Argente v. West Coast Life Insurance Co.

- Misrepresentation
51 PHIL 725
Facts:
> A joint life insurance policy was issued to Bernardo Argente and his wife
Vicenta upon payment of premium, by West Coast.
> On Nov. 18, 1925, during the effectivity of the policy, Vicenta died of cerebral
apoplexy. Thereafter, Bernardo claimed payment but was refused.
> It is admitted that in the Medical Examiners report, Vicenta, in response to
the question asked by the medical examiner, her replies were as follows:
- How frequently do you use beer, wine, spirits and other intoxicants? she
answered beer only in small quantities.

submitting the form, he entered the hospital where he complained of dizziness,

anemia, abdominal pains and tarry stools. He was found to have peptic ulcer.
The insured entered another hospital for medical treatment but he died of
"infiltrating medullary carcinoma, Grade 4, advanced cardiac and of lesser
curvature, stomach metastases spleen." Yu Pang Cheng aimed to collect
P10,000.00 on life of one Yu Pang Eng from an insurance company. The
company set up the defense that the insured was guilty of misrepresentation
and concealment of material facts. They subsequently refused to give the
indemnity. The trial court rendered judgment ordering defendant to pay
plaintiff the sum of P10,000.00, plus P2,000.00 as attorney's fees. The Court of
Appeals reversed the decision of the trial court, holding that the insured was
guilty of concealment of material facts. Hence the present petition.

- What physician have you consulted or been treated by within the last 5 years
and for what illness or ailment? she answered none

Issue: Whether or not the insured is guilty of concealment of some facts

material to the risk insured that consequently avoids the policy.

> It is however, not disputed that in 1924, Vicenta was taken to a hospital for
what was first diagnosed as alcoholism and later changed to manic-depressive
psychosis and then again changed to pscyhonuerosis.

Held: Yes. Petition dismissed.

The first confinement took place from January 29, 1950 to February 11, while
his application was submitted on September 5, 1950. When he gave his answers
to the policy, he concealed the ailment of which he was treated in the hospital.
The negative answers given by the insured regarding his previous ailment
deprived defendant of the opportunity to make the necessary inquiry as to the
nature of his past illness so that as it may form its estimate relative to the
approval of his application. Had defendant been given such opportunity, the
company would probably had never consented to the issuance of the policy in
question. In fact, according to the death certificate, the insureds death may have
direct connection with his previous illness. Under the law, a neglect to
communicate that which a party knows and ought to communicate, is called
concealment. This entitles the insurer to rescind the contract. The insured is
required to communicate to the insurer all facts within his knowledge which are
material to the contract and which the other party has not the means of
ascertaining. The 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 the
communication is due.

Issue:
Whether or not on the basis of the misrepresentations of Vicenta, Bernardo is
barred from recovery.
Held: YES.
The court found that the representations made by Vicenta in his application for
life insurance were false with respect to her state of health and that she knew
and was aware that the representations so made by her were false. In an action
on a life insurance policy where the evidence conclusively shows that the
answers to questions concerning diseases were untrue, the truth or falsity of the
answer becomes the determining factor.
If the policy was procured by fraudulent misrepresentations, the contract of
insurance apparently set forth therein was never legally existent. It can be fairly
assumed that had the true facts been disclosed by the insured, the insurance
would never have been granted.
Yu v CA G.R. No. L-12465 May 29, 1959
J. Bautista

Argente vs. West Coast- One ground for the rescission of a contract of
insurance under the insurance Act is "a concealment", which in section 25 is
defined "A neglect to communicate that which a party knows and ought to
communicate."

Facts:
Yu Pang Eng submitted application for insurance consisting of the medical
declaration made by him to the medical examiner and the report. Yu then paid
the premium in the sum of P591.70. The insured, in his application for
insurance, said no to ever having stomach disease, cancer, and fainting-spells.
He also claimed to not have consulted a physician regarding such diseases. After

In an action on a life insurance policy where the evidence conclusively shows

that the answers to questions concerning diseases were untrue, the truth or
falsity of the answers become the determining factor. If the policy was procured
by fraudulent representations, the contract of insurance was never legally
existent. It can fairly be assumed that had the true facts been disclosed by the
assured, the insurance would never have been granted.

