Ng v Asian Crusader G.R. No. L-30685 May 30, 1983

J. Escolin:

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.

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?

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.

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."