Digested Cases on Concealment/Misrepresention in Insurance Argente vs.

West Coast Life Facts: A joint life insurance policy was issued to Bernardo Argente and his wife Vicen ta upon payment of premium, by West Coast. On Nov. 18, 1925, during the effectiv ity of the policy, Vicenta died of cerebral apoplexy. Thereafter, Bernardo clai med 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 intoxic ants? she answered beer only in small quantities. What physician have you consulted or been treated by within the last 5 years and for what illness or ailment? she a nswered none It is however, not disputed that in 1924, Vicenta was taken to a hosp ital for what was first diagnosed as alcoholism and later changed to manic-depre ssive psychosis and then again changed to psychoneurosis. Issue: Whether or not on the basis of the misrepresentations of Vicenta, Bernardo is ba rred 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 ac tion on a life insurance policy where the evidence conclusively shows that the a nswers 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 ins urance apparently set forth therein was never legally existent. It can be fairl y assumed that had the true facts been disclosed by the insured, the insurance w ould never have been granted. YU PANG CHENG v. CA 1959 / Bautista Angelo / Petition for review by certiorari of a CA decision FACTS: On September 1950, Yu Pang Eng submitted his application for insurance to an ins urance company [defendant]. He answered no to questions on his medical history (st omach diseases, dizziness, ulcers, vertigo, cancer, tumors, etc.) as well as to the question of WON he consulted any physician regarding said diseases. Upon pay ment of the first premium, the company issued to him an insurance policy. On Dec ember 1950, he went to St. Lukes for medical treatment but he died two months lat er. According to the death certificate, he died of infiltrating medullary carcin oma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases splee n. His brother and beneficiary, Yu Pang Cheng [petitioner], demanded from the insur ance company the payment of the policy proceeds [10k], but his demand was refuse d so he brought the present action. The insurance companys defense was that the i nsured was guilty of misrepresentation and concealment of material facts in that he gave false and untruthful answers to questions asked him in his application; hence, the effect is the avoiding of the policy. It appears that the insured entered the Chinese General Hospital for medical tre atment on January 1950 [before application for insurance policy], complaining of dizziness, anemia, abdominal pains and tarry stools. His illness history shows that this started a year ago as frequent dizziness. An x-ray picture of his stom ach and the diagnosis was that he suffered from peptic ulcer, bleeding. INSURED IS GUILTY OF CONCEALMENT OF MATERIAL FACTS

Concealment is a neglect to communicate that which a party knows and ought to co mmunicate. Whether intentional or not, concealment entitles the insurer to resci nd the contract. The law requires the insured to communicate to the insurer all facts within his knowledge which are material to the contract and which the othe r party has not the means of ascertaining. The materiality is determined not by the event but by the probable and reasonable influence of the facts upon the par ty to whom the communication is due. The insureds negative answers to the questions on his previous ailments, or his c oncealment of his hospitalization deprived the insurance company of the opportun ity to make the necessary inquiry as to the nature of his past illness so that i t may form its estimate relative to the approval of his application. Had the ins urance company been given such opportunity, it would not probably consent to the policy issuance. IGNACIO SATURNINO vs. THE PHILIPPINE AMERICAN LIFEINSURANCE COMPANYG.R. No. L-16 163, 28 February 1963 FACTS: Estefania Saturnino obtained a 20-year endowment non-medical insurance. T his kind of policy dispenses with the medical examination of the applicant usual ly required in ordinary life policies. However, two months prior to the issuance of the policy, Saturnino was operated on for cancer, involving mastectomy of th e right breast. She did not make a disclosure thereof in her application for ins urance. On the contrary, she stated therein that she did not have, nor had she e ver had, among other ailments listed in the application, cancer or other tumors. Sometime after, Saturnino died of pneumonia, secondary to influenza. Appellants here, who are her surviving husband and minor child, respectively, demanded pay ment of the face value of the policy. The claim was rejected and hence an action was subsequently instituted. ISSUE: Whether or not the insured made such false representations of material fa cts as to avoid the policy. HELD: YES. 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 upo n the party to whom the communication is due, in forming his estimate of the pro posed contract, or in making his inquiries. The waiver of medical examination ren ders even more material the information required of the applicant concerning pre vious condition of health and diseases suffered, for such information necessaril y constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. It is logical to assume that if app ellee had been properly apprised of the insureds medical history she would at lea st have been made to undergo medical examination in order to determine her insur ability .A concealment, whether intentional or unintentional, entitles the insur er 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 th e rule vitiating the contract in cases of concealment is that it misleads or dec eives the insurer into accepting the risk, or accepting it at the rate of premiu m agreed upon. The insurer, relying upon the belief that the assured will disclo se every material facts with in his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and he is thereby induc ed to estimate the risk upon a false basis that it does not exist. The judgment appealed from, dismissing the complaint and awarding the return to appellants of the premium already, paid, with interest at 6% up to January 29, 1959, affirmed , with costs against appellants. Great Pacific Life Assurance Corporation vs Court of Appeals There was an existing group life insurance executed between Great Pacific Life A ssurance (Grepalife) and the Development Bank of the Philippines (DBP). Grepalif

e agreed to insure the lives of eligible housing loan mortgagors of DBP. In Nove mber 1983, Wilfredo Leuterio, mortgagor of DBP applied to be a member of the gro up life insurance. He filled out a form where he indicated he never consulted an y physician regarding any illness (heart condition etc) and that he is in good h ealth. He was eventually included in the group life insurance and he was covered for the amount of his indebtedness (P86,200.00). In August 1984, Wilfredo died. DBP submitted a death claim but it was denied by Grepalife as it insisted that Wilfredo actually concealed that he was suffering from hypertension at the time of his insurance application. Grepalife relied on the statement made by the doctor who issued Wilfredos death certificate wherein i t was stated that Wilfredos immediate cause of death was massive cerebral hemorrh age secondary to hypertension or hypertension as a possible cause of death. Since Grepalife refused to pay the insurance claim filed by DBP, Medarda Leuteri o (widow) sued Grepalife. Grepalife assailed the suit and insisted that Medarda is not a proper party in interest. The lower court ruled in favor of Medarda and the court ordered Grepalife to pay the amount of the insurance to DBP. The Cour t of Appeals affirmed this decision in 1993. Grepalife appealed to the Supreme C ourt. In 1995, pending resolution of the case in the SC, DBP foreclosed the prop erty of Medarda. ISSUE: Whether or not Grepalife is liable to pay the insurance claim. HELD: Yes. Grepalife is liable to pay the insurance claim. Medarda is a proper p arty in interest (note that it was Wilfredo who has been paying the premium, as the insured, he is the real party in interest and this status was transferred to his widow). The group life insurance or mortgage redemption insurance provides th at DBP as the mortgagee is merely an assignee of Wilfredo; and that in the event of Wilfredos death before his indebtedness to DBP is paid, proceeds from the ins urance shall first be applied to the sum of the balance insured. But this does n ot cease Wilfredo to be a party to the insurance contract. Grepalife failed to prove that Wilfredo concealed that he was suffering from hyp ertension at the time of his application. The doctors finding as to the cause of death is not conclusive because no autopsy was conducted. The doctor who issued the death certificate has no knowledge of Wilfredos hospital confinement [if ther e are any]. 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 esta blish such defense by satisfactory and convincing evidence rests upon the insure r. Grepalife must however pay the claim to Medarda considering that DBP already for eclosed the property. Soliman v. US Life104 PHIL 1046 Facts: US Life issued a 20yr endowment life policy on the joint lives of Patricio Solim an and his wife Rosario, each of them being the beneficiary of the other. In Mar ch 1949, the spouses were informed that the premium for Jan1949 was still unpaid notwithstanding that the 31-day grace period had already expired, and they were furnished at the same time long-form health certificates for the reinstatement of the policies. In April 1949, they submitted the health certificates and paid the premium due up to said month. In Jan. 1950, Rosario died of acute dilatation of the heart, and thereafter Patricio filed a claim for the proceeds of the ins urance. US Life denied the claim and it filed a case for rescission on the groun d that the health certificates failed to disclose that Rosario had been sufferin g from bronchial asthma for three years prior to the submission. Patricio claims

that the answers to the questions in the health certificates were made by US Li fes agent. Issue: WON the policy can be rescinded. Held: YES. The spouses in allowing the agent to answer some of the blanks in the certificates and afterwards stamping their signature thereon are presumed to ha ve at least acquiesced in and approved all that had bee stated therein in their behalf. Saturnino v. Philamlife7 SCRA 316 Facts: 2 months prior to the insurance of the policy, Saturnino was operated on for can cer, involving complete removal of the right breast, including the pectoral musc les and the glands, found in the right armpit. Notwithstanding the fact of her o peration, Saturnino did not make a disclosure thereof in her application for ins urance. She stated therein that she did not have, nor had she ever had, among others lis ted in the application, cancer or other tumors; that she had not consulted any p hysician, 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 i llness or disease peculiar to her sex, particularly of the breast, ovaries, uter us and menstrual disorders. The application also recited that the declarations o f Saturnino constituted a further basis for the issuance of the policy. Issue: WON 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 appl ication for insurance was false, namely, that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period o f 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 prop osed contract, or making his inquiries. The contention of appellants is that the facts subject of there presentation were not material in view of the non-medica l nature of the insurance applied for, which does away with the usual requiremen t 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 heal th and diseases suffered, for such information necessarily constitutes an import ant factor which the insurer takes into consideration in deciding whether to iss ue the policy or not. Appellants also contend that there was no fraudulent conce alment of the truth inasmuch as the insured herself did not know, since her doct or never told her, that the disease for which she had been operated on was cance r. In the first place, concealment of the fact of the operation itself was fraud ulent, as there could not have been any mistake about it, no matter what the ail ment. Secondly, in order to avoid a policy, it is not necessary to show actual f raud on the part of the insured. In this jurisdiction, concealment, whether inte ntional or unintentional entitled the insurer to rescind the contract of insuran ce, concealment being defined as negligence to communicate that which a party kno ws and ought to communicate. The basis of the rule vitiating the contract in case s 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 upo n the belief that the insured will disclose every Gen. Insurance & Surety Corp v. NG Hua106 PHIL 1117

Facts: In 1952, General issued a fire policy to Ng Hua to cover the contents of the Cen tral Pomade Factory owned by him. There was a provision in the policy that shoul d there be any insurance already affected or to be subsequently procured, the in sured shall give notice to the insurer. Ng Hua declared that there was none. The very next day, the building and the goods stored therein burned. Subsequently, the claim of Ng Hua for the proceeds was denied by General since it discovered t hat Ng Hua had obtained an insurance from General Indemnity for the same goods a nd for the same period of time. Issue: WON General Insurance can refuse to pay the proceeds. Held: Yes. Violation of the statement which is to be considered a warranty entit les the insurer to rescind the contract of insurance. Such misrepresentation isf atal Vda. De Canilang v. CA223 SCRA 443 (1993) Facts: Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of P19,700. On 5 August 1983, Canilang died of "congestive heart fail ure," "anemia, "and "chronic anemia." The wife as beneficiary, filed a claim wit h Grepalife which the insurer denied on the ground that the insured had conceale d material information from it. Vda Canilang filed a complaint with the Insuranc e Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder. Grepal ife was ordered to pay the widow by the Insurance Commissioner holding that ther e was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the applicant by the is suance of the policy despite the lack of answers to "some of the pertinent quest ions" in the insurance application. CA reversed. Issue: WON Grepalife is liable. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from " sinus tachycardia" and "acute bronchitis. Under the relevant provisions of the I nsurance Code, the information concealed must be information which the concealin g party knew and "ought to [have] communicated," that is to say, information whi ch was "material to the contract. The information which Canilang failed to discl ose was material to the ability of Grepalife to estimate the probable risk he pr esented as a subject of life insurance. Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Grepalife would have m ade further inquiries and would have probably refused to issue a non-medical ins urance policy or, at the very least, required a higher premium for the same cove rage.The materiality of the information withheld by Canilang from Grepalife did not depend upon the state of mind of Jaime Canilang. A man s state of mind or su bjective 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 subject ive belief may be reasonably drawn. Neither does materiality depend upon the act ual 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 inmaking or omitting to ma ke further inquiries and in accepting the application for insurance; that "proba ble and reasonable influence of the facts" concealed must, of course, be determi ned objectively, by the judge ultimately. SC found it difficult to take seriousl y the argument that Grepalife had waived inquiry into the concealment by issuing the insurance policy notwithstanding Canilang s failure to set out answers to s

ome of the questions in the insurance application. Such failure precisely consti tuted concealment on the part of Canilang. Petitioner s argument, if accepted, w ould obviously erase Section 27 from the Insurance Code of 1978. Sun Life v. CA245 SCRA 268 (1995) Facts: On April 15, 1986, Bacani procured a life insurance contract for himself from Sun Life. He was issued a life insurance policy with double indemnity in ca se of accidental death. The designated beneficiary was his mother, Bernarda. On June 26, 1987, the insured died in a plane crash. Bernarda Bacanifiled claim wit h Sun Life, seeking the benefits of the insurance. Sun Life conducted an investi gation and its findings prompted it to reject the claim. Sun Life discovered tha t 2 weeks prior to his application, Bacani was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hem atology tests. He did not reveal such fact in his application. In its letter, Su n Life informed Berarda, that the insured did not disclosed material facts relev ant to the issuance of the policy, thus rendering the contract of insurance void able. A check representing the total premiums paid in the amount of P10, 172.00 was attached to said letter. Bernarda and her husband filed an action for specif ic performance against Sun Life. RTC ruled for Bernarda holding that the facts c oncealed by the insured were made in good faith and under the belief that they n eed not be disclosed. Moreover, it held that the health history of the insured w as immaterial since the insurance policy was "non-medical." CA affirmed. Issue: WON the beneficiary can claim despite the concealment. Held: NOPE. 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 w ithin 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 influ ence of the facts upon the party to whom communication is due, in forming his es timate of the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec 31) The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health . The information which the insured failed to disclose was 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 b y approving it with the corresponding adjustment for a higher premium or rejecti ng the same. Moreover, a disclosure may have warranted a medical examination of the insured by petitioner in order for it to reasonably assess the risk involved in accepting the application. Thus, "good faith" is no defense in concealment. The insured s failure to disclose the fact that he was hospitalized for two week s prior to filing his application for insurance, raises grave doubts about his b onafides. It appears that such concealment was deliberate on his part. Section 28. Each party to a contract of insurance must communicate to the other, in good faith, all facts within his knowledge which are material to the contrac t and as to which he makes no warranty, and which the other has not the means of ascertaining. According to Sec. 28, what are the matters that must be communicated by the part y to the other? This section makes it the duty of each party to a contract of insurance to commu nicate in good faith all facts that are material to the contract within his know ledge when:1.the party with the duty to communicate makes no warranty; and2.the other party has no means of ascertaining the facts Any exceptions to the duty to communicate? Those falling under Sec. 30. What is the test to determine whether or not one must communicate thefacts to the other party? The test is: If the applicant is aware of the existence of some circumstance whi ch he knows would influence the insurer in acting upon his application, GOOD FAI TH requires him to disclose that circumstance, though unasked. Problem.

