Argente v West Coast G.R. No.

L-24899 March 19,

1928
J. Malcolm

Facts:
Bernardo Argente signed an application for joint insurance with his wife in the sum of P2,000. The
wife, Vicenta de Ocampo, signed for the same. All the information contained in the applications was
furnished the agent by Bernardo Argente.
Argente was examined by Dr. Sta. Ana, a medical examiner for the West Coast. The result was
recorded in the Medical Examiner's Report, and with the exception of the signature of Bernardo
Argente, was in the hand-writing of Doctor Sta. Ana. But the information or answers to the questions
contained on the face of the Medical Examiner's Report were furnished the doctor by Argente.
Vicenta de Ocampo, wife of the plaintiff, was examined at her residence by the same doctor.
The spouses submitted to West Coast Life an amended application, increasing the amount to
P15,000, and asked that the policy be dated May 15, 1925. The amended application was
accompanied by the documents entitled "Short Form Medical Report." In both of these documents
appear certain questions and answers.
A temporary policy for P15,000 was issued to Bernardo Argente and his wife as of May 15, but it
was not delivered until the first quarterly premium on the policy was paid. More than thirty days had
elapsed since the applicants were examined. Each of them was required to file a certificate of health
before the policy was delivered.
Vicenta de Ocampo died of cerebral apoplexy. Argente presented a claim in due form to the West
Coast Life Insurance Co. for the payment of the sum of P15,000. It was apparently disclosed that the
answers given by the insured in their medical examinations with regard to their health were untrue.
West Coastrefused to pay the claim and wrote Argente to the effect that the claim was rejected due
to fraud.
The trial court held the policy null and void, hence this appeal.

Issue: WON Argente and Ocampo were guilty of concealment and thereby misled the insurer into
accepting the risk?

Held: Yes. Petition dismissed.

Ratio:
Vicenta de Ocampo, in response to the question asked by the medical examiner, answered no to
"Have you ever consulted a physician for or have you ever suffered from any ailment or diseaseof
the brain or nervous system?" She also answered none as to the question whether she consumed
alcohol of not.
To the question, "What physician or physicians, if any, not named above, have you consulted or
been treated by, within the last five years and for what illness or ailment?" she answered "None."
But the facts show that she was taken to San Lazaro Hospital, her case was diagnosed by the
admitting physician as "alcoholism, moreover, she was diagnosed with "phycho-neurosis."
Section 25 of the Insurance Code defined concealment as "a neglect to communicate that which a
party knows and ought to communicate."
The court held that the alleged concealment was not immaterial and insufficient to avoid the policy.
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. If the true facts been disclosed by the assured, the insurance would never have
been granted.
Concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must
have been intentionally withheld. If no inquiries are made and no fraud or design to conceal enters
into the concealment the contract is not avoided.
The assurer 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.
If the assured has exclusive knowledge of material facts, he should fully and fairly disclose the
same, whether he believes them material or not. The determination of the point whether there has or
has not been a material concealment must rest largely in all cases upon the exact terms of the
contract.

GREPALIFE V. CA (1999)
FACTS:

A contract of group life insurance was executed between Great Pacific Life
Assurance Corporation Grepalife) and Development Bank of the
Philippines (DBP)
Grepalife agreed to insure the lives of eligible housing loanmortgagors of
DBP
November 11, 1983: Dr. Wilfredo Leuterio, a physician and a housing
debtor of DBP applied for membership in the group life insurance plan
Dr. Leuterio answered questions concerning his health condition as follows:

7. Have you ever had, or consulted, a physician for a heart condition, high blood pressure,
cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment?

Answer: No. If so give details ___________.

8. Are you now, to the best of your knowledge, in good health?

Answer: [ x ] Yes [ ] No.[4]

November 15, 1983: Grepalife issued Certificate No. B-18558, as insurance
coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness
amounting to P86,200
August 6, 1984: Dr. Leuterio died due to massive cerebral
hemorrhage.
DBP submitted a death claim to Grepalife
Grepalife denied the claim alleging that Dr. Leuterio was not physically
healthy when he applied
RTC: Favored Medarda V. Leuterio (widow) and held Grepalife (insurer) liable
to pay DBP (creditor of the insured Dr. Wilfredo Leuterio)
CA sustained
ISSUE:
1. W/N DBP has insurable interest as creditor - YES
2. W/N Grepalife should be held liable - YES


HELD:


1. YES
In this type of policy insurance, the mortgagee is simply an appointee of
the insurance fund, such loss-payable clause does not make the
mortgagee a party to the contract
Section 8 of the Insurance Code provides:

Unless the policy provides, where a mortgagor of property effects insurance in his own
name providing that the loss shall be payable to the mortgagee, or assigns a policy of
insurance to a mortgagee, the insurance is deemed to be upon the interest of the
mortgagor, who does not cease to be a party to the original contract, and any act of
his, prior to the loss, which would otherwise avoid the insurance, will have the same
effect, although the property is in the hands of the mortgagee, but any act which,
under the contract of insurance, is to be performed by the mortgagor, may be
performed by the mortgagee therein named, with the same effect as if it had been
performed by the mortgagor.
The insured Dr. Wilfredo Leuterio did not cede to the mortgagee all his rights or interests in
the insurance. When Grepalife denied payment, DBP collected the debt from
the mortgagor and took the necessary action of foreclosure on the
residential lot of Dr. Wilfredo Leuterio
Insured may be regarded as the real party in interest, although he has
assigned the policy for the purpose of collection, or has assigned as
collateral security any judgment he may obtain
2. YES
medical findings were not conclusive because Dr. Mejia did not conduct
an autopsy
widow who was not even sure if the medicines taken by Dr. Leuterio were
for hypertension
Grepalife failed to establish that there was concealment made by the
insured, hence, it cannot refuse payment of the claim
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
The policy states that upon receipt of due proof of the Debtors death
during the terms of this insurance, a death benefit in the amount of
P86,200.00 shall be paid. In the event of the debtors death before his
indebtedness with the creditor shall have been fully paid, an amount to
pay the outstanding indebtedness shall first be paid to the Creditor and
the balance of the Sum Assured, if there is any shall then be paid to the
beneficiary/ies designated by the debtor.
DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagors
outstanding loan
insurance proceeds shall inure to the benefit of the heirs of the deceased
person or his beneficiaries
Equity dictates that DBP should not unjustly enrich itself at the expense
of another (Nemo cum alterius detrimenio protest). Hence, it cannot
collect the insurance proceeds, after it already foreclosed on the
mortgage.

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."

Vda Canilang v CA G.R. No. 92492 June 17, 1993
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 treatmentconstituted
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 didnt 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 hisestimate 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
insuranceapplication, it may be reasonably assumed that Great Pacific would have made
further inquiriesand 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, bythe
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 insuranceapplication 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.

Sunlife v CA G.R. No. 105135 June 22, 1995
J. Quiason

Facts:
Robert John B. Bacani procured a life insurance contract for himself from Sunlife. He was issued a
policy for P100,000.00, with double indemnity in case of accidental death. The designated
beneficiary was his mother, Bernarda Bacani.
The insured died in a plane crash. Respondent Bernarda Bacani filed a claim with petitioner, seeking
the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its
findings prompted it to reject the claim.
Sunlife informed Bacani that the insured did not disclose 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.
Petitioner claimed that the insured gave false statements in his application. The deceased answered
claimed that he consulted a Dr. Raymundo of the Chinese General Hospital for cough and flu
complications. The other questions were answered in the negative.
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 tests.
Bernarda Bacani and her husband filed an action for specific performance against petitioner with the
RTC. The court ruled in favor of the spouses and ordered Sunlife to pay P100,000.00.
In ruling for private respondents, the trial court concluded that the facts concealed by the insured
were made in good faith and under a belief that they need not be disclosed. The court also held that
the medial history was irrelevant because it wasnt medical insurance.
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled that petitioner
cannot avoid its obligation by claiming concealment because the cause of death was unrelated to
the facts concealed by the insured. Petitioner's motion for reconsideration was denied. Hence, this
petition.

Issue: WON the insured was guilty of misrepresentation which made the contract void.

Held: Yes. Petition dismissed.

Ratio:
Section 26 of The Insurance Code required 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.
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 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
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.
Vda. de Canilang v. Court of Appeals- 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.
Good faith" is no defense in concealment. The insured's failure to disclose the fact that he was
hospitalized raises grave doubts about his eligibility. 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.
Saturnino v. Philippine American Life Insurance " . . . the waiver of a 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 . . . "
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 as held in Henson.
Great Pacific v CA G.R. No. L-31845 April 30, 1979
J. De Castro

Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year endowment policy in the
amount of P50,000.00 on the life of his one-year old daughter Helen. He supplied the essentialdata
which petitioner Mondragon, the Branch Manager, wrote on the form. The latter paid the
annual premium the sum of P1,077.75 going over to the Company, but he retained the amount of
P1,317.00 as his commission for being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding deposit receipt was issued Ngo Hing.
Likewise, petitioner Mondragon handwrote at the bottom of the back page of the application formhis
strong recommendation for the approval of the insurance application. Then Mondragon received a
letter from Pacific Life disapproving the insurance application. The letter stated that the said life
insurance application for 20-year endowment plan is not available for minors below seven years old,
but Pacific Life can consider the same under the Juvenile Triple Action Plan, and advised that if the
offer is acceptable, the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was allegedly not communicated by
petitioner Mondragon to private respondent Ngo Hing. Instead, on May 6, 1957, Mondragon wrote
back Pacific Life again strongly recommending the approval of the 20-year endowment
insuranceplan to children, pointing out that since the customers were asking for such coverage.
Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the insurance, but
having failed in his effort, he filed the action for the recovery before the Court of First Instance of
Cebu, which ruled against him.

Issues:
1. Whether the binding deposit receipt constituted a temporary contract of the life insurance in
question
2. Whether Ngo Hing concealed the state of health and physical condition of Helen Go, which
rendered void the policy

Held: No. Yes. Petition dismissed.

Ratio:
The receipt was intended to be merely a provisional insurance contract. Its perfection was subject to
compliance of the following conditions: (1) that the company shall be satisfied that the applicant was
insurable on standard rates; (2) that if the company does not accept the application and offers to
issue a policy for a different plan, the insurance contract shall not be binding until the applicant
accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that if the company
disapproves the application, the insurance applied for shall not be in force at any time, and the
premium paid shall be returned to the applicant.
The receipt is merely an acknowledgment that the latter's branch office had received from the
applicant the insurance premium and had accepted the application subject for processing by the
insurance company. There was still approval or rejection the same on the basis of whether or not the
applicant is "insurable on standard rates." Since Pacific Life disapproved the insuranceapplication of
respondent Ngo Hing, the binding deposit receipt in question had never become in force at any time.
The binding deposit receipt is conditional and does not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen Go. When
hesupplied data, he was fully aware that his one-year old daughter is typically a mongoloid child. He
withheld the fact material to the risk insured.
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.
The concealment entitles the insurer to rescind the contract of insurance.
Yu Pang Cheng v. CA

YU PANG CHENG v. CA
1959 / Bautista Angelo / Petition for review by certiorari of a CA decision

FACTS
On September 1950, Yu Pang Eng submitted his application for insurance to an insurance company [defendant]. He
answered no to questions on his medical history (stomach diseases, dizziness,ulcers, vertigo, cancer, tumors, etc.)
as well as to the question of WON he consulted any physician regarding said diseases. Upon payment of the first
premium, the company issued to him an insurance policy. On December 1950, he went to St. Lukes for medical
treatment but he died two months later. According to the death certificate, he died of infiltrating medullary
carcinoma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen.
His brother and beneficiary, Yu Pang Cheng [petitioner], demanded from the insurance company the
payment of the policy proceeds [10k], but his demand was refused so he brought the present action. The insurance
companys defense was that the insured was guilty of misrepresentation and concealment of material facts in that he
gave false and untruthful answers to questions asked him in his application; hence, the effect is the avoiding of the
policy.
It appears that the insured entered the Chinese General Hospital for medical treatment on January 1950
[before application for insurance policy], complaining of dizziness, anemia, abdominal pains and tarry stools. His
illness history shows that this started a year ago as frequent dizziness. An x-ray picture of his stomach and the
diagnosis was that he suffered from peptic ulcer, bleeding.

INSURED IS GUILTY OF CONCEALMENT OF MATERIAL FACTS

Concealment is a neglect to communicate that which a party knows and ought to communicate. Whether intentional
or not, concealment entitles the insurer to rescind the contract. The law requires the insured 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 determined not by the event but by the probable and reasonable influence of
the facts upon the party to whom the communication is due.
The insureds negative answers to the questions on his previous ailments, or his concealment of his
hospitalization deprived the insurance company of the opportunity to make the necessary inquiry as to the nature of
his past illness so that it may form its estimate relative to the approval of his application. Had the insurance company
been given such opportunity, it would not probably consent to the policy issuance.
Tan v CA G.R. No. 48049 June 29, 1989
J. Gutierrez Jr.

Facts:
Tan Lee Siong, father of the petitioners, applied for life insurance in the amount of P 80,000.00 with
Philamlife. It was approved. Tan Lee Siong died of hepatoma. Petitioners then filed a claim for the
proceeds. The company denied petitioners' claim and rescinded the policy by reason of
thealleged misrepresentation and concealment of material facts. The premiums paid on the policy
were refunded. The petitioners filed a complaint in the Insurance Commission. The latter
dismissed the complaint.
The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's
decision for lack of merit. Hence, this petition.

Issue:
WON Philam didnt have the right to rescind the contract of insurance as rescission must allegedlybe
done during the lifetime of the insured within two years and prior to the commencement of action.

Held: No. Petition dismissed.

Ratio:
The Insurance Code states in Section 48:
Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this
chapter, such right must be exercised previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in force
during the lifetime of the insured for a period of two years from the date of its issue or of its last
reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of
the fraudulent concealment or misrepresentation of the insured or his agent.
The so-called "incontestability clause" in the second paragraph prevents the insurer from raising the
defenses of false representations insofar as health and previous diseases are concerned if
the insurance has been in force for at least two years during the insured's lifetime.
The policy was in force for a period of only one year and five months. Considering that the insured
died before the two-year period had lapsed, respondent company is not, therefore, barred from
proving that the policy is void ab initio by reason of the insured's fraudulent concealment or
misrepresentation.
The "incontestability clause" added by the second paragraph of Section 48 is in force for two years.
After this, the defenses of concealment or misrepresentation no longer lie.
The petitioners argue that no evidence was presented to show that the medical terms were
explained in a layman's language to the insured. They also argue that no evidence was presented by
respondent company to show that the questions appearing in Part II of the application
forinsurance were asked, explained to and understood by the deceased so as to prove concealment
on his part. This couldnt be accepted because the insured signed the form. He affirmed the
correctness of all the entries.
The company records show that the deceased was examined by Dr. Victoriano Lim and was found
to be diabetic and hypertensive. He was also found to have suffered from hepatoma. Because of the
concealment made by the deceased, the company was thus misled into accepting the risk and
approving his application as medically fit.
Edillon v Manila Bankers Life G.R. No. L-34200
September 30, 1982
J. Vasquez

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. Acheck 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...
Pacific v CA G.R. No. L-41014 November 28, 1988
J. Paras

