INSURANCE – Atty.

Migallos

HARVARDIAN COLLEGE V. COUNTRY BANKERS o The insured has a right to collect on the policy, so long
CA CV 03771, 6 JANUARY 1986 as his relation to the insured property is such that he
will be benefited by its existence and injured by its loss.
FACTS: o The test in determining insurable interest in property is
whether one will derive pecuniary benefit or
advantage from its preservation, or will suffer
 Petitioner Yap was president of the Philippine Harvardian
pecuniary loss or damage from its destruction,
College, an educational institution, of which he, his wife, and
termination or injury by the happening of the event
his children were all the stockholders.
insured against.
 In 1979, a sales agent of respondent Country Bankers proposed
 Harvardian was not only in possession of the building, but in
that Harvardian insure its primary school building, which
fact had been using the same for several years with the
Harvardian agreed to.
knowledge and consent of Yap.
o After inspection, the school building was insured for
o Thus, it is reasonable to assume that, had the building
PhP 500,000.00.
not been burned, Harvardian would have been
o Harvardian contracted itself to pay an annual
allowed the continued use of the site for its operations.
premium of PhP 2,500.00.
o Harvardian is therefore directly affected by the loss
o County Bankers therefore issued the fire insurance
thereof.
policy to Harvardian.
 In 1980, during the effectivity of the abovementioned
insurance policy, the school building was totally burned, WHEREFORE, Harvardian has the right to the proceeds of the fire
rendering it a total loss. insurance policy
 Harvardian therefore made a claim on Country Bankers under fda
its insurance policy.
o Country Bankers denied the claim, contending that
plaintiff had no insurable interest over the building,
since it had been constructed on the piece of land in
the name of the late Yap.
 Neither party contended that the lot and the building were
both in the name of Yap, nor that the policy was in the name
of Harvardian.

ISSUE: W/N Harvardian has a right to the proceeds of the fire insurance
policy.

HELD: Yes, it does.

 As a rule, the nature of the title of the insured over the property
which was under the policy is immaterial to the insured’s right
to collect on the policy.

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INSURANCE – Atty. Migallos
COMMERCIAL UNION ASSURANCE V. LEPANTO
GR L-52027, 27 April 1982
Lampano v Jose, GR L-9401, 30 March 1915
FACTS:
 Mariano R. Barretto, constructed a house for Placida A. Jose
sold the house to Antonina Lampano for P6,000
 The house was destroyed by fire during which Lampano still
owed Jose P2,000 as evidenced by a promissory note. Jose
also owed Barretto P2,000 for the construction.
 After the completion of the house and before it was destroyed,
Mariano R. Barretto took out an insurance policy upon it in his
own name, with the consent of Placida A. Jose, for the sum of
P4,000. After its destruction, he collected P3,600 from the
insurance company, having paid in premiums the sum of
P301.50
 Lampano filed a complaint against Barreto and Jose alleging
that Jose in a verbal agreement told her that the policy will be
delivered to her so she should collected P3,600 from each of
them
 RTC: favored Jose ordering Barreto to pay him P1,298.50 and
offsetting the P2,000
 Barreto alone appealed
ISSUE: W/N Barreto had insurable interest in the house and could insure
it for his it for his own protection
HELD: YES. reversed and Barretto is absolved
 Where different persons have different interests in the same
property, the insurance taken by one in his own right and in his
own interest does not in any way insure to the benefit of
another
 A contract of insurance made for the insurer's (insured)
indemnity only, as where there is no agreement, express or
implied, that it shall be for the benefit of a third person, does
not attach to or run with the title to the insured property on a
transfer thereof personal as between the insurer and the
insured.
CHARRY BLUE BACINA
 Barretto had an insurable interest in the house. He construed
the building, furnishing all the materials and supplies, and
insured it after it had been completed
F. CONCEALMENT AND REPRESENTATION
Bernardo Argente v. West Coast Life Insurance Co.
G.R. No. L-24899 March 19, 1928 Malcolm, J.
DOCTRINE:
FACTS: February 9, 1925, Argente signed application for joint insurance
with his wife in the sum of Php 2,000. His wife, Vicenta signed a
likeapplication for the same policy. Both applications were written by
West Coast Life Insurance’s agent, del Rosario. February 10, Argente
was examined by Dr. Sta Ana, West Coast’s medical examiner, who
wrote the Medical Examiner’s Report with information furnished by
Argente. Vicenta was also examined.
May 9, Argente and his wife submitted an amended application for
fda insurance, increasing the amount to Php 15,000. It was accompanied
by documents entitled “Short Form Medical report”, upon which
appeared certain questions and answers.
May 15, a temporary policy was issued but not delivered until the first
quarterly premium on the policy was paid on July 2. In view of the fact
that more than 30 days had elapsed since they had been examined,
each of them was required to file a certificate of health before the
policy was delivered.
November 18, Vicenta died of cerebral apoplexy. Argente presented
a claim for Php 15,000. Upon investigation, it was found that the spouses
gave false answers during their medical examination regarding their
health and previous illnesses. Vicenta had stated in her medical
examination that she had not suffered from any ailment or disease of
the brain or nervous system, nor consulted any physician for any sort of
illness in the last five years. West Coast refused to pay.
Argente alleged that he and his wife answered truthfully, but Dr. Sta
Ana, in collusion with the insurance agent, del Rosario failed to record
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INSURANCE – Atty. Migallos
such in the medical reports. Trial judge ruled in favor of West Coast. No
evidence of motive on the part of Dr. Sta Ana. The representations of
the spouses in their applications, with regard to their health during the
past five years, were false.
ISSUE: W/N the insurance policy was null and void. YES
HELD: One ground for rescission of an insurance contract under the
Insurance Act is “concealment”, as defined in Sec. 25 as a neglect to
communicate that which a party knows and ought to communicate.
In an action on a life insurance policy where evidence conclusively
shows that the answers to questions concerning diseases were untrue,
the truth or falsity of the answers become the determining factor. A
policy procured by fraudulent representations renders the insurance
contract as never legally existent. It may be assumed that had the
assured disclosed the truth, the insurance policy would never have
been granted.
“Concealment exists where the assured has 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 designated and
intentionally with holds the same… the concealment must, in the
absence of inquiries, be not only material, but fraudulent, or the fact
must have been intentionally withheld; so it is held under English law
that if no inquiries are made and no fraud or design to conceal enters
into the concealment the contract is not avoided. And it is determined
that even though silence may constitute misrepresentation or
concealment it is not itself necessarily so as it is a question of fact. Nor
is there a concealment justifying a forfeiture where the fact of insanity
is not disclosed no questions being asked concerning the same...”
Trial Court affirmed; Petition dismissed.
GREAT PACIFIC LIFE and MONDRAGON vs. CA and NGO HING
GR No. L-31845 | April 30, 1979 | J. De Castro | Magsanay
FACTS:
Ngo Hing filed an application with the Great Pacific Life Assurance
Company (Pacific Life) for a 20-year endowment policy (50k) on the
life of his one-year old daughter Helen Go. He supplied the essential
CHARRY BLUE BACINA
data which Mondragon (Branch Manager of the Pacific Life in Cebu
City) wrote on the corresponding form in his own handwriting.
Mondragon entered the data on the application form and was signed
by Ngo Hing. Ngo Hing paid the annual premium (P1,077.75).
Upon the payment of the insurance premium, the binding deposit
receipt was issued to Ngo Hing. Mondragon handwrote at the bottom
of the back page of the application form his strong recommendation
for the approval of the insurance application.
Pacific Life disapproved the insurance application. It stated that the
insurance plan applied for is not available for minors below seven years
old, but Pacific Life 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 Pacific Life was
allegedly not communicated by Mondragon to Ngo Hing. Instead,
Mondragon wrote back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan to children,
fda pointing out that since 1954, the customers, especially the Chinese,
were asking for such coverage.
On May 28, 1957, Helen Go died of influenza with complication of
bronchopneumonia. Ngo Hing sought to claim the proceeds of the
insurance, but having failed in his effort, he filed the action for the
recovery of the same before the CFI Cebu. It ordered Pacific Life and
Mondragon to pay Ngo Hing 50k as proceeds of the insurance policy.
ISSUE:
WON there was concealment on the state of health and physical
condition of Helen Go?
HELD: YES! Ngo Hing guilty of concealment. Pacific Life and
Mondragon absolved from civil liability. Only reimburse the annual
premium paid.
RATIO:
Ngo Hing had deliberately concealed the state of health and physical
condition of his daughter Helen Go. Where Ngo Hing supplied the
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INSURANCE – Atty. Migallos
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
distinguished. Nonetheless, Ngo Hing, in apparent bad faith, withheld
the fact material to the risk to be assumed by the insurance company.
As an insurance agent of Pacific Life, Mondragon ought to know, as he
surely must have known, his duty and responsibility to such a material
fact. Had he clearly indicated said significant fact in the insurance
application form, Pacific Life 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. Concealment is a neglect to communicate that which a party
knows and ought to communicate. Whether intentional or
unintentional the concealment entitles the insurer to rescind the
contract of insurance.
Therefore, no insurance contract was perfected.
fda
IGNACIO SATURNINO, in his own behalf and as the JUDICIAL GUARDIAN
OF CARLOS SATURNINO, minor,plaintiffs-appellants,
vs.
THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, defendant-
appellee. | February 28, 1963 | G.R. No. L-16163| OLIVETE
DOCTRINE:
In this jurisdiction a concealment, whether intentional or unintentional,
entitles the insurer to rescind the contract of insurance, concealment
being defined as "negligence to communicate that which a party
knows and ought to communicate”
FACTS
 A written application for a 20-year endowment non-medical
insurance, whereby a detailed information is called for in the
said application concerning the applicant's health and
medical history, was submitted by Estefania Saturnino to
CHARRY BLUE BACINA
appellee PHILAM Life Insurance on November 16, 1957,
witnessed by appellee's agent Edward A. Santos. (This kind of
policy dispenses with the medical examination of the
applicant usually required in ordinary life policies.)
 The policy was issued on the same day, upon payment of the
first year's premium of P339.25.
 On September 19, 1958 Saturnino died of pneumonia,
secondary to influenza.
 Appellants here, who are her surviving husband and minor
child, respectively, demanded payment of the face value of
the policy.
 The claim was rejected by PHILAM Life and an action to
recover the sum of P5,000.00, corresponding to the face value
of an insurance policy issued was subsequently filed in the
Court of First Instance of Manila.
 It appears that two months prior to the issuance of the policy
or on September 9, 1957, 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. She stayed in the hospital for a period of eight
days, after which she was discharged, although according to
the surgeon who operated on her she could not be considered
definitely cured, her ailment being of the malignant type.
 Notwithstanding the fact of her operation Estefania A.
Saturnino did not make a disclosure thereof in her application
for insurance. On the contrary, she stated therein that she did
not have, nor had she ever had, among other ailments 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 five years.
 It is noteworthy to mention that the application also recites that
the foregoing declarations constituted "a further basis for the
issuance of the policy."
 Defendant-appelle PHILAM Life, set up foregoing special
defenses in its answer, with a counterclaim for damages
allegedly sustained as a result of the unwarranted presentation
of this case.
 CFI Manila: DISMISSED both complaint and counterclaim; ; but
appellants were declared entitled to the return of the premium
already paid
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INSURANCE – Atty. Migallos
ISSUE/S
WON the insured made such false representations of material facts as
to avoid the policy? YES; petition appealed from is AFFIRMED. Saturnino
not entitled to insurance claim.
HELD/RATIO
1. YES. The concealment of the fact of the operation is
fraudulent. Even if, as argued by the heirs, Estefania never
knew she was operated for cancer, there is still fraud in the
concealment no matter what the ailment she was operated
for. Note also that in order to avoid a policy, it is not necessary
that actual fraud be established otherwise insurance
companies will be at the mercy of anyone seeking insurance.
In this jurisdiction a concealment, whether intentional or unintentional,
entitles the insurer to rescind the contract of insurance, concealment
being defined as “negligence to communicate that which a party
knows and ought to communicate.”
Also, the fact that Philamlife waived its right to have Estefania undergo
a medical examination is not negligence. Because of Estefania’s
concealment, Philamlife considered medical checkup to be no longer
necessary. Had Philamlife been informed of her operation, she would
have been made to undergo medical checkup to determine her
insurability.
THELMA VDA. DE CANILANG, petitioner, vs. HON. COURT OF APPEALS
and GREAT PACIFIC LIFE ASSURANCE CORPORATION, respondents.
