Great Pacific Life Assurance Company vs Court of Appeals (1979)

FACTS: In March 1957, Ngo Hing filed an application for a 20-year endowment policy for the life of his
one-year old daughter with the Great Pacific Life Assurance Company (Grepalife). Lapulapu Mondragon
was the insurance agent who assisted Ngo Hing. The insurance policy was for P50,000.00. The proper
form was filled out and Ngo Hing paid the insurance premium. He received a binding deposit receipt in
return. Said receipt however was subject to certain conditions, among which is the acceptance of
Grepalife.

Grepalife eventually denied the insurance application because the endowment plan by Grepalife is not
offered for minors below seven years old. Grepalife, instead made a counter-offer which Ngo Hing failed
to accept because Mondragon, instead of communicating the said denial to Ngo Hing, wrote a letter to
Grepalife trying to convince Grepalife to allow one-year olds to be covered by endowment plans.

In May 1957, Ngo Hing’s one-year old daughter died. Ngo Hing tried to collect the insurance claim but
Grepalife refused as it claimed that the insurance contract was never perfected sans their acceptance.

ISSUE: Whether or not Grepalife should pay the insurance claim.

HELD: No. As properly ruled by the lower court as well as the Court of Appeals, the insurance contract
was never completed because Grepalife never accepted the insurance offer. The binding deposit receipt
issued to Ngo Hing is only acknowledgement of his application and receipt of his payment for the
insurance premium.

The Supreme Court also noted that Ngo Hing failed to disclose the fact that his one-year old daughter
was a mongoloid. Such congenital defect was withheld by Ngo Hing with bad faith and such risk to be
assumed by the insurance company.

The contract of insurance is one of perfect good faith uberrima fides meaning good faith, absolute and
perfect candor or openness and honesty; the absence of any concealment or demotion, however slight
not for the insured alone but equally so for the insurer. Concealment is a neglect to communicate that
which a party knows and ought to communicate. Whether intentional or unintentional the concealment
entitles the insurer to rescind the contract of insurance.

Insular Life Assurance Co., Ltd. vs Serafin Feliciano (1943)

FACTS: From the court’s decision rendered in the case of Insular Life Assurance vs Feliciano (1941),
Insular Life filed a motion for reconsideration. Insular avers that Feliciano is not entitled to the claim
because the insurance policy is void ab initio; that he connived with the insurance agent and the medical
examiner; and that at best, Feliciano is only entitled to refund or the reimbursement of what he has paid
in premium.

ISSUE: Whether or not Insular Life is correct.

HELD: Yes. This time, the Supreme Court held that Insular Life’s contention is correct. When Evaristo
Feliciano, the applicant for insurance, signed the application in blank and authorized the soliciting agent
and/or medical examiner of Insular to write the answers for him, he made them his own agents for that
purpose, and he was responsible for their acts in that connection. If they falsified the answers for him,
he could not evade the responsibility for the falsification. He was not supposed to sign the application in
blank. He knew that the answers to the questions therein contained would be “the basis of the policy,”
and for that very reason he was required with his signature to vouch for truth thereof.

Ng Gan Zee vs Asian Crusader Life Assurance Corporation

FACTS: In May 1962, Kwong Nam applied for a 20-year endowment policy with Asian Crusader Life
Assurance Corporation. Asian Crusader asked the following question:

Has any life insurance company ever refused your application for insurance or for reinstatement of a
lapsed policy or offered you a policy different from that applied for? If, so, name company and date.

Kwong Nam answered “No” to the above question.

Kwong Nam was also examined by Asian Crusader’s medical examiner to whom he disclosed that he was
once operated and a tumor was removed from his stomach and such was “associated with ulcer of the
stomach.”

Kwong Nam’s application was approved. In May 1963, he died. His widow, Ng Gan Zee, filed an
insurance claim but Asian Crusader refused her claim as it insisted that Kwong Nam concealed material
facts from them when he was applying for the insurance; that he misrepresented the fact that he was
actually denied application by Insular Life when he was renewing his application with them; that Kwong
Nam was actually operated for peptic ulcer.

ISSUE: Whether or not Ng Gan Zee can collect the insurance claim.

