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MA. LOURDES S. FLORENDO v. PHILAM PLANS

FACTS:

Manuel Florendo filed an application for a comprehensive pension plan with Philam Plans, Inc. The plan included life insurance coverage. Manuel signed the application and left the task of supplying information to Perla Abcede, who was convinced by Perla's daughter, Ma. Celeste Abcede, who signed as the sales counselor. Philam Plans approved Manuel's application and issued a pension plan agreement with his wife, Ma. Lourdes Florendo, as the beneficiary. Manuel paid his premiums and 11 months later, he died. Lourdes filed a claim for the benefits under the plan, but Philam Plans declined the claim on the grounds that Manuel concealed his true state of health in the application. Lourdes filed a lawsuit against the pension plan company, and the trial court ruled in favor of Lourdes, finding Manuel not guilty of concealing his health condition. The Court of Appeals reversed the decision, holding that Manuel was obligated to disclose his health condition and that Philam Plans' approval of the application did not preclude it from denying the claim.

ISSUES:

  1. 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.

  2. Whether or not the CA erred in holding that Manuel was bound by the failure of respondents Perla and Ma. Celeste to declare the condition of Manuel's health in the pension plan application.

  3. Whether or not the CA erred in finding that Philam Plans' approval of Manuel's pension plan application and acceptance of his premium payments precluded it from denying Lourdes' claim.

RULING:

  1. The Supreme Court held that Manuel Florendo was indeed guilty of concealing his chronic heart ailment and diabetes from Philam Plans, as he did not provide necessary details regarding his treatments which were required in his pension plan application.

  2. The Court determined that Manuel Florendo was bound by the representations and omissions in the pension plan application made by Perla because he authorized Perla to fill out the application form and certified that the information was correct by signing it.

  3. The Court found that Philam Plans' acceptance of the pension plan application and premium payments did not preclude them from questioning the validity of the claim as the one-year incontestability period had not yet lapsed before Manuel died.

PRINCIPLES:

  1. Contract of Uberrima Fides (Utmost Good Faith): Insurance contracts require the utmost good faith, meaning the insured must disclose all material facts that the insurer would need to give the coverage.

  2. Concealment: An insured’s failure to disclose conditions affecting the risk, which he knows or ought to know, can void the insurance contract.

  3. Section 27 of the Insurance Code: Justifies an insurer to rescind a contract of insurance in case of concealment.

  4. Incontestability Clause: Insurance policies often have an incontestability period, after which the insurer cannot contest the policy for health-related misrepresentations or concealments, except under specific exclusions like non-payment of premiums.