TAI TONG CHUACHE & CO., vs.

THE INSURANCE COMMISSION and TRAVELLERS MULTIINDEMNITY CORPORATION Facts: On April 19, 1975, the spouses Palomo obtained a P100,000 loan from Tai Tong Chuache, Inc. To secure payment, a mortgage was executed over their land and building in favor of Tai Tong Chuache & Co. On April 25, 1975, Arsenio Chua, representative of Tai Tong Chuache & Co. insured the latters interest with Travellers Multi-Indemnity Corporation for P100,000 (P70,000 for the building and P30,000 for the contents thereof). On July 31, 1975, the bulding and the contents were totally razed by fire. Issue: Whether at the time of the occurrence of the peril insured against, the petitioner Tai Tong Chuache & Co. as mortgagee had no more insurable interest over the insured property. SC Ruling: The record of the case shows that the petitioner Tai Tong Chuache & Co. to support its claim for the insurance proceeds offered as evidence the contract of mortgage which has not been cancelled nor released. It has been held in a long line of cases that when the creditor is in possession of the document of credit, he need not prove non-payment for it is presumed. The validity of the insurance policy taken by petitioner was not assailed by Multi-Indemnity Corporation. Moreover, petitioners claim that the loan extended to the Palomos has not yet been paid was corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner. The respondent insurance company having issued a policy in favor of herein petitioner which policy was of legal force and effect at the time of the fire, it is bound by its terms and conditions. Upon its failure to prove the allegation of lack of insurable interest on the part of the petitioner, respondent insurance company is and must be held liable. Travellers Multi-Indemnity corporation is ordered to pay petitioner the face value of Insurance Policy in the amount of P100,000.

Great Pacific Life Assurance vs CA (316 SCRA 677)

FACTS: Great Pacific Life Assurance Corporation (Grepalife) executed a contract of group life insurance with Development Bank of the Philippines (DBP) wherein Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. One such loan mortgagor is Dr. Wilfredo Leuterio. In an application form, Dr. Leuterio answered questions concerning his test, attesting among others that he does not have any heart conditions and that he is in good health to the best of his knowledge. However, after about a year, Dr. Leuterio died due to massive cerebral hemorrhage. When DBP submitted a death claim to Grepalife, the latter denied the claim, alleging 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. Hence, the widow of the late Dr. Leuterio filed a complaint against Grepalife for Specific Performance with Damages. Both the trial court and the Court of Appeals found in favor of the widow and ordered Grepalife to pay DBP. Issue: WON there was concealment on the part of the insured/Dr. Leuterio?

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Held: No, concealment by the insured was not duly proven by Grepalife. 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. The medical findings were not conclusive because Dr. Mejia did not conduct an autopsy on the body of the decedent. As the attending physician, Dr. Mejia stated that he had no knowledge of Dr. Leuterio's any previous hospital confinement. Dr. Leuterio's death certificate stated that hypertension was only "the possible cause of death." The private respondent's statement, as to the medical history of her husband, was due to her unreliable recollection of events. Hence, the statement of the physician was properly considered by the trial court as hearsay. The question of whether there was concealment was aptly answered by the appellate court, thus: "The insured, Dr. Leuterio, had answered in his insurance application that he was in good health and that he had not consulted a doctor or any of the enumerated ailments, including hypertension; when he died the attending physician had certified in the death certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. From this report, the appellant insurance company refused to pay the insurance claim. Appellant alleged that the insured had concealed the fact that he had hypertension. 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. . . xxx xxx xxx 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.