HELD: Yes. Asian Crusader was not able to prove that Kwong Nam’s statement that Insular Life did not
deny his insurance renewal with them is untrue. In fact, evidence showed that in April 1962, Insular Life
approved Kwong Nam’s request of reinstatement only with the condition that Kwong Nam’s plan will be
lowered from P50,000.00 to P20,000.00 considering his medical history.

Kwong Nam did not conceal anything from Asian Crusader. His statement that his operation, in which a
tumor the size of a hen’s egg was removed from his stomach, was only “associated with ulcer of the
stomach” and not peptic ulcer can be considered as an expression made in good faith of his belief as to
the nature of his ailment and operation. Indeed, such statement must be presumed to have been made
by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead
Asian Crusader.
While it may be conceded that, from the viewpoint of a medical expert, the information communicated
was imperfect, the same was nevertheless sufficient to have induced Asian Crusader to make further
inquiries about the ailment and operation of Kwong Nam. It has been held that where, upon the face of
the application, a question appears to be not answered at all or to be imperfectly answered, and the
insurers issue a policy without any further inquiry, they waive the imperfection of the answer and
render the omission to answer more fully immaterial.

Estefania Saturnino vs The Philippine American Life Insurance Company

FACTS: In September 1957, Estefania Saturnino was operated for cancer in which her right breast was
removed. She was advised by her surgeon that she’s not totally cured because her cancer was
malignant. In November 1957, she applied for an insurance policy under Philamlife (Philippine American
Life Insurance Company). She did not disclose the fact that she was operated nor did she disclose any
medical histories. Philamlife, upon seeing the clean bill of health from Estefania waived its right to have
Estefania undergo a medical checkup. In September 1958, Estefania died of pneumonia secondary to
influenza. Her heirs now seek to enforce the insurance claim.

ISSUE: Whether or not Saturnino is entitled to the insurance claim.

HELD: No. The concealment of the fact of the operation is fraudulent. Even if, as argued by the heirs,
Estefania never knew she was operated for cancer, there is still fraud in the concealment no matter
what the ailment she was operated for. Note also that in order to avoid a policy, it is not necessary that
actual fraud be established otherwise insurance companies will be at the mercy of any one seeking
insurance.

In this jurisdiction a concealment, whether intentional or unintentional, entitles the insurer to rescind
the contract of insurance, concealment being defined as “negligence to communicate that which a party
knows and ought to communicate.”

Also, the fact that Philamlife waived its right to have Estefania undergo a medical examination is not
negligence. Because of Estefania’s concealment, Philamlife considered medical checkup to be no longer
necessary. Had Philamlife been informed of her operation, she would have been made to undergo
medical checkup to determine her insurability.

Vda. De Canilang v. CA

Facts:

> Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang
consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis."
> On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife
naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of
P19,700.

> On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic anemia." The
wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured
had concealed material information from it.

> Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as
far as she knows her husband was not suffering from any disorder and that he died of kidney disorder.

> Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no
intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into
the health condition of the applicant by the issuance of the policy despite the lack of answers to "some
of the pertinent questions" in the insurance application. CA reversed.

Issue: Whether or not Grepalife is liable.

Held:

SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B.
Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the
relevant provisions of the Insurance Code, the information concealed must be information which the
concealing party knew and "ought to [have] communicate[d]," that is to say, information which was
"material to the contract.

The information which Canilang failed to disclose was material to the ability of Grepalife to estimate the
probable risk he presented as a subject of life insurance. Had Canilang disclosed his visits to his doctor,
the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Grepalife would have made further inquiries and would have probably refused
to issue a non-medical insurance policy or, at the very least, required a higher premium for the same
coverage.

The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of
mind of Jaime Canilang. A man's state of mind or subjective belief is not capable of proof in our judicial
process, except through proof of external acts or failure to act from which inferences as to his subjective
belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events
which ensue. Materiality relates rather to the "probable and reasonable influence of the facts" upon the
party to whom the communication should have been made, in assessing the risk involved in making or
omitting to make further inquiries and in accepting the application for insurance; that "probable and
reasonable influence of the facts" concealed must, of course, be determined objectively, by the judge
ultimately.

