Vda. De Canilang v.

CA - Concealment
223 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 failure," "anemia," and
"chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the
insurer denied on the ground that the insured had concealed material information
from it.
> Vda Canilang filed a complaint with the Insurance 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.
> Grepalife was ordered to pay the widow by the Insurance Commissioner holding
that there 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
issuance of the policy despite the lack of answers to "some of the pertinent
questions" in the insurance application. CA reversed.

Issue:
Whether or not 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 Insurance
Code, the information concealed must be information which the concealing party
knew and "ought to [have] communicate[d]," that is to say, information which was
"material to the contract.

The information which Canilang failed to disclose was material to the ability of
Grepalife to estimate the probable risk he presented as a subject of life insurance.
Had Canilang disclosed his visits to his doctor, the diagnosis made and the
medicines prescribed by such doctor, in the insurance application, it may be
reasonably assumed that Grepalife 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 Canilang from Grepalife 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 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.

SC found it difficult to take seriously the argument that Grepalife had waived inquiry
into the concealment by issuing the insurance policy notwithstanding Canilang's
failure to set out answers to some of the questions in the insurance application.
Such failure precisely constituted concealment on the part of Canilang. Petitioner's
argument, if accepted, would obviously erase Section 27 from the Insurance Code of
1978.

SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF APPEALS

SUNLIFE ASSURANCE COMPANY OF CANADA vs. COURT OF APPEALS G.R.
No. 105135, 22 June 1995

FACTS:

Robert John Bacani procured a life insurance contract for himself from petitionercompany, designating his mother Bernarda Bacani, herein private respondent, as
the beneficiary. He was issued a policy valued at P100,000.00 with double
indemnity in case of accidental death. Sometime after, the insured died in a plane
crash. Bernarda filed a claim with petitioner, seeking the benefits of the insurance
policy taken by her son. However, said insurance company rejected the claim on the
ground that the insured did not disclose material facts relevant to the issuance of
the policy, thus rendering the contract of insurance voidable. Petitioner discovered
that two weeks prior to his application for insurance, the insured was examined and

confined at the Lung Center of the Philippines, where he was diagnosed for renal
failure. The RTC, as affirmed by the CA, this fact was concealed, as alleged by the
petitioner. But the fact that was concealed was not the cause of death of the insured
and that matters relating to the medical history of the insured is deemed to be
irrelevant since petitioner waived the medical examination prior to the approval and
issuance of the insurance policy.

ISSUE: Whether or not the concealment of such material fact, despite it not being
the cause of death of the insured, is sufficient to render the insurance contract
voidable

HELD:

YES. Section 26 of the Insurance Code is explicit in requiring a party to a contract of

insurance to communicate to the other, in good faith, all facts within his knowledge
which are material to the contract and as to which he makes no warranty, and
which the other has no means of ascertaining. Anent the finding that the facts
concealed had no bearing to the cause of death of the insured, 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. The SC, therefore,
ruled that petitioner properly exercised its right to rescind the contract of insurance
by reason of the concealment employed by the insured. It must be emphasized that
rescission was exercised within the two-year contestability period as recognized in
Section 48 of The Insurance Code. WHEREFORE, the petition is GRANTED and the
Decision of the Court of Appeals is REVERSED and SET ASIDE.