Summary: Sunlife Assurance Company of Canada vs. Court of Appeals (GR 105135, 22 June 1995)

Sunlife Assurance Company of Canada vs. Court of Appeals
[GR 105135, 22 June 1995]
First Division, Quiason (J): 4 concur

Facts: On 15 April 1986, Robert John B. Bacani procured a life insurance contract for himself from Sunlife Assurance Company of Canada. He was issued Policy 3-903-766-X valued P100,000.00, with double indemnity in case of accidental death. The designated beneficiary was his mother, Bernarda Bacani. On 26 June 1987, the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an investigation and its findings prompted it to reject the claim. In its letter, Sunlife informed Bacani, that the insured did not disclosed material facts relevant to the issuance of the policy, thus rendering the contract of insurance voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to said letter. Sunlife claimed that the insured gave false statements in his application when he answered the following questions: "5. Within the past 5 years have you: a) consulted any doctor or other health practitioner? b) submitted to: ECG? X-rays? blood tests? other tests? c) attended or been admitted to any hospital or other medical facility? 6. Have you ever had or sought advice for: xxx b) urine, kidney or bladder disorder?" The deceased answered questions No. 5(a) in the affirmative but limited his answer to a consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February 1986, for cough and flu complications. The other questions were answered in the negative. Sunlife discovered that two weeks prior to his application for insurance, the insured was examined and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure. During his confinement, the deceased was subjected to urinalysis, ultra-sonography and hematology tests. On 17 November 1988, Bernarda Bacani and her husband, respondent Rolando Bacani, filed an action for specific performance against Sunlife with the Regional Trial Court, Branch 191, Valenzuela, Metro Manila. Sunlife filed its answer with counterclaim and a list off exhibits consisting of medical records furnished by the Lung Center of the Philippines. On 14 January 1990, Bacani filed a "Proposed Stipulation with Prayer for Summary Judgment" where they manifested that they "have no evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of his health condition." Sunlife filed its Request for Admissions relative to the authenticity and due execution of several documents as well as allegations regarding the health of the insured. The Bacanis failed to oppose said request or reply thereto, thereby rendering an admission of the matters alleged. Sunlife then moved for a summary judgment and the trial court decided in favor of the Bacanis, ordering Sunlife to pay the former the amount of P100,000.00 the face value of insured's Insurance Policy 3903766, and the Accidental Death Benefit in the amount of P100,000.00 and further sum of P5,000.00 in the concept of reasonable attorney's fees and the costs of the suit. Sunlife's counterclaim was dismissed. Sunlife appealed to the Court of Appeals, which affirmed the decision of the trial court. Sunlife's motion for reconsideration was denied, hence, Sunlife filed the petition for review on certiorari.

Issue [1]: Whether good faith is a defense in concealment.

Held [1]: NO. Section 26 of the Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means of ascertaining. Said Section provides that "a neglect to communicate that which a party knows and ought to communicate, is called concealment." 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 communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The information which the insured failed to disclose were material and relevant to the approval and the issuance of the insurance policy. The matters concealed would have definitely affected Bacani's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured by Sunlife in order for it to reasonably assess the risk involved in accepting the application. In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), the Court held that materiality of the information withheld does not depend on the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about his bonafides. It appears that such concealment was deliberate on his part.

Issue [2]: Whether Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed.

Held [2]: NO. The argument, that Sunlife's waiver of the medical examination of the insured debunks the materiality of the facts concealed, is untenable. In Saturnino v. Philippine American Life Insurance Company, 7 SCRA 316 (1963), the Court held that "the waiver of a medical examination [in a non-medical insurance contract] 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." Moreover, such argument would make Section 27 of the Insurance Code, which allows the injured party to rescind a contract of insurance where there is concealment, ineffective. Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries.

	This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.