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The West Coast Life Insurance Company issued two policies of insurance on
the life of Esperanza J. Villanueva, one for two thousand pesos and maturing
on April 1, 1943, and the other for three thousand pesos and maturing on
March 31, 1943. In both policies (with corresponding variation in amount and
date of maturity) the insurer agreed "to pay two thousand pesos, at the home
office of the Company, in San Francisco, California, to the insured hereunder,
if living, on the 1st day of April 1943, or to the beneficiary Bartolome
Villanueva, father of the insured, immediately upon receipt of due proof of the
prior death of the insured, Esperanza J. Villanueva, of La Paz, Philippine
Islands, during the continuance of this policy, with right on the part of the
insured to change the beneficiary.
After the death of Bartolome Villanueva in 1940, the latter was duly
substituted as beneficiary under the policies by Mariano J. Villanueva, a
brother of the insured. Esperanza J. Villanueva survived the insurance period,
for she died only on October 15, 1944, without, however, collecting the
insurance proceeds. Adverse claims for said proceeds were presented by the
estate of Esperanza J. Villanueva on the one hand and by Mariano J.
Villanueva on the other, which conflict was squarely submitted in the
intestate proceedings of Esperanza J. Villanueva pending in the Court of First
Instance of Iloilo. From an order, dated February 26, 1947, holding the estate
of the insured is entitled to the insurance proceeds, to the exclusion of the
beneficiary, Mariano J. Villanueva, the latter has interposed the present
appeal.
The lower court committed no error. Under the policies, the insurer obligated
itself to pay the insurance proceeds (1) to the insured if the latter lived on the
dates of maturity or (2) to the beneficiary if the insured died during the
continuance of the policies. The first contingency of course excludes the
second, and vice versa. In other words, as the insured Esperanza J. Villanueva
was living on April 1, and March 31, 1943, the proceeds are payable
exclusively to her estate unless she had before her death otherwise assigned
the matured policies. (It is not here pretended and much less proven, that
the policies the condition that the insurer "agrees to pay . . . to the
insured hereunder, if living
Upon the insured's death, within the period, the beneficiary will take,
as against the personal representative or the assignee of the insured.
Upon the other hand, if the insured survives the endowment period, the
benefits are payable to him or to his assignee, notwithstanding a
beneficiary is designated in the policy
constructed on the piece of land in the name of the late Ildefonso Yap as
owner.
> It was contended that both the lot and the building were owned by
Ildefonso Yap and NOT by the Harvardian Colleges.
Issue:
Whether or not Harvardian colleges has a right to the proceeds.
Held:
Harvardian has a right to the proceeds.
Regardless of the nature of the title of the insured or even if he did not have
title to the property insured, the contract of fire insurance should still be
upheld if his interest in or his relation to the property is such that he will be
benefited in its continued existence or suffer a direct pecuniary loss from its
destruction or injury. The test in determining insurable interest in property is
whether one will derive pecuniary benefit or advantage from its preservation,
or will suffer pecuniary loss or damage from its destruction, termination or
injury by the happening of the event insured against.
Here Harvardian was not only in possession of the building but was in fact
using the same for several years with the knowledge and consent of Ildefonso
Yap. It is reasonably fair to assume that had the building not been burned,
Harvardian would have been allowed the continued use of the same as the
site of its operation as an educational institution. Harvardian therefore would
have been directly benefited by the preservation of the property, and
certainly suffered a pecuniary loss by its being burned.
materials which have been sold or delivered to various customers and dealers
of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the
Book of Account of the Insured 45 days after the time of the loss covered
under this Policy." The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in
respect of the merchandise sold and delivered by the Insured which are
outstanding at the date of loss for a period in excess of six (6) months from
the date of the covering invoice or actual delivery of the merchandise
whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12)
days after the close of every calendar month all amount shown in their books
of accounts as unpaid and thus become receivable item from their customers
and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On
February 25, 1991, the Gaisano Superstore Complex in Cagayan de Oro City,
owned by petitioner, was consumed by fire. Included in the items lost or
destroyed in the fire were stocks of ready-made clothing materials sold and
delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It
alleges that IMC and LSPI were paid for their claims and that the unpaid
accounts of petitioner on the sale and delivery of ready-made clothing
materials with IMC was P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that
the fire was purely accidental; that the cause of the fire was not attributable
to the negligence of the petitioner. Also, it said that IMC and LSPI retained
ownership of the delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered
Gaisano to pay Insurance the P 2 million and the P 500,000 the latter paid to
IMC and Levi Strauss.
