Ng vs. Asian Crusader; 122 SCRA 461 (1983)

FACTS:

On May 12, 1962, Kwong Nam applied for a 20-year endowment insurance on his life for the sum of P20,000.00, with his wife, appellee Ng Gan Zee, as beneficiary. On the same date, Asian Crusader, upon receipt of the required premium from the insured, approved the application and issued the corresponding policy. On December 6, 1963, Kwong Nam died of cancer of the liver with metastasis. All premiums had been religiously paid at the time of his death.

On January 10, 1964, his widow Ng Gan Zee presented a claim in due form to appellant for payment of the face value of the policy. Appellant denied the claim on the ground that the insured was guilty of misrepresentation when he answered “No” to the following question appearing in the application for life insurance—

“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.”

ISSUE:

Whether Asian Crusader, because of insured’s aforesaid representation, misled or deceived into entering the contract or in accepting the risk at the rate of premium agreed upon?

RULING:

NO. Section 27 of the Insurance Law [Act 2427] provides that “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.” It has also been held “that the concealment must, in the absence of inquiries, be not only material, but fraudulent, or the fact must have been intentionally withheld.” Assuming that the aforesaid answer given by the insured is false, as claimed by the appellant. Sec. 27 of the Insurance Law, above-quoted, nevertheless requires that fraudulent intent on the part of the insured be established to entitle the insurer to rescind the contract.

It bears emphasis that Kwong Nam had informed the appellant’s medical examiner that the tumor for which he was operated on was “associated with ulcer of the stomach.” 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. Indeed, such statement must be presumed to have been made by him without knowledge of its incorrectness and without any deliberate intent on his part to mislead the appellant.
While it may be conceded that, from the viewpoint of a medical expert, the information communicated was imperfect, the same was nevertheless sufficient to have induced appellant to make further inquiries about the ailment and operation of the insured. It has been held that where, “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.

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