3rd SET CASES – CONCEALMENT AND MISREPRESENTATION

1. Canilang vs. CA
G.R. No. 92492. June 17, 1993

FACTS:

Just more than a month Prior to Canilang’s application for a non-medical insurance policy, he visited
his doctor wherein he was found to have sinus tachycardia. Also, a day prior thereto, he was also
found to have acute bronchitis. Canilang died of congestive heart failure. His widow filed a claim with
the insurer but the same was denied on the ground that Canilang concealed material information from
it.

ISSUE:

Whether the deceased insured, Jaime Canilang, made a material concealment as to the state of his
health at the time of the filing of insurance application, justifying respondent’s denial of the claim.

RULING:

Yes. Concealment has been defined in Section 26 of the ICP as a neglect to communicate that which a
party knows and ought to communicate. Also, Section 26 provides that each party to a contract of
insurance must communicate to the other, in good faith, all factors 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.

The information concealed must be information which the concealing party knew and ought to have
communicated, that is to say, information which was material to the contract. The test of materiality
is contained in Section 31 of the ICP which provides that materiality is to be determined by the
reasonable influence of the facts upon the party to whom the communication is due, in forming
his estimate of the disadvantages of the proposed contract, or in making his inquiries.

The information which Jaime Canilang failed to discloses was material to the ability of Great Pacific 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 Great Pacific 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.

2. SUNLIFE VS CA
G.R. No. 105135. June 22, 1995

FACTS:

Bacani procured a life insurance contract designating his mother as the beneficiary. Bacani died of a
plane crash. Mother filed a claim but it was denied by Sunlife, instead, it rescinded the insurance
policy on the ground that deceased did not disclose material facts relevant to the issuance of the
policy. Sunlife discovered that two weeks prior to his application the insured was examine and
confined in the Lung Center of the Philippines were he was diagnosed for renal failure. The trial court
concluded that there was indeed concealment and misrepresentation, however, it held that the same
was made in good faith. The Court Appeals in affirming that of the trial court ruled that petitioner
cannot avoid obligation by invoking concealment since the cause of death was unrelated to the facts
concealed.

ISSUE and RULING:

Whether good faith can be defense in concealment?

Good faith is no defense in concealment. Section 26 of the Insurance Code is explicit

in requiring 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.

The information which the insured failed to disclose were material and relevant to
the approval and the 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.
 ISSUE and RULING:

Whether concealment cannot be invoked if the cause of death is unrelated to the facts concealed?

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.
Note:

It must be emphasized that rescission was exercised within the two-year contestability period as recognized in
Section 48 of The Insurance Code.

3. NG GAN ZEE vs ASIAN CRUSADER

G.R. No. L-30685. May 30, 1983

FACTS:

Kwong Nam applied for a life insurance. He stated in his application that he was operated for tumor of
the stomach associated with ulcer, and said tumor has been removed in said operation. Kwong died of
cancer of the liver. Asian refused to pay on the ground of false information. It was found that prior to
his application, Kwong was diagnosed of peptic ulcer, and that during the operation what was
removed from Kwong’s body was actually a portion of the stomach and not a tumor.

ISSUE:
Whether contract may be rescinded on the ground of imperfection in the application form.

RULING:

No. Kwong did not have sufficient knowledge as to distinguish between a tumor and a peptic ulcer. His
statement therefore was made in good faith. Asian should have made an inquiry as to the illness and
operation of Kwong when it appeared on the face of the application that a question appeared to be
imperfectly answered. Asian’s failure to inquire constitutes a waiver of the imperfection in the answer
in accordance with Section 32 of Insurance law,

Section 32 of Insurance Law [Act No. 2427] provides as follows:

"Section 32. The right to information of material facts may be waived either by the terms of insurance
or by neglect to make inquiries as to such facts where they are distinctly implied in other facts of
which information is communicated."

4. SATURNINO vs PHILAM LIFE

G.R. No. L-16163. February 28, 1963

FACTS:

Two months prior to the issuance of the policy , Saturnino was operated on for cancer.
Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her
application for insurance. She stated therein that she did not have, nor had ever she had, among
others listed in the application, cancer or other tumors; that she had not consulted any physician,
undergone any operation or suffered any injury within the preceding 5 years. Heirs of Saturnino
contended that the facts subject of the representations were not material in view of the "non-medical"
nature of the insurance applied for, which does away with the usual requirement of medical
examination before the policy is issued. They also contend there was no fraudulent concealment of the
truth as much as the insured herself did not know, since her doctor never told her, that the disease
for which she had been operated on was cancer.

ISSUE:

Whether the contentions were tenable.

