FLORENDO V PHILAM FACTS: Manuel Florendo filed an application for comprehensive pension plan with respondent Philam Plans,

Inc. (Philam Plans) Manuel signed the application and left to Perla the task of supplying the information needed in the application. Respondent Ma. Celeste Abcede, Perlas daughter, signed the application as sales counselor. Philam Plans issued Pension Plan Agreement to Manuel, with petitioner Ma. Lourdes S. Florendo, his wife, as beneficiary. In time, Manuel paid his quarterly premiums. Eleven months later, Manuel died of blood poisoning. Subsequently, Lourdes filed a claim with Philam Plans for the payment of the benefits under her husbands plan but Philam Plans declined her claim prompting her to file the present action against the pension plan company before the Regional Trial Court (RTC) of Quezon City and ruled in favor of Ma. Lourdes. However, the Court of Appeals then reversed the RTC decision. Hence this appeal. ISSUE: Whether or not Ma. Lourdes could claim benefits as the beneficiary of her husband under the insurance plan despite consideration that her husband Manuel concealed the true condition of his health. RULING: The Supreme Court answers this to the negative and the AFFIRMED in its entirety the decision of the Court of Appeals. The comprehensive pension plan that Philam Plans issued contains a one-year incontestability period. It states: VIII. INCONTESTABILITY After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any claim for insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or that you are not insurable at the time you bought this pension program by reason of age. If this Agreement lapses but is reinstated afterwards, the one (1) year contestability period shall start again on the date of approval of your request for reinstatement. The above incontestability clause precludes the insurer from disowning liability under the policy it issued on the ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance. Since Manuel died on the eleventh month following the issuance of his plan, the one year incontestability period has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes entitlement to the benefits of her husbands pension plan .

VDA DE CANILANG V CA > Canilang consulted Dr. Claudio and was diagnosed as suffering from "sinus tachycardia." Mr. Canilang consulted the same doctor again on 3 August 1982 and this time was found to have "acute bronchitis." > On the next day, 4 August 1982, Canilang applied for a "non-medical" insurance policy with Grepalife naming his wife, as his beneficiary. Canilang was issued ordinary life insurance with the face value of P19,700. > On 5 August 1983, Canilang died of "congestive heart failure," "anemia," and "chronic anemia." The wife as beneficiary, filed a claim with Grepalife which the insurer denied on the ground that the insured had concealed material information from it. > Vda Canilang filed a complaint with the Insurance Commissioner against Grepalife contending that as far as she knows her husband was not suffering from any disorder and that he died of kidney disorder.

> Grepalife was ordered to pay the widow by the Insurance Commissioner holding that there was no intentional concealment on the Part of Canilang and that Grepalife had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to "some of the pertinent questions" in the insurance application. CA reversed.

Issue: Whether or not Grepalife is liable. Held: SC took note of the fact that Canilang failed to disclose that hat he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from "sinus tachycardia" and "acute bronchitis. Under the relevant provisions of the Insurance Code, 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 information which Canilang failed to disclose was material to the ability of Grepalife to estimate the probable risk he presented as a subject of life insurance. Had Canilang disclosed 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 Grepalife 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 Canilang from Grepalife 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.

SC found it difficult to take seriously the argument that Grepalife 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.

NG GAN ZEE V ASIAN CRUSADER LIFE > 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. > In 1963, Kwong died of cancer of the liver with metastasis. Asian refused to pay on the ground of alse 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 Kwongs 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. Asians failure to inquire constituted a waiver of the imperfection in the answer.

GREPALIFE V CA In March 1957, Ngo Hing filed an application for a 20-year endowment policy for the life of his one-year old daughter with the Great Pacific Life Assurance Corporation (Grepalife). Lapulapu Mondragon was the insurance agent who assisted Ngo Hing. The insurance policy was for P50,000.00. The proper form was filled out and Ngo Hing paid the insurance premium. He received a binding deposit receipt in return. Said receipt however was subject to certain conditions, among which is the acceptance of Grepalife. Grepalife eventually denied the insurance application because the endowment plan by Grepalife is not offered for minors below seven years old. Grepalife, instead made a counter-offer which Ngo Hing failed to accept because Mondragon, instead of communicating the said denial to Ngo Hing, wrote a letter to Grepalife trying to convince Grepalife to allow one-year olds to be covered by endowment plans. In May 1957, Ngo Hings one -year old daughter died. Ngo Hing tried to collect the insurance claim but Grepalife refused as it claimed that the insurance contract was never perfected sans their acceptance. ISSUE: Whether or not Grepalife should pay the insurance claim. HELD: No. As properly ruled by the lower court as well as the Court of Appeals, the insurance contract was never completed because Grepalife never accepted the insurance offer. The binding deposit receipt issued to Ngo Hing is only acknowledgement of his application and receipt of his payment for the insurance premium. The Supreme Court also noted that Ngo Hing failed to disclose the fact that his one-year old daughter was a mongoloid. Such congenital defect was withheld by Ngo Hing with bad faith and such risk to be assumed by the insurance company. 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 not for the insured alone but equally so for the insurer. 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.

HENSON V PHILAM LIFE > Celestino Henson was insured by Philamlife in 1954 upon his application or a 20-yr endowment life policy. > In 1955, the policy lapsed due to non-payment of the premiums.

> Upon payment of the premiums due, the policy was reinstated, but in the application for reinstatement, Henson did not disclose the fact that he had been previously diagnosed for pyelonephritis, enlarged liver and hernia. He also did not disclose that he had been examined by a physician. > In 1956, Henson died, and his beneficiaries claim was rejected by Philamlife on the ground of concealment. > The company then filed for rescission. Beneficiaries contend that the intent to conceal must be proven to warra nt rescission.