Hence this petition.
Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as
one covering the unpaid accounts of IMC and LSPI since such insurance
applies to loss of the ready-made clothing materials sold and delivered to
petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of
the goods by stipulating in the sales invoices that "[i]t is further agreed that
merely for purpose of securing the payment of the purchase price the above
described merchandise remains the property of the vendor until the purchase
price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with
IMC and LSPI.
Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly
granted.
Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject
of the insurance is the goods sold and delivered to the customers and dealers
of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with
petitioner which remained unpaid 45 days after the loss through fire, and not
the loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil
Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until
the ownership therein is transferred to the buyer, but when the ownership
therein is transferred to the buyer the goods are at the buyer's risk whether
actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for
the buyer, in pursuance of the contract and the ownership in the goods has
been retained by the seller merely to secure performance by the buyer of his
obligations under the contract, the goods are at the buyer's risk from the
time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay
its debt, the risk of loss is borne by the buyer. Petitioner bears the risk of loss
of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the
delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in
property insurance, one's interest is not determined by concept of title, but
whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest
in property, whether real or personal, or any relation thereto, or liability in
respect thereof, of such nature that a contemplated peril might directly
damnify the insured." Parenthetically, under Section 14 of the same Code, an
insurable interest in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on existing interest; or (c) an expectancy, coupled
with an existing interest in that out of which the expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its
existence or would suffer loss from its destruction. Indeed, a vendor or seller
retains an insurable interest in the property sold so long as he has any
interest therein, in other words, so long as he would suffer by its destruction,
as where he has a vendor's lien. In this case, the insurable interest of IMC and
was
the
duly
authorized
representative
(insurance
agent)
of
Commercial Union Assurance Company in the Philippines. The cars value was
estimated with the help of an experienced mechanic (Mr. Server) of the
Luneta Garage. The car was bought by Mr. Harding for P2,800.00. The
mechanic, considering some repairs done, estimated the value to be at
P3,000.00. This estimated value was the value disclosed by Mrs. Harding to
Smith, Bell, and Co. She also disclosed that the value was an estimate made
by Luneta Garage (which also acts as an agent for Smith, Bell, and Co).
In March 1916, a fire destroyed the Studebaker. Mrs. Harding filed an
insurance claim but Commercial Union denied it as it insisted that the
representations and averments made as to the cost of the car were false; and
that said statement was a warranty. Commercial Union also stated that the
car does not belong to Mrs. Harding because such a gift [from her husband] is
void under the Civil Code.
ISSUE: Whether or not Mrs. Harding is entitled to the insurance claim.
HELD: Yes. Commercial Union is not the proper party to attack the validity of
the gift made by Mr. Harding to his wife.
The statement made by Mrs. Harding as to the cost of the car is not a
warranty. The evidence does not prove that the statement is false. In fact, the
evidence shows that the cost of the car is more than the price of the
insurance. The car was bought for P2,800.00 and then thereafter, Luneta
Garage made some repairs and body paints which amounted to P900.00. Mr.
Server attested that the car is as good as new at the time the insurance was
effected.
Commercial Union, upon the information given by Mrs. Harding, and after an
inspection of the automobile by its examiner, having agreed that it was worth
P3,000, is bound by this valuation in the absence of fraud on the part of the
insured. All statements of value are, of necessity, to a large extent matters of
opinion, and it would be outrageous to hold that the validity of all valued
policies must depend upon the absolute correctness of such estimated value.
Lampano v Jose, GR L-9401, 30 March 1915
FACTS:
R. Barretto took out an insurance policy upon it in his own name, with the
consent of Placida A. Jose, for the sum of P4,000. After its destruction, he
collected P3,600 from the insurance company, having paid in premiums
the sum of P301.50
Lampano filed a complaint against Barreto and Jose alleging that Jose
in a verbal agreement told her that the policy will be delivered to her so
she should collected P3,600 from each of them
RTC: favored Jose ordering Barreto to pay him P1,298.50 and offsetting
the P2,000
Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could insure it for
his it for his own protection
HELD: YES. reversed and Barretto is absolved
the insurance taken by one in his own right and in his own interest does
not in any way insure to the benefit of another
A contract of insurance made for the insurer's (insured) indemnity only,
FACTS:
June 6, 1920: the warehouse was destroyed by fire. Only copra worth
P49,985 was salvaged. At that time Lopez was still liable for the storage
and insurance of P315.90
Mrs. Del Rosario submitted the insurance with the arbitrators and
seems to have satisfied all of the persons who had copra stored in her
warehouse, including the stockholders in the Compaia Coprera de
Tayabas (whose stock she took over), with the exception of Froilan Lopez
Ineffectual attempts by Mrs. Del Rosario to effect a compromise with
Lopez first for P71,994, later raised to P72,724, and finally reduced to
P17,000, were made. But Lopez stubbornly contended, or, at least, his
attorney contended for him, that he should receive not a centavo less
than P88,595.43 (from originally P107,990.40)
ISSUE: W/N Mrs. Del Rosario should be held liable to Lopez even if he has not
paid the insurance at the time of the fire
Mortgagor (Insurance)
Measure of Insurable Interest (Insurance)
Laws Applicable: sec. 16,sec. 19 (now sec. 20),sec. 50,sec.55 (now sec. 58) of
the Insurance Code (all old law)
FACTS:
In the contract of mortgage, the owner P.D. Dunn had agreed, at his
own expense, to insure the mortgaged property for its full value and to
indorse the policies in such manner as to authorize the Brewery Company
to receive the proceeds in case of loss and to retain such part thereof as
might be necessary to satisfy the remainder then due upon the mortgage
debt. Instead, however, of effecting the insurance himself Dunn
authorized and requested the Brewery Company to procure insurance on
the property in the amount of P15,000 at Dunn's expense.
San Miguel insured the property only as mortgagee.
Dunn sold the propert to Henry Harding. The insurance was not
not entitled to the difference between the mortgage credit and the face
value of the policies.
Henry Harding appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of
the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO
HELD: affirmed
the mere transfer of a thing insured does not transfer the policy,
but suspends it until the same person becomes the owner of both the
policy and the thing insured
Undoubtedly these policies of insurance might have been so framed as
Brewery rather than with the insurance companies, and there is nothing in
the record to indicate that the insurance companies were requested to
write insurance upon the insurable interest of the owner or intended to
make themselves liable to that extent
If by inadvertence, accident, or mistake the terms of the contract were
not fully set forth in the policy, the parties are entitled to have it
reformed. But to justify the reformation of a contract, the proof must be
of the most satisfactory character, and it must clearly appear that the
contract failed to express the real agreement between the parties
In the case now before us the proof is entirely insufficient to authorize
reformation.
without the consent of the LESSOR then the policy is deemed assigned
and transferred to the LESSOR for its own benefit; x x x 1
On the day that the lease contract was to expire, fire broke out inside
the leased premises.
United refused to pay CKS. Hence, the latter filed a complaint against
the spouses and United.
The liability of the spouses to CKS for violating their lease contract in
that Cha spouses obtained a fire insurance policy over their own
merchandise, without the consent of CKS, is a separate and distinct
issue which we do not resolve in this case.
FACTS:
Spouses Nilo Cha and Stella Uy-Cha and CKS Development Corporation
entered a 1 year lease contract with a stipulation not to insure against fire
the chattels, merchandise, textiles, goods and effects placed at any stall
or store or space in the leased premises without first obtaining the written
consent and approval of the lessor. But it insured against loss by fire their
merchandise inside the leased premises for P500,000 with the United
Insurance Co., Inc. without the written consent of CKS
On the day the lease contract was to expire, fire broke out inside the
leased premises and CKS learning that the spouses procured an insurance
wrote to United to have the proceeds be paid directly to them. But United
refused so CKS filed against Spouses Cha and United.
RTC: United to pay CKS the amount of P335,063.11 and Spouses Cha to
ISSUE: W/N the CKS has insurable interest because the spouses Cha violated
the stipulation
of loss, whether the person insured has or has not any interest in the
property insured, or that the policy shall be received as proof of such
interest, and every policy executed by way of gaming or wagering, is void
Section 17. The measure of an insurable interest in property is the
Tai Tong Chuache & Co. V. Insurance Commission (1988) - February 29,
1988
Lessons Applicable: When Insurable Interest Must Exist (Insurance)
FACTS:
Inc. in the amount of P100,000 and to secure it, the land and building was
mortgaged
June 11, 1975: Pedro Palomo secured a Fire Insurance Policy covering
mortgage creditor
Tai Tong Chuache & Co. filed a complaint in intervention claiming
the proceeds of the fire Insurance Policy issued by travellers
affirmative defense of lack of insurable interest that before the
occurrence of the peril insured against the Palomos had already paid their
credit due the petitioner
ISSUE: W/N Tai Tong Chuache & Co. has insurable interest
HELD: YES. Travellers Multi-Indemnity Corporation to pay Tai Tong Chuache &
Co.
