No. L-30685 – NG GAN ZEE, plaintiff-appellee, vs. ASIAN CRUSADER LIFE ASSURANCE CORPORATION, defendant-appellant.
ESCOLIN, J.
Rule Synopsis
Misrepresentation to be a ground for rescinding an insurance contract must both be MATERIAL and FRAUDULENT (active concealment), the burden of proof is with the insurer, misrepresentation being an affirmative defense.
Facts
Kwong Nam had an insurance policy with Asian Crusader with his wife Ng Gan Zee, as beneficiary. Premiums were duly paid until he died of cancer of the liver with metastasis. Ng filed a claim with the insurer. The insurer denied on ground of material concealment and misrepresentation: 1) when Kwong answered “No” to the question “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”, and 2) when Kwong allegedly furnished false and misleading information as to his ailment and previous operation.
Ng brought and action before the Insurance Commission.
The IC found no material concealment on the part of he insured and ordered Asian to pay Ng the face amount of the policy. The RTC affirmed. CA certified the case to the SC. The SC affirmed.
Issues
- Was there material concealment that would justify rescission of the insurance contract when Kwong answered “No” to the question “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,” in his application with Asian Crusader?
- Did Kwong give Asian false and misleading information as to his ailment and previous operation, when, among others, he said that his operation was related to a ”peptic ulcer” instead of a “tumor”?
Ruling and Discussion
- No. There was no material concealment that would justify rescission of the insurance contract.
Note: Asian argued that Insular Life has refused Kwong’s application for insurance policy.
Quoting RTC decision – there is no sufficient factual basis for the allegation of Asian Crusader that Kwong’s application for insurance was refused by Insular Life or by other insurance companies. Evidence showed that Kwong’s application with Insular was for the reinstatement and amendment of his lapsed insurance policy, not an application for a ‘new’ insurance policy. - No. Kwong did not give Asian false and misleading information as to his ailment and previous operation.
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. [Note: this case was decided before the present Insurance Code, approved 2013]
The concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld.
Assuming Kwong’s answers were false, the fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. The burden of proof is on the latter being an affirmative defense. In this case, in the absence of evidence that the insured had sufficient medical knowledge as to enable him to distinguish between “peptic ulcer” and “a 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.
Digester’s Note: In the present Code, Sec. 27, material concealment on the part of the insured, regardless of whether intentional or unintentional gives rise to a remedy of rescission on the part of the insurer. The requirement of fraudulent intent may properly be attributed to Misrepresentations. In this case, the Court required fraudulent intent for concealment to be a ground for rescission.
Furthermore, Asian is deemed to have waived the subject information: upon the face of the application, 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 Court noted that if the answer to the subject question was really important for Asian, it should have made clarifications and further inquiries, but it did not.
Dispositive
Judgment affirmed.
Note: in the later case of Canilang v. Court of Appeals, where the CA held that this case involves a case of “misrepresentation” rather than “concealment.”