G.R. No. L-12465; May 29, 1959
Yu Pang Cheng alias Yu Pang Ching, petitioner, vs. The Court of Appeals, et al., respondents.

FACTS

Petitioner Yu Pang Cheng, as beneficiary, filed an action to collect the sum of P10,000 from the respondent insurance company under a life insurance policy issued on the life of Yu Pang Eng. The defendant insurer refused payment, alleging that the insured was guilty of misrepresentation and concealment of material facts in his application. The trial court ruled in favor of the plaintiff, ordering the insurer to pay. The Court of Appeals reversed this decision, holding that the insured was guilty of concealment, thereby relieving the insurer of liability. The insured, Yu Pang Eng, submitted his application for insurance on September 5 and 7, 1950, and the policy was issued on September 8, 1950. He died on February 27, 1951, from “infiltrating medullary carcinoma, Grade 4, advanced cardiac and of lesser curvature, stomach metastases spleen.” In his application, specifically in the medical declaration, the insured answered “No” to questions asking whether he had ever had gastritis, ulcer of the stomach, or any disease of that organ; vertigo, dizziness, fainting-spells, or unconsciousness; cancer, tumors, or ulcers of any kind; and whether he had ever consulted any physician not previously listed. However, the record showed that from January 29 to February 11, 1950, the insured had been confined at the Chinese General Hospital, where he complained of dizziness, anemia, abdominal pains, and tarry stools, and was diagnosed with “peptic ulcer, bleeding.”

ISSUE

Whether the insured was guilty of concealment of material facts in his insurance application, which would avoid the policy and relieve the insurer from liability.

RULING

Yes, the insured was guilty of concealment of material facts. The Supreme Court affirmed the decision of the Court of Appeals. The insured’s negative answers in his September 1950 application concealed his hospitalization and treatment for peptic ulcer and related symptoms (dizziness, abdominal pains, tarry stools) just months earlier, from January to February 1950. These facts were directly related to the questions asked concerning stomach diseases and dizziness. This concealment deprived the insurer of the opportunity to investigate the insured’s medical history and make a proper assessment of the risk. Had the true facts been disclosed, the insurer would probably not have issued the policy. Under the Insurance Act (Act No. 2427), concealment—defined as a neglect to communicate what a party knows and ought to communicate—whether intentional or unintentional, entitles the insurer to rescind the contract. The materiality of a concealment is determined by its probable and reasonable influence on the insurer’s decision to assume the risk. Following the precedent in Argente vs. West Coast Life Insurance Co., the Court held that the concealment of the prior illness was material and sufficient to avoid the policy. Therefore, the insurer was correctly relieved of liability. The decision of the Court of Appeals was affirmed.