G.R. No.

105135 June 22, 1995

SUNLIFE ASSURANCE COMPANY OF CANADA, petitioner, 5. Within the past 5 years have you:
vs.
The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA ACANI, respondents. a) consulted any doctor or other health practitioner?
b) submitted to:
QUIASON, J.: EGG?
X-rays?
This is a petition for review for certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the Decision dated February 21, 1992 of the Court of
Appeals in CA-G.R. CV No. 29068, and its Resolution dated April 22, 1992, denying reconsideration thereof. We grant the petition. blood tests?
other tests?
SUMMARY: Robert John Bacani entered into a life insurance contract with petitioner Sunlife. He
named his mother respondent Bernarda Bacani as his beneficiary. In his application, Robert Bacani c) attended or been admitted to any hospital or other medical facility?
was asked a series of questions relating to his medical history; he disclosed therein that his recent
medical history consisted only of a consultation with a doctor for cough and flu symptoms. Robert 6. Have you ever had or sought advice for:
Bacani failed to disclose that he was admitted to the Lung Center of the Philippines for renal failure xxx xxx xxx
and was subjected to urinalysis, ultra-sonography and hematology tests.
b) urine, kidney or bladder disorder? (Rollo, p. 53)
Later, Robert Bacani died in a plane crash. When his mother Bernarda filed a claim with Sunlife, the
latter rejected the claim on the ground that Bacani did not disclose material facts relevant to the The deceased answered question No. 5(a) in the affirmative but limited his answer to a
issuance of the policy. consultation with a certain Dr. Reinaldo D. Raymundo of the Chinese General Hospital on February
1986, for cough and flu complications. The other questions were answered in the negative (Rollo,
Bacani argued that Sunlife even waived a medical examination of Robert prior to issuing the p. 53).
insurance policy.
Sunlife discovered that two weeks prior to his application for insurance, the insured was examined
The RTC and the CA ruled in favor of Bacani, holding that there was indeed concealment but such and confined at the Lung Center of the Philippines, where he was diagnosed for renal failure.
concealment was made in "good faith" and the facts concealed or misrepresented were irrelevant During his confinement, the deceased was subjected to urinalysis, ultra-sonography and
since the policy was "non-medical". hematology tests.

Issue: Whether Sunlife should answer for the insurance claim of Bacani? On November 17, 1988, respondent Bernarda Bacani and her husband, respondent Rolando Bacani,
filed an action for specific performance against Sunlife with the Regional Trial Court, Branch 191,
Held: No. Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance Valenzuela, Metro Manila. Sunlife filed its answer with counterclaim and a list of exhibits consisting of
to communicate to the other, in good faith, all facts within his knowledge which are material to the medical records furnished by the Lung Center of the Philippines.
contract and as to which he makes no warranty, and which the other has no means of ascertaining.
On January 14, 1990, private respondents filed a "Proposed Stipulation with Prayer for Summary Judgment" where they manifested
that they "have no evidence to refute the documentary evidence of concealment/misrepresentation by the decedent of his health
The information which the insured failed to disclose were material and relevant to the approval and condition (Rollo, p. 62).
issuance of the insurance policy. The matters concealed would have definitely affected Sunlife's
Sunlife filed its Request for Admissions relative to the authenticity and due execution of several documents as well as allegations
action on his application, either by approving it with the corresponding adjustment for a higher regarding the health of the insured. Private respondents failed to oppose said request or reply thereto, thereby rendering an admission
premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of of the matters alleged.
the insured by Sunlife in order for it to reasonably assess the risk involved in accepting the
application. Sunlife then moved for a summary judgment and the trial court decided in favor of private
respondents. The dispositive portion of the decision is reproduced as follows:
With regard to the waiver of the health exam, the SC cited Philam Life vs. Saturnino where it held: " . .
. the waiver of a medical examination [in a non-medical insurance contract] renders even more WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant, condemning the latter to
pay the former the amount of One Hundred Thousand Pesos (P100,000.00) the face value of insured's Insurance Policy
material the information required of the applicant concerning previous condition of health and No. 3903766, and the Accidental Death Benefit in the amount of One Hundred Thousand Pesos (P100,000.00) and
diseases suffered, for such information necessarily constitutes an important factor which the insurer further sum of P5,000.00 in the concept of reasonable attorney's fees and costs of suit.
takes into consideration in deciding whether to issue the policy or not . . . "
Defendant's counterclaim is hereby Dismissed (Rollo, pp. 43-44).

FACTS: On April 15, 1986, Robert John B. Bacani procured a life insurance contract for himself
from Sunlife. He was issued Policy No. 3-903-766-X valued at P100,000.00, with double indemnity in In ruling for private respondents, the trial court concluded that the facts concealed by the insured
case of accidental death. The designated beneficiary was his mother, respondent Bernarda were made in good faith and under a belief that they need not be disclosed. Moreover, it held that
Bacani. the health history of the insured was immaterial since the insurance policy was "non-medical".

On June 26, 1987, the insured died in a plane crash. Respondent Bernarda Bacani filed a claim Sunlife appealed to the Court of Appeals, which affirmed the decision of the trial court. The
with Sunlife, seeking the benefits of the insurance policy taken by her son. Sunlife conducted an appellate court ruled that Sunlife cannot avoid its obligation by claiming concealment because the
investigation and its findings prompted it to reject the claim. cause of death was unrelated to the facts concealed by the insured. It also sustained the finding
of the trial court that matters relating to the health history of the insured were irrelevant since
In its letter, Sunlife informed respondent Bernarda Bacani, that the insured did not disclose Sunlife waived the medical examination prior to the approval and issuance of the insurance policy.
material facts relevant to the issuance of the policy, thus rendering the contract of insurance Moreover, the appellate court agreed with the trial court that the policy was "non-medical" (Rollo,
voidable. A check representing the total premiums paid in the amount of P10,172.00 was attached to pp. 4-5).
said letter.
Sunlife's motion for reconsideration was denied; hence, this petition.
Sunlife claimed that the insured gave false statements in his application when he answered the
following questions:
ISSUE: WON Sunlife should be made to answer for the insurance claim of Bacani (NO. There was
concealment in this case) RELEVANCE OF THE FACTS CONCEALED

RULING: We reverse the decision of the Court of Appeals. WHEREFORE, the petition is GRANTED Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is
and the Decision of the Court of Appeals is REVERSED and SET ASIDE. SO ORDERED. well settled that the insured need not die of the disease he had failed to disclose to the insurer.
It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks
RATIO: of the proposed insurance policy or in making inquiries (Henson v. The Philippine American Life
Insurance Co., 56 O.G. No. 48 [1960]).
The rule that factual findings of the lower court and the appellate court are binding on this Court is not absolute and admits of
exceptions, such as when the judgment is based on a misappreciation of the facts (Geronimo v. Court of Appeals, 224 SCRA 494
[1993]). We, therefore, rule that Sunlife properly exercised its right to rescind the contract of insurance by
reason of the concealment employed by the insured. It must be emphasized that rescission was
In weighing the evidence presented, the trial court concluded that indeed there was concealment exercised within the two-year contestability period as recognized in Section 48 of The Insurance
and misrepresentation, however, the same was made in "good faith" and the facts concealed or Code.
misrepresented were irrelevant since the policy was "non-medical".

We disagree.

Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to

communicate to the other, in good faith, all facts within his knowledge which are material to
the contract and as to which he makes no warranty, and which the other has no means of
ascertaining. Said Section provides:

A neglect to communicate that which a party knows and ought to communicate, is

called concealment.

ON THE RELEVANCE OF THE MEDICAL HISTORY

Materiality is to be determined not by the event, but solely by the probable and reasonable
influence of the facts upon the party to whom communication is due, in forming his estimate of
the disadvantages of the proposed contract or in making his inquiries (The Insurance Code, Sec. 31).

The terms of the contract are clear. The insured is specifically required to disclose to the insurer
matters relating to his health.

The information which the insured failed to disclose were material and relevant to the approval
and issuance of the insurance policy. The matters concealed would have definitely affected
Sunlife's action on his application, either by approving it with the corresponding adjustment for a
higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical
examination of the insured by Sunlife in order for it to reasonably assess the risk involved in
accepting the application.

In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the
information withheld does not depend on the state of mind of the insured. Neither does it depend on
the actual or physical events which ensue.

Thus, "good faith" is no defense in concealment. The insured's failure to disclose the fact that he
was hospitalized for two weeks prior to filing his application for insurance, raises grave doubts about
his bonafides. It appears that such concealment was deliberate on his part.

ON THE WAIVER OF THE HEALTH EXAM BY SUNLIFE

The argument, that Sunlife's waiver of the medical examination of the insured debunks the materiality
of the facts concealed, is untenable. We reiterate our ruling in Saturnino v. Philippine American Life
Insurance Company, 7 SCRA 316 (1963), that " . . . the waiver of a 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 . . . "

Moreover, such argument of private respondents would make Section 27 of the Insurance Code,
which allows the injured party to rescind a contract of insurance where there is concealment,
ineffective (See Vda. de Canilang v. Court of Appeals, supra).