Argente vs West Coast Life Insurance

Insurance Law Representation Concealment Rescission of an Insurance Contract

In February 1925, Argente and his wife applied for a joint life insurance under West Coast Life Insurance
Company. The couple was examined by the insurance company doctor (Doctor Sta. Ana). The couple disclosed
to the doctor that they never had any serious medical histories; that they were never confined; that Vicenta De
Ocampo (wife of Argente) was not an alcoholic. Doctor Sta. Ana then recommended the approval of the
application. In May 1925, the couple were issued with the insurance policy. In November 1925, Vicenta died.
West Coast Life denied the subsequent insurance claim filed by Argente as it averred that the application made
in June was attended by fraud because the couple failed to disclose the fact that each of them were actually
confined prior to their application; that Vicenta in particular was diagnosed for alcoholism and ultimately for
psycho-neurosis; that in sum, their statement as to their health and previous illnesses within the last 5-7 years
prior to their application were untrue.
Argente conceded to the allegations of West Coast however he stated that those facts were actually disclosed to
Dr. Sta. Ana however Dr. Sta. Ana connived with the insurance agent hence he failed to record them in the
medical reports. Further, Argente averred that if West Coast did have the right to rescind the insurance, it should
have done so prior to the filing of a suit involving the insurance claim.
ISSUE: Whether or not Argente is entitled to the insurance claim.
HELD: No. 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 apparently set forth therein 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. The allegations of Argente do not have a leg to stand on, Dr. Sta. Ana
has no motive whatsoever and such alleged illicit act will only destroy his reputation as a physician.
As to the allegation of Argente regarding the failure of West Coast to rescind the insurance prior to the filing of
this case, there are two answers:
1. The failure of West Coast to rescind the contract cannot prejudice any defense to the suit which
concealment may furnish.
2. Prior to the filing of this case, West Coast sent a notice to Argente advising him that the policy is being
canceled due to the concealment and that his premium is being refunded this operates as a rescission
to the contract of insurance.

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.

vda. de Canilang v. CA
THELMA vda. de CANILANG v. CA and GREAT PACIFIC LIFE ASSURANCE
1993 / Feliciano / Petition for review on certiorari of CA decision
On June 1982, Jaime Canilang was diagnosed as suffering from sinus tachycardia. Two
months later, he was found to have acute bronchitis. The next day, he applied for a nonmedical insurance policy with Great Pacific and named his wife Thelma as his
beneficiary. A year later, he died of congestive heart failure, anemia, and chronic anemia.
When Thelma filed a claim with Great Pacific, it was denied on the ground that Jaime
concealed material information.
Thelma filed a complaint against Great Pacific with the Insurance Commission for
recovery of the insurance proceeds. She testified that she was not aware of any serious
illness suffered by Jaime, and that what she knew was that he died because of a kidney
disorder. Great Pacific presented a physician who explained that Jaimes application had
been approved based on his medical declaration, and that medical examinations are
required only in cases where applicant indicated that he has undergone medical
consultation and hospitalization.
The Insurance Commission held that there was no intentional concealment
on Jaimes part. It also held that Great Pacific waived its right to inquire into
Jaimes health condition by issuing the policy despite the lack of answers to some of
the pertinent questions in the application. It said BP 874, which voids an insurance
contract WON concealment was made intentionally, was not applicable since the law
became effective only on 1985.
CA reversed IC. CA said that the issue is WON there was material
concealment, and not WON Canilang intentionally made material concealment. It held
that Jaimes failure to disclose previous medical consultation and treatment constituted
material information.
CANILANG FAILED TO DISCLOSE MATERIAL INFORMATION
The applicable law at that time was PD 1460 (Insurance Code of 1978). Under
said law, the information concealed must be such which the concealing party knew and
ought to have communicatedthose which are material to the contract. The test of
materiality is 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.
Canilang failed to disclose material information when he did not indicate
under the caption Exceptions that he twice consulted a doctor who found him to be
suffering from sinus tachycardia and acute bronchitis. This failure to communicate
must have been intentional, since Jaime could have been aware that his heartbeat
would rise to high levels and that he consulted a doctor twice before applying for
insurance.
The preceding statute, Act 2427, provided that a concealment, whether
intentional or unintentional, entitles the injured party to rescind a contract of insurance.
However, in PD 1460, this phrase was not present. [The current law, BP 874, has the
phrase.] SC rejected the ICs unspoken theory that the deletion of the phrase
intended to limit the kinds of concealment to intentional concealments. The provision is
properly read as referring to ANY concealment [intentional and unintentional
cancel each other out].
CA AFFIRMED; PETITION DENIED
SUNLIFE ASSURANCE v. CA and SPS. ROLANDO and BERNARDA BACANI
1995 / Quiason / Petition for review on certiorari of a CA decision

