ARGENTE VS WEST COAST LIFE INSURANCE COMPANY FACTS: In February 1925, Argente and his wife applied for

a joint life insurance under West Coast Life Insurance Company. The couple was examined by the insurance company doctor (Doctor Sta. Ana). The couple disclosed to the doctor that they never had any serious medical histories; that they were never confined; that Vicenta De Ocampo (wife of Argente) was not an alcoholic. Doctor Sta. Ana then recommended the approval of the application. In May 1925, the couple were issued with the insurance policy. In November 1925, Vicenta died. West Coast Life denied the subsequent insurance claim filed by Argente as it averred that the application made in June was attended by fraud because the couple failed to disclose the fact that each of them were actually confined prior to their application; that Vicenta in particular was diagnosed for alcoholism and ultimately for psycho-neurosis; that in sum, their statement as to their health and previous illnesses within the last 5-7 years prior to their application were untrue. Argente conceded to the allegations of West Coast however he stated that those facts were actually disclosed to Dr. Sta. Ana however Dr. Sta. Ana connived with the insurance agent hence he failed to record them in the medical reports. Further, Argente averred that if West Coast did have the right to rescind the insurance, it should have done so prior to the filing of a suit involving the insurance claim. ISSUE: Whether or not Argente is entitled to the insurance claim. RULING: No. 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 apparently set forth therein 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. The allegations of Argente do not have a leg to stand on, Dr. Sta. Ana has no motive whatsoever and such alleged illicit act will only destroy his reputation as a physician. As to the allegation of Argente regarding the failure of West Coast to rescind the insurance prior to the filing of this case, there are two answers: 1. The failure of West Coast to rescind the contract cannot prejudice any defense to the suit which concealment may furnish. 2. Prior to the filing of this case, West Coast sent a notice to Argente advising him that the policy is being canceled due to the concealment and that his premium is being refunded this operates as a rescission to the contract of insurance.

MUSNGI VS WEST COAST LIFE

Facts:
Arsenio Garcia was insured by West Coast twice in 1931. In both policies, he was asked to answer the question: what physician or practitioners have you consulted or been treated by, and for what illness or ailment? In both policies, he answered in the negative. It turned out that from 1929 to 1939, he went to see several physicians for a number of ailments. So when he died in 1942, the company refused to pay the proceeds of the insurance.

Issue:
Whether or not the answer given by Arsenio in the policies justifies the companys refusal to pay?

RULING:
YES. Aresenio knew that he was suffering from a number of ailments, yet, he concealed this. Such concealment and his false statements constituted fraud, because the insurance company by reasons of such statement accepted the risk which it would otherwise have rejected.

SATURNINO VS PHIL.AMERICAN LIFE INSURANCE 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.

RULING:
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.

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.

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.

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.

SATURNINO VS PHIL AM LIFE ( another version of digest) FACTS: In September 1957, Estefania Saturnino was operated for cancer in which her right breast was removed. She was advised by her surgeon that shes not totally cured because her cancer was malignant. In November 1957, she applied for an insurance policy under Philamlife. 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. RULING: 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 Estefanias 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.

Thelma Vda. De Canilang vs. CA & Pacific Life

Facts: Jaime Canilang applied for a non-medical insurance policy with Pacific Life which the latter granted. Prior to such application, Jaime consulted a doctor and was diagnosed as suffering from sinus tachycardia and later on acute bronchitis. Jaime later on died of congestive heart failure. His wife, Thelma, as beneficiary, filed a claim with Pacific Life but the latter denied alleging that the insured had concealed material information from it. The Insurance Commissioner favored Thelma Canilang and ruled: (1) Jaimes illness was not so serious that even if it were disclosed it would not have affected Pacific Lifes decision; Pacific Life waived its right to inquire into the health condition of Jaime when it granted the application despite some of the questions were left unanswered; (3) no intentional concealment on Jaimes part as he was thinking that he had been suffering merely from a minor ailment and simple cold. The CA reversed the Insurance Commissioners decision.

SC Ruling:

SC agreed with CA.

We agree 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 mans 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.

The restoration in 1985 by B.P. Blg. 874 of the phrase whether intentional or unintentional merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be intentional in order to authorize rescission by the injured party. In any case, in the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime 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.

We find it difficult to take seriously the argument that Great Pacific had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilangs failure to set out answers to some of the questions in the insurance application. Such failure precisely constituted concealment on the part of Canilang.

Ng Gan Zee vs Asian Crusader Life Assurance Corp

Facts: Kwong Nam applied for a 20yr endowment insurance on his life, naking his wife, Ng Gan Zee as beneficiary. All premiums had been paid, Kwong Nam died of cancer of the liver with metastasis. Ng Gan Zee presented a claim against the insurer but the latter refused despite orders of the Insurance Commissioner. Insurer alleged concealment when he gave an information, re: that he was operated on for a tumor which had been associated with ulcer of stomach and that a tumor, hard and a hens egg sized had been removed, when in fact he had peptic ulcer.

Issue: WON insurer, because of the insureds representation, had been misled or deceived into entering the contract.

RULING: No. (See Sec. 27)

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.

Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant. Sec. 27 of the Insurance Law nevertheless requires that fraudulent intent on the part of the insured 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 appellants medical examiner that the tumor for which he was operated on was associated with ulcer of the stomach. In the absence of evidence that the insured had sufficient medical knowledge as to enable him to distinguish between peptic ulcer and a 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. 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 the appellant. 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 appellant to make further inquiries about the ailment and operation of the insured.

Section 32 of Insurance Law [Act No. 24271 provides as follows: 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. 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. As aptly noted by the lower court, if the ailment and operation of Kwong Nam had such an important bearing on the question of whether the defendant would undertake the insurance or not, the court cannot understand why the defendant or its medical examiner did not make any further inquiries on such matters from the Chinese General Hospital or require copies of the hospital records from the appellant 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 insureds premium. It would be inequitable now to allow the defendant to avoid liability under the circumstances.

UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTY CO., INC. 47 SCRA 271 (G.R. NO. L-27932) OCTOBER 30, 1972

Petitioner: Respondent: J. Fernando: FACTS:

Republic Bank Philippine Guaranty Co.. Inc.

On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic Bank in the total sum of 415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage on certain properties. The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for 500,000.00 over the properties of the UMC, as described in defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said cover note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendants Fire Insurance Policy Form. On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground: Policy Condition No. 3 and/or the Other Insurance Clause of the policy was violated because you did not give notice to us of the other insurance which you had taken from New India for 80,000.00. Sincere Insurance for 25,000.00 and Manila Insurance for 200,000.00 with the result that these insurances of which we became aware of only after the fire, were not endorsed on our policy. ISSUE: Whether Republic Bank can recover. HELD: Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in

the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128). If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out the contracts actually made. While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense. The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. xxx The materiality of non-disclosure of other insurance policies is not open to doubt. The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties.