Ng Gan Zee vs. Asian Crusader Life Assurance Corp. G.R. No. L-30685 (Digest)

 

Ng Gan Zee vs. Asian Crusader Life Assurance Corp.

G.R. No. L-30685

 

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, appellant, 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.

            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 answers given by the insured to the questions appealing in his application for life insurance were untrue.

            Insurance Commissioner found no material concealment on the part of the insured and that, therefore, appellee should be paid the full face value of the policy. This opinion of the Insurance Commissioner notwithstanding, appellant refused to settle its obligation.

            Appellant rationalized its thesis that the insured had in January, 1962, applied for reinstatement of his lapsed life insurance policy with the Insular Life Insurance Co., Ltd, but this was declined by the insurance company, although later on approved for reinstatement with a very high premium as a result of his medical examination. Thus notwithstanding the said insured answered 'No' to the [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] question propounded to him.

            The lower court found the argument bereft of factual basis. The evidence shows that the Insular Life Assurance Co., Ltd. approved Kwong Nam's request for reinstatement and amendment of his lapsed insurance policy on April 24, 1962. The Court notes from said application for reinstatement and amendment, that the amount applied for was P20,000.00 only and not for P50,000.00 as it was in the lapsed policy. The amount of the reinstated and amended policy was also for P20,000.00. It results, therefore, that when on May 12, 1962 Kwong Nam answered 'No' to the question whether any life insurance company ever refused his application for reinstatement of a lapsed policy he did not misrepresent any fact.

            The evidence shows that the application of Kwong Nam with the Insular Life Assurance Co., Ltd. was for the reinstatement and amendment of his lapsed insurance policy-Policy No. 369531 -not an application for a 'new insurance policy. The Insular Life Assurance Co., Ltd. approved the said application on April 24, 1962. Policy No. 369531 was reinstated for the amount of P20,000.00 as applied for by Kwong.  No new policy was issued by the Insular Life Assurance Co., Ltd. to Kwong Nam in connection with said application for reinstatement and amendment. Such being the case, the Court finds that there is no misrepresentation on this matter.

            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. On the bases of the undisputed medical data showing that the insured was operated on for peptic ulcer", involving the excision of a portion of the stomach, appellant argues that the insured's statement in his application that a tumor, "hard and of a hen's egg size," was removed during said operation, constituted material concealment.

 

 

Issue:

            Whether insured's aforesaid representation, misled or deceived into entering the contract or in accepting the risk at the rate of premium agreed upon.

 

Held:

            NO. Section 27 of the Insurance Law [Act 2427] provides: Sec. 27. Such party 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."

            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.