If A consulted Dr. B for treatment of syphilis and gonorrhea when must A disclos e the fact? He must disclose such fact even if not inquired into, if such fact is material t o the risk assumed by the insurer. In the problem above, how will A know if the fact is material or not? The fact must be related to the insurance applied for. In the above example, suc h fact is material in cases of life or health insurance and may ven be material up to a certain extent for accident insurance. It is far-fetched to require disc losing such information if he is applying for fire or marine insurance. What if the insurer with reasonable diligence could have known or discovered suc h facts for himself, can the Insured be excused for his concealment and deny the remedy of rescission to the insurer? NO. The effect of the material concealment cannot be avoided by the allegation t hat the insurer could have known and discovered a fact which the insured had con cealed. An allegation like this implies that there is an obligation on the part of the insurance company to verify all the statements made by the insured in his application. No such obligation exists on the part of the insurer. The insurer has the right to rely upon the statements of the insured for he knows the facts and the insurer does not. What is deemed material? See sec. 31. Atty Quimson asked us to look at Sec. 107. What does this provision say? Sec. 107 provides that in marine insurance each party is bound to communicate, in addition to what is required by section twenty-eight, all the information which he possesses, material to the risk, except such as is mentioned in Section thir ty, and to state the exact and whole truth in relation to all matters that he re presents, or upon inquiry discloses or assumes to disclose. Insular Life v. Feliciano73 PHIL 201 Facts: Evaristo Feliciano filed an application with Insular Life upon the solici tation of one of its agents. It appears that during that time, Evaristo was alre ady suffering from tuberculosis. Such fact appeared during the medical exam, but the examiner and the companys agent ignored it. After that, Evaristo was made to sign an application form and thereafter the blank spaces were filled by the med ical examiner and the agentmaking it appear that Evaristo was a fit subject of i nsurance. (Evaristocould not read and understand English) When Evaristo died, In sular life refused to pay the proceeds because of concealment. Issue: WON Insular Life was bound by their agents acts. Held: Yes. The insurance business has grown so vast and lucrative within the pas t century. Nowadays, even people of modest means enter into insurance contracts. Agents who solicit contracts are paid large commissions on the policies secured by them. They act as general representatives of insurance companies. IN the cas e at bar, the true state of health of the insured was concealed by the agents of the insurer. The insurers medical examiner approved the application knowing full y well that the applicant was sick. The situation is one in which of two innocen t parties must bear a loss for his reliance upon a third person. In this case, i t is the one who drafted and accepted the policy and consummated the contract. I t seems reasonable that as between the two of them, the one who employed and gav e character to the third person as its agent should be the one to bear the loss. Hence, Insular is liable to the beneficiaries. Insular life v. Feliciano74 PHIL 4681 Facts: Insular life filed a motion for reconsideration of the decision in thepre ceding case. Issue: WON Insular Life was bound by their agents acts Held: There was collusion between Evaristo and the agent and the medical examin er in making it appear that Evaristo was a fit subject for insurance. When Evari sto authorized them to write the answers for him, he made them his own agents fo r that purpose and he was responsible for their acts in that connection.If they

falsified the answers for him, he could not evade liability for the falsificatio n. He was not supposed to sign the application in blank. He knew that his answer s would be the basis for the policy, and was required with his signature to vouc h for their truth. The judgment rendered therefore in the preceding case is thus reversed, and Insular Life is absolved from liability. Fieldmans Insuranc v. Songco25 SCRA 70 Facts: In 1960, Sambat, an agent of Fieldmans Insurance, induced Songco, a man of scant education to enter into a common carrier insurance contract with Fieldman . During the inducement, a son of Songco butted in and said that they could not ac cept the type of insurance offered because theirs was an owner-type jeepney and not a common carrier. Sambat answered that it did not matter because the insuran ce not owned by the government and therefore had nothing to do with rules and regulations of the latter (Fieldman). The insurance was executed and approved fo r a year from Sept. 1960-1961. It was renewed in 1961 for another year. In Oct. 1961, the jeepney collided with a car in Bulacan and as a result,Sonco d ied. The remaining members of the family claimed the proceeds of the insurance w ith the company but it refused to pay on the ground that the vehicle was not a c ommon carrier. Issue: WON the Songcos can claim the insurance proceeds despite the fact that the vehicle concerned was an owner and not a common carrier. Held: Yes. The company is estopped from asserting that the vehicle was not cover ed. After it had led Federico Songco to believe that he could qualify under the common carrier liability insurance policy, and to