No. 28499 – BERNARDO ARGENTE, plaintiff and appellant, vs. WEST COAST LIFE INSURANCE Co., defendant and appellee.
MALCOLM, J.
Rule Synopsis
Even before the provision in the present Insurance Code stating the concealment, whether intentional or unintentional, is a ground for the rescission of the insurance contract, this case already declared the same principle by saying that: if a material fact is actually known to the assured, its concealment must of itself necessarily be a fraud.
Facts
Bernardo Agente and wife, Vicenta de Ocampo, had a joint life insurance policy with West Coast Life Insurance Co. They were both medically examined and the results were included in the Medical Examiner’s Report. The policy was delivered on May 1925. Vicenta died on November 1925. Bernardo filed a claim with West Coast, but the latter refused on the ground that the insurance was obtained through fraud and misrepresentation.
The Sps furnished the following disputed answers to the questions asked by the medical examiner, as they appear in the Medical Examiner’s Report:
Bernardo’s Answers:
Have you ever consulted a physician for, or have you ever suffered from any ailment or disease of, the brain or nervous system? NO.
Have you consulted a physician for any ailment or disease not included in your above answer? YES.
Nature of Ailment, Disease or Injury. SCABIES.
Number of attacks. 1.
Date. 1911.
Duration. 1 MONTH.
Severity. FAIR.
Results and, if within five years, name and address of every physician consulted. Dr. P. Guazon. Cured. Dr. Guazon is dead now.
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? NO.
Vicenta’s Answers:
How frequently, if at all, and in what quantity do you use beer, wine, spirits or other intoxicants? Beer only in small quantities occasionally.
Have you ever consulted a physician for or have you ever suffered from any ailment or disease of the brain or nervous system? NO.
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? NONE.
Are you in good health as far as you know and believe? YES.
Bernardo filed an action for recover insurance proceeds.
The trial judge ruled in favor of West Coast. The SC affirmed.
Issues
- Was it duly established that the answers furnished by the Spouses to the medical examiner’s questions were false?
- Was the concealment of the spouses material and sufficient to avoid the policy?
- Must concealment be made fraudulently to be a ground for rescission?
- May West Coast still rescind the contract given then Sec. 47 of the Insurance Act which provides that: “[w]henever a right” to rescind a contract of insurance is given to the insurer …, such right must be exercised previous to the commencement of an action on the contract?
Ruling and Discussion
Note: the spouses argued that they disclosed all the facts concerning their previous illnesses to West Coast’s doctor. And that the latter probably acted in connivance with the insurance agent in failing to record the same in the reports. The trial judge did not give credence to his claim, and found not motive on the part of the company doctor to falsify the Medical Examiner’s Report — to the jeopardization of his medical career, and also criminal implication. The Court adopted this finding.
- Yes. It was duly established that the answers furnished by the Spouses to the medical examiner’s questions were false.
The undisputed findings of the Court follow:
As to Bernardo. On January 10, 11, and 13, 1923, Bernardo was confined in the Philippine General Hospital where he was treated by Dr. Sison for cerebral congestion and Bell’s Palsy.
As to Vicenta. Vicenta de Ocampo was taken by a patrolman, at the request of , Bernardo, on May 1924, to the Meisic police station. She was subsequently transferred to San Lazaro Hospital and was diagnosed for “alcoholism”. The diagnosis was later changed to probable “manic-depressive psychosis.” The final diagnosis was “phycho-neurosis.”
Test of materiality. 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?
An information is material if the insured knows, ought to know, or presumed to know the same, and of which he had exclusive or peculiar knowledge, which directly tend to increase the hazard or risk. In assuming the risk, the insurer is entitled to know every such material fact.
The determination of the point 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. - Yes. The concealment of the spouses was material and sufficient to avoid the 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.
The legal effect of procuring the insurance by fraudulent representation – the contract was never legally existent. The assumption was that, had the insured disclosed the true facts, the insurance would never have been granted. - Yes. Concealment must be made fraudulently to be a ground for rescission. However, it was argued that knowledge of the insured of the concealed facts necessarily constitutes fraud.
Citing Joyce, The Law of Insurance, second edition, volume 3, Chapter LV:
Concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld. But if a material fact is actually known to the assured, its concealment must of itself necessarily be a fraud, and if the fact is one which the assured ought to know, or is presumed to know, the presumption of knowledge ought to place the assured in the same position as in the former case with relation to material facts (necessarily fraudulent). If a material fact is concealed by assured it is equivalent to a false representation that it does not exist.
Digester’s Note: One of the elements of concealment is knowledge of fact (actual or presumptive). So declaring the above, is tantamount to saying that concealment is necessarily a fraudulent act. The Court likewise equated concealment with misrepresentation. - Yes. West Coast still rescind the contract.
The failure to rescind the insurance contract does not bar the insurance company from raising the defense of concealment in an action to recover proceeds against it.
Furthermore, West Coast actually rescinded the contract when it wrote the Argente and informed him that the insurance contract was void because it had been procured through fraudulent representations, and offered to refund to him the premium upon the return of the policy for cancellation. As held in California as to a fire insurance policy, 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.
Dispositive
Judgment affirmed.