245 SCRA 268 (1995)
- 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:
Bacani procured a life insurance contract for himself from Sunlife Assurance. Specifically, the policy included a double indemnity in case of accidental death, designating his mother as beneficiary.
Later, Bacani died in a plane crash and so the mother filed a claim. After investigation, Sunlife rejected the claim on ground of non-disclosure of material facts. They said that Bacani did not mention that two weeks prior to his insurance application he was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.
The trial court ruled that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed. Also, it held that the health history of the insured was immaterial since the insurance policy was “non-medical.”
The CA affirmed, stating that the cause of death was unrelated to the facts concealed by the insured.
ISSUE:
- Whether or not the concealment made by Bacani warranted the rejection of the insurance claim
HELD:
The Supreme Court reversed the decision of the CA and ruled that rescission of the insurance contract was proper.
Disclosure of Material Facts required
Under sec. 26 of the Insurance Code, a party to a contract of insurance is required 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 information which the insured failed to disclose was 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 the petitioner in order for it to reasonably assess the risk involved in accepting the application.
Good Faith not a defense
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.
Thus, “good faith” is no defense in concealment.
Waiver of Medical Examination not a defense
The waiver of the medical examination of the insured does not mean that material facts need not be disclosed. In fact, it 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.
Cause of Death
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.
