G.R. No. L-30685 May 30, 1983
NG GAN ZEE, plaintiff-appellee, vs. ASIAN CRUSADER LIFE ASSURANCE CORPORATION, defendant-appellant.

FACTS

Kwong Nam applied for a 20-year endowment life insurance policy with Asian Crusader Life Assurance Corporation, naming his wife Ng Gan Zee as beneficiary. The policy was issued on May 12, 1962. Kwong Nam died of liver cancer on December 6, 1963. Upon Ng Gan Zee’s claim for the policy proceeds, the insurer denied liability, alleging material concealment and misrepresentation by the insured in his application.
The insurer contended the insured made two material misrepresentations. First, he answered “No” to a question asking if any life insurance company had ever refused his application for insurance or reinstatement of a lapsed policy. The insurer argued this was false because the Insular Life Assurance Co. had initially declined a reinstatement application in January 1962, though it later approved it in April 1962. Second, during the medical exam, the insured stated he was operated on for a “tumor… associated with ulcer of the stomach,” describing the tumor as hard and hen’s egg-sized. Hospital records indicated the actual diagnosis was peptic ulcer and the procedure was a subtotal gastric resection.

ISSUE

Whether the insured committed material concealment or misrepresentation that would void the insurance policy.

RULING

The Supreme Court affirmed the lower court’s judgment, ordering the insurer to pay the policy face value. On the first point, the Court found no misrepresentation. The evidence established that the Insular Life application was for the reinstatement and amendment of a specific lapsed policy, which was ultimately approved. Thus, the insured’s negative answer was truthful, as there was no final refusal by the company.
On the second point, the Court held there was no fraudulent concealment. The insured’s statement that the tumor was “associated with ulcer of the stomach” was made in good faith, reflecting his layman’s understanding of his medical condition. There was no proof he possessed medical expertise to distinguish precisely between a tumor and an ulcer. Crucially, this disclosed information was sufficient to put the insurer on notice to conduct further inquiries, such as requesting hospital records, before approving the risk. Under Section 32 of the Insurance Law (now Section 28 of the Insurance Code), an insurer waives its right to information if it neglects to make further inquiries when facts communicated distinctly imply other material facts. By issuing the policy without further investigation, the insurer waived any imperfection in the answer. The insurer, having eagerly accepted the premium, cannot now equitably avoid liability.