SC found it difficult to take seriously the argument that Grepalife had waived inquiry into the
concealment by issuing the insurance policy notwithstanding Canilang's failure to set out answers to
some of the questions in the insurance application. Such failure precisely constituted concealment on
the part of Canilang. Petitioner's argument, if accepted, would obviously erase Section 27 from the
Insurance Code of 1978.
Sunlife v CA G.R. No. 105135 June 22, 1995

Facts: Robert John B. Bacani procured a life insurance contract for himself from Sunlife. He was issued a
policy for P100,000.00, with double indemnity in case of accidental death. The designated beneficiary
was his mother, Bernarda Bacani.

The insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner, seeking the
benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings
prompted it to reject the claim.

Sunlife informed Bacani that the insured did not disclose material facts relevant to the issuance of the
policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid
in the amount of P10,172.00 was attached to said letter.

Petitioner claimed that the insured gave false statements in his application. The deceased answered
claimed that he consulted a Dr. Raymundo of the Chinese General Hospital for cough and flu
complications. The other questions were answered in the negative.

Petitioner discovered that two weeks prior to his application for insurance, the insured was examined
and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his
confinement, the deceased was subjected to urinalysis tests.

Bernarda Bacani and her husband filed an action for specific performance against petitioner with the
RTC. The court ruled in favor of the spouses and ordered Sunlife to pay P100,000.00.

In ruling for private respondents, the trial court concluded that the facts concealed by the insured were
made in good faith and under a belief that they need not be disclosed. The court also held that the
medial history was irrelevant because it wasn’t medical insurance.

The Court of Appeals affirmed the decision of the trial court. The appellate court ruled that petitioner
cannot avoid its obligation by claiming concealment because the cause of death was unrelated to the
facts concealed by the insured. Petitioner's motion for reconsideration was denied. Hence, this petition.

Issue: WON the insured was guilty of misrepresentation which made the contract void.

Held: Yes. Petition dismissed.

Ratio:

Section 26 of The Insurance Code required a party to a contract of insurance to communicate to the
other, in good faith, all facts within his knowledge which are material to the contract and as to which he
makes no warranty, and which the other has no means of ascertaining.

“A neglect to communicate that which a party knows and ought to communicate, is called
concealment.”
“Materiality is to be determined not by the event, but solely by the probable and reasonable influence
of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages
of the proposed contract or in making his inquiries.”

The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters
relating to his health.

The information which the insured failed to disclose were material and relevant to the approval and
issuance of the insurance policy. The matters concealed would have definitely affected petitioner's
action on his application, either by approving it with the corresponding adjustment for a higher
premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of
the insured by petitioner in order for it to reasonably assess the risk involved in accepting the
application.

Vda. de Canilang v. Court of Appeals- materiality of the information withheld does not depend on the
state of mind of the insured. Neither does it depend on the actual or physical events which ensue.

“Good faith" is no defense in concealment. The insured's failure to disclose the fact that he was
hospitalized raises grave doubts about his eligibility. Such concealment was deliberate on his part.

The argument, that petitioner's waiver of the medical examination of the insured debunks the
materiality of the facts concealed, is untenable.

Saturnino v. Philippine American Life Insurance " . . . the waiver of a medical examination [in a non-
medical insurance contract] renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in deciding whether to issue
the policy or not . . . "

Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well
settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient
that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance
policy or in making inquiries as held in Henson.

Philamcare v CA G.R. No. 125678. March 18, 2002

Facts:

Ernani Trinos applied for a health care coverage with Philam. He answered no to a question asking if he
or his family members were treated to heart trouble, asthma, diabetes, etc.

The application was approved for 1 year. He was also given hospitalization benefits and out-patient
benefits. After the period expired, he was given an expanded coverage for Php 75,000. During the
period, he suffered from heart attack and was confined at MMC. The wife tried to claim the benefits but
the petitioner denied it saying that he concealed his medical history by answering no to the
aforementioned question. She had to pay for the hospital bills amounting to 76,000. Her husband
subsequently passed away. She filed a case in the trial court for the collection of the amount plus
damages. She was awarded 76,000 for the bills and 40,000 for damages. The CA affirmed but deleted
awards for damages. Hence, this appeal.