 RULING:

As to the first contention, the court ruled that in non-medical insurance, the waiver of medical
examination 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. 

As to the second contention, the court ruled that the concealment of the fact of the operation itself is
fraudulent, as there could not have been any mistake about it, no matter what the ailment. 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".

5. EDILLON vs MANILA BANKERS

G.R. No. L-34200. September 30, 1982

FACTS:

Carmen Lapuz applied with respondent insurance corporation for coverage against accident and
injuries. On the application form she gave her age at 64 years old and paid the premium thereon.
Thereafter, she was issued a certificate of insurance. During the effectivity of said policy, she died in a
vehicular accident. Petitioner-appellant, who was named as beneficiary to the policy, filed her claim
for the proceeds of the insurance. The insurance company rejected her claims on the ground that the
Certificate of Insurance excludes its liability to pay claims under the policy in behalf of persons who
are over 60 years old; thus, the insured being over 60 when she applied for coverage, the policy was
null and void.

ISSUE:
Whether the acceptance by the private respondent corporation of the premium and its issuance of the
corresponding certificate of insurance should be deemed a waiver of exclusionary condition coverage.

RULING:

The insurance corporation’s inaction to revoke the policy despite a departure from the exclusionary
condition contained in the policy constituted a waiver of such condition. The age of the insured
Carmen 0. Lapuz was not concealed to the insurance company. Her application for insurance coverage
clearly indicated her age at the time of filing the same to be almost 65 years of age. There was
sufficient time for the private respondent to process the application and to notice that the applicant
was over 60 years of age and thereby cancel the policy on that ground if it was minded to do so. If
the private respondent 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, the insurance corporation is already deemed in
estoppel.

6. PHILAMCARE vs TRINOS
G.R. No. 125678. March 18, 2002

FACTS:

Ernani applied for a Health care agreement with the insurer. In his application, he answered no
when asked whether he or any of his family member consulted or have been treated for
highblood pressure, heart trouble etc. During effectivity of the coverage, Ernani suffered a heart
attack and was hospitalized. His wife claimed for reimbursement for their medical expenses but
the same was denied by the insurer alleging concealment of his medical history. Eventually,
Ernani died. His widow filed an action for damages.

ISSUE:
Whether the widow can recover under the policy.

RULING:
YES.
1. The answer relied by the insurer which they alleged to have been misrepresented by the insured
relates to the medical history of the insured which largely depends on an opinion rather than a
fact especially since he is not a medical doctor. Where matters of opinion or judgment are called
for, answers made in good faith and without intent to deceive will not avoid the policy even
though they are untrue.
 2. The fraudulent intent on the part of the insured must be established to warrant rescission of the
insurance contract. Concealment as a defense for the health care provider or insurer to avoid
liability is an affirmative defense and the duty to establish such defense by satisfactory and
convincing evidence rests upon the provider or insurer.

3. Moreover, assuming the insurer has the right to rescind, the same must have been exercised
prior to the commencement of an action in the contract. In this case, no rescission was made.

4. Besides, the cancellation of an insurance policy requires occurrence of the following 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 of the above conditions was fulfilled in this case.

7. FLORENDO vs PHILAM PLANS

G.R. No. 186983 : February 22, 2012

FACTS:

Mr. Florendo applied for a comprehensive pension plan with life insurance policy. Eleven months after
he was issued the policy, he died due to blood poisoning. His wife then filed a claim with the insurer
but the same was denied because it found that Mr Florendo was on maintenance medicine for his
heart and had an implanted pacemaker. Further, he suffered from diabetes mellitus and was taking
insulin. Such facts was however, not disclosed in his application, since he left the details regarding his
continuing treatments in blank. One of the defense of Mrs. Florendo is 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.

ISSUE:

Whether such contention was tenable?

RULING:

No. The comprehensive pension plan 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.

8. INSULAR LIFE vs. FELICIANO

G.R. No. 47593. December 29, 1943.]

FACTS:

Feliciano was suffering from pulmonary tuberculosis when he signed his application for insurance in
blank. The answers for the questions therein was however supplied for him by the soliciting agent
and/or the medical examiner. In his application, it was declared that he have not suffered from any
ailment or disease of the lungs, pneumonia or asthma, although in fact he was already in a very
serious and practically hopeless condition.

ISSUE:

Whether the policy is valid despite the presence of false statements.

RULING:

The policy was declared void ab initio since the policies were issued on the basis subscribed by the
applicant that he was in good health. The court concluded that the insured was a coparticipant, and
coresponsible with the Insurance Agent and the Medical Examiner in the fraudulent procurement of
the policies in question. Said persons acted as his agent, he cannot evade responsibility for the
falsification.