enter into a contract of insur ance paying the premiums due, it could not thereafter be permitted to change its stand to the detriment of the heirs of the insured. It knew all along that Fred erico owned a private vehicle. Its agent Sambat twice exerted the utmost pressur e on the insured, a man of scant education, and the company did not object to th is. Section 29. An intentional and fraudulent omission, on the part of one insur ed, to communicate information of matters proving or tending to prove the falsit y of a warranty, entitles the insurer to rescind. What type of concealment is re ferred to here? The type of concealment referred to here relates to the falsity o f awarranty. Unlike the ordinary concealment provided for in Sec. 27, the non-dis closure under this section must be Intentional and fraudulent in order that the contract may be rescinded. What is an example of this kind of concealment? In every contract of marine insurance, there is an implied warranty of seaworthiness of the vessel. The intentional and fraudulent omission on the part of the insured to communicate the fact that his ship is in distress or in special peril entitles the insurer to rescind because the concealment refers to matters proving or tending to prove the falsity of th e warranty that the ship is sea worthy. Section 30. Neither party to a contract of insurance is bound to communicate inf ormation of the matters following, except in answer to the inquiries of the othe r:(a) Those which the other knows;(b) Those which, in the exercise of ordinary c are, the other ought to know, and of which the former has no reason to suppose h im ignorant;(c) Those of which the other waives communication;(d) Those which pr ove or tend to prove the existence of a risk excluded by a warranty, and which a re not otherwise material; and(e) Those which relate to a risk excepted from the policy andwhich are not otherwise material. What is the general rule? Communicate the necessary material facts. What is the exception? Those provided for under Section 30. When will the insured be required to communicate information covered by Sec. 30 (exception to the exception)? If the insurer asks about them, the insured becomes duty bound to communicate su ch information.

Ng Gan Zee v. Asian Crusader LIfe122 SCRA 61 Facts: In 1962, Kwon Nam applied for 20yr endowment insurance on his lifewith hi s wife, Ng Gan Zee as the beneficiary. He stated in his application that he was operated on for tumor of the stomach associated with ulcer. In 1963, Kwong died of cancer of the liver with metastasis. Asian refused to pay on the ground of a lse information. It was found that prior to his application, Kwong was diagnosed to have peptic ulcers, and that during the operation what was removed fromKwongs body was actually a portion of the stomach and not tumor. Issue: WON the contract may be rescinded on the ground of the imperfectionin the application form. Held: NO. Kwong did not have sufficient knowledge as to distinguish between a tu mor and a peptic ulcer. His statement therefore was made in good faith. Asian sh ould have made an inquiry as to the illness and operation of Kwong when it appea red on the face of the application that a question appeared to be imperfectly an swered. Asians failure to inquire constituted a waiver of the imperfection in the answer. Section 34. Information of the nature or amount of the interest of one insured n eed not be communicated unless in answer to an inquiry, except as prescribed by section fifty-one. What does this provision provide? Under Sec. 51(e), it is required that a policy of an insurance must specify the interest of the insured in the property insured, if he is not the absolute owner thereof. So a mortgagee must disclose his particular interest even if no inquir y is made by the insurer in relation thereto. Such requirement is made so that t he insurer may determine the extent of the insureds insurable interest. This sect ion therefore says, that there is NO NEED to disclose the interest in the proper ty insured if the interest is absolute. The exception of course is the insurer a sks. Problem: A fire insurance policy was issued in which Imeda (insured) was describ ed asthe owner of the insured residential property. But actually, Imelda was onl y given the privilege of occupying the house rent-free for life. Imelda represen ted herself as owner. Is the policy valid? NO. She is guilty of misrepresentation. She should have disclosed the nature of her interest in the property in as much as she was not the absolute owner thereo f. Section 35. Neither party to a contract of insurance is bound to communicate, ev en upon inquiry, information of his own judgment upon the matters in question. To what is the duty to disclose confined? The duty to disclose is confined to fa cts. There is no duty to disclose mere opinion, speculation, intention or expect ation. This is true even if the insured is asked. Example? Beatrix Kiddo was ask ed by the insurer: How long do you think you will live? If Beatrix uses the 5-po int exploding heart technique on the insurer, shewill be convicted of murder. (no t the point of the article) HOWEVER, if shesaid, As long as the moon rises over t he grave of Pai Mei and she dies the next day, her error in answering that questi on which called for an expression of an opinion does not constitute fraud in law . Atty. Quimsons asked us to look at Sec. 108. What does it say? Section 108 provides that In marine insurance, information of the belief or expec tation of a third person, in reference to a material fact, is material.