Saturnino vs PhilAm (G.R. No. L-16163 February 28, 1963)

Saturnino vs The Philippine American Life Insurance Company
G.R. No. L-16163 February 28, 1963

Facts:  The policy sued upon is one for 20-year endowment non-medical insurance. This kind of policy dispenses with the medical examination of the applicant usually required in ordinary life policies. However, detailed information is called for in the application concerning the applicant’s health and medical history. The written application in this case was submitted by Saturnino to appellee on November 16, 1957, witnessed by appellee’s agent Edward A. Santos. The policy was issued on the same day, upon payment of the first year’s premium of P339.25. On September 19, 1958 Saturnino died of pneumonia, secondary to influenza. Appellants here, who are her surviving husband and minor child, respectively, demanded payment of the face value of the policy. The claim was rejected and this suit was subsequently instituted. It appears that two months prior to the issuance of the policy or on September 9, 1957, 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. She stayed in the hospital for a period of eight days, after which she was discharged, although according to the surgeon who operated on her she could not be considered definitely cured, her ailment being of the malignant type. Notwithstanding the fact of her operation Estefania A. Saturnino did not make a disclosure thereof in her application for insurance. On the contrary, she stated therein that she did not have, nor had she ever had, among other ailments 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 five years; and 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 recites that the foregoing declarations constituted “a further basis for the issuance of the policy.”

Issue: Whether or not the failure of Saturnino to disclose the severity of his previous illness is material to the avoidance of the insurance policy.

Held: Yes. In the application for insurance signed by the insured in this case, she agreed to submit to a medical examination by a duly appointed examiner of appellee if in the latter’s opinion such examination was necessary as further evidence of insurability. In not asking her to submit to a medical examination, appellants maintain, appellee was guilty of negligence, which precluded it from finding about her actual state of health. No such negligence can be imputed to appellee. It was precisely because the insured had given herself a clean bill of health that appellee no longer considered an actual medical checkup necessary.

In the first place the 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 a concealment, whether intentional or unintentional, entitles the insurer to rescind the contract of insurance, concealment being defined as “negligence to communicate that which a party knows and ought to communicate” (Sections 24 & 26, Act No. 2427). In the case of Argente v. West Coast Life Insurance Co., 51 Phil. 725, 732, this Court said, quoting from Joyce, The Law of Insurance, 2nd ed., Vol. 3:

“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 the rate of premium agreed upon. 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.”

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