INSURANCE LAW: Concealment

Disclosure of material facts is required
Good faith is not a defense in determining the materiality of the information to be disclosed
Waiver of medical examination by insured is not a defense
Cause of death is immaterial in case of concealment

FACTS
On April 1986, Robert John Bacani procured for himself a life insurance contract from
Sunlife. He was issued a policy valued at 100k with double indemnity in case of
accidental death, and his beneficiary was his mother, Bernarda. On June 1987, Robert
died in a plane crash.
Bernarda filed a claim with Sunlife, seeking the benefits of her sons insurance
policy. The findings of the investigation conducted by Sunlife prompted it to reject the
claim. Sunlife informed Bernarda that Robert did not disclose material facts relevant to
the policy issuance, thus rendering the contract voidable. Sunlife claimed that Robert
gave false statements in his application when he answered questions regarding
consulting doctors [re: urine, kidney, bladder disorder], submitting to medical exams, and
being admitted to a hospital within the past 5 years. Robert only said that he consulted a
doctor for cough and flu complications. Sunlife discovered that 2 weeks prior to Roberts
application for insurance, he was examined and confined at the Lung Center where he
was diagnosed for renal failure. A check representing the premiums paid was attached to
the letter.
Sps. Bacani filed an action for specific performance against Sunlife. RTC ruled in
favor of Sps. Bacani, saying that the facts concealed by Robert were made in good
faith and under a belief that they need not be disclosed. It also held that Roberts health
history was immaterial since the insurance policy was non-medical. CA affirmed RTC.
SUNLIFE PROPERLY EXERCISED ITS RIGHT TO RESCIND THE CONTRACT BY
REASON OF ROBERTS CONCEALMENT
RATIO
Good faith is no defense in concealment. Materiality is to be determined 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. Materiality does not depend on the insureds state of
mind, nor does it depend on the actual or physical events that ensue.
The matters concealed would have affected Sunlifes action on Roberts
application, as it would have approved it with the corresponding adjustment for a higher
premium or it would have rejected it. A disclosure may have warranted a medical

examination by Sunlife in order for it to assess the risk involved in accepting the
application. In addition, Roberts failure to disclose his hospitalization raises grave doubts
about his good faith.
The argument that Sunlifes waiver of the medical examination debunks the materiality
of the facts concealed is untenable. The waiver of a medical examination [in a nonmedical insurance contract] renders even more material the information required
of the applicant, for such information constitutes an important factor which the insurer
takes into consideration in deciding WON to issue the policy. Moreover, this argument by
Sps. Bacani would make ineffective the provision that allows rescission where there is
concealment.
The insured need not die of the disease he had failed to disclose. 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.
CA DECISION REVERSED; SUNLIFES PETITION GRANTED
Saturnino vs Philamlife
In September 1957, Estefania Saturnino was operated for cancer in which her right breast was removed. She was
advised by her surgeon that shes not totally cured because her cancer was malignant. In November 1957, she
applied for an insurance policy under Philamlife. She did not disclose the fact that she was operated nor did she
disclose any medical histories. Philamlife, upon seeing the clean bill of health from Estefania waived its right to
have Estefania undergo a medical checkup. In September 1958, Estefania died of pneumonia secondary to
influenza. Her heirs now seek to enforce the insurance claim.
ISSUE: Whether or not Saturnino is entitled to the insurance claim.
HELD: No. The concealment of the fact of the operation is fraudulent. Even if, as argued by the heirs, Estefania
never knew she was operated for cancer, there is still fraud in the concealment no matter what the ailment she
was operated for. Note also that in order to avoid a policy, it is not necessary that actual fraud be established
otherwise insurance companies will be at the mercy of any one seeking insurance.
In this jurisdiction a concealment, whether intentional or unintentional, entitles the insurer to rescind the
contract of insurance, concealment being defined as negligence to communicate that which a party knows and
ought to communicate.
Also, the fact that Philamlife waived its right to have Estefania undergo a medical examination is not
negligence. Because of Estefanias concealment, Philamlife considered medical checkup to be no longer
necessary. Had Philamlife been informed of her operation, she would have been made to undergo medical
checkup to determine her insurability.

Tan Chay Heng v. West Coast Life - Fraud

51 Phil 80
Facts:
> In 1926, Tan Chay Heng sued West Coast on the policy allegedly issued to his uncle, Tan Caeng who died
in 1925. He was the sole beneficiary thereof.
> West Coast refused on the ground that the policy was obtained by Tan Caeng with the help of agents Go
Chuilian, Francisco Sanchez and Dr. Locsin of West Coast.
> West Coast said that it was made to appear that Tan Caeng was single, a merchant, health and not a drug user,
when in fact he was married, a laborer, suffering form tuberculosis and addicted to drugs.
> West Coast now denies liability based on these misrepresentations.

> Tan Chay contends that West Coast may not rescind the contract because an action for performance has
already been filed.
> Trial court found for Tan Chay holding that an insurer cannot avoid a policy which has been procured by
fraud unless he brings an action to rescind it before he is sued thereon.

Issue:
Whether or not West Coasts action for rescission is therefore barred by the collection suit filed by Tan Chay.

Held:
NO.
Precisely, the defense of West Cast was that through fraud in its execution, the policy is void ab initio, and
therefore, no valid contract was ever made. Its action then cannot be fore rescission because an action to rescind
is founded upon and presupposes the existence of the contract. Hence, West Coasts defense is not barred by
Sec. 47.

In the instant case, it will be noted that even in its prayer, the defendant does not seek to have the alleged
insurance contract rescinded. It denies that it ever made any contract of insurance on the life of Tan Caeng, or
that any such a contract ever existed, and that is the question which it seeks to have litigated by its special
defense. In the very nature of things, if the defendant never made or entered into the contract in question, there
is no contract to rescind, and, hence, section 47 upon which the lower court based its decision in sustaining the
demurrer does not apply.

As stated, an action to rescind a contract is founded upon and presupposes the existence of the contract which is
sought to be rescinded. If all of the material matters set forth and alleged in the defendant's special plea are true,
there was no valid contract of insurance, for the simple reason that the minds of the parties never met and never
agreed upon the terms and conditions of the contract. We are clearly of the opinion that, if such matters are
known to exist by a preponderance of the evidence, they would constitute a valid defense to plaintiff's cause of
action. Upon the question as to whether or not they are or are not true, we do not at this time have or express any
opinion, but we are clear that section 47 does not apply to the allegations made in the answer, and that the trial
court erred in sustaining the demurrer.

Soliman v. US Life- Rescind Contract of Insurance

104 PHIL 1046
Facts:
> US Life issued a 20 yr endowment life policy on the joint lives of Patricio Soliman and his wife Rosario, each
of them being the beneficiary of the other.
> In Mar. 1949, the spouses were informed that the premium for Jan 1949 was still unpaid notwithstanding that
the 31-day grace period has already expired, and they were furnished at the same time long-form health
certificates for the reinstatement of the policies.
> In Apr 1949, they submitted the certificates and paid the premiums.
> In Jan. 1950, Rosario died of acute dilation of the heart, and thereafter, Patricio filed a claim for the proceeds
of the insurance.

> US life denied the claim and filed for the rescission of the contract on the ground that the certificates failed to
disclose that Rosario had been suffering from bronchial asthma for 3 years prior to their submission.

Issue:
Whether or not the contract can still be rescinded.

Held:
Yes.
The insurer is once again given two years from the date of reinstatement to investigate into the veracity of the
facts represented by the insured in the application for reinstatement. When US life sought to rescind the
contract on the ground of concealment/misrepresentation, two years had not yet elapsed. Hence, the contract
can still be rescinded.
Tan vs CA
In September 1973, Tan Lee Siong applied for a life insurance under Philippine American Life Insurance
Company. He stated in the application form that he has no health issues whatsoever and so in November 1973 he
was issued a life insurance policy in the amount of P80,000.00. He listed his sons as beneficiaries. In April
1975, Tan Lee Siong died due to hepatoma. His sons filed an insurance claim but PHILAMLIFE denied the
same as it alleged that Tan Lee Siong concealed the fact that he was hypertensive, diabetic, and was suffering
from hepatoma at the time of his application for the insurance.
The beneficiaries averred that PHILAMLIFE can no longer rescind the insurance contract because the insured is
already dead. They invoke Section 48 of the Insurance Code which they interpreted to mean that an insurer can
only rescind an insurance contract during the lifetime of the insured; and that such rescission should be done
within two years prior to the filing of a suit involving the insurance.
ISSUE: Whether or not the interpretation of the Tan brothers is correct.
HELD: No. The pertinent section in the Insurance Code provides:
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 precludes the insurer from raising the defenses of false representations or
concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in
force for at least two years during the insureds lifetime. The phrase during the lifetime found in Section 48
simply means that the policy is no longer considered in force after the insured has died. The key phrase in the
second paragraph of Section 48 is for a period of two years.
Note that the policy was in force for only one year and 5 months when Tan Lee Siong died. This means that
PHILAMLIFE can still contest and rescind the policy issued by reason of the misrepresentation made by Tan
Lee Siong.
Further, because of Tan Lee Siongs statement that he does not have any health issues, the insurance company
was misled into believing that he was healthy and so it did not deem a medical checkup to be necessary and that
ultimately led to the issuance of the life insurance policy.