Issue: WON a health care agreement is not an insurance contract; hence the “incontestability clause”
under the Insurance Code does not apply.

Held: No. Petition dismissed.

Ratio:

Petitioner claimed that it granted benefits only when the insured is alive during the one-year duration.
It contended that there was no indemnification unlike in insurance contracts. It supported this claim by
saying that it is a health maintenance organization covered by the DOH and not the Insurance
Commission. Lastly, it claimed that the Incontestability clause didn’t apply because two-year and not
one-year effectivity periods were required.

Section 2 (1) of the Insurance Code defines a contract of insurance as “an agreement whereby one
undertakes for a consideration to indemnify another against loss, damage or liability arising from an
unknown or contingent event.”

Section 3 states: every person has an insurable interest in the life and health:

(1) of himself, of his spouse and of his children.

In this case, the husband’s health was the insurable interest. The health care agreement was in the
nature of non-life insurance, which is primarily a contract of indemnity. The provider must pay for the
medical expenses resulting from sickness or injury.

While petitioner contended that the husband concealed materialfact of his sickness, the contract stated
that:

“that any physician is, by these presents, expressly authorized to disclose or give testimony at anytime
relative to any information acquired by him in his professional capacity upon any question affecting the
eligibility for health care coverage of the Proposed Members.”

This meant that the petitioners required him to sign authorization to furnish reports about his medical
condition. The contract also authorized Philam to inquire directly to his medical history.

Hence, the contention of concealment isn’t valid.

They can’t also invoke the “Invalidation of agreement” clause where failure of the insured to disclose
information was a grounds for revocation simply because the answer assailed by the company was the
heart condition question based on the insured’s opinion. He wasn’t a medical doctor, so he can’t
accurately gauge his condition.
Henrick v Fire- “in such case the insurer is not justified in relying upon such statement, but is obligated
to make further inquiry.”

Fraudulent intent must be proven to rescind the contract. This was incumbent upon the provider.

“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.”

Section 27 of the Insurance Code- “a concealment entitles the injured party to rescind a contract of
insurance.”

As to cancellation procedure- Cancellation requires certain 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 were fulfilled by the provider.

As to incontestability- The trial court said that “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.”

Regina Edillon vs Manila Banker Life Assurance Corporation

FACTS: In April 1969, Carmen Lapuz filled out an application form for insurance under Manila Banker Life
Assurance Corporation. She stated that her date of birth was July 11, 1904. Upon payment of the Php
20.00 premium, she was issued the insurance policy in April 1969. In May 1969, Carmen Lapuz died in a
vehicular accident. Regina Edillon, who was named a beneficiary in the insurance policy sought to collect
the insurance proceeds but Manila Banker denied the claim. Apparently, it is a rule of the insurance
company that they were not to issue insurance policies to “persons who are under the age of sixteen
(16) years of age or over the age of sixty (60) years …” Note, that Lapuz was already 65 years old when
she was applying for the insurance policy.

ISSUE: Whether or not Edillon is entitled to the insurance claim as a beneficiary.

HELD: Yes. Carmen Lapuz did not conceal her true age. Despite this, the insurance company still received
premium from Lapuz and issued the corresponding insurance policy to her. When the accident
happened, the insurance policy has been in force for 45 days already and such time was already
sufficient for Manila Banker to notice the fact that Lapuz is already over 60 years old and thereby cancel
the insurance policy. If Manila Banker failed to act, it is either because it was willing to waive such
disqualification; or, through the negligence or incompetence of its employees for which it has only itself
to blame, it simply overlooked such fact. Under the circumstances, Manila Banker is already deemed in
estoppel.

