GREAT PACIFIC LIFE V.
CA Whether private respondent Ngo Hing concealed the
FACTS:
Ngo Hing filed an application with the Great Pacific
Assurance Company (Grepalife) for a twenty-year
endowment policy in the amount of P50,000.00 on
the life of his one-year old daughter Helen Go. Said
respondent supplied the essential data which
petitioner Lapulapu D. Mondragon, Branch Manager
of the Grepalife in Cebu City wrote on the
corresponding form in his own handwriting.
Mondragon finally type-wrote the data on the
application form which was signed by private
respondent Ngo Hing. The latter paid the annual
premuim to the Company, but he retained a certain
amount as his commission for being a duly
authorized agent of Grepalife. Upon the payment of
the insurance premium, the binding deposit receipt
was issued to private respondent Ngo Hing.
Likewise, petitioner Mondragon handwrote at the
bottom of the back page of the application form his
strong recommendation for the approval of the
insurance application.
Then Mondragon received a letter from Grepalife
disapproving the insurance application. The letter
stated that the said life insurance application for 20-
year endowment plan is not available for minors
below seven years old, but Grepalife can consider
the same under the Juvenile Triple Action Plan, and
advised that if the offer is acceptable, the Juvenile
Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by
Grepalife was allegedly not communicated by
Mondragon to Ngo Hing. Instead, Mondragon wrote
back Grepalife again strongly recommending the
approval of the 20-year endowment insurance plan
to children, pointing out that since 1954 the
customers, especially the Chinese, were asking for
such coverage.
It was when things were in such state that on May
28, 1957 Helen Go died of influenza with
complication of bronchopneumonia. Thereupon, Ngo
Hing sought the payment of the proceeds of the
insurance, but having failed in his effort, he filed the
action for the recovery of the same before the CFI of
Cebu, which rendered the adverse decision.
ISSUE:
state of health and physical condition of Helen Go,
which rendered void the aforesaid deposit receipt.
RULING: YES
Relative to the second issue of alleged concealment,
the Court is of the firm belief that private respondent
had deliberately concealed the state of health and
physical condition of his daughter Helen Go. Where
private respondent supplied the required essential
data for the insurance application form, he was fully
aware that his one-year old daughter is typically a
mongoloid child. Such a congenital physical defect
could never be ensconced nor disguised.
Nonetheless, private respondent, in apparent bad
faith, withheld the fact material to the risk to be
assumed by the insurance company. As an
insurance agent of Grepalife, he ought to know, as
he surely must have known. his duty and
responsibility to such a material fact. Had he
diamond said significant fact in the insurance
application form Grepalife would have verified the
same and would have had no choice but to
disapprove the application outright.
The contract of insurance is one of perfect good faith
uberrima fides meaning good faith, absolute and
perfect candor or openness and honesty; the
absence of any concealment or demotion, however
slight [Black's Law Dictionary, 2nd Edition], not for
the alone but equally so for the insurer (Field man's
Insurance Co., Inc. vs. Vda de Songco, 25 SCRA
70). Concealment is a neglect to communicate that
which a party knows and ought to communicate
(Section 25, Act No. 2427). Whether intentional or
unintentional the concealment entitles the insurer to
rescind the contract of insurance (Section 26, Id.: Yu
Pang Cheng vs. Court of Appeals, et al, 105 Phil
930; Satumino vs. Philippine American Life
Insurance Company, 7 SCRA 316). Private
respondent appears guilty thereof.
The SC held that no insurance contract was
perfected between the parties with the
noncompliance of the conditions provided in the
binding receipt, and concealment, as legally defined,
having been committed by herein private
respondent.
Musngi v. West Coast Life
FACTS:
Plaintiffs Musngi and Garia filed a suit against West
Coast Life to recover the value of the two insurance
policies applied for by Arsenio Garcia (the insured).
In applying for the said insurance, the insured was
asked if he consulted a physician or practitioner, and
if so, for what ailment or illness; he answered “None”
and “No”, respectively. These answers were one of
the causes or considerations for the issuance of the
policies. Upon the death of the insured, the plaintiffs,
as beneficiaries, demanded West Coast to pay the
value of the policies. However, West Coast found
out that the insured had been treated by a lady
physician in the General Hospital in Manila for
different ailments such as incipient pulmonary
tuberculosis, chronic bronchitis, and chronic
suppurative pyelocystisis. It contended that the two
policies did not create any valid obligation because
they were fraudulently obtained by the insured. The
appealed decision held that the health of the
insured, before acceptance of his application and the
issuance of the policies, could neither be discussed
nor questioned by the defendant company because
three physicians of the company examined the
insured; however, all the physicians signified that the
insured was in good health. Nevertheless, the
findings of the company physicians were nit the main
cause for the issuance (or non-issuance) of the
policies.
ISSUES:
1.) W/N the statements of the insured regarding
his health were false
2.) W/N such statements were the causes
which induced the defendant company to
issue the policies
RULING:
1.) Yes, the statements of the insured regarding
his health were false because at the time of
application, he already knew that he had
been suffering from ailments.
2.) Yes, such statements were the causes
which induced the defendant company to
issue the policies. The concealment and
false statements of the insured constituted
fraud; the insurance company, by reason of
such statement, accepted the risk
associated with the policy nut for which it
could have rejected. It was further held that
the principal question must be whether the
assurer (the insurance company) was
misled or deceived into entering a contract
of obligation or in fixing the premium of the
insurance by withholding of material
information or facts within the assured’s
knowledge or presumed knowledge. Under
Art. 1276 of the Civil Code, the statement of
a false consideration shall render the
contract void. Such matter is not specifically
provided for by the Insurance Law, and so
the general rules of the civil law regarding
contracts (there being a life insurance
contract) shall apply. Thus, a valid cause or
consideration is a requisite for a valid
insurance contract.
Sunlife Assurance Company of Canada vs. Court
of Appeals
CONCEALMENT – In weighing the evidence
presented, the trial court concluded that indeed
there was concealment and misrepresentation,
however, it was done in “good faith” and the facts
concealed or misrepresented were irrelevant since
the policy was “non-medical.” SC disagrees. 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 to communicate, is called
concealment.”
FACTS:
Bacani procured a life insurance contract for himself
from Sunlife Assurance. Specifically, the policy
included a double indemnity in case of accidental
death, designating his mother as beneficiary.
Later, Bacani died in a plane crash and so the
mother filed a claim. After investigation, Sunlife
rejected the claim on ground of non-disclosure of
material facts. They said that Bacani did not mention
that two weeks prior to his insurance application he
was examined and confined at the Lung Center of
the Philippines, where he was diagnosed for renal
failure.
The trial court ruled that the facts concealed by the
insured were made in good faith and under the belief
that they need not be disclosed. Also, it held that the
health history of the insured was immaterial since
the insurance policy was “non-medical.”
The CA affirmed, stating that the cause of death was
unrelated to the facts concealed by the insured.
ISSUE:
Whether or not the concealment made by Bacani
warranted the rejection of the insurance claim
RULING:
The Supreme Court reversed the decision of the CA
and ruled that rescission of the insurance contract
was proper.
Disclosure of Material Facts required
Under sec. 26 of the Insurance Code, a party to a
contract of insurance is required 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.
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 information which the insured failed to disclose
was material and relevant to the approval and
issuance of the insurance policy. The matters
concealed would have definitely affected petitioner’s
action on his application, either by approving it with
the corresponding adjustment for a higher premium
or rejecting the same. Moreover, a disclosure may
have warranted a medical examination of the
insured by the petitioner in order for it to reasonably
assess the risk involved in accepting the application.
Good Faith not a defense.
Materiality of the information withheld does not
depend on the state of mind of the insured. Neither
does it depend on the actual or physical events
which ensue.
Thus, “good faith” is no defense in concealment.
Waiver of Medical Examination not a defense.
The waiver of the medical examination of the insured
does not mean that material facts need not be
disclosed. In fact, it 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.
Cause of Death.
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.
GREPALIFE vs. CA
FACTS:
A contract of group life insurance was executed
between petitioner Grepalife and DBP. Grepalife
agreed to insure the lives of eligible housing loan
mortgagors of DBP.
Leuterio, a physician and a housing debtor of DBP
applied for membership in the group life insurance
plan. In an application form,. Leuterio answered
questions concerning his health condition as follows:
7. Have you ever had, or consulted, a physician for a
heart condition, high blood pressure, cancer,
diabetes, lung; kidney or stomach disorder or any
other physical impairment?
Answer: No. If so give details _____________.
8. Are you now, to the best of your knowledge, in
good health?
Answer: [x] Yes [ ] NO.
Grepalife then issued a Certificate, as insurance
coverage of Leuterio, to the extent of his DBP
mortgage indebtedness amounting to P86,200.00
Later, Leuterio died due to “massive cerebral
hemorrhage.” Consequently, DBP submitted a death
claim to Grepalife. Grepalife denied the claim
alleging that. Leuterio was not physically healthy
when he applied for an insurance coverage.
Grepalife insisted that Leuterio did not disclose he
had been suffering from hypertension, which caused
his death. Allegedly, such non-disclosure constituted
concealment that justified the denial of the claim.
The widow of Leuterio, respondent Medarda, filed a
complaint with the RTC, against Grepalife for
“Specific Performance with Damages.” During the
trial, Dr. Mejia, who issued the death certificate, was
called to testify. Dr. Mejia’s findings, based partly
from the information given by the respondent widow,
stated that Leuterio complained of headaches
presumably due to high blood pressure. The
inference was not conclusive because Leuterio was
not autopsied, hence, other causes were not ruled
out.
The trial court rendered a decision in favor of
respondent widow and against Grepalife. The CA
sustained the trial court’s decision. Hence, the
present petition.
ISSUE:
WON there was concealment as to justify Grepalife’s
non-payment of the insurance proceeds.
RULING: NO
Petitioner contends that Dr. Leuterio failed to
disclose that he had hypertension, which might have
caused his death. 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 assured, but he
designedly and intentionally withholds the same.
Petitioner merely relied on the testimony of the
attending physician, Dr. Hernando Mejia, as
supported by the information given by the widow of
the decedent
On the contrary the medical findings were not
conclusive because Dr. Mejia did not conduct an
autopsy on the body of the decedent. Hence, the
statement of the physician was properly considered
by the trial court as hearsay.
The CA’s stand is that contrary to appellant’s
allegations, there was no sufficient proof that the
insured had suffered from hypertension.
Appellant insurance company had failed to establish
that there was concealment made by the insured,
hence, it cannot refuse payment of the claim
The fraudulent intent on the part of the insured must
be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and
the duty to establish such defense by satisfactory
and convincing evidence rests upon the insurer. In
the case at bar, the petitioner failed to clearly and
satisfactorily establish its defense, and is therefore
liable to pay the proceeds of the insurance.
PHILAMCARE HEALTH SYSTEMS, INC., vs.
COURT OF APPEALS
FACTS:
The health coverage 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.
FACTS:
Ernani Trinos, deceased husband of Julita Trinos,
applied for a health care coverage with 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).
Coverage of the health care agreement (HCA):
 approved for a period of one year, Renewed 3
times yearly: March 1, 1988 - March 1, 1990; March
1, 1990 – June 1, 1990. The amount of coverage
was increased to a maximum sum of P75,000.00 per
disability.
Ernani’s entitlement under HCA:
 hospitalization benefits, whether ordinary or
emergency, listed therein.
 out-patient benefits" such as annual physical
examinations, preventive health care and other out-
patient services.
Ernani was subsequently confined. HISTORY
(everything happened within the period of coverage):
1. Ernani suffered a heart attack and was confined at
the Manila Medical Center (MMC) for one month
beginning March 9, 1990.
2. Julita tried to claim the benefits under the health
care agreement.
3. Philamdenied her claim saying that the Health
Care Agreement was void. 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.
4. Julita paid the hospitalization expenses herself,
amounting to about P76,000.00
5. Ernani was discharged at MMC
6. He was attended by a physical therapist at home.
7. Again he was admitted at the Chinese General
Hospital.
8. Julita brought her husband home again due to
financial difficulties.
9. In the morning of April 13, 1990, Ernani had fever
and was feeling very weak.
10. Julita was constrained to bring him back to the
Chinese General Hospital where he died on the
same day.
On July 24, 1990, respondent instituted with the
Regional Trial Court of Manila, Branch 44, an action
for damages against Philam and its president, Dr.
Benito Reverente, She asked for reimbursement of
her expenses plus moral damages and attorney’s
fees. After trial, the lower court ruled against Philam,
ordered:
1. Defendants to pay and reimburse the medical and
hospital coverage of the late ErnaniTrinos in the
amount of P76,000.00 plus interest, until the amount
is fully paid to plaintiff who paid the same;
2. Defendants to pay the reduced amount of moral
damages of P10,000.00 to plaintiff;
3. Defendants to pay the reduced amount
ofP10,000.00 as exemplary damages to plaintiff;
4. Defendants to pay attorney’s fees of P20,000.00,
plus costs of suit. CA: affirmed the decision of the
trial court but deleted all awards for damages and
absolved petitioner Reverente.Denied MR.
ISSUE:
1. Whether there was concealment of material
facts on the part of Ernani that rendered the
HCA void by virtue of the "Invalidation of
agreement" contained in the contract.
2. Suppose there was concealment, what are
the steps Philam should have done?
RULING:
1. NONE, there was no concealment of material
facts.
Petitioner cannot rely on the stipulation regarding
"Invalidation of agreement" which reads:
Failure to disclose or misrepresentation of any
material information by 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 policy even though they are
untrue.
Thus, although false, a representation of the
expectation, intention, belief, opinion, or judgment of
the insured will not avoid the policy if there is no
actual fraud in inducing the acceptance of the risk, or
its acceptance at a lower rate of premium, and this is
likewise the rule although the statement is material Anent the incontestability of the membership of
to the risk, if the statement is obviously of the respondent’s husband, we quote with approval the
foregoing character, since in such case the insurer is following findings of the trial court:
not justified in relying upon such statement, but is
obligated to make further inquiry. There is a clear Under the title Claim procedures of expenses, the
distinction between such a case and one in which defendant Philamcare Health Systems Inc. had
the insured is fraudulently and intentionally states to twelve months from the date of issuance of the
be true, as a matter of expectation or belief, that Agreement within which to contest the membership
which he then knows, to be actually untrue, or the of the patient if he had previous ailment of asthma,
impossibility of which is shown by the facts within his and six months from the issuance of the agreement
knowledge, since in such case the intent to deceive if the patient was sick of diabetes or hypertension.
the insurer is obvious and amounts to actual fraud. The periods having expired, the defense of
concealment or misrepresentation no longer lie.
The fraudulent intent on the part of the insured must
be established to warrant rescission of the insurance
contract. Concealment as a defense for the health
care provider or insurer to avoid liability is an
affirmative defense and the duty to establish such Manulife v. Ybanez
defense by satisfactory and convincing evidence
rests upon the provider or insurer. In any case, with
FACTS:
or without the authority to investigate, petitioner is
liable for claims made under the contract. Having
Manulife Philippines, Inc. (Manulife) instituted a
assumed a responsibility under the agreement,
Complaint for Rescission of Insurance Contracts
petitioner is bound to answer the same to the extent
against Hermenegilda Ybañez (Hermenegilda) and
agreed upon. In the end, the liability of the health
the BPI Family Savings Bank (BPI Family). It is
care provider attaches once the member is
alleged in the Complaint that Insurance which
hospitalized for the disease or injury covered by the
Manulife issued in favor of Dr. Gumersindo Solidum
agreement or whenever he avails of the covered
Ybañez (insured), were void due to concealment or
benefits which he has prepaid
misrepresentation of material facts in the latter's
applications for life insurance; that Hermenegilda,
2. Philam should have followed Section 27 of the
wife of the said insured, was revocably designated
Insurance Code:
as beneficiary in the subject insurance policies; that
on November 17, 2003, when one of the subject
"a concealment entitles the injured party to rescind a
insurance policies had been in force for only one
contract of insurance." The right to rescind should be
year and three months, while the other for only four
exercised previous to the commencement of an
months, the insured died; that Manulife conducted
action on the contract. In this case, no
an investigation into the circumstances leading to
rescission was made. Besides, the cancellation of
the said insured's death, in view of the
health care agreements as in insurance policies
aforementioned entries in the said insured's Death
require the concurrence of the following conditions:
Certificate; that Manulife thereafter concluded that
the insured misrepresented or concealed material
a. Prior notice of cancellation to insured;
facts at the time the subject insurance policies were
b. Notice must be based on the occurrence after
applied for; and that for this reason Manulife
effective date of the policy of one or more of
accordingly denied Hermenegilda's death claims and
thegrounds mentioned;
refunded the premiums that the insured paid on the
c. Must be in writing, mailed or delivered to the
subject insurance policies.
insured at the address shown in the policy;
d. Must state the grounds relied upon provided in
BPI Family filed a Manifestation praying that either it
Section 64 of the Insurance Code and upon request
be dropped from the case or that the case be
of insured, to furnish facts on which cancellation is
dismissed with respect to it, since no objection was
based.
interposed to this prayer by either Manulife or
Hermenegilda, the RTC granted the prayer. Manulife
None of the above pre-conditions was fulfilled in this
presented its sole witness in the person of Ms.
case.
Jessiebelle Victoriano (Victoriano ), the Senior
Manager of its Claims and Settlements Department.
The oral testimony of this witness chiefly involved
identifying herself as the Senior Manager of
Manulife's Claims and Settlements Department and
also identifying the evidence. After due proceedings,
the RTC dismissed Manulife's Complaint. The RTC
found no merit at all in Manulife's Complaint for
rescission of the subject insurance policies because
it utterly failed to prove that the insured had
committed the alleged misrepresentation/s or
concealment/s. The CA affirmed the decision of
RTC.
ISSUE:
Whether the CA committed any reversible error in
affirming the RTC Decision dismissing Manulife's
Complaint for rescission of insurance contracts for
failure to prove concealment on the part of the
insured.
RULING:
No. The RTC correctly held that the CDH’s medical
records that might have established the insured’s
purported misrepresentation/s or concealment/s was
inadmissible for being hearsay, given the fact that
Manulife failed to present the physician or any
responsible official of the CDH who could confirm or
attest to the due execution and authenticity of the
alleged medical records.
Manulife's sole witness gave no evidence at all
relative to the particulars of the purported
concealment or misrepresentation allegedly
perpetrated by the insured. In fact, Victoriano merely
perfunctorily identified the documentary exhibits
adduced by Manulife; she never testified in regard to
the circumstances attending the execution of these
documentary exhibits much less in regard to its
contents. Of course, the mere mechanical act of
identifying these documentary exhibits, without the
testimonies of the actual participating parties thereto,
adds up to nothing. These documentary exhibits did
not automatically validate or explain themselves.
"The fraudulent intent on the part of the insured must
be established to entitle the insurer to rescind the
contract. Misrepresentation as a defense of the
insurer to avoid liability is an affirmative defense and
the duty to establish such defense by satisfactory
and convincing evidence rests upon the insurer." For
failure of Manulife to prove intent to defraud on the
part of the insured, it cannot validly sue for
rescission of insurance contracts.
NG GAN ZEE V. ASIAN
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.
Kwong Nam died of cancer of the liver with
metastasis. All premiums had been religiously paid
at the time of his death. When the widow, Gan Zee
claimed for benefits, it was declined on the ground
that the answers given by the insured to the
questions appealing in his application for life
insurance were untrue:
“Has 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” –
Kwong Answered in the negative.
According to Asian Crusader, Kwong Nam applied
for reinstatement of his lapsed life insurance policy
with the Insular Life Insurance Co., Ltd, but this was
declined by the insurance company, although later
on approved for reinstatement with a very high
premium. CFI said that he did not file for a “new”
insurance but merely an amendment.  
When the case was brought before the Insurance
Commissioner, he found no material concealment on
the part of the insured and that, therefore, appellee
should be paid the full face value of the policy but
Asian Crusader still did not pay the insurance policy.
CFI ordered Asian Crusader to pay the face value of
the insurance policy issued in favour of Kwong Nam,
the deceased husband of petitioner Ng Gan Zee.
ISSUE:
WON appellant (Asian Crusader), because of
insured's aforesaid representation, misled or
deceived into entering the contract or in accepting
the risk at the rate of premium agreed upon?
RULING: NO.
Insurance Code Sec. 28 states that “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” Thus, "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, above-quoted, 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."
VDA DE CANILANG V. CA
FACTS:
On 18 June 1982, Jaime Canilang consulted Dr.
Claudio and was diagnosed as suffering from "sinus
tachycardia” And was latter found to have "acute
bronchitis." On next day, Jaime applied for a "non-
medical" insurance policy with respondent Great
Pacific Life Assurance naming his wife, Thelma
Canilang, as his beneficiary. Jaime was issued
ordinary life insurance Policy effective as of 9 August
1982. On 5 August 1983, Jaime Canilang 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. Petitioner
filed a complaint against Great Pacific with the
Insurance Commission for recovery of the insurance
proceeds. During the hearing called by the
Insurance Commissioner, petitioner testified that she
was not aware of any serious illness suffered by her
late husband.
The medical declaration which was set out in the
application for insurance executed by Jaime
Canilang read as follows: xxxx
(1) I have not been confined in any hospital,
sanitarium or infirmary, nor receive any medical or
surgical advice/attention within the last five (5) years.
(2) I have never been treated nor consulted a
physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney, stomach disorder, or
any other physical impairment.
(3) I am, to the best of my knowledge, in good
health.
ISSUE:
Whether or not there is a material concealment
RULING:
There is a material concealment.
On appeal by Great Pacific, the Court of Appeals
reversed and set aside the decision of the Insurance
Commissioner and dismissed Thelma Canilang's
complaint and Great Pacific's counterclaim. The
Court of Appeals 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.
Canilang failed to disclose, under the caption
"Exceptions," that he had twice consulted Dr.
Claudio who had found him to be suffering from
"sinus tachycardia" and "acute bronchitis."
The provisions of P.D. No. 1460, also known as the
Insurance Code of 1978 read as follows:
Sec. 26. A neglect to communicate that which a
party knows and ought to communicate, is called a
concealment. xxx xxx 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
contract and as to which he makes no warranty, and
which the other has not the means of ascertaining.
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 in Section 31 of the
Insurance Code of 1978 which reads:
Sec. 31. Materially 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
disadvantages of the proposed contract, or in
making his inquiries.
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 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 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.
The insurance Great Pacific applied for was a "non-
medical" insurance policy. In Saturnino v. Philippine-
American Life Insurance Company, this Court held
that:
.. . if anything, the waiver of medical examination [in
a non-medical insurance contract] 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 . . .
The Insurance Code of 1978 was amended by
B.P. Blg. 874. This subsequent statute modified
Section 27 of the Insurance Code of 1978 so as to
read as follows:
Sec. 27. A concealment whether intentional or
unintentional entitles the injured party to rescind a
contract of insurance.
The Commissioner is wrong when it said that by
deleting the phrase "intentional or unintentional," the
Insurance Code of 1978 (prior to its amendment by
B.P. Blg. 874) intended to limit the kinds of
concealment which generate a right to rescind on
the part of the injured party to "intentional
concealments." "Intentional" and "unintentional"
cancel each other out. The deletion of the phrase
"whether intentional or unintentional" could not have
had the effect of imposing an affirmative requirement
that a concealment must be 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.
The nature of the facts not conveyed to the insurer
was such that the failure to communicate must have
been intentional rather than merely inadvertent. For
Jaime Canilang could not have been unaware that
his heart beat would at times rise to high and
alarming levels and that he had consulted a doctor
twice in the 2 months before applying for non-
medical insurance. The last medical consultation
took place just the day before the insurance
application was filed. 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'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.
It remains only to note that the Court of Appeals
finding that the parties had not agreed in the pretrial
before the Insurance Commission that the relevant
issue was whether or not Jaime Canilang had
intentionally concealed material information from the
insurer, was supported by the evidence of record,
i.e., the Pre-trial Order itself dated 17 October 1984
and the Minutes of the Pre-trial Conference dated 15
October 1984, which "readily shows that the word
"intentional" does not appear in the statement or
definition of the issue in the said Order and Minutes."
WHEREFORE, the Petition for Review is DENIED
for lack of merit and the Decision of the Court of is
AFFIRMED.
PHILAMCARE HEALTH SYSTEMS, INC., vs.
COURT OF APPEALS
FACTS Ernani Trinos, deceased husband of Julita
Trinos, applied for a health care coverage with
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).
Coverage of the health care agreement (HCA):
 approved for a period of one year, Renewed 3
times yearly: March 1, 1988 - March 1, 1990; March
1, 1990 – June 1, 1990. The amount of coverage
was increased to a maximum sum of P75,000.00 per
disability.
Ernani’s entitlement under HCA:
 hospitalization benefits, whether ordinary or
emergency, listed therein.
 out-patient benefits" such as annual physical
examinations, preventive health care and other out-
patient services.
Ernani was subsequently confined. HISTORY
(everything happened within the period of coverage):
1. Ernani suffered a heart attack and was confined at
the Manila Medical Center (MMC) for one month
beginning March 9, 1990.
2. Julita tried to claim the benefits under the health
care agreement.
3. Philamdenied her claim saying that the Health
Care Agreement was void. 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.
4. Julita paid the hospitalization expenses herself,
amounting to about P76,000.00
5. Ernani was discharged at MMC
6. He was attended by a physical therapist at home.
7. Again he was admitted at the Chinese General
Hospital.
8. Julita brought her husband home again due to
financial difficulties.
9. In the morning of April 13, 1990, Ernani had fever
and was feeling very weak.
10. Julita was constrained to bring him back to the
Chinese General Hospital where he died on the
same day.
On July 24, 1990, respondent instituted with the
Regional Trial Court of Manila, Branch 44, an action
for damages against Philam and its president, Dr.
Benito Reverente, She asked for reimbursement of
her expenses plus moral damages and attorney’s
fees. After trial, the lower court ruled against Philam,
ordered:
1. Defendants to pay and reimburse the medical and
hospital coverage of the late ErnaniTrinos in the
amount of P76,000.00 plus interest, until the amount
is fully paid to plaintiff who paid the same;
2. Defendants to pay the reduced amount of moral
damages of P10,000.00 to plaintiff;
3. Defendants to pay the reduced amount
ofP10,000.00 as exemplary damages to plaintiff;
4. Defendants to pay attorney’s fees of P20,000.00,
plus costs of suit. CA: affirmed the decision of the
trial court but deleted all awards for damages and
absolved petitioner Reverente.Denied MR.
ISSUE:
1. Whether there was concealment of material
facts on the part of Ernani that rendered the
HCA void by virtue of the "Invalidation of
agreement" contained in the contract.
2. Suppose there was concealment, what are
the steps Philam should have done?
RULING:
1. NONE, there was no concealment of material
facts.
Petitioner cannot rely on the stipulation regarding
"Invalidation of agreement" which reads:
Failure to disclose or misrepresentation of any
material information by 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 policy even though they are
untrue.

Thus, although false, a representation of the

expectation, intention, belief, opinion, or judgment of
the insured will not avoid the policy if there is no
actual fraud in inducing the acceptance of the risk, or
its acceptance at a lower rate of premium, and this is
likewise the rule although the statement is material
to the risk, if the statement is obviously of the
foregoing character, since in such case the insurer is
not justified in relying upon such statement, but is
obligated to make further inquiry. There is a clear
distinction between such a case and one in which
the insured is fraudulently and intentionally states to
be true, as a matter of expectation or belief, that
which he then knows, to be actually untrue, or the
impossibility of which is shown by the facts within his
knowledge, since in such case the intent to deceive
the insurer is obvious and amounts to actual fraud.

The fraudulent intent on the part of the insured must

be established to warrant rescission of the insurance
contract. 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