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 G.R. No. 105135, 22 June 1995

FACTS:

Robert John Bacani procured a life insurance contract for himself from petitioner-company, 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.
Ng Gan Zee vs Asian Crusader Life Assurance Corp

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

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

Held:
No. (See Sec. 27)

“Concealment exists where the assured had knowledge of a fact material to the risk, and honesty, good
faith, and fair dealing requires that he should communicate it to the assurer, but he designedly and
intentionally withholds the same.” It has also been held “that the concealment must, in the absence of
inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld."

Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant. Sec. 27 of
the Insurance Law nevertheless requires that fraudulent intent on the part of the insured be established
to entitle the insurer to rescind the contract. And as correctly observed by the lower court,
"misrepresentation as a defense of the insurer to avoid liability is an ‘affirmative’ defense. The duty to
establish such a defense by satisfactory and convincing evidence rests upon the defendant. The
evidence before the Court does not clearly and satisfactorily establish that defense.”

It bears emphasis that Kwong Nam had informed the appellant’s medical examiner that the tumor for
which he was operated on was “associated with ulcer of the stomach.” In the absence of evidence that
the insured had sufficient medical knowledge as to enable him to distinguish between “peptic ulcer” and
“a tumor”, his statement that said tumor was “associated with ulcer of the stomach, ” should be
construed as an expression made in good faith of his belief as to the nature of his ailment and operation.
Indeed, such statement must be presumed to have been made by him without knowledge of its
incorrectness and without any deliberate intent on his part to mislead the appellant.

While it may be conceded that, from the viewpoint of a medical expert, the information communicated
was imperfect, the same was nevertheless sufficient to have induced appellant to make further inquiries
about the ailment and operation of the insured.

Section 32 of Insurance Law [Act No. 24271 provides as follows: Section 32. The right to information of
material facts maybe waived either by the terms of insurance or by neglect to make inquiries as to such
facts where they are distinctly implied in other facts of which information is communicated. It has been
held that where, upon the face of the application, a question appears to be not answered at all or to be
imperfectly answered, and the insurers issue a policy without any further inquiry, they waive the
imperfection of the answer and render the omission to answer more fully immaterial. As aptly noted by
the lower court, “if the ailment and operation of Kwong Nam had such an important bearing on the
question of whether the defendant would undertake the insurance or not, the court cannot understand
why the defendant or its medical examiner did not make any further inquiries on such matters from the
Chinese General Hospital or require copies of the hospital records from the appellant before acting on
the application for insurance. The fact of the matter is that the defendant was too eager to accept the
application and receive the insured’s premium. It would be inequitable now to allow the defendant to
avoid liability under the circumstances.”
Saturnino v. Philamlife - False Representation
7 SCRA 316

Facts:
> 2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving
complete removal of the right breast, including the pectoral muscles and the glands, found in the right
armpit.

> Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her
application for insurance.

> She stated therein that she did not have, nor had she ever had, among others listed in the application,
cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered
any injury within the preceding 5 years.

> She also stated that she had never been treated for, nor did she ever have any illness or disease
peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.

> The application also recited that the declarations of Saturnino constituted a further basis for the
issuance of the policy.

Issue:
Whether or not the insured made such false representation of material facts as to avoid the policy.

Held:
YES.

There can be no dispute that the information given by her in the application for insurance was false,
namely, that she never had cancer or tumors or consulted any physician or undergone any operation
within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material? The Insurance Law
provides that “materiality is to be determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom the communication is due, in forming his
estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in view of
the non-medical nature of the insurance applied for, which does away with the usual requirement of
medical examination before the policy is issued. The contention is without merit. If anything, the
waiver of medical examination renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in deciding whether to issue
the policy or not.
Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured
herself did not know, since her doctor never told her, that the disease for which she had been operated
on was cancer. In the first place, concealment of the fact of the operation itself was fraudulent, as there
could not have been any mistake about it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In
this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the
contract of insurance, concealment being defined as “negligence to communicate that which a party
knows and ought to communicate.” The basis of the rule vitiating the contract in cases of concealment
is that it misleads or deceives the insurer into accepting the risk, or accepting it at a rate of premium
agreed upon. The insurer, relying upon the belief that the insured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that the circumstances withheld does
not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.
Edillon v Manila Bankers Life G.R. No. L-34200 September 30, 1982
J. Vasquez

Facts:
> In Apr. 1969, Carmen Lapuz applied for insurance with Manila Bankers. In the application she stated
the date of her birth as July 11, 1904 (around 64 yrs old). The policy was thereafter issued.

> Subsequently, in May 1969, Carmen died of a car accident. Her sister, as beneficiary claimed the
proceeds of the insurance.

> Manila Bankers refused to pay because the certificate of insurance contained a provision excluding it’s
liability to pay claims to persons under 16 or over 60.

Issue:
Whether or not the policy is void considering that the insured was over 60 when she applied.

Held:

NO.

The age of Carmen was not concealed to the insurance company. Her application form indicated her
true age. Despite such information, Manila Bankers accepted the premium and issued the policy. It had
all the time to process the application and notice the applicant’s age. If it failed to act, it was because
Manila Bankers was willing to waive such disqualifications or it simply overlooked such fact. It is
therefore estopped from disclaiming any liability.
Philamcare Health Systems, Inc. v. Court of Appeals
G.R. No. 125678, 18 March 2002, 379 SCRA 356

FACTS:

In 1988, Ernani Trinos applied for a health care insurance under the Philamcare Health Systems, Inc. He
was asked if he was ever treated for high blood, heart trouble, diabetes, cancer, liver disease, asthma, or
peptic ulcer; he answered no. His application was approved and it was effective for one year. His
coverage was subsequently renewed twice for one year each. While the coverage was still in force in
1990, Ernani suffered a heart attack for which he was hospitalized. The cost of the hospitalization
amounted to P76,000.00. Julita Trinos, wife of Ernani, filed a claim before Philamcare for the latter to
pay the hospitalization cost. Philamcare refused to pay as it alleged that Ernani failed to disclose the fact
that he was diabetic, hypertensive, and asthmatic. Julita ended up paying the hospital expenses. Ernani
eventually died. In July 1990, Julita sued Philamcare for damages. Philamcare alleged that the health
coverage is not an insurance contract; that the concealment made by Ernani voided the agreement.

ISSUE:

Whether or not Philamcare can avoid the health coverage agreement.

HELD:

No.
The health coverage agreement (health care agreement) entered upon by Ernani with Philamcare is a
non-life insurance contract and is covered by the Insurance Law. It is primarily a contract of indemnity.
Once the member incurs hospital, medical or any other expense arising from sickness, injury or other
stipulated contingent, the health care provider must pay for the same to the extent agreed upon under
the contract. There is no concealment on the part of Ernani. He answered the question with good faith.
He was not a medical doctor hence his statement in answering the question asked of him when he was
applying is an opinion rather than a fact. Answers made in good faith will not void the policy.
Further, Philamcare, in believing there was concealment, should have taken the necessary steps to void
the health coverage agreement prior to the filing of the suit by Julita. Philamcare never gave notice to
Julita of the fact that they are voiding the agreement. Therefore, Philamcare should pay the expenses
paid by Julita.
MA. LOURDES S. FLORENDO, Petitioner, vs. PHILAM PLANS, INC., PERLA ABCEDE MA. CELESTE
ABCEDE, Respondents.

FACTS:
Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans, Inc.
(Philam Plans) Manuel signed the application and left to Perla the task of supplying the information
needed in the application. Respondent Ma. Celeste Abcede, Perla’s daughter, signed the application as
sales counselor. Philam Plans issued Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S.
Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later,
Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment
of the benefits under her husband’s plan but Philam Plans declined her claim prompting her to file the
present action against the pension plan company before the Regional Trial Court (RTC) of Quezon City
and ruled in favor of Ma. Lourdes. However, the Court of Appeals then reversed the RTC decision. Hence
this appeal.

ISSUE:
Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the insurance
plan despite consideration that her husband Manuel concealed the true condition of his health.

RULING:
The Supreme Court answers this to the negative and the AFFIRMED in its entirety the decision of the
Court of Appeals.

The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It
states:

VIII. INCONTESTABILITY
After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons
any claim for insurance under this Agreement, except for the reason that installment has not been paid
(lapsed), or that you are not insurable at the time you bought this pension program by reason of age. If
this Agreement lapses but is reinstated afterwards, the one (1) year contestability period shall start
again on the date of approval of your request for reinstatement.

The above incontestability clause precludes the insurer from disowning liability under the policy it issued
on the ground of concealment or misrepresentation regarding the health of the insured after a year of
its issuance.

Since Manuel died on the eleventh month following the issuance of his plan, the one year
incontestability period has not yet set in. Consequently, Philam Plans was not barred from questioning
Lourdes’ entitlement to the benefits of her husband’s pension plan.
Insular Life Assurance Co. v. Serafin D. Feliciano
G.R. No. L-47593, 29 December 1943, 74 Phil. 468

FACTS:

Evaristo Feliciano filed an application for insurance with the Insular Life upon the solicitation in one of its
agent. He was issued two insurance policies with an aggregate amount of Php25,000. In September
1935, he died. His heirs (Serafin Feliciano et al) filed an insurance claim but Insular Life refused to pay as
it averred that Feliciano’s application was fraudulenly obtained. It was later found in court that the
insurance agent and the medical examiner of Insular Life who assisted Feliciano in signing the
application knew that Feliciano was already suffering from tuberculosis; that they were aware of the
true medical condition of Feliciano yet they still made it appear that he was healthy in the insurance
application form; that Feliciano signed the application in blank and the agent filled the information for
him.

ISSUE:

Whether or not Insular Life can avoid the insurance policy by reason of the fact that its agent knowingly
and intentionally wrote down the answers in the application differing from those made by Feliciano
hence instead of serving the interests of his principal, acts in his own or another’s interest and adversely
to that of his principal.

HELD:

No. Insular Life must pay the insurance policy. The weight of authority is that if an agent of the insurer,
after obtaining from an applicant for insurance a correct and truthful answer to interrogatories
contained in the application for insurance, without knowledge of the applicant fills in false answers,
either fraudulently or otherwise, the insurer cannot assert the falsity of such answers as a defense to
liability on the policy, and this is true generally without regard to the subject matter of the answers or
the nature of the agent’s duties or limitations on his authority, at least if not brought to the attention of
the applicant.
The fact that the insured did not read the application which he signed, is not indicative of bad faith. It
has been held that it is not negligence for the insured to sign an application without first reading it if the
insurer by its conduct in appointing the agent influenced the insured to place trust and confidence in the
agent.
Saturnino v. Philamlife - False Representation
7 SCRA 316

Facts:
> 2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving
complete removal of the right breast, including the pectoral muscles and the glands, found in the right
armpit.
> Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her
application for insurance.
> She stated therein that she did not have, nor had she ever had, among others listed in the application,
cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered
any injury within the preceding 5 years.
> She also stated that she had never been treated for, nor did she ever have any illness or disease
peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.
> The application also recited that the declarations of Saturnino constituted a further basis for the
issuance of the policy.

Issue:
Whether or not the insured made such false representation of material facts as to avoid the policy.

Held:
YES.

There can be no dispute that the information given by her in the application for insurance was false,
namely, that she never had cancer or tumors or consulted any physician or undergone any operation
within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material? The Insurance Law
provides that “materiality is to be determined not by the event, but solely by the probable and
reasonable influence of the facts upon the party to whom the communication is due, in forming his
estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in view of
the non-medical nature of the insurance applied for, which does away with the usual requirement of
medical examination before the policy is issued. The contention is without merit. If anything, the
waiver of medical examination renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered, for such information necessarily
constitutes an important factor which the insurer takes into consideration in deciding whether to issue
the policy or not.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured
herself did not know, since her doctor never told her, that the disease for which she had been operated
on was cancer. In the first place, concealment of the fact of the operation itself was fraudulent, as there
could not have been any mistake about it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In
this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the
contract of insurance, concealment being defined as “negligence to communicate that which a party
knows and ought to communicate.” The basis of the rule vitiating the contract in cases of concealment
is that it misleads or deceives the insurer into accepting the risk, or accepting it at a rate of premium
agreed upon. The insurer, relying upon the belief that the insured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that the circumstances withheld does
not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.
Edillon v Manila Bankers Life G.R. No. L-34200 September 30, 1982
J. Vasquez

Facts:
> In Apr. 1969, Carmen Lapuz applied for insurance with Manila Bankers. In the application she stated
the date of her birth as July 11, 1904 (around 64 yrs old). The policy was thereafter issued.

> Subsequently, in May 1969, Carmen died of a car accident. Her sister, as beneficiary claimed the
proceeds of the insurance.

> Manila Bankers refused to pay because the certificate of insurance contained a provision excluding it’s
liability to pay claims to persons under 16 or over 60.

Issue:
Whether or not the policy is void considering that the insured was over 60 when she applied.

Held:
NO.
The age of Carmen was not concealed to the insurance company. Her application form indicated her
true age. Despite such information, Manila Bankers accepted the premium and issued the policy. It had
all the time to process the application and notice the applicant’s age. If it failed to act, it was because
Manila Bankers was willing to waive such disqualifications or it simply overlooked such fact. It is
therefore estopped from disclaiming any liability.