Facts:
An open fire insurance policy, was issued to Paramount
Shirt Manufacturing by OrientalAssurance Corporation to indemnify P61,000.00, caused by fire to
the factorys stocks, materials and supplies.
The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods
described in the policy were held in trust by the insured for Pacific Banking under trust receipts.
The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with the
knowledge and consent of private respondent to the effect that "loss if any under this policy is
payable to the Pacific Banking Corporation".
A fire broke out on the premises destroying the goods contained in the building.
The bank sent a letter of demand to Oriental for indemnity.
The company wasnt ready to give since it was awaiting the adjusters report.
The company then made an excuse that the insured had not filed any claim with it, nor submitted
proof of loss which is a clear violation of Policy Condition No.11, as a result, determination of the
liability of private respondent could not be made.
Pacific Banking filed in the trial court an action for a sum of money for P61,000.00
againstOriental Assurance.
At the trial, petitioner presented communications of the insurance adjuster to Asian Surety revealing
undeclared co-insurances with the following: P30,000 with Wellington Insurance; P25,000 with
Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount on the same
property covered by its policy with Oriental whereas the only co-insurances declared in the subject
policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with
Victory.
The defense of fraud, in the form of non-declaration of co-insurances which was not pleaded inthe
answer, was also not pleaded in the Motion to Dismiss.
The trial court denied the respondents motion. Oriental filed another motion to include additional
evidence of the co-insurance which could amount to fraud.
The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision. Pacific
Banking filed a motion for reconsideration of the said decision of the respondent Court of Appeals,
but this was denied for lack of merit.

Issues:
1. WON unrevealed co-insurances Violated policy conditions No. 3
2. WON the insured failed to file the required proof of loss prior to court action.

Held: Yes. Petition dismissed.

Ratio:
1. Policy Condition No. 3 explicitly provides:
3. The Insured shall give notice to the Company of any insurance already effected, or which may
subsequently be effected, covering any of the property hereby insured, and unless such notice be
given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by
or on behalf of the Company before the occurrence of any loss or damage, all benefit under this
policy shall be forfeited.
The insured failed to reveal before the loss three other insurances. Had the insurer known that there
were many co-insurances, it could have hesitated or plainly desisted from entering into such
contract. Hence, the insured was guilty of clear fraud.
Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself
when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance
Clause" are materially different from the actual number of co-insurances taken over the subject
property.
As the insurance policy against fire expressly required that notice should be given by the insured of
other insurance upon the same property, the total absence of such notice nullifies the policy.
Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause"
supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the
insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the endorsement
or assignment was made was to protect the mortgagee/assignee against any untoward act or
omission of the insured. It would be absurd to hold that petitioner is barred from recovering the
insurance on account of the alleged violation committed by the insured.
It is obvious that petitioner has missed all together the import of subject mortgage clause which
specifically provides:
Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila
mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this
insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act
or neglectexcept fraud or misrepresentation, or arsonof the mortgagor or owner/trustee of the
property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay
any premium, the mortgagee/ trustor shall, on demand pay the same.
The paragraph clearly states the exceptions to the general rule that insurance as to the interest of
the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. Concealment of
the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation.
Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the
proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right.
Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's
answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of
fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to
the introduction of evidence but on the contrary, presented the very evidence that proved its
existence.
2. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy
provides that no action shall be brought unless the claim is first presented extrajudicially in the
manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects
the claim for payment
In the case at bar, policy condition No. 11 specifically provides that the insured shall on the
happening of any loss or damage give notice to the company and shall within fifteen (15) days after
such loss or damage deliver to the private respondent (a) a claim in writing giving particular account
as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all
other insurances, if any.
Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve as a
notice of loss. It didnt even furnish other documents. Instead, petitioner shifted upon private
respondent the burden of fishing out the necessary information to ascertain the particular account of
the articles destroyed by fire as well as the amount of loss. Since the required claim by insured,
together with the preliminary submittal of relevant documents had not been complied with, it follows
that private respondent could not be deemed to have finally rejected petitioner's claim and therefore
there was no cause of action.
It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the
contract, and such violation or want of performance has not been waived by the insurer, the insured
cannot recover, much less the herein petitioner.