeals:31

The same may be said of Manuel, a civil engineer and manager of a construction company. He could be expected to know that one
must read every document, especially if it creates rights and obligations affecting him, before signing the same. Manuel is not
unschooled that the Court must come to his succor. It could reasonably be expected that he would not trifle with something that
would provide additional financial security to him and to his wife in his twilight years.
Three. In a final attempt to defend her claim for benefits under Manuel’s pension plan, Lourdes points out that any defect or
insufficiency in the information provided by his pension plan application should be deemed waived after the same has been
approved, the policy has been issued, and the premiums have been collected.

The Court cannot agree. The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. The
incontestability clause precludes the insurer from disowning liability under the policy it issued on the ground of concealment or
misrepresentation regarding the health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in.
Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits of her husband’s pension plan.
ADDITIONAL NOTES/DOCTRINES: