warranty as to the fact concealed 4. The other party has no means of
ascertaining the fact concealed 5. The fact must be material
Q: What is the test of materiality?
A: It is 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 advantages of the proposed contract, or in making his inquiries. (Sec. 31)
Q: What is the presumption when the insured failed to convey the nature of the facts to the insurer? A: GR: The failure of the insured to communicate is intentional rather than inadvertent.
XPN: In the absence of evidence of the
uninsurability of a person afflicted with chronic cough, concealment thereof is no
ground for annulment of the policy.
Note: As long as the facts concealed are material. Sec. 27 states concealment, whether intentional or not.
Q: How does it differ from materiality in marine insurance?
A: Rules on concealment are stricter since the
insurer would have to depend almost entirely on the matters communicated by the insured. Thus, in addition to material facts, each party must disclose all the information he possesses which are material to the information of the belief or expectation of a third person, in reference to a material fact. But a concealment in a marine insurance in any of the following matters enumerated under Section 110, Insurance Code does not vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the risk concealed. Q: What is the test in ascertaining the existence of concealment?
A: If the applicant is aware of the existence of
some circumstances which he knows would influence the insurer in acting upon his application, good faith requires him to disclose that circumstance, though unasked.
Q: What are the matters that need not be disclosed?
A:
GR: The parties are not bound to
communicate information of the following matters:
1. Those which the other knows
2. Those which, in the exercise of ordinary care, the other ought to know and of which, the former has no reason to suppose him ignorant
3. Those of which the other waives communication
4. Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material
5. Those which relate to a risk excepted from the policy and which are not otherwise material;
6. The nature or amount of the interest of one insured (except if he is not the owner of the property insured, Sec. 34).
XPN: In answer to inquiries of the other. (Sec.
30)
Note: Neither party is bound to communicate, even upon inquiry, information of his own judgment, because such would add nothing to the appraisal of the application.
The parties are bound to know all the general causes which are open to his inquiry, equally with the other, and all general usages of trade. Q: What are the matters that must be disclosed even in the absence of inquiry? A: 1. Those material to the contract 2. Those which the other has no means of ascertaining
3. Those as to which the party with the duty to communicate makes no warranty
Note: Matters relating to the health of the insured are material and relevant to the approval of the issuance of the life insurance policy as these definitely affect the insurer’s action to the application. It is well‐settled that the insured need not die of the disease he had failed to disclose to the insurer, as it is sufficient that his non‐disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries (Sunlife Assurance Company of Canada v. CA, G.R. No. 105135, June 22, 1995).
Information as to the nature of interest need not be disclosed except In property insurance, if the insured is not the owner. If somebody is insuring properties of which he is not the owner, he must disclose why he has insurable interest that would entitle him to ensure it. Q: May the right to information of material facts be waived? A: Yes. 1. By the terms of the contract
2. By the failure to make an inquiry as to such facts, where they are distinctly implied in other facts from which information is communicated. (Sec. 33)
Q: What are the effects of concealment?
A:
1. If there is concealment under Section 27, the remedy of the insurer is rescission since concealment vitiates the contract of insurance.
2. The party claiming the existence of concealment must prove that there was knowledge of the fact concealed on the part of the party charged with concealment.
3. Good faith is not a defense in concealment. Concealment, whether intentional or unintentional entitles the injured party to rescind the contract of insurance. (Sec. 27)
4. The matter concealed need not be the cause of loss.
5. To be guilty of concealment, a party must have knowledge of the fact concealed at the time of the effectivity of the policy.
Q: When should concealment take place in order that the policy may be avoided?
A: At the time the contract is entered into and
not afterwards. The duty of disclosure ends with the completion of the contract. Waiver of medical examination in a non‐medical insurance contract renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. Failure to communicate information acquired after the effectivity of the policy will not be a ground to rescind the contract.
Reason: Information is no longer material as it will no longer influence the other party to enter into such contract.
Q: Joanna applied for a non‐medical life insurance. The Joanna did not inform the insurer that one week prior to her application for insurance, he was examined and confined at St. Luke’s Hospital where she was diagnosed for lung cancer. The insured soon thereafter died in a plane crash. Is the insurer liable considering that the fact concealed had no bearing with the cause of death of the insured? Why?
A: No. The concealed fact is material to the
approval and issuance of the insurance policy. It is well settled that the insured need not die of the disease she failed to disclose to the insurer. It is sufficient that his nondisclosure misled the insurer in forming his estimate of the risks of the proposed insurance policy or in making inquiries. (2001 Bar Question) Q: What are the instances whereby concealment made by an agent procuring the insurance binds the principal? A.
1. Where it was the duty of the agent to acquire and communicate information of the facts in question;
2. Where it was possible for the agent, in the exercise of reasonable diligence to have made of the insurance contract.
Note: Failure on the part of the insured to disclose such facts known to his agent, or wholly due to the fault of the agent, will avoid the policy, despite the good faith of the insured. B. MISREPRESENTATION/OMMISON Q: What is representation?
A: An oral or written statement of a fact or
condition affecting the risk made by the insured to the insurance company, tending to induce the insurer to assume the risk. Q: What are the kinds of representation? A: 1. Oral or written; (Sec. 36) 2. Affirmative; (Sec. 39) or 3. Promissory. (Sec. 42)