JAMES STOKES vs. MALAYAN INSURANCE CO., INC. G.R. No. L-34768, 24 February 1984 127 SCRA 766

FACTS:

Daniel Adolfson had a subsisting Malayan car insurance policy with coverage against own damage as
well as 3rd party liability when his car figured in a vehicular accident with another car, resulting to
damage to both vehicles. At the time of the accident, Adolfson’s car was being driven by James Stokes,
who was authorized to do so by Adolfson. Stokes, an Irish tourist who had been in the Philippines for
only 90 days, had a valid and subsisting Irish driver’s license but without a Philippine driver’s license.
Adolfson filed a claim with Malayan but the latter refused to pay contending that Stokes was not an
authorized driver under the “Authorized Driver” clause of the insurance policy in relation to Section 21
of the Land Transportation Office.

ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson

HELD:

NO. A contract of insurance is a contract of indemnity upon the terms and conditions specified therein.
When the insurer is called upon to pay in case of loss or damage, he has the right to insist upon
compliance with the terms of the contract. If the insured cannot bring himself within the terms and
conditions of the contract, he is not entitled as a rule to recover for the loss or damage suffered. For the
terms of the contract constitute the measure of the insurer’s liability, and compliance therewith is a
condition precedent to the right of recovery. At the time of the accident, Stokes had been in the
Philippines for more than 90 days. Hence, under the law, he could not drive a motor vehicle without a
Philippine driver’s license. He was therefore not an “authorized driver” under the terms of the insurance
policy in question, and Malayan was right in denying the claim of the insured. Acceptance of premium
within the stipulated period for payment thereof, including the agreed period of grace, merely assures
continued effectivity of the insurance policy in accordance with its terms. Such acceptance does not
estop the insurer from interposing any valid defense under the terms of the insurance policy. The
principle of estoppel is an equitable principle rooted upon natural justice which prevents a person from
going back on his own acts and representations to the prejudice of another whom he has led to rely
upon them. The principle does not apply to the instant case. In accepting the premium payment of the
insured, Malayan was not guilty of any inequitable act or representation. There is nothing inconsistent
between acceptance of premium due under an insurance policy and the enforcement of its terms.
WHEREFORE, the appealed judgment is reversed. The complaint is dismissed. Costs against appellees.
Emilio Tan vs Court of Appeals

FACTS: In September 1973, Tan Lee Siong applied for a life insurance under the Philippine American Life
Insurance Company (PHILAMLIFE). He stated in the application form that he has no health issues
whatsoever and so in November 1973 he was issued a life insurance policy in the amount of P80,000.00.
He listed his sons as beneficiaries (Emilio Tan et al). In April 1975, Tan Lee Siong died due to hepatoma.
His sons filed an insurance claim but PHILAMLIFE denied the same as it alleged that Tan Lee Siong
concealed the fact that he was hypertensive, diabetic, and was suffering from hepatoma at the time of
his application for the insurance.

The beneficiaries averred that PHILAMLIFE can no longer rescind the insurance contract because the
insured is already dead. They invoke Section 48 of the Insurance Code which they interpreted to mean
that an insurer can only rescind an insurance contract during the lifetime of the insured; and that such
rescission should be done within two years prior to the filing of a suit involving the insurance.

ISSUE: Whether or not the interpretation of the Tan brothers is correct.

HELD: No. The pertinent section in the Insurance Code provides:

Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision
of this chapter, such right must be exercised previous to the commencement of an action on the
contract.

After a policy of life insurance made payable on the death of the insured shall have been in force
during the lifetime of the insured for a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of
the fraudulent concealment or misrepresentation of the insured or his agent.

The so-called “incontestability clause” precludes the insurer from raising the defenses of false
representations or concealment of material facts insofar as health and previous diseases are concerned
if the insurance has been in force for at least two years during the insured’s lifetime. The phrase “during
the lifetime” found in Section 48 simply means that the policy is no longer considered in force after the
insured has died. The key phrase in the second paragraph of Section 48 is “for a period of two years.”

Note that the policy was in force for only one year and 5 months when Tan Lee Siong died. This means
that PHILAMLIFE can still contest and rescind the policy issued by reason of the misrepresentation made
by Tan Lee Siong.

Further, because of Tan Lee Siong’s statement that he does not have any health issues, the insurance
company was misled into believing that he was healthy and so it did not deem a medical checkup to be
necessary and that ultimately led to the issuance of the life insurance policy.