G.R. No. L-41794

August 30, 1935

SEGUNDINA MUSGI, ET AL., plaintiffs-appellees, vs. WEST COAST LIFE INSURANCE CO., defendant-appellant. Facts: The two policies were issued upon applications filed by the insured (ARsenio Garcia) on July 20, 1931 and October 15, of the same year, respectively. In both applications, the insured had to answer inquiries as to his state of health and that of his family, which he did voluntarily. In each of the said applications the following question was asked: "1. What physician or practitioner or any other person not named above have you consulted or been treated by, and for what illness, or ailment? (If none, so state.)" In the first application, the insured answered "None", and in the second, "No". These answers of the insured as well as his other statements contained in his applications were one of the causes or considerations for the issuance of the policies, and they so positively appear therein. After the death of the insured and as a result of the demand made by the beneficiaries upon the defendant to pay the value of the policies, the latter discovered that the aforementioned answers were false and fraudulent, because the truth was that the insured, before answering

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and signing the applications and before the issuance of the policies, had been treated in the General Hospital by a lady physician for different ailments. Plaintiffs herein are the beneficiaries in said policies, Segundina Musgi of Policy No. 129454, and Buenaventura Garcia of Policy No. 130381; Demand was made upon the defendant company for the payment of the two policies above referred to, but the defendant company refused to pay on the grounds stated in the answer. Issue: whether the two answers given by the insured in his applications are false, and if they were the cause, or one of the causes, which induced the defendant to issue the policies. Held: On the first point, the facts above set out leave no room for doubt. The insured knew that he had suffered from a number of ailments, including incipient pulmonary tuberculosis, before subscribing the applications, yet he concealed them and omitted the hospital where he was confined as well as the name of the lady physician who treated him. That this concealment and the false statements constituted fraud, is likewise clear, because the defendant by reason thereof accepted the risk which it would otherwise have flatly refused. When not otherwise specially provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regarding contracts. Article 1261 of the Civil Code provides that there is no contract unless there should be, in addition to consent and a definite object, a consideration for the obligation established. And article 1276 provides that the statement of a false consideration shall render the contract void. The two answers being one of the considerations of the policies, and it appearing that they are false and fraudulent, it is evident that the insurance contracts were null and void and did not give rise to any right to recover their value or amount. A similar case was already decided by this court in Argente vs. West Coast Life Insurance Co. where it held that: One ground for the rescission of a contract of insurance under the Insurance Act is a "concealment", which in section 25 is defined as "A neglect to communicate that which a party knows and ought to communicate". Appellant argues that the alleged concealment was immaterial and insufficient to avoid the policy. We cannot agree. 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 fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted. In Joyce, The Law of Insurance, second edition, volume 3, Chapter LV, is found the following: "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 designedly and intentionally withholds the same. "Another rule is that if the assured undertakes to state all the circumstances affecting the risk, a full and fair statement of all is required. "It is also held that 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 of itself

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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. . . . "The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will disclose every material fact within his actual or presumed knowledge, is misled into a belief that the circumstance withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist. The principal question, therefore, must be, Was the assurer misled or deceived into entering a contract obligation or in fixing the premium of insurance by a withholding of material information or facts within the assured's knowledge or presumed knowledge? "It therefore follows that the assurer in assuming a risk is entitled to know every material fact of which the assured has exclusive or peculiar knowledge, as well as all material facts which directly tend to increase the hazard or risk which are known by the assured, or which ought to be or are presumed to be known by him. And a concealment of such facts vitiates the policy. "It does not seem to be necessary ... that the ... suppression of the truth should have been willful." If it were but an inadvertent omission, yet if it were material to the risk and such as the plaintiff should have known to be so, it would render the policy void. But it is held that if untrue or false answers are given in response to inquiries and they relate to material facts the policy is avoided without regard to the knowledge or fraud of assured, although under the statute statements are representations which must be fraudulent to avoid the policy. So under certain codes the important inquiries are whether the concealment was willful and related to a matter material to the risk. xxx xxx xxx

"If the assured has exclusive knowledge of material facts, he should fully and fairly disclose the same, whether he believes them material or not. But notwithstanding this general rule it will not infrequently happen, especially in life risks, that the assured may have a knowledge actual or presumed of material facts, and yet entertain an honest belief that they are not material. ... The determination of the point whether there has or has not been a material concealment must rest largely in all cases upon the form of the questions propounded and the exact terms of the contract. Thus, where in addition to specifically named diseases the insured was asked whether he had had any sickness within ten years, to which he answered "No", and it was proven that within that period he had had a slight attack of pharyngitis, it was held a question properly for the jury whether such an inflammation of the throat was a "sickness" within the intent of the inquiry, and the court remarked on the appealed decision that if it could be held as a matter of law that the policy was thereby avoided, then it was a mere devise on the part of insurance companies to obtain money without rendering themselves liable under the policy. . . . In view of the foregoing, we are of the opinion that the appellant's first two assignments of error are well founded, wherefore, the appealed judgment is reversed and the defendant absolved from the complaint, with the costs of both instances to the plaintiffs. So ordered.

Sunlife Assurance Company of Canada v. CA GR No. 105135 June 22, 1995

Facts: Robert Bacani procured a life insurance contract for himself from Sunlife. He was issued a policy valued P100,000 with double indemnity in case of accidental death. The designated beneficiary was his mother, respondent Bernarda Bacani.

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Robert died in a plane crash. Hence, Bernarda filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an investigation and its findings prompted it to reject the claim that insured Robert did not disclose material facts relevant to the issuance of the policy, rendering insurance voidable. It claimed that Robert gave false statements in his application. "5.Within the past 5 years have you: a)consulted any doctor or other health practitioner? b)submitted to: ECG? X-rays? blood tests? other tests? c)attended or been admitted to any hospital or other medical facility? "6.Have you ever had or sought advice for: xxx xxx xxx b)urine, kidney or bladder disorder?" (Rollo, p. 53). The deceased answered question No. 5(a) in the affirmative but limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and flu complications. The other questions were answered in the negative (Rollo, p. 53). Petitioner discovered that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests. Issue: WON Sunlife can avoid its obligation by claiming concealment. Held: Yes, it may. The rule that factual findings of the lower court and the appellate court are binding on this Court is not absolute and admits of exceptions, such as when the judgment is based on a misappreciation of the facts (Geronimo v. Court of Appeals, 224 SCRA 494 [1993]). 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." 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. In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that 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.

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Thus, "good faith" is no defense in concealment. The insured's failure to 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. The argument, that petitioner's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. Moreover, such argument of private respondents would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective (See Vda de Canilang v. Court of Appeals, supra). Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries (Henson v. The Philippine American Life Insurance Co., 56 O.G. No. 48 [1960]). We, therefore, rule that petitioner properly exercised its right to rescind the contract of insurance by reason of the concealment employed by the insured. It must be emphasized that rescission was exercised within the two-year contestability period as recognized in Section 48 of The Insurance Code.

Vda. de Canilang v. CA Fact: On 18 June 1982, Jaime Canilang consulted Dr. Wilfredo B. Cluadio. He was diagnosed as suffering from sinus tachycardia. He again consulted the same doctor on 3 August 1982 and this time was found to have acute bronchitis. On the next day . 4 August 1982, he applied for a non-medical insurance policy with Great pacific Life Assurance Company naming his wife Thelma Canilang, as his beneficiary. On 2 August 1983, he died of congestive heart failure. anemia, and chronic anemia. The widow and beneficiary, petitioner herein, filed a claim with Great Pacific which he insured denied on 5 December 1983 upon the ground that the insured had concealed material information from it. At the hearing of the complaint she filed with the Insurance Commission, she testified that she was not aware of any serious illness suffered by her late husband and that, as far as she knew, her husband had died because of kidney disorder. The Commission ruled in her favor but was reversed on appeal. Held: We agree with the Court of Appeals that the information which Jaime Canilang failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclose his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refuse to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A mans state of mind or subjective belief is not capable of proof in our judicial process. Except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon actual orphysical event which ensue. Materiality relates rather to the probable and reasonable influence of the upon the party to whom the communication 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. Or Title: Vda. DE CANILANG v. COURT OF Topic: Test of materiality in concealment Facts:

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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. EXCEPTIONS: xxx Issue: Whether or not there is a material concealment Held: 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. PhilippineAmerican Life Insurance Company, this Court held that:

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.. . 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. Title: Bernardo Argente vs. West Coast Life Insurance (March 19, 1928, G.R. No. L-24899) Facts: Bernardo Argente and his wife Vicenta de Ocampo signed an application for life insurance with the sum of P2,000, later amended to P15,000. Both applications, with the exception of the names and the signatures of the applicants, were written by the agent of West Coast Life Insurance Co. But all the information contained in the applications were furnished by Bernardo Argente to the agent. Pursuant to their applications, Bernardo and Vicenta were examined separately by Dr. Sta. Ana, a medical examiner for the West Coast Life Insurance Co.,. Except for the name and signature, the report was handwritten by Dr. Sta. Ana. The information and answers to the questions were furnished by the applicants (Bernardo and Vicenta). Later, Vicenta died of cerebral apoplexy. Bernardo presented a claim in due form to the West Coast Life Insurance Co. for the payment of the sum of P15,000 the amount of the joint life Insurance policy.

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Following investigation conducted, it was apparently disclosed that the answers given by the insured in their medical examinations with regard to their health and previous illness and medical attendance were untrue. For that reason, the West Coast Life Insurance Co. refused to pay the claim of Bernardo Argente and wrote him to the effect that the claim was rejected because the insurance was obtained through fraud and misrepresentation. The court found from the evidence that the representations made by Bernardo Argente and his wife in their applications to the defendant for life insurance were false with respect to their estate of health during the period of five years preceding the date of such applications, and that they knew the representations made by them in their applications were false. The court further found from the evidence that the answers given by Bernardo Argente and his wife at the time of the medical examination by Doctor Sta. Ana were false with respect to the condition of their health at that time and for a period of several years prior thereto. Issue: Whether or not West Coast Life Insurance can rescind the insurance contract. Ruling: One ground for the rescission of a contract of insurance under the Insurance Act is "a concealment," which in section 25 is defined as "A neglect to communicate that which a party knows and ought to communicate." Appellant argues that the alleged concealment was immaterial and insufficient to avoid the policy. We cannot agree. In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning diseases were untrue, the truth of falsity of the answers become the determining factor. In the policy was procured by fraudulent representations, the contract of insurance apparently set forth therein was never legally existent. It can fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted. In Joyce, The Law of Insurance, second edition, volume 3, Chapter LV, is found the following: 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. Another rule is that if the assured undertakes to state all the circumstances affecting the risk, a full and fair statement of all is required. It is also held that 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. . . .

Saturnino vs. Philippine American Life Ins. Co.

FACTS: It appears that two months after the issuance of the policy, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands found in the right armpit. Notwithstanding the fact of her operation, Estefania A. Saturnino did not make the 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 9 Insurance CD - Barbs, Chinky, Ling, Lordie, Marga

tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding five years. She also stated that she had never been treated for nor did she ever have any illness or disease peculiar to her sex, particularly the breast, ovaries, uterus and menstrual disorders, the application also recites that the forgoing declarations constituted a further basis for the issuance of the policy. ISSUE: Whether or not the insured made such false representations of material facts as to avoid the policy. HELD: There can be no dispute that the information given by her in her application for insurance was false, namely, that she had never had cancer or tumors, or consulted any physician or undergone any operations within the preceding period of five years. The Insurance Law provides that materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the proposed contract, or in making his inquiries. The contention of appellants is that the facts subject of the representation were not material in view of the non- medical nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued. The contention is without merit. If anything, the waiver of the medical examinations render 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 wether to issue the policy or not. Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know, since her doctor never told her, that the disease for which she was operated in was cancer. In the first place the concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment. Secondly, in order to avoid the policy it is not necessary to show actual fraud on the part of the insured. 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. The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at the rate of the premium agreed upon. The insurer relying upon the belief that the assured will disclose every material fact within his actual or presumed knowledge , is misled into a belief that the circumstances withheld does not exist and he is thereby induced to estimate the risk upon a false basis that does not exist.

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