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Argente v. West Coast Life Insurance Co.

No. 28499
March 19, 1928
Group 3 (Oliquino)

Plaintiff-appellant: Bernardo Argente


Defendant-appellee: West Coast Life Insurance Co.
Ponente: Malcolm, J.

TOPIC: Determination of Materiality

FACTS
1. On February 9, 1925, plaintiff-appellant Bernardo Argente and his deceased wife Vicenta de
Ocampo, signed an application for joint insurance in the sum of Php2k. All information in the both
applications were written by the defendant company’s agent, except the signature and name of
plaintiff. However, all information came from the plaintiff and his wife.
2. On February 10, 1925, Bernardo and his wife were examined by Dr. Cesareo Sto. Tomas, a medical
examiner from West Coast. The report was written by the doctor except for the signature of
plaintiff-appellant. All information were provided by the spouses.
3. On May 9, 1925, plaintiff Bernardo and his wife submitted to defendant insurance company an
amended application, increasing the amount to Php15k. A temporary policy was issued to them on
May 15. Policy was delivered to them only July 2, 1925, when the first quarterly premium was
paid.
4. Since it had been more than 30 days since they were examined by the company’s physician, a
certificate of health was needed before the policy would be delivered.
5. On November 18, 1925, Vicenta de Ocampo died of cerebral aploplexy.
6. Bernardo presented a claim for the payment of Php15k but was refused by the defendant company
because the answers given by the insured in their medical examinations with regard to their health
and previous illnesses and medical attendance were untrue. The company said it was rejected
because of fraud and misrepresentation. It appears from the investigation of said company that:
a. For Bernardo Argente, he denied having consulted a physician for any ailment or disease
of the brain or nervous system and that he had never consulted or been treated of any
ailiment within the last 5 years. He only declared that he consulted a physician in 1911 for
scabies. However, it is not disputed that on January 10, 11, and 13, 1923, Bernardo
Argente was confined in the Philippine General Hospital where he was treated for
cerebral congestion and Bell's Palsy
b. For Vincenta de Ocampo, when asked how frequent she took alchoholic beverages, she
only decared that she drank “beer only in small quantities.” When asked about any
ailments or diseases, she said she was treated for none and that she was in good health.
However, it is not disputed that she was brought to San Lazaro Hospital where she
was initially diagnosed with “alcoholism” but later was diagnosed with “manic-
depressive psychosis” and later in Mary Chiles Hospital, a final diagnosis of “psycho-
neurosis.”
7. The plaintiff pleads in defense that they revealed all of the information but Doctor Sta. Ana and the
insurance agent, Jose Geronimo del Rosario, failed to record them in the medical reports.
8. The trial court ruled in favor of defendant company and said that the spouses lied in their application
forms.

ISSUE/HELD

I. W/N the insurance policy was null and void


YES
1. One ground for the rescission of a contract of insurance under the Insurance Act is "a
concealment," which in section 25 is defined as "A neglect to communicate that which a party
knows and ought to communicate."
2. The contention of appellant that concealment was immaterial and insufficient to avoid the policy
is untenable.
3. In an action on a life insurance policy where the evidence conclusively shows that the answers to
questions 'concerning diseases were untrue, the truth or falsity of the answers become the
determining factor. If the policy was procured by fraudulent representations, the contract of
insurance was never legally existent
4. It can be assumed that had the true facts been disclosed by the assured, the insurance would
never have been granted
5. Court quotes Joyce, The Law on Insurance, 2nd edition
a. Concealment exists where the assured has knowledge of a fact material to the risk, and
honesty, good faith, and fair dealing requires that he should communicate it to the
assured, but he designedly and intentionally withholds the same.
b. Another rule is that if the assured undertakes to state all the circumstances affecting the
risk, a full and fair statement of all is required
c. The concealment must, in the absence of inquiries, be not only material, but fraudulent,
or the fact must have been intentionally withheld thus if no inquiries are made and no
fraud or design to conceal enters into the concealment the contract is not avoided
d. Under a stipulation voiding the policy for concealment or misrepresentation of any
material fact or if his interest is not truly stated or is other than the sole and unconditional
ownership, the facts are unimportant that insured did not intend to deceive or
withhold information as to encumbrances even though no questions were asked
6. Court continues to quote Joyce and explains why it is necessary to reveal material facts
a. It misleads or deceives the insurer into accepting the risk, or accepting it at the rate of
premium agreed upon
b. The insurer, relying upon the belief that the assured will disclose every material fact
within his actual or presumed knowledge, is misled into a belief that the circumstance
withheld does not exist, and he is thereby induced to estimate the risk upon a false basis
that it does not exist
c. The principal question must be: “Was the assurer misled or deceived into entering a
contract obligation or in fixing the premium of insurance by a withholding of
material information or facts within the assured's knowledge or presumed
knowledge?”
d. It does not seem to be necessary that the suppression of the truth should have been
willful. If it were but an inadvertent omission, yet if it were material to the risk and such
as the plaintiff should have known to be so, it would render the policy void.
e. If the assured has exclusive knowledge of material facts, he should fully and fairly
disclose the same, whether he believes them material or not. However, it may frequently
happen that the assured believes that the facts are not material.
f. Test to determine whether there has or has not been a material concealment must
rest largely in all cases upon the form of the questions propounded and the exact
terms of the contract
i. Must be left to jury to decide (English law)
g. Such a matter cannot rest alone upon the assured's belief irrespective of what is a
reasonable belief, but that it ought to be judged by the criterion whether the belief is one
fairly warranted by the circumstances
II. W/N the insurance company can exercise its right to rescind given section 47 of the Insurance Act

YES
1. Section 47, Insurance Act: “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.”
2. 1st answer: California law code examiners say: A failure to exercise the right (of rescission),
cannot, of course, prejudice any defense to the action which the concealment may furnish
3. 2nd answer: the insurance company more than one month previous to the commencement of the
present action wrote the plaintiff and informed him that the insurance contract was void because
it had been procured through fraudulent representations, and offered to refund to the plaintiff the
premium which the latter had paid upon the return of the policy for cancellation
a. California jurisprudence: where any of the material representations are false, the insurer's
tender of the premium and notice that the policy is canceled, before the commencement
of suit thereon, operate to rescind the contract of insurance

Judgment AFFIRMED.