GR No. 92492 June 17, 1993
DOCTRINE
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
disadvantages of the proposed contract, or in making his inquiries.
FACTS
 June 1982 – Jaime Canilang consulted Dr. Wilfredo B. Caludio
and was diagnosed as suffering from “sinus tachycardia”.
 The doctor prescribed the ff. for him: Trazepam (tranquilizer)
and Aptin (beta-blocker drug)
CHARRY BLUE BACINA
 Aug. 1982 – Mr. Canilang consulted the same doctor and was
diagnosed to have “acute bronchitis.” Next day, he applied
for a non-medical insurance policy with respondent Great
Pacific Life Assurance Company naming his wife, Thelma
Canilang, as his beneficiary.
 The application had a medical declaration portion which was
executed and read as:
(1) I have not been confined in any hospital, sanitarium or
infirmary, nor received 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.
EXCEPTIONS
xxx
I hereby declare that all the foregoing answers and statements are
complete, true and correct. I hereby agree that if there be any fraud
fda or misrepresentation in the above statements material to the risk, the
INSURANCE COMPANY upon discovery within two (2) years from the
effective date of insurance shall have the right to declare such
insurance null and void. xxx
 As a result, Jaime was issued ordinary life insurance Policy No.
345163 with face value of P19,700 effective as of 9 August 1982.
 Year after, Jaime died of congestive heart failure, anemia and
chronic anemia. Thus, widow Thelma filed a claim with Great
Pacific which the latter denied on the ground that the insured
had concealed material information from it. [He failed to
disclose that he had consulted Dr. Claudio who has found him
to suffering from sinus trachydia]
 Canilang then filed before the insurance commission against
Great Pacific for the recovery of their insurance proceeds.
During the hearing, she testified that she was not aware that
her late husband suffered serious illnesses and that as far as she
knew her husband died because of kidney failure. Insurance
Commissioner ruled in favor of Canilang—there was no
intentional concealment on the part of the insured as he had
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INSURANCE – Atty. Migallos
thought that he was merely suffering from a minor ailment and
simple cold.
 BP 874 was found to be inapplicable to the said case as ruled
by the Insurance Commission. Such law voids an insurance
contract whether or not a concealment was intentionally
made. This law did not apply because it became effective
only on June 1, 1985.
 CA reversed the Ins. Comm’s decision. It dismissed Thelma
Canilang’s petition. CA found that the failure of Jaime
Canialng to disclose previous medical consultation and
treatment constituted material information which should have
been communicated to Great Pacific to enable the latter to
make proper inquiries. Hence, this petition for review on
certiorari.
ISSUE/S
W/N the concealment is material to the contract? YES.
HELD/RATIO
1. Materiality of the information concealed.
Under the Old Insurance Code, the information concealed must be
material to the contract. (Test of materiality)
Sec. 31. 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
disadvantages of the proposed contract, or in making his inquiries.
2. Application of the materiality test: 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.
Materiality relates rather to the ‘probable and reasonable influence of
the fact 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.
3. Nature of the concealment, whether intentional or not.
CHARRY BLUE BACINA
Before, a concealment, whether intentional or unintentional entitles the
injured party to rescind the contract. In 1978, the code intended to limit
the kinds of concealment which generates the right of rescission on the
ground that the kinds of appear. This is not persuasive.
The net result of the phrase, “whether intentional or unintentional is
precisely to leave unqualified the term of “Concealment”. Thus,
Section 27 of the Insurance Code of 1978 is properly read as referring
to “any concealment” without regard to whether such concealment is
intentional or unintentional.
4. in the case at bar, 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 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.”
fda
5. 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.
PETITION DENIED. CA AFFIRMED.
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INSURANCE – Atty. Migallos
SUNLIFE v. BACANI
GR 105135, 22 JUNE 1995
Facts:
> On April 15, 1986, Bacani procured a life insurance contract for
himself from Sun Life. He was issued a life insurance policy with double
indemnity in case of accidental death. The designated beneficiary was
his mother, Bernarda.
> On June 26, 1987, the insured died in a plane crash. Bernarda Bacani
filed a claim with Sun Life, seeking the benefits of the insurance. Sun Life
conducted an investigation and its findings prompted it to reject the
claim.
> Sun Life discovered that 2 weeks prior to his application, Bacani 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. He did not reveal such fact in his application.
> In its letter, Sun Life informed Bernarda, that the insured did not
disclosed material facts relevant to the issuance of the policy, thus
rendering the contract of insurance voidable. A check representing
the total premiums paid in the amount of P10,172.00 was attached to
said letter.
> Bernarda and her husband, filed an action for specific performance
against Sun Life. RTC ruled for Bernarda holding 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." CA affirmed.
Issue:
Whether or not the beneficiary can claim despite the concealment.
Held:
NOPE.
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
CHARRY BLUE BACINA
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 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 material and relevant to the
approval and the 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 petitioner in
order for it to reasonably assess the risk involved in accepting the
application.
Thus, "good faith" is no defense in concealment. The insured's failure to
fda disclose the fact that he was hospitalized for two weeks prior to filing his
application for insurance, raises grave doubts about his bonafides. It
appears that such concealment was deliberate on his part.
YU PANG CHENG vs. CA and (unidentified insurance company)
GR No. L-12465 | May 29, 1959 | Bautista Angelo | Magsanay
FACTS:
Yu Pang Eng: insured
Yu Pang Cheng: brother and beneficiary, plaintiff
 [1950, January 29] The insured entered the Chinese General
Hospital for medical treatment and stayed there up to
February 11, 1950. Upon entering the hospital, he complained
of dizziness, anemia, abdominal pains and tarry stools, and in
the evening of his admission he had several abdominal pains
and his discharges were with black tarry stools and felt dizzy
and weak. The history of his illness shows that the same "started
a year ago as frequent dizziness." An X-Ray picture of his
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INSURANCE – Atty. Migallos
stomach was taken and the diagnosis showed that he has
"peptic ulcer, bleeding."
 [1950, September 5] Yu Pang Eng submitted parts of his
application for insurance. He declared to the examining
physicians the following information as answers to the
questions propounded to him:
14. Have you ever had any of the following diseases or symptoms?
Gastritis, Ulcer of the Stomach or any disease of that organ? [No]
Vertigo, Dizziness, Fainting-spells or Unconscious? [No]
Cancer, Tumors or Ulcers of any kind? [No]
15. Have you ever consulted any physician not included in any of the
above answers? [No]
 [1950, September 7] He submitted part I of his application
which is the declaration made by him to an agent of
defendant.
 [1950, September 8] Based on said application, and upon
payment of the first premium, defendant issued the policy.
 [1950, December 27] The insured entered St. Luke's Hospital for
medical treatment.
 [1951, February 27] Yu Pang Eng died. According to the death
certificate, he died of "infiltrating medullary carcinoma, Grade
4, advanced cardiac and of lesser curvature, stomach
metastases spleen."
 Plaintiff demanded from the insurance company the payment
of the proceeds of the insurance policy.
 Defendant, in denying the claim, set up the defense that the
insured was guilty of misrepresentation and concealment of
material facts in that he gave false and untruthful answers in
his application, which were material to the risk insured against
and have the effect of avoiding the insurance policy.
 Plaintiff argues that the concealment was immaterial and
insufficient to avoid the policy.
 TC: insurance company to pay plaintiff P10,000.00.
 CA: insured was guilty of concealment of material facts which
relieves defendant from liability.
 Hence, this petition.
ISSUE: WON insured is guilty of concealment? YES!
HELD: Policy ineffective on the ground of concealment. Insurance
company relieved from liability.
CHARRY BLUE BACINA
RATIO:
It is apparent that when the insured gave his answers regarding his
previous ailment, he concealed the ailment of which he was treated in
the Chinese General Hospital which precisely has direct connection
with the subject of the questions propounded. The negative answers
given by the insured regarding his previous ailment, or his concealment
of the fact that he was hospitalized and treated for sometime of peptic
ulcer and had suffered from "dizziness, anemia, abdominal pains and
tarry stools", deprived defendant of the opportunity to make the
necessary inquiry as to the nature of his past illness so that as it may
form its estimate relative to the approval of his application. Had
defendant been given such opportunity, defendant would probably
had never consented to the issuance of the policy in question. In fact,
according to the death certificate, the cause of insured’s demise may
have a direct connection with his previous illness.
In an action on a life insurance policy where the evidence conclusively
shows that the answers to questions concerning diseases were untrue,
the truth or falsity of the answers become the determining factor. If the
policy was procured by fraudulent representations, the contract of
insurance apparently set forth therein was never legally existent. It can
fda fairly be assumed that had the true facts been disclosed by the
assured, the insurance would never have been granted.
DOCTRINE:
Our Insurance Law provides that "A neglect to communicate that a
party knows and ought to communicate, is called concealment"
(Section 25, Act No. 2427). Whether intentional or unintentional, the
concealment entitles the insurer to rescind the contract of insurance
(Section 26). Our law even requires the insured to communicate to the
insurer all facts within his knowledge which are material to the contract
and which the other party has no means of ascertaining (Section 27),
and the materiality is to be determined not by the event but solely by
the probable and reasonable influence of the facts upon the party to
whom the communication is due (Section 30).
PAGE 8 OF 18
INSURANCE – Atty. Migallos
JUANA VDA. DE COLLADO, ET. AL., plaintiffs and apellants vs. THE
INSULAR LIFE ASSURANCE CO. LTD., defendant and appellee. | July 23,
1955 | 51 OG (No 12) 6269
FACTS
 Vivencio Collado applied for an insurance contract with
Insular life in 1948. His application was approved and he
began started making premium payments. However, he
defaulted and the insurance was cancelled.
 He then applied for the reinstatement of his insurance policy in
Nov. of 1951 and tendered the amount of premium for the
years 1950-1951.
 He stated that he was as of Nov. 1951 of good health, and that
he had no injuries, ailments or illnesses and had not been sick
for any case since 1948 (his medical checkup when he applied
for insurance) and that he had not consulted any physician or
practitioner for any case since the date of such latest medical
exam.
 However, when Vivencio applied for the reinstatement, he was
already sick of a fatal disease known as carcinoma of the liver
and that 4 days prior to his application for insurance, he
consulted a doctor regarding his condition.
 The reinstatement was approved. Vivencio again failed to
pay the premiums for the last quarter of Nov. 1951 and as such,
Insular life sent him a notice canceling the policy.
 Vivencio then died. The beneficiaries instituted the present
action to recover from Insular life the death benefits of a life
insurance policy valued at 2T. Insular refused to pay claiming
concealment on the part of Vivencio.
 Collado contends that Insular life had waived the right to
rescind the policy in view of its repeated acceptance of the
overdue premiums for the second and third years.
 Municipal court of Manila: found for Collado and Insular filed
an appeal with CFI of Manila.
 CFI: rendered judgment in favor of Insular and dismissed
Collado’s complaint.
ISSUE/S
CHARRY BLUE BACINA
WON Insular life was estopped and could no longer cancel the
contract due to the fact that it accepted the tender of overdue
payments from Vivencio?
HELD/RATIO
2. NO. It is enormously clear that when the deceased applied for
a reinstatement of his policy in Nov. 1951, he had already been
afflicted with the fatal ailment for a period of about four
months. Furthermore, in submitting together with his
application for reinstatement, a health statement to the effect
that he was in good health, Vivencio concealed the material
fact that he had consulted a doctor and was then found to be
afflicted with the malady.
The acceptance of Insular life of the overdue premiums did not
necessarily deprive it of the right to cancel the policy in case of default
incurred by the Insured in the payment of future premiums. The case
would be different had the insured died at any time after the payment
of overdue premiums but previous to the reinstatement of the policy,
for the, Insular, by its acceptance of its overdue premiums is deemed
fda to have waived its right to rescind the policy.
The evidence at hand shows that insofar as the payment of the last
quarterly premium for 1951 was concerned, Insular had availed of the
right to rescind the policy by notifying the Insured that the policy had
lapsed.
2. REPRESENTATION
PAGE 9 OF 18
INSURANCE – Atty. Migallos
EDILLON V MANILA BANKERS LIFE
GR L-34200, 30 September 1982
Facts:
Carmen O, Lapuz applied with Manila Bankers for insurance coverage
against accident and injuries. She gave the date of her birth as July 11,
1904. She paid the sum of P20.00 representing the premium for which
she was issued the corresponding receipt. The policy was to be
effective for 90 days.
During the effectivity, Carmen O. Lapuz died in a vehicular accident in
the North Diversion Road.
Petitioner Regina L. Edillon, a sister of the insured and the beneficiary in
the policy, filed her claim for the proceeds of the insurance. Her claim
having been denied, Regina L. Edillon instituted this action in the trial
court.
The insurance corporation relies on a provision contained in the
contract excluding its liability to pay claims under the policy in behalf
of "persons who are under the age of sixteen (16) years of age or over
the age of sixty (60) years" They pointed out that the insured was over
sixty (60) years of age when she applied for the insurance coverage,
hence the policy became void.
The trial court dismissed the complaint and ordered edillon to pay
P1000. The reason was that a policy of insurance being a contract
of adhesion, it was the duty of the insured to know the terms of the
contract he or she is entering into.
The insured could not have been qualified under the conditions stated
in said contract and should have asked for a refund of the premium.
Issue:
Whether or not the acceptance by the insurance corporation of
the premium and the issuance of the corresponding certificate of
insurance should be deemed a waiver of the exclusionary condition of
coverage stated in the policy.
Held: Yes. Petition granted.
CHARRY BLUE BACINA
Ratio:
The age of Lapuz was not concealed to the insurance company.
Her application clearly indicated her age of the time of filing the same
to be almost 65 years of age. Despite such information which could
hardly be overlooked, the insurance corporation received her
payment of premium and issued the corresponding certificate of
insurance without question.
There was sufficient time for the private respondent to process
the application and to notice that the applicant was over 60 years of
age and cancel the policy.
Under the circumstances, the insurance corporation is already
deemed in estoppel. It inaction to revoke the policy despite a
departure from the exclusionary condition contained in the said policy
constituted a waiver of such condition, similar to Que Chee Gan vs.
Law Union Insurance.
The insurance company was aware, even before the policies were
issued, that in the premises insured there were only two fire hydrants
contrary to the requirements of the warranty in question.
fda It is usually held that where the insurer, at the time of the issuance of a
policy of insurance, has knowledge of existing facts which, if insisted on,
would invalidate the contract from its very inception, such knowledge
constitutes a waiver of conditions in the contract inconsistent with the
known facts, and the insurer is stopped thereafter from asserting
the breach of such conditions.
To allow a company to accept one's money for a policy of insurance
which it then knows to be void and of no effect, though it knows as it
must, that the assured believes it to be valid and binding, is so contrary
to the dictates of honesty and fair dealing.
Capital Insurance & Surety Co., Inc. vs. - involved a violation of
the provision of the policy requiring the payment of premiums before
the insurance shall become effective. The company issued the policy
upon the execution of a promissory note for the payment of
the premium. A check given subsequent by the insured as partial
payment of the premium was dishonored for lack of funds. Despite
such deviation from the terms of the policy, the insurer was held liable.
PAGE 10 OF 18
INSURANCE – Atty. Migallos
“... is that although one of conditions of an insurance policy is that "it
shall not be valid or binding until the first premium is paid", if it is silent as
to the mode of payment, promissory notes received by the company
must be deemed to have been accepted in payment of the premium.
In other words, a requirement for the payment of the first or
initial premium in advance or actual cash may be waived by
acceptance of a promissory note...”
SHORTCUT:
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.
CHARRY BLUE BACINA
THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. SERAFIN D.
FELICIANO AND ANGEL, FLORENDA, EUGENIO, HERMINIO and LETICIA,
all surnamed FELICIANO, represented by their guardían ad litem
SERAFIN D. FELICIANO, respondents. GR No. 47593 13 Sept. 1941
DOCTRINE
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 defense to liability on the policy.
FACTS
 Evaristo Feliciano filed an application for insurance with
petitioner Insular Life upon the solicitation of one of its agents.
Two insurance policies were issued to him in the amount of
P25,000 (1st policy: P20,000 and 2nd policy: P5,000).
 Feliciano died on 29 Sept. 1935 of pulmonary tuberculosis, the
defendant company refused to pay on the ground that the
policies were fraudulently obtained, the insured having given
false answers and statements in the application as well as in
fda the medical report.
 RTC ruled in favor of the insured Feliciano. The lower court
found that in the medical examination the results yielded that
Feliciano was suffering from tuberculosis at the time of his
application of the insurance. However, such fact was not
disclosed in his application.
 It was further found out that Feliciano was made to sign the
application and the examiner’s report in blank and afterwards
the blank spaces therein were filled in by the agent and
medical examiner who made it appear that Feliciano was fit
to be subject of an insurance
 On appeal, trial court was sustained. Now this petition alleging
that CA erred in holding that an insurance company has no
right to avoid a policy where its agent knowingly and
intentionally wrote down the answers in the application
differing from those made by the insured, in disregard of the
exception that when the agent, instead of serving the interests
of his principal, acts in his own or another's interest and
adversely to that of his principal, the said principal is not bound
by said acts of the agent.
PAGE 11 OF 18
INSURANCE – Atty. Migallos
ISSUE/S
W/N the insurance company should be liable for the acts of their
agents? YES.
HELD/RATIO
1. In the present case, the agent knew all the time the true state
of health of the insured. The insurer's medical examiner
approved the application knowing full well that the applicant
was sick. The situation is one in which one of two innocent
parties must bear a loss for his reliance upon a third person. In
this case, it was the insurer who gave the agent authority to
deal with the applicant. It was the one who selected the
agent, thus implying that the insured could put his trust on him.
It was the one who drafted and accepted the policy and
consummated the contract. It seems reasonable that as
between the two of them, the one who employed and gave
character to the third person as its agent should be the one to
bear the loss.
2. 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 tills 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.
3. 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. He is justified in assuming that the agent has with
equal good faith, truthfully recorded the answers given him.
CHARRY BLUE BACINA
THE INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs.
SERAFIN D. FELICIANO ET AL., respondents. GR No. 47593 Dec. 29, 1943
DOCTRINE
Where the insured merely signed the application form and made the
agent of the insurer fill the same for him, it was held that by doing so,
the insured made the agent of the insurer his own agent.
FACTS
 Evaristo Feliciano (respondent) died on September 29, 1935, he
was suffering with advanced pulmonary tuberculosis when he
signed his application for insurance with petitioner Insular Life
on October 12, 1934.
 Doctor Trepp, who took X-ray pictures of Feliciano’s lungs,
informed respondent that the latter was already in a very
serious and practically hopeless condition.
 In Feliciano’s insurance application with the petitioner, a
question was contained therein: “Have you ever suffered from
any ailment or disease of the lungs, pleurisy, pneumonia or
asthma?” In such application, it appeared that the answer
was NO—this was signed by the applicant.
fda  It appears that Feliciano signed the application in blank and
authorized the soliciting agent and/or medical examiner of the
Company to write the answers for him, he made them his
agents for that purpose.
 RTC and CA ruled in favor of the respondents and ordered the
insurer to pay for P25,000 representing the two life insurance
policies of Feliciano. Appeal to SC was filed but SC also
affirmed appellate court’s decision in a 4-3 decision on 13 Sept
1941. Hence, this motion for reconsideration.
ISSUE/S: W/N there was a valid insurance contract between the parties
notwithstanding the false statements committed by the insured? NO,
the contract was invalid.
HELD/RATIO
The applicant, Feliciano, having signed the application in blank and
authorized agents to write answers for him, he was responsible for the
acts in that connection. He was not supposed to sign the application
in blank, he knew that the answers to the questions therein would be
PAGE 12 OF 18
INSURANCE – Atty. Migallos
the basis of the policy and for that very reasons he was required with
his signature to vouch for the truth.
When he accepted the policy, he knew he was not in good health.
Nevertheless, he not only accepted the first policy of P20,000 but then
and there applied for another policy of P5000.
By accepting the policy, he became charged with knowledge of its
contents, whether he actually read it or not. He could not ostrich-like
hide his head from it in order to avoid his part of the bargain and at the
same time claim the benefit thereof. He knew, and was chargeable
with knowledge, from the very terms of the two policies sued upon that
the soliciting agent and the medical examiner had no power to bind
the company by any verbal promise or oral representation.
From all the facts and circumstances of the case, we are constrained
to conclude that the insured was a coparticipant, and coresponsible
with Agent David and Medical Examiner Valdez, in the fraudulent
procurement of the policies in question and that by reason thereof said
policies are void ab initio. Although the agent and the medical
examiner knew the statement to be false, no valid contract of
insurance was entered into because there is no real meeting of the
minds of the parties.
CHARRY BLUE BACINA
NG ZEE V. ASIAN CRUSADER LIFE INSURANCE
GR L-30685, 30 May 1983
Facts:
Kwong Nam applied for a 20-year endowment insurance on his life for
the sum of P20,000.00, with his wife, appellee Ng Gan Zee as
beneficiary. On the same date, Asian Crusader, upon receipt of the
required premium from the insured, approved the application and
issued the corresponding policy. Kwong Nam died of cancer of the liver
with metastasis. All premiums had been paid at the time of his death.
Ng Gan Zee presented a claim for payment of the face value of the
policy. On the same date, she submitted the required proof of death
of the insured. Appellant denied the claim on the ground that
the answers given by the insured to the questions in his application for
life insurance were untrue.
Appellee brought the matter to the attention of the Insurance
Commissioner. The latter, after conducting an investigation, wrote
the appellant that he had found no material concealment on the part
of the insured and that, therefore, appellee should be paid the full face
value of the policy. The company refused to settle its obligation.
fda
Appellant alleged that the insured was guilty of misrepresentation
when he answered "No" to the following question appearing in
the application for life insurance-
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.
The lower court ruled against the company on lack of evidence.
Appellant further maintains that when the insured was examined in
connection with his application for life insurance, he gave the
appellant's medical examiner false and misleading information as to
his ailment and previous operation. The company contended that he
was operated on for peptic ulcer 2 years before the policy
was applied for and that he never disclosed such an operation.
Issue: WON Asian Crusader was deceived into entering the contract or
in accepting the risk at the rate of premium agreed upon because of
insured's representation?
PAGE 13 OF 18
INSURANCE – Atty. Migallos
Held: No. Petition dismissed.
Ratio:
Section 27 of the Insurance Law:
Sec. 27. Such party a contract of insurance must communicate to the
other, in good faith, all facts within his knowledge which are material
to the contract, and which the other has not the means of ascertaining,
and as to which he makes no warranty.
"Concealment exists where the assured had knowledge of a fact
material to the risk, and honesty, good faith, and fair dealing requires
that he should 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."
Fraudulent intent on the part of the insured must 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 of the 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.
While the information communicated was imperfect, the same was
sufficient to have induced appellant to make further inquiries about
the ailment and operation of the insured.
Section 32 of Insurance Law:
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.
CHARRY BLUE BACINA
Where 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.
The company or its medical examiner did not make any further inquiries
on such matters from the hospital 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."
SHORTCUT:
Facts:
> In 1962, Kwon Nam applied for a 20yr endowment insurance on his
life with his wife, Ng Gan Zee as the beneficiary.
> He stated in his application that he was operated on for tumor of the
stomach associated with ulcer.
fda > In 1963, Kwong died of cancer of the liver with metastasis. Asian
refused to pay on the ground of false information.
> It was found that prior to his application, Kwong was diagnosed to
have peptic ulcers, and that during the operation what was removed
from Kwong’s body was actually a portion of the stomach and not
tumor.
Issue:
Whether or not the contract may be rescinded on the ground of the
imperfection in the application form.
Held:
NO.
Kwong did not have sufficient knowledge as to distinguish between a
tumor and a peptic ulcer. His statement therefore was made in good
faith. Asian should have made an inquiry as to the illness and operation
of Kwong when it appeared on the face of the application that a
question appeared to be imperfectly answered. Asian’s failure to
inquire constituted a waiver of the imperfection in the answer.
PAGE 14 OF 18
INSURANCE – Atty. Migallos
GREAT PACIFIC LIFE ASSURANCE V. COURT OF APPEALS
GR L- 113899, 13 October 1999
Facts:
A contract of group life insurance was executed between petitioner
Great Pacific and Development Bank Grepalife agreed to insure the
lives of eligible housing loan mortgagors of DBP.
Wilfredo Leuterio, a physician and a housing debtor of
DBP, applied for membership in the group life insurance plan. In
an application form, Dr. 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?
8. Are you now, to the best of your knowledge, in good health?”
Grepalife issued a coverage to the value of P86,200.00 pesos.
Dr. Leuterio died due to “massive cerebral hemorrhage.”
DBP submitted a death claim to Grepalife. Grepalife denied the claim
alleging that Dr. Leuterio was not physically healthy when
he applied for an insurance coverage. Grepalife insisted that Dr.
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, respondent Medarda V. Leuterio, filed against Grepalife.
The trial court rendered a decision in favor of respondent widow and
against Grepalife. The Court of Appeals sustained the trial court’s
decision.
Issues:
1. Whether the Court of Appeals erred in holding petitioner liable to DBP
as beneficiary in a group life insurance contract from a complaint filed
by the widow of the decedent/mortgagor?
2. Whether the Court of Appeals erred in not finding that Dr. Leuterio
concealed that he had hypertension, which would vitiate the
insurance contract?
3. Whether the Court of Appeals erred in holding Grepalife liable in the
amount of eighty-six thousand, two hundred (P86,200.00) pesos without
CHARRY BLUE BACINA
proof of the actual outstanding mortgage payable by the mortgagor
to DBP.
Held: No to all three. Petition dismissed.
Ratio:
1. Petitioner alleges that the complaint was instituted by the widow of
Dr. Leuterio, not the real party in interest, hence the trial court acquired
no jurisdiction over the case. It argues that when the Court of Appeals
affirmed the trial court’s judgment, Grepalife was held liable to pay the
proceeds of insurance contract in favor of DBP, the indispensable party
who was not joined in the suit.
The insured private respondent did not cede to the mortgagee all his
rights or interests in the insurance, the policy stating that: “In the event
of the debtor’s death before his indebtedness with the Creditor [DBP]
shall have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the creditor and the balance of sum
assured, if there is any, shall then be paid to the beneficiary/ies
designated by the debtor.” When DBP’s claim was denied, it collected
the debt from the mortgagor and took the necessary action of
fda foreclosure on the residential lot of private respondent.
Gonzales vs. Yek Tong Lin- Insured, being the person with whom the
contract was made, is primarily the proper person to bring suit
thereon. Insured may thus sue, although the policy is taken wholly or in
part for the benefit of another person named or unnamed, and
although it is expressly made payable to another as his interest may
appear or otherwise. Although a policy issued to a mortgagor is taken
out for the benefit of the mortgagee and is made payable to him, yet
the mortgagor may sue thereon in his own name, especially where the
mortgagee’s interest is less than the full amount recoverable under the
policy. Insured may be regarded as the real party in interest, although
he has assigned the policy for the purpose of collection, or has
assigned as collateral security any judgment he may obtain.
And since a policy of insurance upon life or health may pass by transfer,
will or succession to any person, whether he has an insurable interest or
not, and such person may recover it whatever the insured might have
recovered,[14] the widow of the decedent Dr. Leuterio may file the suit
against the insurer, Grepalife.
PAGE 15 OF 18
INSURANCE – Atty. Migallos
2. The medical findings were not conclusive because Dr. Mejia did not
conduct an autopsy on the body of the decedent. The medical
certificate stated that hypertension was “the possible cause of death.”
Hence, the statement of the physician was properly considered by the
trial court as hearsay.
Contrary to appellant’s allegations, there was no sufficient proof that
the insured had suffered from hypertension. Aside from the statement
of the insured’s widow who was not even sure if the medicines taken
by Dr. Leuterio were for hypertension, the appellant had not proven nor
produced any witness who could attest to Dr. Leuterio’s medical
history.
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.
3. A life insurance policy is a valued policy. Unless the interest of a
person insured is susceptible of exact pecuniary measurement, the
measure of indemnity under a policy of insurance upon life or health is
the sum fixed in the policy. The mortgagor paid
the premium according to the coverage of his insurance.
In the event of the debtor’s death before his indebtedness with the
creditor shall have been fully paid, an amount to pay the outstanding
indebtedness shall first be paid to the creditor.
DBP foreclosed one of the deceased person’s lots to satisfy the
mortgage. Hence, the insurance proceeds shall inure to the benefit of
the heirs of the deceased person or his beneficiaries.
CHARRY BLUE BACINA
TAN CHAY HENG V. WEST COAST LIFE
GR L-27541, 21 November 1927
In April 1925, West Coast Life Insurance Company (West Coast)
accepted and issued a temporary life insurance policy (pending
further review) to Tan Ceang. The life insurance was for P10,000.00 and
the premium paid therefor was P936.00. The beneficiary listed in the
policy was Tan Chay Heng. In May 1925, Tan Ceang died. Tan Chay
Heng filed an insurance claim which was denied by West Coast. Tan
Chay Heng sued West Coast. West Coast averred, in its ANSWER that
Tan Chay Heng, in connivance with others made Tan Ceang to enter
into an insurance policy and name Tan Chay Heng as the beneficiary;
that Tan Ceang was induced to lie on the application form about his
health and life conditions (he was made to account that he was not
addicted to opium, morphine, and cocaine when in fact he was); that
Tan Chay Heng was a gang leader involved in the racket of fraudulent
insurance schemes; that by reason of these fraud and machinations,
the insurance policy West Coast issued is void; that West Coast seeks to
avoid the insurance policy. Tan Chay Heng filed a demurrer as it
claimed that West Coast’s ANSWER is a cross-complaint and the facts
contained therein was not sufficient as a defense. The lower court
fda directed West Coast to amend its ANSWER which West Coast duly
excepted from and so the lower court ruled in favor of Tan Chay Heng.
The lower court further ruled that under Section 47 of [the old] Insurance
Law, if an insurer (West Coast) has the right to rescind a contract of
insurance, it must do so before a suit is brought against the insurer on
the said contract.
ISSUE: Whether or not Section 47 is applicable in the case at bar.
HELD: No. West Coast was not seeking for the rescission of the insurance
contract. In fact, West Coast avers that there was no insurance
contract at all because the temporary insurance issued in favor of Tan
Ceang was null and void. For West Coast, it was void ab initio because
of the fraudulent circumstances attending to it. Therefore, it cannot be
subject to rescission. The Supreme Court however remanded the case
to the lower court to determine the material allegations made by West
Coast against Tan Chay Heng.
PAGE 16 OF 18
INSURANCE – Atty. Migallos
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners,
vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE
INSURANCE COMPANY, respondents. GR No. 48049 June 29, 1989
DOCTRINE
Incontestability clause—precludes the insurer from raising the defenses
of false representations or concealment of material facts insofar as
health and previous diseases are concerned if the insurance has been
in force for at least two years during the insured’s lifetime. The phrase
“during the lifetime” found in Section 48 simply means that the policy is
no longer considered in force after the insured has died.
The insurer has two years from the date of issuance of the insurance
contract or of its last reinstatement within which to constest the policy,
whether or not, the insured still lives within such period. After two years,
the defenses of concealment or misrepresentation, no matter how
patent or well-founded, no longer lie.
FACTS
 Tan Lee Siong, father of petitioners, applied for life insurance in
the amount of P80,000 with respondent company PhilamLife.
Said application was approved and policy was issued
effective Nov. 6, 1973 with petitioners the beneficiaries thereof.
 . April 26, 1975—Tan Lee Siong died of hepatoma. Petitioners
then filed with the respondent their claim for the insurance
proceeds of the life insurance policy of their father. Philamlife
denied petitioners’ claim and rescinded policy by reason of
misrepresentation and concealment by the deceased.
Premiums paid were refunded.
 Petitioners, in turn, filed a complaint on 27 Nov. 1975 against
Philamlife before the Office of the Insurance Commissioner
which dismissed petitioner’s complaint on Aug. 9, 1977.
 On appeal, CA dismissed petitioner’s appeal for lack of merit.
Hence, this petition. It is petitioner’s contention that Philamlife
no longer had the right to rescind the contract as rescission
must allegedly be done during the lifetime of the insured within
two years and prior to the commencement of action.
ISSUE/S: W/N Philamlife has the right to contest the policy and rescind
the insurance contract? NO.
CHARRY BLUE BACINA
HELD/RATIO
Appicable law: Section 48, Insurance Code
“SEC. 48. Whenever a right to rescind a contract of insurance is given
to the insurer by any provision of this chapter, such right must be
exercised previous to the commencement of an action on the
contract.
“After a policy of life insurance made payable on the death of the
insured shall have been in force during the lifetime of the insured for a
period of two (2) years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio
or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
According to the petitioners: the insurance law was amended and the
second paragraph of Sec 48 added to prevent the insurance
company from exercising a right to rescind after the death of the
insured.
[SEE DOCTRINE]
fda The phrase “during the lifetime” found in Section 48 simply means that
the policy is no longer considered in force after the insured has died.
The key phrase in the second paragraph of Section 48 is “for a period
of two years.”
Facts noted by CA which was adopted by SC:
“The policy was issued on November 6, 1973 and the insured died on
April 26, 1975. The policy was thus in force for a period of only one year
and five months. Considering that the insured died before the two-year
period had lapsed, respondent company is not, therefore, barred from
proving that the policy is void ab initio by reason of the insured’s
fraudulent concealment or misrepresentation. Moreover, respondent
company rescinded the contract of insurance and refunded the
premiums paid on September 11, 1975, previous to the
commencement of this action on November 27, 1975.”
APPLICATION:
The insurer has two years from the date of issuance of the insurance
contract or of its last reinstatement within which to contest the policy,
whether or not, the insured still lives within such period. After two years,
the defenses of concealment or misrepresentation, no matter how
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INSURANCE – Atty. Migallos
patent or well founded, no longer lie. Congress felt this was a sufficient
answer to the various tactics employed by insurance companies to
avoid liability. The petitioners’ interpretation would give rise to the
incongruous situation where the beneficiaries of an insured who dies
right after taking out and paying for a life insurance policy, would be
allowed to collect on the policy even if the insured fraudulently
concealed material facts.
PETITION IS DENIED.
Manila Bankers Life Insurance Corporation vs Aban
G.R. No. 175666 July 29, 2013
Facts: On July 3, 1993, Delia Sotero (Sotero) took out a life insurance
policy from Manila Bankers Life Insurance Corporation (Bankers Life),
designating respondent Cresencia P. Aban (Aban), her niece, as her
beneficiary. Petitioner issued Insurance Policy No. 747411 (the policy),
with a face value of P 100,000.00, in Sotero’s favor on August 30, 1993,
after the requisite medical examination and payment of the insurance
premium. On April 10, 1996, when the insurance policy had been in
force for more than two years and seven months, Sotero died.
Respondent filed a claim for the insurance proceeds on July 9, 1996.
Petitioner conducted an investigation into the claim, and came out
with the following findings: 1. Sotero did not personally apply for
insurance coverage, as she was illiterate; 2. Sotero was sickly since
1990; 3. Sotero did not have the financial capability to pay the
insurance premiums on Insurance Policy No. 747411; 4. Sotero did not
sign the July 3, 1993 application for insurance; and 5. Respondent was
the one who filed the insurance application, and x x x designated
herself as the beneficiary. For the above reasons, petitioner denied
respondent’s claim on April 16, 1997 and refunded the premiums paid
on the policy.
Issue: Whether or not Manila Bankers is barred from denying the
insurance claims based on fraud or concealment.
Held: Yes. The “incontestability clause” is a provision in law that after a
policy of life insurance made payable on the death of the insured shall
have been in force during the lifetime of the insured for a period of two
CHARRY BLUE BACINA
(2) years from the date of its issue or of its last reinstatement, the insurer
cannot prove that the policy is void ab initio or is rescindible by reason
of fraudulent concealment or misrepresentation of the insured or his
agent.
The purpose of the law is to give protection to the insured or his
beneficiary by limiting the rescinding of the contract of insurance on
the ground of fraudulent concealment or misrepresentation to a period
of only two (2) years from the issuance of the policy or its last
reinstatement.
The insurer is deemed to have the necessary facilities to discover such
fraudulent concealment or misrepresentation within a period of two (2)
years. It is not fair for the insurer to collect the premiums as long as the
insured is still alive, only to raise the issue of fraudulent concealment or
misrepresentation when the insured dies in order to defeat the right of
the beneficiary to recover under the policy.
fda
Section 48 serves a noble purpose, as it regulates the actions of both
the insurer and the insured. Under the provision, an insurer is given two
years – from the effectivity of a life insurance contract and while the
insured is alive – to discover or prove that the policy is void ab initio or
is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year period
lapses, or when the insured dies within the period, the insurer must make
good on the policy, even though the policy was obtained by fraud,
concealment, or misrepresentation. This is not to say that insurance
fraud must be rewarded, but that insurers who recklessly and
indiscriminately solicit and obtain business must be penalized, for such
recklessness and lack of discrimination ultimately work to the detriment
of bona fide takers of insurance and the public in general.
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