Yu v CA G.R. No. L-12465 May 29, 1959

J. Bautista

Facts:

Yu Pang Eng submitted application for insurance consisting of the medical declaration made by him to the medical examiner and the report. Yu then paid the premium in the sum of P591.70.

The insured, in his application for insurance, said “no” to ever having stomach disease, cancer, and fainting-spells. He also claimed to not have consulted a physician regarding such diseases.

After submitting the form, he entered the hospital where he complained of dizziness, anemia, abdominal pains and tarry stools. He was found to have peptic ulcer.

The insured entered another hospital for medical treatment but he died of "infiltrating medullary carcinoma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen."

Yu Pang Cheng aimed to collect P10,000.00 on  life of one Yu Pang Eng from an insurance company.

The company set up the defense that the insured was guilty of misrepresentation and concealment of material facts. They subsequently refused to give the indemnity.

The trial court rendered judgment ordering defendant to pay plaintiff the sum of P10,000.00, plus P2,000.00 as attorney's fees. The Court of Appeals reversed the decision of the trial court, holding that the insured was guilty of concealment of material facts. Hence the present petition.

Issue: Whether or not the insured is guilty of concealment of some facts material to the risk insured that consequently avoids the policy.

Held: Yes. Petition dismissed.

Ratio:

The first confinement took place from January 29, 1950 to February 11, while his application was submitted on September 5, 1950. When he gave his answers to the policy, he concealed the ailment of which he was treated in the hospital.

The negative answers given by the insured regarding his previous ailment 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, the company would probably had never consented to the issuance of the policy in question. In fact, according to the death certificate, the insured’s death may have direct connection with his previous illness.

Under the law, a neglect to communicate that which a party knows and ought to communicate, is called concealment. This entitles the insurer to rescind the contract. The insured is required to communicate to the insurer all facts within his knowledge which are material to the contract and which the other party has not the means of ascertaining. 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.

Argente vs. West Coast- “One ground for the rescission of a contract of insurance under the insurance Act is "a concealment", which in section 25 is defined "A neglect to communicate that which a party knows and ought to communicate."

“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 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.”