FACTS:
such as iron and brass bedsteads, toilet tables, chairs, ice boxes, bureaus,
washstands, mirrors, and sea-grass furniture stored in the ground floor
and first story of house and dwelling with an authorized agent of the
British American Assurance Company
British American Assurance Company denied alleging that:
property covered by the policy to H. W. Peabody & Co. to secure
condition
RTC: British American Assurance Company liable to bACHRACH
the keeping of paints and varnishes upon the premises where the insured
property was stored. If the company intended to rely upon a condition of
that character, it ought to have been plainly expressed in the policy.
alienation clause - forfeiture if the interest in the property pass from
the insured
there is no alienation within the meaning of the insurance law until the
the plaintiff did actually set fire or cause fire to be set to the goods in
question
It does not positively appear of record that the automobile in question
was not included in the other policies. It does appear that the automobile
was saved and was considered as a part of the salvaged. It is alleged that
the salvage amounted to P4,000, including the automobile. This amount
(P4,000) was distributed among the different insurers and the amount of
their responsibility was proportionately reduced. The defendant and
appellant in the present case made no objection at any time in the lower
court to that distribution of the salvage. The claim is now made for the
first time.
San Miguel Brewery V. Law Union And Rock Insurance Co. (1920)
G.R. No. L-14300 January 19, 1920
Lessons Applicable:
Mortgagor (Insurance)
FACTS:
In the contract of mortgage, the owner P.D. Dunn had agreed, at his
own expense, to insure the mortgaged property for its full value and to
indorse the policies in such manner as to authorize the Brewery Company
to receive the proceeds in case of loss and to retain such part thereof as
might be necessary to satisfy the remainder then due upon the mortgage
debt. Instead, however, of effecting the insurance himself Dunn
authorized and requested the Brewery Company to procure insurance on
the property in the amount of P15,000 at Dunn's expense.
San Miguel insured the property only as mortgagee.
Dunn sold the propert to Henry Harding. The insurance was not
not entitled to the difference between the mortgage credit and the face
value of the policies.
Henry Harding appealed.
ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of
the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO
HELD: affirmed
but suspends it until the same person becomes the owner of both the
policy and the thing insured
Undoubtedly these policies of insurance might have been so framed as
Brewery rather than with the insurance companies, and there is nothing in
the record to indicate that the insurance companies were requested to
write insurance upon the insurable interest of the owner or intended to
make themselves liable to that extent
If by inadvertence, accident, or mistake the terms of the contract were
not fully set forth in the policy, the parties are entitled to have it
reformed. But to justify the reformation of a contract, the proof must be
of the most satisfactory character, and it must clearly appear that the
contract failed to express the real agreement between the parties
In the case now before us the proof is entirely insufficient to authorize
reformation.
Doctor Sta. Ana. But the information or answers to the questions contained
on the face of the Medical Examiner's Report were furnished the doctor by
Argente.
Vicenta de Ocampo, wife of the plaintiff, was examined at her residence by
the same doctor.
The spouses submitted to West Coast Life an amended application, increasing
the amount to P15,000, and asked that the policy be dated May 15, 1925.
The amended application was accompanied by the documents entitled "Short
Form Medical Report." In both of these documents appear certain questions
and answers.
A temporary policy for P15,000 was issued to Bernardo Argente and his wife
as of May 15, but it was not delivered until the first quarterly premium on the
policy was paid. More than thirty days had elapsed since the applicants were
examined. Each of them was required to file a certificate of health before the
policy was delivered.
Vicenta de Ocampo died of cerebral apoplexy. Argente presented a claim in
due form to the West Coast Life Insurance Co. for the payment of the sum of
P15,000. It was apparently disclosed that the answers given by the insured in
their medical examinations with regard to their health were untrue. West
Coastrefused to pay the claim and wrote Argente to the effect that the claim
was rejected due to fraud.
The trial court held the policy null and void, hence this appeal.
Issue: WON Argente and Ocampo were guilty of concealment and thereby
misled the insurer into accepting the risk?
Held: Yes. Petition dismissed.
Ratio:
Vicenta de Ocampo, in response to the question asked by the medical
examiner, answered no to "Have you ever consulted a physician for or have
you ever suffered from any ailment or disease of the brain or nervous
system?" She also answered none as to the question whether she
consumed alcohol of not.
To the question, "What physician or physicians, if any, not named above,
have you consulted or been treated by, within the last five years and for what
illness or ailment?" she answered "None."
But the facts show that she was taken to San Lazaro Hospital, her case was
diagnosed by the admitting physician as "alcoholism, moreover, she was
diagnosed with "phycho-neurosis."
Section 25 of the Insurance Code defined concealment as "a neglect to
communicate that which a party knows and ought to communicate."
The court held that the alleged concealment was not immaterial and
insufficient to avoid the policy. In an action on a life insurance policy where
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 (Philippine American Life
Insurance Company). 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.
HELD: 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.
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.
Issue: Won Canilang was guilty of misrepresentation
Held: Yes. Petition denied.
Ratio:
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.
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 insureds
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 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 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.
The insured died in a plane crash. Respondent Bernarda Bacani filed a claim
with petitioner, seeking the benefits of the insurance policy taken by her son.
Petitioner conducted an investigation and its findings prompted it to reject
the claim.
Sunlife informed Bacani that the insured did not disclose material facts
relevant to the issuance of the policy, thus rendering the contract of
insurance voidable. A check representing the total premiums paid in the
amount of P10,172.00 was attached to said letter.
Petitioner claimed that the insured gave false statements in his application.
The deceased answered claimed that he consulted a Dr. Raymundo of the
Chinese General Hospital for cough and flu complications. The other
questions were answered in the negative.
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. During his confinement, the
deceased was subjected to urinalysis tests.
Bernarda Bacani and her husband filed an action for specific performance
against petitioner with the RTC. The court ruled in favor of the spouses and
ordered Sunlife to pay P100,000.00.
In ruling for private respondents, the trial court concluded that the facts
concealed by the insured were made in good faith and under a belief that
they need not be disclosed. The court also held that the medial history was
irrelevant because it wasnt medical insurance.
The Court of Appeals affirmed the decision of the trial court. The appellate
court ruled that petitioner cannot avoid its obligation by claiming
concealment because the cause of death was unrelated to the facts
concealed by the insured. Petitioner's motion for reconsideration was denied.
Hence, this petition.
Issue: WON the insured was guilty of misrepresentation which made the
contract void.
Held: Yes. Petition dismissed.
Ratio:
Section 26 of The Insurance Code required 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.
A neglect to communicate that which a party knows and ought to
communicate, is called concealment.
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
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.
Yu v CA G.R. No. L-12465 May 29, 1959
J. Bautista
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 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.
Issue: Whether or not the insured is guilty of concealment of some facts
material to the risk insured that consequently avoids the policy.
Held: Yes. Petition dismissed.
Ratio:
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.
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."
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
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.
Ratio:
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
> He then applied for the reinstatement of his insurance policy in Nov. of
1951 and tendered the amount of premium for the years 1950-1951.
> He stated that he was as of Nov. 1951 of good health, and that he had no
injuries, ailments or illnesses and had not been sick for any case since 1948
(his medical check up when he applied for insurance) and that he had not
consulted any physician or practitioner for any case since the date of such
latest medical exam.
> However, when Vivencio applied for the reinstatement, he was already sick
of a fatal disease known as carcinoma of the liver and that 4 days prior to his
application for insurance, he consulted a doctor regarding his condition.
> The reinstatement was approved. Vivencio again failed to pay the
premiums for the last quarter of Nov. 1951 and as such, Insular life sent him
a notice canceling the policy.
> Vivencio then died. The beneificiaries instituted the present action to
recover from Insular life the death benefits of a life insurance policy valued at
2T. Insular refused to pay claiming concealment on the part of Vivencio.
> Collado contends that Insular life had waived the right to rescine the policy
in view of its repeated acceptance of the overdue premiums for the second
and third years.
> Municipal court of Manila found for Collado and Insular filed an appeal with
CFI of Manila. CFI rendered judgment in favor of Insular and dismissed
Collados complaint.
Issue:
Whether or nor Insular life was estopped and could no longer cancel the
contract due to the fact that it accepted the tender of overdue payments
from Vivencio.
Held:
NO.
The acceptance of Insular life of the overdue premiums did not necessarily
deprive it of the right to cancel the policy in case of default incurred by the
Insured in the payment of future premiums. The case would be different had
the insured died at any time after the payment of overdue premiums but
previous to the reinstatement of the policy, for the, Insular, by its acceptance
of its overdue premiums is deemed to have waived its right to rescind the
policy.
The evidence at hand shows that insofar as the payment of the last quarterly
premium for 1951 was concerned, Insular had availed of the right to rescind
the policy by notifying the Insured that the policy had lapsed.