SET C- Concealment Digest

7/28/2019 SET C- Concealment Digest

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INSURANCEConcealment

companies to exercise greater care in the selection of their agents

and examiners. Their protection is still in their own hands and

which may be achieved by other means. Withal, the attainment of a

common good may involve impairment and even sacrifice of

beneficial interests of a particular group, but in life compromise is

inevitable until the hour of doom strikes.

The petition is hereby dismissed and the judgment sought

to be reviewed is affirmed with costs against the petitioner. Soordered.

THE I NSULAR LI FE ASSURANCE CO., LTD., , vs. SERAF IN

D. FELI CIANO ET AL.,.

Facts: Evaristo Feliciano, who died on September 29, 1935, was

suffering with advanced pulmonary tuberculosis when he signed

his application for insurance with the petitioner on October 12,

1934. On that same date Doctor Trepp, who had taken X-ray

pictures of his lungs, informed the respondent Dr. Serafin D.

Feliciano, brother of Evaristo, that the latter "was already in a very

serious and practically hopeless condition." Nevertheless the

question contained in the application "Have you ever suffered

from any ailment or disease of the lungs, pleurisy, pneumonia orasthma?"appears to have been answered, "No." And above the

signature of the applicant

The false answer above referred to, as well as the others, was

written by the Company's soliciting agent Romulo M. David, in

collusion with the medical examiner Dr. Gregorio Valdez, for the

purpose of securing the Company's approval of the application so

that the policy to be issued thereon might be credited to said agent

in connection with the inter-provincial contest which the

Company was then holding among its soliciting agents to boost

the sales of its policies. Agent David bribed Medical Examiner

Valdez with money which the former borrowed from the

applicant's mother by way of advanced payment on the premium,

according to the finding of the Court of Appeals. Said court also

found that before the insured signed the application he, as well asthe members of his family, told the agent and the medical

examiner that he had been sick and coughing for some time and

that he had gone three times to the Santol Sanatorium and had X-

ray pictures of his lungs taken; but that in spite of such

information the agent and the medical examiner told them that the

applicant was a fit subject for insurance.

Issue: WON the insurance policy is enforceable?

WON there is concealment?

Ruling: The petitioner insists that upon the facts of the case the

policies in question are null and void ab initio and that all that the

respondents are entitled to is the refund of the premiums paidthereon.

When Evaristo Feliciano, the applicant for insurance,

signed the application in blank and authorized the soliciting

agent and/or the medical examiner of the Company to write the

answers for him, he made them his own agents for that purpose,

and he was responsible for their acts in that connection. If they

falsified the answers for him, he could not evade the

responsibility for the falsification. He was not supposed to sign

the application in blank. He knew that the answers to the

questions therein contained would be "the basis of the policy,"

and for that very reason he was required with his signature to

vouch for the truth thereof.

the conclusion that the insured acted in connivance with

soliciting agent and the medical examiner of the Company

accepting the policies in question.

We cannot bring ourselves to believe that the insured did not t

the trouble to read the answers contained in the photostatic cop

the application attached to and made a part of the policy befor

accepted it and paid the premium thereon. He must have notthat the answers to the questions therein asked concerning

clinical history were false, and yet he accepted the first policy

applied for another.

By accepting the policy he became charged with knowledg

its contents, whether he actually read it or not. He could

ostrich-like hide his head from it in order to avoid his part of

bargain and at the same time claim the benefit thereof. He knew

was chargeable with knowledge, from the very terms of the

policies sued upon (one of which is printed in English and

other in Spanish) that the soliciting agent and the medical exam

had no power to bind the Company by any verbal promise or

representation. The insured, therefore, had no right to rely

we cannot believe he relied in good faith upon the representation of said agent and medical examiner that he

applicant) was a fit subject for insurance notwithstanding that

had been and was still suffering with advanced pulmon

tuberculosis.

Wherefore, the motion for reconsideration is sustained and

judgment of the Court of Appeals is hereby reversed. Let ano

judgment be entered in favor of the respondents and against

petitioner for the refund of the premiums amounting to P1,3

with legal interest thereon from the date of the complaint,

without any finding as to costs.

Note:

The policies were issued on the basis of the statement subscr

by the applicant to the effect that he was and had been in ghealth, when as a matter of fact he was then suffering f

advanced pulmonary tuberculosis. Held: Altho the agent and

medical examiner knew that statement to be false, no valid cont

of insurance was entered into because there was no real meetin

the minds of the parties.

SUNLIFE ASSURANCE COMPANY OF CANADA, vs.

CA and Spouses ROLANDO and BERNARDA BACANI

Facts: On April 15, 1986, Robert John B. Bacani procu

a life insurance contract for himself from petitioner. He was iss

Policy No. 3-903-766-X valued P100,000.00, with do

indemnity in case of accidental death. The designated benefic

was his mother, respondent.

On June 26, 1987, the insured died in a plane crash. Respond

filed a claim with petitioner, seeking the benefits of the insura

policy taken by her son. Petitioner conducted an investigation

its findings prompted it to reject the claim.

In its letter, petitioner informed respondent Bernarda Bacani,

the insured did not disclosed material facts relevant to the issua

of the policy, thus rendering the contract of insurance voidabl


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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 when he answered the following questions:

"5.Within the past 5 years have you:

a)consulted any doctor or other health practitioner?

b)submitted to:

ECG?

X-rays?blood tests?

other tests?

c)attended or been admitted to any hospital or other medical

facility?

"6.Have you ever had or sought advice for:

xxx xxx xxx

b)urine, kidney or bladder disorder?"

(Rollo, p. 53).

The deceased answered question No. 5(a) in the affirmative but

limited his answer to a consultation with a certain Dr. Reinaldo D.

Raymundo of the Chinese General Hospital on February 1986, for

cough and flu complications. The other questions were answered in

the negative (Rollo, p. 53).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,

ultra-sonography and hematology tests.

On November 17, 1988, respondents filed an action for specific

performance against petitioner with RTC. RTC concluded that

the facts concealed by the insured were made in good faith and

under the belief that they need not be disclosed. Moreover, it

held that the health history of the insured was immaterial since

the insurance policy was "non-medical."

Petitioner appealed to the CA, which affirmed the decision of theRTC.

Issue: Whether the concealment and misrepresentation was made

in in "good faith" and the facts concealed or misrepresented were

irrelevant since the policy was "non-medical.

Ruling: No. 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. Said Section

provides:

"A neglect to communicate that which a party knows and ought tocommunicate, 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 is due, in forming his estimate 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 were mate

and relevant to the approval and the issuance of the insura

policy. The matters concealed would have definitely affe

petitioner's action on his application, either by approving it w

the corresponding adjustment for a higher premium or rejecting

same. Moreover, a disclosure may have warranted a med

examination of the insured by petitioner in order for it

reasonably assess the risk involved in accepting the application.

In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (19we held that materiality of the information withheld does

depend on the state of mind of the insured. Neither does it dep

on the actual or physical events which ensue.

Thus, "good faith" is no defense in concealment. The insur

failure to disclose the fact that he was hospitalized for two we

prior to filing his application for insurance, raises grave do

about his bonafides. It appears that such concealment

deliberate on his part.

On the argument that petitioners waiver of th

medical exam of the insured debunks the materiality of th

facts concealed, Saturnino v. Philippine American Lif

Insurance Company, 7 SCRA 316 (1963), that ". . . the waiv

of a medical examination [in a non-medical insuranccontract] renders even more material the information require

of the applicant concerning previous condition of health an

diseases suffered, for such information necessarily constitut

an important factor which the insurer takes into consideratio

in deciding whether to issue the policy or not . . . ."

Anent the finding that the facts concealed had n

bearing to the cause of death of the insured, it is well settle

that the insured need not die of the disease he had failed t

disclose to the insurer. It is sufficient that his non-disclosu

misled the insurer in forming his estimates of the risks of th

proposed insurance policy or in making inquiries (Henson

The Philippine American Life Insurance Co., 56 O.G. No. 4

[1960]).

We, therefore, rule that petitioner properly exerciseits right to rescind the contract of insurance by reason of th

concealment employed by the insured. It must be emphasize

that rescission was exercised within the two-year contestabili

period as recognized in Section 48 of The Insurance Code.

WHEREFORE, the petition is GRANTED and th

Decision of the CA is REVERSED and SET ASIDE.

THELMA VDA. DE CANILANG vs. HON. COURT

APPEALS and GREAT PACIFIC LIFE INSURAN

CORPORATION

Facts: 18 June 1982, Jaime Canilang consulted Dr. Wilfredo

Claudio and was diagnosed as suffering from "sinus tachycard

Mr. Canilang consulted the same doctor again on 3 August 1and this time was found to have "acute bronchitis

On the next day, 4 August 1982, Jaime Canilang applied fo

"non-medical" insurance policy with Grepalife naming his wif

his beneficiary. Jaime Canilang was issued ordinary

insurance Policy No. 345163, with the face value of P19,

effective as of 9 August 1982.

5 August 1983, Jaime Canilang died of "congestive heart failu

"anemia," and "chronic anemia." Petitioner filed a claim w


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Grepalife which the insurer denied on 5 December 1983 upon the

ground that the insured had concealed material information from it.

Petitioner then filed a complaint against Grepalife with the

Insurance Commission for recovery of the insurance proceeds.

During the hearing petitioner testified that she was not aware of

any serious illness suffered by her late husband and that, as far as

she knew, her husband had died because of a kidney disorder. A

deposition given by Dr. Wilfredo Claudio was presented by

petitioner wherein it was stated that the doctor had previouslytreated him for "sinus tachycardia" and "acute bronchitis."

Grepalife presented Dr. Esperanza Quismorio, a physician and a

medical underwriter working for Grepalife. She 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.

5 November 1985, Insurance Commissioner ordered Grepalife to

pay P19,700.00 plus legal interest and P2,000.00 as attorney's fees

after holding that the ailment of Canilang was not so serious that,even if it had been disclosed, it would not have affected Great

Pacific's decision to insure him; Great Pacific 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; there was no intentional

concealment on the part of the insured Jaime Canilang as he had

thought that he was merely suffering from a minor ailment and

simple cold;

CA reversed and set aside the decision of the Insurance

Commissioner and dismissed Thelma Canilang complaint and

Great Pacific's counterclaim. CA found that the use of the word

"intentionally" by the Insurance Commissioner was not supported

by the evidence; that the failure of Jaime Canilang to discloseprevious medical consultation and treatment constituted material

information which should have been communicated to Great

Pacific to enable the latter to make proper inquiries.

Issues: 1. Whether or not Jaime Canilang `intentionally' made

material concealment in stating his state of health;

2. Whether the non-disclosure of certain facts about Canilangs

previous health conditions does not amount to fraud and private

respondent is deemed to have waived inquiry thereto."

Ruling: P.D. No. 1460, also known as the Insurance Code of

1978 "Sec. 26.A neglect to communicate that which a party

knows and ought to communicate, is called a concealment." xxxxxx xxx

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 contractand as to which he makes no warranty,

and which the other has not the means of ascertaining."

Under the foregoing provisions, 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 test of materiality is contained

Section 31 of the Insurance Code of 1978 which reads:

"Sec. 31.Materiality is to be determined not by the even

butsolely by theprobable and reasonable influence of th

facts upon the party to whom the communication is due,

forming his estimate of the disadvantages of the propose

contract, or in making his inquiries." (Emphases supplied)

"Sinus tachycardia" is considered present "when the heart

exceeds 100 beats per minute." The symptoms of this condiinclude pounding in the chest and sometimes faintness

weakness of the person affected.

We agree with the Court of Appeals that the information wh

Jaime Canilang failed to discloses was material to the ability

Grepalife to estimate the probable risk he presented as a subjec

life insurance.

Had Canilang disclosed his visits to his doctor, the diagnosis m

and the medicines prescribed by such doctor, in the insura

application, it may be reasonably assumed that Great Pacific wo

have made further inquiries and would have probably refuse

issue a non-medical insurance policy or, at the very least, requa higher premium for the same coverage. 15 The materiality of

information withheld by Great Pacific did not depend upon

state of mind of Jaime Canilang. A man's state of mind

subjective belief is not capable of proof in our judicial proc

except through proof of external acts or failure to act from wh

inferences as to his subjective belief may be reasonably dra

Neither does materiality depend upon the actual or physical ev

which ensue. Materiality relates rather to the "probable

reasonable influence of the facts" upon the party to whom

communication should have been made, in assessing the

involved in making or omitting to make further inquiries an

accepting the application for insurance; that "probable

reasonable influence of the facts" concealed must, of course

determined objectively, by the judge ultimately.

Saturnino v. Philippine-American Life Insurance Company,

held that:". . . if anything, the waiver of medical examination [

non-medical insurance contract] renders even more material

information required of the applicant concerning prev

condition of health and diseases suffered, for such informa

necessarily constitutes an important factor which the insurer ta

into consideration in deciding whether to issue the policy or no

.."

Section 27 of the Insurance Code of 1978 so as to read as follo

A concealment whether intentional or unintentional entitles

injured party to rescind a contract of insurance. As a simple maof grammar, it may be noted that "intentional" and "unintentio

cancel each other out. The net result therefore of the ph

"whether intentional or unintentional" is precisely to le

unqualified the term "concealment." Thus, Section 27 of

Insurance Code of 1978 is properly read as referring to "

concealment" without regard to whether such concealmen

intentional or unintentional. The phrase "whether intentiona

unintentional" was in fact superfluous. The deletion of the ph

"whether intentional or unintentional" could not have had the ef

of imposing an affirmative requirement that a concealment mus


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intentional if it is to entitle the injured party to rescind a contract of

insurance. 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 havebeen intentional rather than merely inadvertent. For Jaime Canilang

could not have been unaware that this 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. Indeed, the last medical consultation took place just the

day before the insurance application was filed. In all probability,

Jaime Canilang went to visit his doctor precisely because of the

discomfort and concern brought about by his experiencing "sinus

tachycardia."

We find it difficult to take seriously the argument that Great Pacific

had waived inquiry into the concealment by issuing the insurance

policy notwithstanding Canilang failure to set out answers to someof 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.

WHEREFORE, the Petition for Review is DENIED for lack of

merit and the Decision of the CA dated 16 October 1989 in C.A-

G.R. SP No. 08696 is hereby AFFIRMED. No pronouncement as

to costs.

PHI LAM CARE HEALTH SYSTEMS, INC., , vs. COURT OF

APPEALS and JULI TA TRINOS,.

Facts: Ernani Trinos, deceased husband of respondent JulitaTrinos, applied for a health care coverage with petitioner

Philamcare Health Systems, Inc. In the standard application form,

he answered no to the following question:

Have you or any of your family members ever consulted or been

treated for high blood pressure, heart trouble, diabetes, cancer, liver

disease, asthma or peptic ulcer? (If Yes, give details).

The application was approved for a period of one year from March

1, 1988 to March 1, 1989 Upon the termination of the agreement,

the same was extended for another year. During the period of his

coverage, Ernani suffered a heart attack and was confined at the

Manila Medical Center (MMC) for one month beginning March 9,1990. While her husband was in the hospital, respondent tried to

claim the benefits under the health care agreement. However,

petitioner denied her claim saying that the Health Care Agreement

was void. According to petitioner, there was a concealment

regarding Ernani's medical history. Doctors at the MMC allegedly

discovered at the time of Ernani's confinement that he was

hypertensive, diabetic and asthmatic, contrary to his answer in the

application form. Thus, respondent paid the hospitalization

expenses herself, amounting to about P76,000.00.

After her husband was discharged from the MMC, he was atten

by a physical therapist at home. Later, he was admitted at

Chinese General Hospital. Due to financial difficulties, howe

respondent brought her husband home again. In the morning

April 13, 1990, Ernani had fever and was feeling very w

Respondent was constrained to bring him back to the Chin

General Hospital where he died on the same day.

After trial, the lower court ruled against petitionersthe Court of Appeals affirmed the decision of the trial court

deleted all awards for damage

Argument of Philam care:

Petitioner argues that the agreement grants "living benefits," s

as medical check-ups and hospitalization which a member m

immediately enjoy so long as he is alive upon effectivity of

agreement until its expiration one-year thereafter. Petitioner

points out that only medical and hospitalization benefits are g

under the agreement without any indemnification, unlike in

insurance contract where the insured is indemnified for his l

Moreover, since Health Care Agreements are only for a perio

one year Petitioner further argues that it is not an insuracompany, which is governed by the Insurance Commission, b

Health Maintenance Organization under the authority of

Department of Health.

Petitioner argues that respondent's husband concealed a mat

fact in his application.

Issue:WON there was concealment of the material fact whic

the health of the insured

Ruling:Section 2 (1) of the Insurance Code defines a contrac

insurance as an agreement whereby one undertakes fo

consideration to indemnify another against loss, damage or liab

arising from an unknown or contingent event. An insuracontract exists where the following elements concur:

1.The insured has an insurable interest;

2.The insured is subject to a risk of loss by the happening of

designated peril;

3.The insurerassumes the risk;

4.Such assumption of risk is part of a general scheme to distrib

actual losses among a large group of persons bearing a similar r

and

5.In consideration of the insurer's promise, the insured pay

premium. 8

Section 3 of the Insurance Code states that any contingen

unknown event, whether past or future, which may damnif

person having an insurable interest against him, may be insu

against. Every person has an insurable interest in the life and he

of himself. Section 10 provides:

Every person has an insurable interest in the life and health:


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(1)of himself, of his spouse and of his children;

(2)of any person on whom he depends wholly or in part for

education or support, or in whom he has a pecuniary interest;

(3)of any person under a legal obligation to him for the payment of

money, respecting property or service, of which death or illness

might delay or prevent the performance; and

(4)of any person upon whose life any estate or interest vested in

him depends.

In the case at bar, the insurable interest of respondent's husband in

obtaining the health care agreement was his own health. The health

care agreement was in the nature of non-life insurance, which is

primarily a contract of indemnity.

Petitioner cannot rely on the stipulation regarding "Invalidation of

Agreement" which reads:

Failure to disclose or misrepresentation of any material informationby the member in the application or medical examination, whether

intentional or unintentional, shall automatically invalidate the

Agreement from the very beginning and liability of Philamcare

shall be limited to return of all Membership Fees paid. An

undisclosed or misrepresented information is deemed material if its

revelation would have resulted in the declination of the applicant

by Philamcare or the assessment of a higher Membership Fee for

the benefit or benefits applied for.

The answer assailed by petitioner was in response to the question

relating to the medical history of the applicant. This largely

depends on opinion rather than fact, especially coming from

respondent's husband who was not a medical doctor. Where

matters of opinion or judgment are called for, answers made in

good faith and without intent to deceive will not avoid a policyeven though they are untrue.

The fraudulent intent on the part of the insured must be established

to warrant rescission of the insurance contract. 16 Concealment as

a defense for the health care provider or insurer to avoid liability is

an affirmative defense and the duty to establish such defense by

satisfactory and convincing evidence rests upon the provider or

insurer. In any case, with or without the authority to investigate,

petitioner is liable for claims made under the contract. Having

assumed a responsibility under the agreement, petitioner is bound

to answer the same to the extent agreed upon. In the end, the

liability of the health care provider attaches once the member is

hospitalized for the disease or injury covered by the agreement or

whenever he avails of the covered benefits which he has prepaid.Section 27 of the Insurance Code, "a concealment entitles the

injured party to rescind a contract of insurance." The right to

rescind should be exercised previous to the commencement of an

action on the contract. 17 In this case, no rescission was made.

Besides, the cancellation of health care agreements as in insurance

policies require the concurrence of the following conditions:

1.Prior notice of cancellation to insured;

2.Notice must be based on the occurrence after effective date of the

policy of one or more of the grounds mentioned;

3.Must be in writing, mailed or delivered to the insured at

address shown in the policy;

4.Must state the grounds relied upon provided in Section 64 of

Insurance Code and upon request of insured, to furnish facts

which cancellation is based. 18

None of the above pre-conditions was fulfilled in this case. W

the terms of insurance contract contain limitations on liabi

courts should construe them in such a way as to preclude

insurer from non-compliance with his obligation. 19 Bein

contract of adhesion, the terms of an insurance contract are to

construed strictly against the party which prepared the contrac

the insurer

the defendant Philamcare Health Systems Inc. had twelve mo

from the date of issuance of the Agreement within which to con

the membership of the patient if he had previous ailment of asth

and six months from the issuance of the agreement if the pat

was sick of diabetes or hypertension. The periods having expithe defense of concealment or misrepresentation no longer lie. 2

Finally, petitioner alleges that respondent was not the legal wif

the deceased member considering that at the time of their marri

the deceased was previously married to another woman who

still alive. The health care agreement is in the nature of a cont

of indemnity. Hence, payment should be made to the party w

incurred the expenses. It is not controverted that respondent p

all the hospital and medical expenses. She is therefore entitle

reimbursement. The records adequately prove the expen

incurred by respondent for the deceased's hospitalizat

medication and the professional fees of the attending physici

24

WHEREFORE, in view of the foregoing, the petition is DENI

The assailed decision of the Court of Appeals dated December

1995 is AFFIRMED.

SO ORDERED.

Documents

SET C- Concealment Digest