Saturnino v. Philamlife - False Representation

7 SCRA 316
Facts:
> 2 months prior to the insurance of the policy, Saturnino was operated on for
cancer, involving complete removal of the right breast, including the pectoral
muscles and the glands, found in the right armpit.
> 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 she ever 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.
> She also stated that she had never been treated for, nor did she ever have any
illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus
and menstrual disorders.
> The application also recited that the declarations of Saturnino constituted a
further basis for the issuance of the policy.
Issue:
Whether or not the insured made such false representation of material facts as
to avoid the policy.
Held:
YES.
There can be no dispute that the information given by her in the application for
insurance was false, namely, that she never had cancer or tumors or consulted
any physician or undergone any operation within the preceding period of 5
years.

Appellants also contend that there was no fraudulent concealment of the truth
inasmuch 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. In the first
place, concealment of the fact of the operation itself was fraudulent, as there
could not have been any mistake about it, no matter what the ailment.
Secondly, in order to avoid a policy, it is not necessary to show actual fraud on
the part of the insured. In this jurisdiction, concealment, whether intentional or
unintentional entitled the insurer to rescind the contract of insurance,
concealment being defined as negligence to communicate that which a party
knows and ought to communicate. The basis of the rule vitiating the contract
in cases of concealment is that it misleads or deceives the insurer into accepting
the risk, or accepting it at a rate of premium agreed upon. The insurer, relying
upon the belief that the insured will disclose every material fact within his
actual or presumed knowledge, is misled into a belief that the circumstances
withheld does not exist, and he is thereby induced to estimate the risk upon a
false basis that it does not exist.
GREPALIFE vs. CA AND LEUTERIO
G.R. No. 113899, October 13, 1999
FACTS: A contract of group life insurance was executed between petitioner
Grepalife and DBP. Grepalife agreed to insure the lives of eligible housing loan
mortgagors of DBP.
Leuterio, a physician and a housing debtor of DBP applied for membership in
the group life insurance plan. In an application form,. Leuterio answered
questions concerning his health condition as follows:

The question to determine is: Are the facts then falsely represented material?
The Insurance Law provides that 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 the communication is due, in forming his estimate of the
proposed contract, or making his inquiries.

7. Have you ever had, or consulted, a physician for a heart condition, high blood
pressure, cancer, diabetes, lung; kidney or stomach disorder or any other
physical impairment?

The contention of appellants is that the facts subject of the representation 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. The contention is without merit. If anything, 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.

8. Are you now, to the best of your knowledge, in good health?

Answer: No. If so give details _____________.

Answer: [x] Yes [ ] NO.

Grepalife then issued a Certificate, as insurance coverage of Leuterio, to the
extent of his DBP mortgage indebtedness amounting to P86,200.00
Later, Leuterio died due to massive cerebral hemorrhage. Consequently, DBP
submitted a death claim to Grepalife. Grepalife denied the claim alleging that.
Leuterio was not physically healthy when he applied for an insurance coverage.

Grepalife insisted that Leuterio did not disclose he had been suffering from
hypertension, which caused his death. Allegedly, such non-disclosure
constituted concealment that justified the denial of the claim.
Tthe widow of the. Leuterio, respondent Medarda, filed a complaint with the
RTC, against Grepalife for Specific Performance with Damages. During the
trial, Dr. Mejia, who issued the death certificate, was called to testify. Dr. Mejias
findings, based partly from the information given by the respondent widow,
stated that Leuterio complained of headaches presumably due to high blood
pressure. The inference was not conclusive because Leuterio was not autopsied,
hence, other causes were not ruled out.
The trial court rendered a decision in favor of respondent widow and against
Grepalife. The CA sustained the trial courts decision. Hence, the present
petition.
ISSUE:
1. who is the proper party to bring the suit, the widow or the mortgagee (DBP)?
2. WON there was concealment as to justify Grepalifes non-payment of the
insurance proceeds
HELD: petition denied
1.
WIDOW
To resolve the issue, we must consider the insurable interest in mortgaged
properties and the parties to this type of contract.
The rationale of a group insurance policy of mortgagors, otherwise known as
the mortgage redemption insurance, is a device for the protection of both the
mortgagee and the mortgagor. On the part of the mortgagee, it has to enter into
such form of contract so that in the event of the unexpected demise of the
mortgagor during the subsistence of the mortgage contract, the proceeds from
such insurance will be applied to the payment of the mortgage debt, thereby
relieving the heirs of the mortgagor from paying the obligation. In a similar
vein, ample protection is given to the mortgagor under such a concept so that in
the event of death; the mortgage obligation will be extinguished by the
application of the insurance proceeds to the mortgage indebtedness.
Consequently, where the mortgagor pays the insurance premium under the
group insurance policy, making the loss payable to the mortgagee, the insurance
is on the mortgagors interest, and the mortgagor continues to be a party to the
contract. In this type of policy insurance, the mortgagee is simply an appointee
of the insurance fund, such loss-payable clause does not make the mortgagee a
party to the contract.
Sec. 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in

