Saturnino v. Philamlife - False Representation

7 SCRA 316

Facts:

>  2 months prior to the insurance of the policy, Saturnino was operated on for cancer, involving complete removal of the right breast, including the pectoral muscles and the glands, found in the right armpit.

>  Notwithstanding the fact of her operation, Saturnino did not make a disclosure thereof in her application for insurance.

>  She stated therein that she did not have, nor had she ever had, among others listed in the application, cancer or other tumors; that she had not consulted any physician, undergone any operation or suffered any injury within the preceding 5 years.

>  She also stated that she had never been treated for, nor did she ever have any illness or disease peculiar to her sex, particularly of the breast, ovaries, uterus and menstrual disorders.

>  The application also recited that the declarations of Saturnino constituted a further basis for the issuance of the policy.

Issue:

Whether or not the insured made such false representation of material facts as to avoid the policy.

Held:

YES.

There can be no dispute that the information given by her in the application for insurance was false, namely, that she never had cancer or tumors or consulted any physician or undergone any operation within the preceding period of 5 years.

The question to determine is: Are the facts then falsely represented material?  The Insurance Law provides that “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 the communication is due, in forming his estimate of the proposed contract, or making his inquiries.

The contention of appellants is that the facts subject of the representation were not material in view of the non-medical nature of the insurance applied for, which does away with the usual requirement of medical examination before the policy is issued.  The contention is without merit.  If anything, the waiver of medical examination 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.

Appellants also contend that there was no fraudulent concealment of the truth inasmuch as the insured herself did not know, since her doctor never told her, that the disease for which she had been operated on was cancer.  In the first place, concealment of the fact of the operation itself was fraudulent, as there could not have been any mistake about it, no matter what the ailment.

Secondly, in order to avoid a policy, it is not necessary to show actual fraud on the part of the insured. In this jurisdiction, concealment, whether intentional or unintentional entitled the insurer to rescind the contract of insurance, concealment being defined as “negligence to communicate that which a party knows and ought to communicate.”  The basis of the rule vitiating the contract in cases of concealment is that it misleads or deceives the insurer into accepting the risk, or accepting it at a rate of premium agreed upon.  The insurer, relying upon the belief that the insured will disclose every material fact within his actual or presumed knowledge, is misled into a belief that the circumstances withheld does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist.