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 Examiner’s report, Vicenta, in response to the question
asked by the medical examiner, her replies were as follows:

o “How frequently do you use beer, wine, spirits and other intoxicants?” she answered
“beer only in small quantities”.

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

> 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.

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.

Edillon v. Manila Bankers Life Insurance Corp. - Concealment

Facts:

> In Apr. 1969, Carmen Lapuz applied for insurance with Manila Bankers. In the application
she stated the date of her birth as July 11, 1904 (around 64 yrs old). The policy was
thereafter issued.

> Subsequently, in May 1969, Carmen died of a car accident. Her sister, as beneficiary
claimed the proceeds of the insurance.

> Manila Bankers refused to pay because the certificate of insurance contained a provision
excluding it’s liability to pay claims to persons under 16 or over 60.

Issue:

Whether or not the policy is void considering that the insured was over 60 when she applied.

Held:

NO.

The age of Carmen was not concealed to the insurance company. Her application form
indicated her true age. Despite such information, Manila Bankers accepted the premium
and issued the policy. It had all the time to process the application and notice the
applicant’s age. If it failed to act, it was because Manila Bankers was willing to waive such
disqualifications or it simply overlooked such fact. It is therefore estopped from disclaiming
any liability.

THELMA VDA. DE CANILANG vs. COURT OF APPEALS

THELMA VDA. DE CANILANG vs. COURT OF APPEALS G.R. No. 92492, 17 June 1993

FACTS:

Jaime Canilang applied for a “non-medical” insurance policy with respondent Great Pacific
Life Assurance Company naming his wife, Thelma Canilang as his beneficiary. But he did not
disclose the fact that he was diagnosed as suffering from sinus tachycardia and that he has
consulted a doctor twice. Jaime was issued an ordinary life insurance policy with the face
value of P19,700.00. Jaime died of “congestive heart failure”, “anemia”, and “chronic
anemia”. Petitioner widow and beneficiary of the insured, filed a claim with Great Pacific
which the insurer denied upon the ground that the insured had concealed material
information from it. Hence, Thelma filed a complaint against Great Pacific with the
Insurance Commission for recovery of the insurance proceeds.

ISSUE: Whether or not the non-disclosure of certain facts about the insured’s previous
health conditions is material to warrant the denial of the claims of Thelma Canilang

HELD: YES. The SC agreed with the Court of Appeals that 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 Canilang 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 or, at
the very least, required a higher premium for the same coverage. The materiality of the
information withheld by Great Pacific 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 ensure. 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.
WHEREFORE, the Petition for Review is DENIED for lack of merit and the Decision of the
Court of Appeals dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED. No
pronouncement as to the costs.

Edillon v Manila Bankers Life G.R. No. L-34200 September 30, 1982
J. Vasquez

VERSION 1
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.

VERSION 2
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.

Ratio:
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...”

5. GULF RESORTS INC vs PHILIPPINE CHARTER INSURANCE CORPORATION (2005)

FACTS: Gulf Resorts, Inc at Agoo, La Union was insured with American Home Assurance
Company which includes loss or damage to shock to any of the property insured by this
Policy occasioned by or through or in consequence of earthquake

July 16, 1990: an earthquake struck Central Luzon and Northern Luzon so the properties and
2 swimming pools in its Agoo Playa Resort were damaged

August 23, 1990: Gulf's claim was denied on the ground that its insurance policy only
afforded earthquake shock coverage to the two swimming pools of the resort
Petitioner insists that the parties have intended to extend the coverage through the
attachment of the phrase "Subject to: Other Insurance Clause, Typhoon Endorsement,
Earthquake Shock Endorsement, Extended Coverage Endorsement, FEA Warranty & Annual
Payment Agreement on Long Term Policies" to the insurance policy.

ISSUE: Whether or not the insurance policy earthquake shock coverage extends to other
property aside from the two swimming pools.

HELD: NO. Petitioner cannot focus on the earthquake shock endorsement to the exclusion
of the other provisions. All the provisions and riders, taken and interpreted together,
indubitably show the intention of the parties to extend earthquake shock coverage to the
two swimming pools only.

A careful examination of the premium recapitulation will show that it is the clear intent of
the parties to extend earthquake shock coverage only to the two swimming pools.

In the subject policy, no premium payments were made with regard to earthquake shock
coverage, except on the two swimming pools. There is no mention of any premium payable
for the other resort properties with regard to earthquake shock. This is consistent with the
history of petitioner’s previous insurance policies from AHAC-AIU.

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot
rely on the general rule that insurance contracts are contracts of adhesion which should be
liberally construed in favor of the insured and strictly against the insurer company which
usually prepares it. A contract of adhesion is xxx

We cannot apply the general rule on contracts of adhesion to the case at bar. Petitioner
cannot claim it did not know the provisions of the policy. From the inception of the policy,
petitioner had required the respondent to copy verbatim the provisions and terms of its
latest insurance policy from AHAC-AIU.

DOCTRINE:
It is basic that all the provisions of the insurance policy should be examined and interpreted
in consonance with each other. All its parts are reflective of the true intent of the parties.
The policy cannot be construed piecemeal. Certain stipulations cannot be segregated and
then made to control; neither do particular words or phrases necessarily determine its
character.

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. Thus, an insurance contract exists where the
following elements concur:
1. The insured has an insurable interest;
2. The insured is subject to a risk of loss by the happening of the designated peril;
3. The insurer assumes the risk;
4. Such assumption of risk is part of a general scheme to distribute actual losses among a
large group of persons bearing a similar risk; and
5. In consideration of the insurer's promise, the insured pays a premium.
An insurance premium is the consideration paid an insurer for undertaking to indemnify the
insured against a specified peril. In fire, casualty, and marine insurance, the premium
payable becomes a debt as soon as the risk attaches.

A contract of adhesion is one wherein a party, usually a corporation, prepares the

stipulations in the contract, while the other party merely affixes his signature or his
"adhesion" thereto. Consequently, any ambiguity therein is resolved against the insurer, or
construed liberally in favor of the insured.

Vda de Sindayen v Insular (1935)

Ponente: Butte
Petitioner: Fortunata Lucero VIuda de Sindayen
Respondent: Insular Life Assurance Co., Ltd.

Under what topic: Perfection of the Contract of Insurance Offer acceptance; consensuality
DELIVERY OF POLICY

Synopsis: Petitioner’s deceased husband, Sindayen, applied for a policy of life insurance on
his life. The same was accepted and the respondent insurer issued the policy. As per
instruction of Sindayen, the policy was delivered to his agent; however, the Sindayen died
a day after the delivery. Insurance company asked Sindayen’s agent to return the policy.
This action was then brought to enforce the payment of the policy. The Court decided in
favor of the petitioner.
Doctrine: Having decided that all the conditions precedent to the taking effect of the policy
had been complied with and having accepted the premium and delivered the policy
thereafter to the insured, it is now estopped to assert that it never intended that the policy
should take effect.
Facts:
• Arturo Sindayen (Sindayen), a linotype operator in the Bureau of Printing at Manila,
and his wife went to Camiling, Tarlac to spend Christmas with his aunt, Felicidad Estrada
(Estrada).
• Dec. 26, 1932- Sindayen applied for an insurance policy
o Sindayen made a written application to Insular Life Assurance Co., Ltd. (Insular),
through its agent, Cristobal Mendoza (Mendoza), for a policy of insurance on his life in the
sum of P1000.
o Sindayen paid part of the premium, amounting to P15, to Mendoza. It was agreed
upon that the policy should be delivered to Estrada.
o Sindayen left P26.06 to his aunt to complete the payment of the first annual premium
of P40.06 to be given at the delivery.
• Jan. 1, 1933- Sindayen, who was 29 years old, was examined by a doctor who made
a favorable report.
• Jan. 11, 1933- Insular accepted the risk and issued the policy, dated Dec. 1, 1932, and
mailed it to Mendoza for delivery.
• Jan. 12, 1933- Sindayen got sick
o Sindayen complained of a severe headache. He called a doctor a few days after who
found that he was suffering from acute nephritis and uremia. He was not treated for his
illness.
• Jan. 18, 1933- Delivery of the policy
o Mendoza delivered the policy to Estrada upon her payment of the remaining
balance.
o Mendoza asked Estrada if her nephew was in good health and she replied that she
believed so because she had no information that she was sick.
• Jan. 19, 1933- Sindayen died
• Jan. 20, 1933- Mendoza found out about Sindayen’s death
o He called Estrada to return the policy
o Estrada returned it but Mendoza did not return of offer to return the premium paid
• Feb. 4, 1933- Insular obtained from the widow of Sindayen her signature to a legal
document entitled, “ACCORD, SATISFACTION, AND RELEASE” which stipulated:
o “Whereby in consideration of the sum of P40.06 paid to her by a check of the
company, she "assigns, releases and forever discharges said Insular...”
• Check was never cashed but was returned to the company.
• Thereupon, this action was brought to enforce payment of the policy.
Issue/s:
1. WON there was delivery despite the fact that the policy was not delivered to and
accepted by the insured in person

2. WON the Sindayen’s bad health at the time of the delivery (re: paragraph 3 of the
application) rendered the policy void.

Held-Ratio:
1. Yes, the delivery was made.
• Delivery to the insured is not necessary and may be made by mail of to a duly
constituted agent.
2. No, the policy remains enforceable.
• The act of delivery of the policy in the absence of fraud or other ground for rescission
consummates the insurance. Insular having decided that all the conditions precedent to the
taking effect of the policy had been complied with and having accepted the premium and
delivered the policy thereafter to the insured, it is now estopped to assert that it never
intended that the policy should take effect.
o Mendoza was authorized by the company to make the delivery of the policy when
he received the payment of the first premium and he was satisfied that the insured was in
good health.
o Mendoza's decision is just as binding on the company as if the decision had been
made by its board of directors.

Dispositive:
We hold that the defendant company assumed the risk covered by policy No. 47710 on the
life of Arturo Sindayen on January 18, 1933, the date when the policy was delivered to the
insured. The judgment appealed from is therefore reversed with directions to enter
judgment against the appellee in the sum of P1,000 together with interest at the legal rate
from and after May 4, 1933, with costs in both instances against the appellee.

Digester’s notes: (other info)

 It is the interest not only the applicant but of all insurance companies as well that
there should be some act which gives the applicant the definite assurance that the contract
has been consummated.
When the policy is issued and delivered, in the absence of fraud or other grounds for
rescission, it is plainly not within the intention of the parties that there should be any
questions held in abeyance or reserved for future determination that leave the very
existence of the contract in suspense and doubt. If this were not so, the entire business
world which deals so voluminously in insurance would be affected by this uncertainly.
The fact that the agent to whom it has entrusted this duty (and corporation can only
act through agents) is derelict or negligent or even dishonest in the performance of the duty
which has been entrusted to him would create a liability of the agent to the company but
does not resolve the company's obligation based upon the authorized acts of the agent
toward a third party who was not in collusion with the agent.

LUZ PINEDA, MARILOU MONTENEGRO, VIRGINIA ALARCON, DINA LORENA AYO, CELIA
CALUMBAG and LUCIA LONTOK, Petitioners,
vs.
HON. COURT OF APPEALS and THE INSULAR LIFE ASSURANCE COMPANY, LIMITED,
Respondents.
FACTS
This is an action for the payment of insurance claims and prayer for administrative
sanctions.
Prime Marine Services, Inc. (PMSI), a crewing/manning outfit, procured a Group Policy from
Insular Life Assurance Co., Ltd. to provide life insurance coverage to its sea-based
employees. During the effectivity of the policy, six covered employees perished at sea when
their vessel sunk. They were survived by the complainants-appellees, the beneficiaries
under the policy.
The beneficiaries, except the spouses Alarcon, executed special powers of attorney
authorizing Capt. Nuval, President and General Manager of PMSI, to , among others,
“follow-up, ask, demand, collect and receive” for their benefit indemnities of sums of
money due them relative to the sinking of the vessel. By virtue of these written powers of
attorney, complainants-appellees were able to receive their respective death benefits.
Unknown to them, however, PMSI, in its capacity as employer and policyholder of the life
insurance of its deceased workers, filed with Insular Life formal claims for and in behalf of
the beneficiaries, through Capt. Nuval. On the basis of the five special powers of attorney,
Insular Life drew against its account six (6) checks, four for P200,000.00 each, one for
P50,000.00 and another for P40,000.00 payable to the order of complainants-appellees.
Capt. Nuval, upon receipt of these checks endorsed and deposited them in his own account.
When the complainants-appellees learned that they were entitled, as beneficiaries, to life
insurance benefits under a group policy, they sought to recover these benefits from Insular
Life but the latter denied their claim on the ground that the liability to complainants-
appellees was already extinguished.
ISSUE:
Whether or not Insular Life is bound by the misconduct of the employer.
RULING
A cursory reading of the questioned powers of attorney would disclose that they do not
contain in clear and unequivocal terms authority to Captain Nuval to obtain, receive, receipt
from respondent company insurance proceed arising from the death of the seaman-
insured. On the contrary, the said powers of attorney are couched in terms which could
easily arouse suspicion of an ordinary man.
In Elfstrom vs. New York Life Insurance Company, 27the California Supreme Court explicitly
ruled that in group insurance policies, the employer is the agent of the insurer. Thus:
We are convinced that the employer is the agent of the insurer in performing the duties of
administering group insurance policies. It cannot be said that the employer acts entirely for
its own benefit or for the benefit of its employees in undertaking administrative functions.
While a reduced premium may result if the employer relieves the insurer of these tasks, and
this, of course, is advantageous to both the employer and the employees, the insurer also
enjoys significant advantages from the arrangement. The reduction in the premium which
results from employer-administration permits the insurer to realize a larger volume of sales,
and at the same time the insurer's own administrative costs are markedly reduced.
The most persuasive rationale for adopting the view that the employer acts as the agent of
the insurer, however, is that the employee has no knowledge of or control over the
employer's actions in handling the policy or its administration. An agency relationship is
based upon consent by one person that another shall act in his behalf and be subject to his
control. It is clear from the evidence regarding procedural techniques here that the insurer-
employer relationship meets this agency test with regard to the administration of the policy,
whereas that between the employer and its employees fails to reflect true agency. The
insurer directs the performance of the employer's administrative acts, and if these duties
are not undertaken properly the insurer is in a position to exercise more constricted control
over the employer's conduct.
In Neider vs. Continental Assurance Company, which was cited in Elfstrom, it was held that:
the employer owes to the employee the duty of good faith and due care in attending to the
policy, and that the employer should make clear to the employee anything required of him
to keep the policy in effect, and the time that the obligations are due. In its position as
administrator of the policy, we feel also that the employer should be considered as the
agent of the insurer, and any omission of duty to the employee in its administration should
be attributable to the insurer.
In the light of the above disquisitions and after an examination of the facts of this case, we
hold that PMSI, through its President and General Manager, Capt. Nuval, acted as the agent
of Insular Life. The latter is thus bound by the misconduct of its
agent.chanroblesvirtualawlibrary chanrobles virtual law library