his own name providing that the loss shall be payable to the mortgagee, or
assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon
the interest of the mortgagor, who does not cease to be a party to the original
contract, and any act of his, prior to the loss, which would otherwise avoid the
insurance, will have the same effect, although the property is in the hands of the
mortgagee, but any act which, under the contract of insurance, is to be
performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor.
The mortgagee is simply an appointee of the insurance fund, such loss-payable
clause does not make the mortgagee a party to the contract.
Sec. 8 of the Insurance Code provides:
Unless the policy provides, where a mortgagor of property effects insurance in
his own name providing that the loss shall be payable to the mortgagee, or
assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon
the interest of the mortgagor, who does not cease to be a party to the original
contract, and any act of his, prior to the loss, which would otherwise avoid the
insurance, will have the same effect, although the property is in the hands of the
mortgagee, but any act which, under the contract of insurance, is to be
performed by the mortgagor, may be performed by the mortgagee therein
named, with the same effect as if it had been performed by the mortgagor.
The insured private respondent did not cede to the mortgagee all his rights or
interests in the insurance, the policy stating that: In the event of the debtors
death before his indebtedness with the Creditor [DBP] shall have been fully
paid, an amount to pay the outstanding indebtedness shall first be paid to the
creditor and the balance of sum assured, if there is any, shall then be paid to the
beneficiary/ies designated by the debtor. When DBP submitted the insurance
claim against petitioner, the latter denied payment thereof, interposing the
defense of concealment committed by the insured. Thereafter, DBP collected the
debt from the mortgagor and took the necessary action of foreclosure on the
residential lot of private respondent.
And since a policy of insurance upon life or health may pass by transfer, will or
succession to any person, whether he has an insurable interest or not, and such
person may recover it whatever the insured might have recovered, 14 the
widow of the decedent Dr. Leuterio may file the suit against the insurer,
Grepalife.
2. The second assigned error refers to an alleged concealment that the
petitioner interposed as its defense to annul the insurance contract. Petitioner
contends that Dr. Leuterio failed to disclose that he had hypertension, which
might have caused his death. Concealment exists where the assured had

knowledge of a fact material to the risk, and honesty, good faith, and fair dealing
requires that he should communicate it to the assured, but he designedly and
intentionally withholds the same.
Petitioner merely relied on the testimony of the attending physician, Dr.
Hernando Mejia, as supported by the information given by the widow of the
decedent
On the contrary the medical findings were not conclusive because Dr. Mejia did
not conduct an autopsy on the body of the decedent. Hence, the statement of the
physician was properly considered by the trial court as hearsay.
The CAs stand is that contrary to appellants allegations, there was no sufficient
proof that the insured had suffered from hypertension.
Appellant insurance company had failed to establish that there was
concealment made by the insured, hence, it cannot refuse payment of the claim
The fraudulent intent on the part of the insured must be established to entitle
the insurer to rescind the contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and the duty to establish such
defense by satisfactory and convincing evidence rests upon the insurer. In the
case at bar, the petitioner failed to clearly and satisfactorily establish its
defense, and is therefore liable to pay the proceeds of the insurance.
And that brings us to the last point in the review of the case at bar. Petitioner
claims that there was no evidence as to the amount of Dr. Leuterios outstanding
indebtedness to DBP at the time of the mortgagors death. Hence, for private
respondents failure to establish the same, the action for specific performance
should be dismissed. Petitioners claim is without merit. A life insurance policy
is a valued policy. Unless the interest of a person insured is susceptible of exact
pecuniary measurement, the measure of indemnity under a policy of insurance
upon life or health is the sum fixed in the policy. The mortgagor paid the
premium according to the coverage of his insurance which states that:
The policy states that upon receipt of due proof of the Debtors death during the
terms of this insurance, a death benefit in the amount of P86,200.00 shall be
paid.
In the event of the debtors death before his indebtedness with the creditor shall
have been fully paid, an amount to pay the outstanding indebtedness shall first
be paid to the Creditor and the balance of the Sum Assured, if there is any shall
then be paid to the beneficiary/ies designated by the debtor.
However, we noted that the CA decision was promulgated in 1993. In private
respondents memorandum, she states that DBP foreclosed in 1995 their

residential lot, in satisfaction of mortgagors outstanding loan. Considering this

supervening event, the insurance proceeds shall inure to the benefit of the heirs
of the deceased person or his beneficiaries. Equity dictates that DBP should not
unjustly enrich itself at the expense of another (Nemo cum alterius detrimenio
protest). Hence, it cannot collect the insurance proceeds, after it already
foreclosed on the mortgage. The proceeds now rightly belong to Leuterios heirs
represented by his widow.
Soliman v. US Life- Rescind Contract of Insurance
104 PHIL 1046
Facts:
> US Life issued a 20 yr endowment life policy on the joint lives of Patricio
Soliman and his wife Rosario, each of them being the beneficiary of the other.
> In Mar. 1949, the spouses were informed that the premium for Jan 1949 was
still unpaid notwithstanding that the 31-day grace period has already expired,
and they were furnished at the same time long-form health certificates for the
reinstatement of the policies.
> In Apr 1949, they submitted the certificates and paid the premiums.
> In Jan. 1950, Rosario died of acute dilation of the heart, and thereafter,
Patricio filed a claim for the proceeds of the insurance.
> US life denied the claim and filed for the rescission of the contract on the
ground that the certificates failed to disclose that Rosario had been suffering
from bronchial asthma for 3 years prior to their submission.
Issue:
Whether or not the contract can still be rescinded.
Held:
Yes.
The insurer is once again given two years from the date of reinstatement to
investigate into the veracity of the facts represented by the insured in the
application for reinstatement. When US life sought to rescind the contract on
the ground of concealment/misrepresentation, two years had not yet elapsed.
Hence, the contract can still be rescinded.
Vda Canilang v CA G.R. No. 92492 June 17, 1993
J. Feliciano
Facts:
Canilang was found to have suffered from sinus tachycardia then bronchitis
after a check-up from his doctor. The next day, he applied for a "non-medical"
insurance policy with respondent Grepalife naming his wife, Thelma Canilang,
as his beneficiary. This was to the value of P19,700.
He died of "congestive heart failure," "anemia," and "chronic anemia." The
widow filed a claim with Great Pacific which the insurer denied on the ground

that the insured had concealed material information from it. Petitioner then
filed a complaint against Great Pacific for recovery of the insurance proceeds.
Petitioner testified that she was not aware of any serious illness suffered by her
late husband and her husband had died because of a kidney disorder. The
doctor who gave the check up stated that he treated the deceased for sinus
tachycardia and "acute bronchitis." Great Pacific presented a physician who
testified that the deceased's insurance application had been approved on the
basis of his medical declaration. She explained that as a rule, medical
examinations are required only in cases where the applicant has indicated in his
application for insurance coverage that he has previously undergone medical
consultation and hospitalization. The Insurance Commissioner ordered Great
Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney's fees. On
appeal by Great Pacific, the Court of Appeals reversed. It found that the failure of
Jaime Canilang to disclose previous medical consultation and treatment
constituted material information which should have been communicated to
Great Pacific to enable the latter to make proper inquiries. Hence this petition
by the widow.

The information which Jaime Canilang failed to disclose was material to the
ability of Great Pacific to estimate the probable risk he presented as a subject of
life insurance. Had he disclosed his visits to his doctor, the diagnosis made and
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.
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.

Issue: Won Canilang was guilty of misrepresentation

Sec. 27. A concealment whether intentional or unintentional entitles the injured

party to rescind a contract of insurance.

Held: Yes. Petition denied.

There was a right of the insurance company to rescind the contract if it was
proven that the insured committed fraud in not affirming that he was treated
for heart condition and other ailments stipulated. Apart from certifying that he
didnt suffer from such a condition, Canilang also failed to disclose in the that he
had twice consulted a doctor who had found him to be suffering from "sinus
tachycardia" and "acute bronchitis."
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and ought to
communicate, is called a concealment.
Sec. 28. 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 not the means
of ascertaining.
The information concealed must be information which the concealing party
knew and should have communicated. The test of materiality of such
information is contained in Section 31:
Sec. 31. 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 the
communication is due, in forming his estimate of the disadvantages of the
proposed contract, or in making his inquiries.

The Insurance Commissioner had also ruled that the failure of Great Pacific to
convey certain information to the insurer was not "intentional" in nature, for
the reason that Canilang believed that he was suffering from minor ailment like
a common cold. Section 27 stated that:

The failure to communicate must have been intentional rather than inadvertent.
Canilang could not have been unaware that his heart beat would at times rise to
high and alarming levels and that he had consulted a doctor twice in the two (2)
months before applying for non-medical insurance. Indeed, the last medical
consultation took place just the day before the insurance application was filed.
In all probability, Jaime Canilang went to visit his doctor precisely because of
the ailment.
Canilang's failure to set out answers to some of the questions in the insurance
application constituted concealment.
Sunlife Assurance v. Court of Appeals
245 SCRA 268 (1995)
INSURANCE LAW: Concealment
Disclosure of material facts is required
Good faith is not a defense in determining the materiality of the information to
be disclosed
Waiver of medical examination by insured is not a defense
Cause of death is immaterial in case of concealment
FACTS:
Bacani procured a life insurance contract for himself from Sunlife Assurance.
Specifically, the policy included a double indemnity in case of accidental death,
designating his mother as beneficiary.

Later, Bacani died in a plane crash and so the mother filed a claim. After
investigation, Sunlife rejected the claim on ground of non-disclosure of material
facts. They said that Bacani did not mention that two weeks prior to his
insurance application he was examined and confined at the Lung Center of the
Philippines, where he was diagnosed for renal failure.
The trial court ruled that the facts concealed by the insured were made in good
faith and under the belief that they need not be disclosed. Also, it held that the
health history of the insured was immaterial since the insurance policy was
non-medical.
The CA affirmed, stating that the cause of death was unrelated to the facts
concealed by the insured.
ISSUE:
Whether or not the concealment made by Bacani warranted the rejection of the
insurance claim
HELD:
The Supreme Court reversed the decision of the CA and ruled that rescission of
the insurance contract was proper.
Disclosure of Material Facts required
Under sec. 26 of the Insurance Code, a party to a contract of insurance
is required 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.
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 Insurance Code, sec. 31)
The information which the insured failed to disclose was material and
relevant to the approval and issuance of the insurance policy. The matters
concealed would have definitely affected petitioners 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 the petitioner in order for it to reasonably assess
the risk involved in accepting the application.
Good Faith not a defense
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.
Thus, good faith is no defense in concealment.

Waiver of Medical Examination not a defense

The waiver of the medical examination of the insured does not mean that
material facts need not be disclosed. In fact, it 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.
Cause of Death
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.
G.R. No. 186983 February 22, 2012
MA. LOURDES S. FLORENDO vs. PHILAM PLANS, INC., PERLA ABCEDE MA.
CELESTE ABCEDE
FACTS:
Manuel Florendo filed an application for comprehensive pension plan with
respondent PhilamPlans, Inc. (Philam Plans) Manuel signed the application and
left to Perla the task of supplying
the information needed in the application. Respondent Ma. Celeste Abcede,
Perlas daughter, signed the application as sales counselor. Philam Plans issued
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, Manuel died of blood poisoning. Subsequently, Lourdes filed a
claim with Philam Plans for the payment of the benefits under her husbands
plan but Philam Plans declined her claim prompting her to file the present
action against the pension plan company before the Regional Trial Court (RTC)
of Quezon City and ruled in favor of Ma. Lourdes. However, the Court of Appeals
then reversed the RTC decision. Hence this appeal.
ISSUE:
Whether or not Ma. Lourdes could claim benefits as the beneficiary of her
husband under the insurance plan despite consideration that her husband
Manuel concealed the true condition of his health.
RULING:
The Supreme Court answers this to the negative and the AFFIRMED in its
entirety the decision of the Court of Appeals. The comprehensive pension plan
that Philam Plans issued contains a one-year incontestability period. It states:
VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can no longer
contest for health reasons any claim for insurance under this Agreement, except

for the reason that installment has not been paid (lapsed), or that you are not
insurable at the time you bought this pension program by reason of age. If this
Agreement lapses but is reinstated afterwards, the one (1) year contestability
period shall start again on the date of approval of your request for
reinstatement. The above 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 husbands pension plan.
Insular Life vs. Feliciano 74 phil 468
Facts: From the courts 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 Lifes 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.
Insular Life Assurance vs Feliciano (1941)
FACTS: Evaristo Feliciano was issued an insurance policy by Insular Life. In
September 1935, he died. His heirs (Serafin Feliciano et al) filed an insurance
claim but Insular Life denied the application as it averred that Felicianos
application was attended by fraud. It was later found in court that the insurance
agent and the medical examiner of Insular Life who assisted Feliciano in signing
the application knew that Feliciano was already suffering from tuberculosis;
that they were aware of the true medical condition of Feliciano yet they still
made it appear that he was healthy in the insurance application form; that
Feliciano signed the application in blank and the agent filled the information for
him.

ISSUE: Whether or not Insular Life can avoid the insurance policy by reason of
the fact that its agent knowingly and intentionally wrote down the answers in
the application differing from those made by Feliciano hence instead of serving
the interests of his principal, acts in his own or anothers interest and adversely
to that of his principal.
HELD: No. Insular Life must pay the insurance policy. The weight of authority is
that if an agent of the insurer, after obtaining from an applicant for insurance a
correct and truthful answer to interrogatories contained in the application for
insurance, without knowledge of the applicant fills in false answers, either
fraudulently or otherwise, the insurer cannot assert the falsity of such answers
as a defense to liability on the policy, and this is true generally without regard to
the subject matter of the answers or the nature of the agents duties or
limitations on his authority, at least if not brought to the attention of the
applicant.
The fact that the insured did not read the application which he signed, is not
indicative of bad faith. It has been held that it is not negligence for the insured to
sign an application without first reading it if the insurer by its conduct in
appointing the agent influenced the insured to place trust and confidence in the
agent.
Ng v Asian Crusader G.R. No. L-30685 May 30, 1983
J. Escolin:
Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for the sum
of P20,000.00, with his wife, appellee Ng Gan Zee as beneficiary. On the same
date, Asian Crusader, upon receipt of the required premium from the insured,
approved the application and issued the corresponding policy. Kwong Nam died
of cancer of the liver with metastasis. All premiums had been paid at the time of
his death.
Ng Gan Zee presented a claim for payment of the face value of the policy. On the
same date, she submitted the required proof of death of the insured. Appellant
denied the claim on the ground that the answers given by the insured to the
questions in his application for life insurance were untrue.
Appellee brought the matter to the attention of the Insurance Commissioner.
The latter, after conducting an investigation, wrote the appellant that he had
found no material concealment on the part of the insured and that, therefore,
appellee should be paid the full face value of the policy. The company refused to
settle its obligation.

Appellant alleged that the insured was guilty of misrepresentation when he

answered "No" to the following question appearing in the application for life
insuranceHas 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.
The lower court ruled against the company on lack of evidence. Appellant
further maintains that when the insured was examined in connection with his
application for life insurance, he gave the appellant's medical examiner false
and misleading information as to his ailment and previous operation. The
company contended that he was operated on for peptic ulcer 2 years before the
policy was applied for and that he never disclosed such an operation.
Issue: WON Asian Crusader was deceived into entering the contract or in
accepting the risk at the rate of premium agreed upon because of insured's
representation?
Held: No. Petition dismissed.
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the other, in
good faith, all facts within his knowledge which are material to the contract, and
which the other has not the means of ascertaining, and as to which he makes no
warranty.
"Concealment exists where the assured had knowledge of a fact material to the
risk, and honesty, good faith, and fair dealing requires that he should
communicate it to the assurer, but he designedly and intentionally withholds
the same."
It has also been held "that the concealment must, in the absence of inquiries, be
not only material, but fraudulent, or the fact must have been intentionally
withheld."
Fraudulent intent on the part of the insured must be established to entitle the
insurer to rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an
'affirmative' defense. The duty to establish such a defense by satisfactory and
convincing evidence rests upon the defendant. The evidence before the Court
does not clearly and satisfactorily establish that defense."
It bears emphasis that Kwong Nam had informed the appellant's medical
examiner of the tumor. His statement that said tumor was "associated with
ulcer of the stomach" should be construed as an expression made in good faith
of his belief as to the nature of his ailment and operation.
While the information communicated was imperfect, the same was sufficient to
have induced appellant to make further inquiries about the ailment and
operation of the insured.
Section 32 of Insurance Law:

Section 32. The right to information of material facts maybe 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.
Where 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.
The company or its medical examiner did not make any further inquiries on
such matters from the hospital before acting on the application for insurance.
The fact of the matter is that the defendant was too eager to accept the
application and receive the insured's premium. It would be inequitable now to
allow the defendant to avoid liability under the circumstances."
Edillon v Manila Bankers Life G.R. No. L-34200 September 30, 1982
J. Vasquez
Facts:
Carmen O, Lapuz applied with Manila Bankers for insurance coverage against
accident and injuries. She gave the date of her birth as July 11, 1904. She paid
the sum of P20.00 representing the premium for which she was issued the
corresponding receipt. The policy was to be effective for 90 days.
During the effectivity, Carmen O. Lapuz died in a vehicular accident in the North
Diversion Road.
Petitioner Regina L. Edillon, a sister of the insured and the beneficiary in the
policy, filed her claim for the proceeds of the insurance. Her claim having been
denied, Regina L. Edillon instituted this action in the trial court.
The insurance corporation relies on a provision contained in the contract
excluding its liability to pay claims under the policy in behalf of "persons who
are under the age of sixteen (16) years of age or over the age of sixty (60) years"
They pointed out that the insured was over sixty (60) years of age when she
applied for the insurance coverage, hence the policy became void.
The trial court dismissed the complaint and ordered edillon to pay P1000. The
reason was that a policy of insurance being a contract of adhesion, it was the
duty of the insured to know the terms of the contract he or she is entering into.
The insured could not have been qualified under the conditions stated in said
contract and should have asked for a refund of the premium.
Issue:
Whether or not the acceptance by the insurance corporation of the premium
and the issuance of the corresponding certificate of insurance should be deemed
a waiver of the exclusionary condition of coverage stated in the policy.

Held: Yes. Petition granted.

The age of Lapuz was not concealed to the insurance company. Her application
clearly indicated her age of the time of filing the same to be almost 65 years of
age. Despite such information which could hardly be overlooked, the insurance
corporation received her payment of premium and issued the corresponding
certificate of insurance without question.
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 cancel the policy.
Under the circumstances, the insurance corporation is already deemed in
estoppel. It inaction to revoke the policy despite a departure from the
exclusionary condition contained in the said policy constituted a waiver of such
condition, similar to Que Chee Gan vs. Law Union Insurance.
The insurance company was aware, even before the policies were issued, that in
the premises insured there were only two fire hydrants contrary to the
requirements of the warranty in question.
It is usually held that where the insurer, at the time of the issuance of a policy of
insurance, has knowledge of existing facts which, if insisted on, would invalidate
the contract from its very inception, such knowledge constitutes a waiver of
conditions in the contract inconsistent with the known facts, and the insurer is
stopped thereafter from asserting the breach of such conditions.
To allow a company to accept one's money for a policy of insurance which it
then knows to be void and of no effect, though it knows as it must, that the
assured believes it to be valid and binding, is so contrary to the dictates of
honesty and fair dealing.
Capital Insurance & Surety Co., Inc. vs. - involved a violation of the provision of
the policy requiring the payment of premiums before the insurance shall
become effective. The company issued the policy upon the execution of a
promissory note for the payment of the premium. A check given subsequent by
the insured as partial payment of the premium was dishonored for lack of funds.
Despite such deviation from the terms of the policy, the insurer was held liable.
... is that although one of conditions of an insurance policy is that "it shall not be
valid or binding until the first premium is paid", if it is silent as to the mode of
payment, promissory notes received by the company must be deemed to have
been accepted in payment of the premium. In other words, a requirement for
the payment of the first or initial premium in advance or actual cash may be
waived by acceptance of a promissory note...