After Jaime Canilang was diagnosed with “sinus tachycardia” and “acute bronchitis”, he applied for life insurance with Great Pacific Life Assurance Company (“Great Pacific”) naming his wife, petitioner Thelma Canilang, as his beneficiary. Jaime Canilang was issued ordinary life insurance Policy No. 345163, with the face value of P19,700, effective as of 9 August 1982.
After a year, Jaime died of “congestive heart failure,” “anemia,” and “chronic anemia.”2 Petitioner, widow and beneficiary of the insured, filed a claim with Great Pacific which the insurer denied on 5 December 1983 upon the ground that the insured had concealed material information from it.
The Insurance Commission ordered Great Pacific to pay P19,700.00 plus legal interest and P2,000.00 on the basis that (a) the ailment of Jaime Canilang was not so serious that, even if it had been disclosed, it would not have affected Great Pacific’s decision to insure him; (b) Great Pacific had waived its right to inquire into the health condition of the applicant by the issuance of the policy despite the lack of answers to “some of the pertinent questions” in the insurance application; (c) there was no intentional concealment on the part of the insured Jaime Canilang and (d) Batas Pambansa Blg. 874 which voids an insurance contract, whether or not concealment was intentionally made, was not applicable to Canilang’s case as that law became effective only on 1 June 1985.
The CA dismissed the case.
(A) WON the failure of Jaime Canilang to disclose previous medical consultation and treatment constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries.
YES. In the medical declaration, he failed to disclose in the appropriate space, under the caption “Exceptions,” that he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering from “sinus tachycardia” and “acute bronchitis.”
Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. The materiality of the information withheld by Great Pacific did not depend upon the state of mind of Jaime Canilang. A man’s state of mind or subjective belief is not capable of proof in our judicial process, except through proof of external acts or failure to act from which inferences as to his subjective belief may be reasonably drawn. Neither does materiality depend upon the actual or physical events which ensue. Materiality relates rather to the “probable and reasonable influence of the facts” upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that “probable and reasonable influence of the facts” concealed must, of course, be determined objectively, by the judge ultimately.
(B) WON the non-disclosure of certain facts about his previous health conditions does not amount to fraud and private respondent is deemed to have waived inquiry thereto
NO. Section 27 of the Insurance Code of 1978 is properly read as referring to “any concealment” without regard to whether such concealment is intentional or unintentional. The phrase “whether intentional or unintentional” was in fact superfluous. The deletion of the phrase “whether intentional or unintentional” could not have had the effect of imposing an affirmative requirement that a concealment must be intentional if it is to entitle the injured party to rescind a contract of insurance. The restoration in 1985 by B.P. Blg. 874 of the phrase “whether intentional or unintentional” merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be “intentional” in order to authorize rescission by the injured party.
In the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. For Jaime Canilang could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice in the two (2) months before applying for non-medical insurance. Indeed, the last medical consultation took place just the day before the insurance application was filed.
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