Insurance Claim Dispute: Misrepresentation Ruling
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ArtemisTzyInsurance Claim Dispute: Misrepresentation Ruling
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ArtemisTzyNG GAN ZEE v.
ASIAN CRUSADER LIFE ASSURANCE CORPORATION
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.
FACTS:
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.
Appellant, upon receipt of the required premium from the insured, approved the
application and issued the corresponding policy.
Kwong Nam died of cancer of the liver with metastasis. All premiums had been
religiously paid at the time of his death.
His widow Ng Gan Zee presented a claim in due form to appellant for payment of
the face value of the policy. On the same date, she submitted the required proof
of death of the insured.
Appellant denied the claim on the ground that the answers given by the insured
to the questions appearing in his application for life insurance were untrue.
Insurance Commissioner had found no material concealment on part of the
insured.
Appellant refused to settle its obligation alleging that the insured was guilty of
misrepresentation when he answered "No" to the following question appearing in
the application for life insurance.
The lower court found the argument bereft of factual basis.
Appellant further maintains that when the insured was examined in connection
with his application for life insurance, he gave the appellant's medical examiner
false and misleading information as to his ailment and previous operation.
ISSUE: Was appellant, 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:
The court agrees with the lower court’s ruling. Section 27 of the Insurance Law
[Act 2427] provides:
"Sec. 27. Such party to a contract of insurance must communicate to the other,
in good faith, all facts within his knowledge which are material to the contract, and
which the other has not the means of ascertaining, and as to which he makes no
warranty."
Thus, "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. And as correctly observed by the lower court, "misrepresentation as a
defense of the insurer to avoid liability is an 'affirmative' defense. The duty to establish
such a defense by satisfactory and convincing evidence rests upon the defendant. The
evidence before the Court does not clearly and satisfactorily establish that defense."
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.
Section 32 of Insurance Law provides as follows:
"Section 32. The right to information of material facts may be waived either by
the terms of insurance or by neglect to make inquiries as to such facts where they are
distinctly implied in other facts of which information is communicated."
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.
As aptly noted by the lower court, "if the ailment and operation of Kwong Nam
had such an important bearing on the question of whether the defendant would
undertake the insurance or not, the court cannot understand why the defendant or its
medical examiner did not make any further inquiries on such matters from the Chinese
General Hospital or require copies of the hospital records from the appellant before
acting on the application for insurance. The fact of the matter is that the defendant was
too eager to accept the application and receive the insured's premium. It would be
inequitable now to allow the defendant to avoid liability under the circumstances."
