Vda. De Canilang v.
CA
GR No. 92492
FACTS:
4 August 1982, Jaime Canilang applied for a "non-medical" insurance policy with respondent Great
Pacific Life Assurance Company ("Grepalife") naming his wife, Thelma Canilang, as his beneficiary. Jaime
Canilang was issued ordinary life insurance, with the face value of P19,700, effective as of 9 August 1982.
On 5 August 1983, Jaime Canilang died of "congestive heart failure," "anemia," and "chronic anemia."
Thelma then applied for a claim of the insurance. The claim was denied due to concealment of material
information.
Prior to his application with Grepalife, Jaime Canilang consulted Dr. Wilfredo B. Claudio and was
diagnosed as suffering from "sinus tachycardia." The doctor prescribed the following from him: Trazepam, a
tranquilizer; and Aptin, a beta-blocker drug. Mr. Canilang consulted the same doctor again on 3 August
1982 and this time was found to have "acute bronchitis."
The medical declaration of Jaime disclosed and he claimed that he have not been confined in any hospital,
sanitarium or infirmary, nor receive any medical or surgical advice/ attention within the last five (5) years and
failed to disclose that he had twice consulted Dr. Wilfredo B. Claudio who had found him to be suffering
from "sinus tachycardia" and "acute bronchitis."
Insurance Commissioner: Ordered Grepalife to pay insurance proceeds. It said that the 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.
CA: Reversed. It was material concealment following the Ng Gan Zee case
ISSUE: Whether or not there is concealment?
RULING: Yes. CA decision is affirmed.
Section 26 of IC - A neglect to communicate that which a party knows and ought to communicate, is called a
concealment.
Section 28 of IC - Each party to a contract of insurance must communicate to the other, in good faith, all factors
within his knowledge which are material to the contract and as to which he makes no warranty, and which the other
has not the means of ascertaining.
Under the foregoing provisions, the information concealed must be information which the concealing
party knew and "ought to [have] communicated," that is to say, information which was "material to the
contract." The test of materiality is contained in Section 31 of the Insurance Code of 1978 which reads:
Materially is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon
the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract,
or in making his inquiries.
"Sinus tachycardia" is considered present "when the heart rate exceeds 100 beats per minute." The
symptoms of this condition include pounding in the chest and sometimes faintness and weakness of the
person affected.
The Court agrees with the CA that the information which Jaime Canilang failed to disclose was material
to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. Had
Canilang disclosed his visits to his doctor, the diagnosis made and 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
Grepalife 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.
The Insurance Commissioner had also ruled that the failure of Great Pacific to convey certain information
to the insurer was not "intentional" in nature, for the reason that Jaime Canilang believed that he was
suffering from minor ailment like a common cold. Section 27 of IC - A concealment, whether intentional or
unintentional, entitles the injured party to rescind a contract of insurance.
The unspoken theory of the Insurance Commissioner appears to have been that by deleting the phrase
"intentional or unintentional," the Insurance Code of 1978 (prior to its amendment by B.P. Blg. 874)
intended to limit the kinds of concealment which generate a right to rescind on the part of the injured
party to "intentional concealments." This argument is not persuasive. As a simple matter of grammar, it
may be noted that "intentional" and "unintentional" cancel each other out. The net result therefore of the
phrase "whether intentional or unitentional" is precisely to leave unqualified the term "concealment." Thus,
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.