Issue:

Whether or not there is need to prove intent to conceal to warrant rescission. Held: NO. Sec. 26 provides that a concealment whether intentional or unintentional entitles the injured party to rescind the contract of insurance. And aside from this, intent, being a state of the mind is hard to prove.

According to Sec. 30 of the Insurance Code: 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. In essence therefore, the insured need not have died of the very diseases he had failed to reveal to the insurance company. It is sufficient that his non-revelation had misled the insurer in forming its estimate of the disadvantages of the proposed policy reinstatement or in making its inquiries, in order to entitle the latter to rescind the contract.

YU PANG CHENG V CA > Yu Pang Eng obtained a life insurance policy naming his brother Yu Pang Cheng as beneficiary. > Eng subsequently died of medullary carcinoma, Grade 4, advanced and lesser curvature. > Cheng claims the proceeds of the policy. > Insurance co. refused payment on the ground that the policy was void due to the concealment.

Issue: Whether or not the policy is void.

Held: YES. In the application for the policy, Eng was asked whether he had been ill or had consulted a doctor due to symptoms or illnesses enumerated in the questionnaire. He answered No, when in fact he was hospitalized seven months prior to his application for the said policy.

ARGENTE V WEST COAST LIFE INSURANCE

Facts: > A joint life insurance policy was issued to Bernardo Argente and his wife Vicenta upon payment of premium, by West Coast. > On Nov. 18, 1925, during the effectivity of the policy, Vicenta died of cerebral apoplexy. Thereafter, Bernardo claimed payment but was refused. > It is admitted that in the Medical Examiners report, Vicenta, in response to the question asked by the medical examiner, her replies were as follows: o o How frequently do you use beer, wine, spirits and other intoxicants? she answered beer only in small quantities. What physician have you consulted or been treated by within the last 5 years and for what illness or ailment? she answered

none > It is however, not disputed that in 1924, Vicenta was taken to a hospital for what was first diagnosed as alcoholism and later changed to manic-depressive psychosis and then again changed to pscyhonuerosis.

Issue: Whether or not on the basis of the misrepresentations of Vicenta, Bernardo is barred from recovery.

Held: YES. The court found that the representations made by Vicenta in his application for life insurance were false with respect to her state of health and that she knew and was aware that the representations so made by her were false. 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 answer becomes the determining factor.

If the policy was procured by fraudulent misrepresentations, the contract of insurance apparently set forth therein was never legally existent. It can be fairly assumed that had the true facts been disclosed by the insured, the insurance would never have been granted.

SATURNINO V PHILAMLIFE > 2 months prior to the insurance 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, Saturnino did not make a disclosure thereof in her application for insurance. > She stated therein that she did not have, nor had she ever had, among others 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 5 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 of the breast, ovaries, uterus and menstrual disorders. > The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy.

Issue:

Whether or not the insured made such false representation of material facts as to avoid the policy.

Held: YES. There can be no dispute that the information given by her in the application for insurance was false, namely, that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material? 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 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 medical examination 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.

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 had been operated on was cancer. In the first place, 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 a policy, it is not necessary to show actual fraud on the part of the insured. In this jurisdiction, concealment, whether intentional or unintentional entitled 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 a rate of premium agreed upon. The insurer, relying upon the belief that the insured 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 it does not exist.

EDILLON V MANILA BANKERS LIFE INSURANCE CORP 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. 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. 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. ... 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...

SUN LIFE V CA > 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 Berarda, 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 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 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.

INSULAR LIFE V FELICIANO > Evaristo Feliciano filed an application with Insular Life upon the solicitation of one of its agents. > It appears that during that time, Evaristo was already suffering from tuberculosis. Such fact appeared during the medical exam, but the examiner and the companys agent ignored it.

> After that, Evaristo was made to sign an application form and thereafter the blank spaces were filled by the medical examiner and the agent making it appear that Evaristo was a fit subject of insurance. (Evaristo could not read and understand English) > When Evaristo died, Insular life refused to pay the proceeds because of concealment.

Issue: Whether or not Insular Life was bound by their agents acts.

Held: Yes. The insurance business has grown so vast and lucrative within the past century. Nowadays, even people of modest means enter into insurance contracts. Agents who solicit contracts are paid large commissions on the policies secured by them. They act as general representatives of insurance companies.

IN the case at bar, the true state of health of the insured was concealed by the agents of the insurer. The insurers medical examiner approved the application knowing fully well that the applicant was sick. The situation is one in which of two innocent parties must bear a loss for his reliance upon a third person. In this case, it is 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. Hence, Insular is liable to the beneficiaries.

ARANILLA V INSULAR LIFE > In 1959, Jose Aranilla applied for life insurance with Insular. In his application, these 2 questions appeared: o o WON he has suffered from any disease of the kidney and urinary tract, to which he answered NO. WON he has been confined in a hospital for consultation and treatment, to which he answered that in 1947, he was confined due to

influenza. > The truth however, was that a few months prior to his application, he was confined and treated for nephritis, a disease of the kidney and urinary tract, and he was accordingly informed of the cause. > When Aranilla died of cirrhosis of the liver, Insular refused to pay the proceeds due to concealment.

Issue: Whether the contract can be rescinded.

Held: Yes. If an answer given by the insured to a specific question asked by the insurer in an application for life insurance turns out to be false, it is a concealment of a material fact which entitles the insurer to rescind, even if the insured died of an ailment which has NO connection with the specific questions falsely answered by him. This is because materiality is to be determined NOT by the event but

ONLY 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.