Argente vs. West Coast Life; 51 Phil. 725 (1928)

FACTS:

In May 1925, West Coast Life Insurance issued a joint life insurance policy for P15,000 to Bernardo Argente, and his wife, Vicenta de Ocampo.  In November 1925, Vicenta de Ocampo died of cerebral apoplexy. Thereafter Bernardo Argente presented a claim in due form to the West Coast Life Insurance Co. for the payment of the sum of P15,000 the amount of the joint life insurance policy.

During the investigations, it was found that the answers given by the insured in their medical examinations with regard to their health and previous illnesses and medical attendance were untrue. For that reason, the West Coast Life Insurance Co. refused to pay the claim of Bernardo Argente on the ground of fraud and misrepresentation.

Appellant argues that the alleged concealment was immaterial and insufficient to avoid the policy.

ISSUES:

(a) Whether Argente may validly claim for the insurance?

(b) Whether the right of the insurance company to rescind the contract cannot be be enforced in view of the provisions of section 47 of the Insurance Act providing that “the right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.”

RULINGS:

(a)

NO. One ground for the rescission of a contract of insurance under the Insurance Act is “a concealment,” which in section 25 is defined as “A neglect to communicate that which a party knows and ought to communicate. In an action on a life insurance 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. If the policy was procured by fraudulent representations, the contract of insurance apparently set forth herein was never legally existent. It can fairly be assumed that had the true facts been disclosed by the assured, the insurance would never have been granted.

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. lt does not seem to be necessary * * * that the * * * suppression of the truth should have been willful.’ If it were but an inadvertent omission, yet if it were material to the risk and such as the plaintiff should have known to be so, it would render the policy void. But it is held that if untrue or false answers are given in response to inquiries and they relate to material facts the policy is avoided without regard to the knowledge or fraud of assured, although under the statute statements are representations which must be fraudulent to avoid the policy. So under certain codes the important inquiries are whether the concealment was willful and related to a matter material to the risk.

Notes: 

• Concealment exists where the assured has knowledge of a fact material to the risk, and honesty, good faith, and fair dealing requires that he should communicate it to the assured, but he designedly and intentionally withholds the same.
• Another rule is that if the assured undertakes to state all the circumstances affecting the risk, a full and fair statement of all is required.
• It is also held that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld; And it is determined that even though silence may constitute misrepresentation or concealment it is not of itself necessarily so as it is a question of fact.
• And it is declared that if a material fact is concealed by assured it is equivalent to a false representation that it does not exist and that the essentials are the truth of the representations whether they were intended to mislead and did insurer accept them as true and act upon them to his prejudice.

(b)

There are two answers to the problem as propounded.

• The first is that the California law as construed by the code examiners, at whose recommendation it was adopted, conceded that “A failure to exercise the right (of rescission), cannot, of course, prejudice any defense to the action which the concealment may furnish.”
• The second answer is that the insurance company more than one month previous to the commencement of the present action wrote the plaintiff and informed him that the insurance contract was void because it had been procured through fraudulent representations, and offered to refund to the plaintiff the premium which the latter had paid upon the return of the policy for cancellation.

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