J. Feliciano
Facts:
Canilang was found to have suffered from sinus tachycardia then bronchitis after a check-up from his doctor. The next day, he applied for a "non-medical" insurance policy with respondent Grepalife naming his wife, Thelma Canilang, as his beneficiary. This was to the value of P19,700.
He died of "congestive heart failure," "anemia," and "chronic anemia." The widow filed a claim with Great Pacific which the insurer denied on the ground that the insured had concealed material information from it.
Petitioner then filed a complaint against Great Pacific for recovery of the insurance proceeds. Petitioner testified that she was not aware of any serious illness suffered by her late husband and her husband had died because of a kidney disorder. The doctor who gave the check up stated that he treated the deceased for “sinus tachycardia” and "acute bronchitis."
Great Pacific presented a physician who testified that the deceased's insurance application had been approved on the basis of his medical declaration. She explained that as a rule, medical examinations are required only in cases where the applicant has indicated in his application for insurance coverage that he has previously undergone medical consultation and hospitalization.
The Insurance Commissioner ordered Great Pacific to pay P19,700 plus legal interest and P2,000.00 as attorney's fees. On appeal by Great Pacific, the Court of Appeals reversed. It 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.
Hence this petition by the widow.
Issue: Won Canilang was guilty of misrepresentation
Held: Yes. Petition denied.
Ratio:
There was a right of the insurance company to rescind the contract if it was proven that the insured committed fraud in not affirming that he was treated for heart condition and other ailments stipulated.
Apart from certifying that he didn’t suffer from such a condition, Canilang also failed to disclose in the that he had twice consulted a doctor who had found him to be suffering from "sinus tachycardia" and "acute bronchitis."
Under the Insurance Code:
Sec. 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.
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 should have communicated. The test of materiality of such information is contained in Section 31:
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.
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 he disclosed his visits to his doctor, the diagnosis made and 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 refused to issue a non-medical insurance policy.
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 Commissioner had also ruled that the failure of Great Pacific to convey certain information to the insurer was not "intentional" in nature, for the reason that Canilang believed that he was suffering from minor ailment like a common cold. Section 27 stated that:
Sec. 27. A concealment whether intentional or unintentional entitles the injured party to rescind a contract of insurance.
The failure to communicate must have been intentional rather than inadvertent. 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 ailment.
Canilang's failure to set out answers to some of the questions in the insurance application constituted concealment.
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