Sunlife Assurance Company vs CA, Spouses Rolando and Bernarda Bacani

Facts: Robert John Bacani procured a life insurance contract for himself from
petitioner with double indemnity in case of accidental death, designating his
mother, respondent Bernarda as beneficiary.

The insured died in a plane crash and accordingly, respondent Bernarda

filed a claim with petitioner seeking the benefits of the insurance policy. After an
investigation conducted by petitioner, its findings prompted it to reject the claim.
In its letter, petitioner informed the respondent that the insured did not disclose
material facts relevant to the issuance of the policy, thus rendering the insurance
voidable. Petitioner alleged that when the insured was asked in his application of
whether he had consulted any doctor or been submitted to any physical test in
the last 5 years, the insured declared that he had consulted with a doctor for
cough and flu symptoms without revealing that two weeks prior to his
application, he was examined, confined in a hospital and was diagnosed for renal
failure.

Respondent and her husband filed an action before the RTC for specific
performance. After petitioner moved for summary judgment, the trial court
decided in favor of herein respondents. The lower court ruled that the concealed
facts by the insured were made in good faith, that the health history of the
insured was immaterial since the insurance policy was non-medical. On appeal at
the CA, the judgment was affirmed with the appellate court reasoning that aside
from the findings of the lower court the petitioner cannot avoid its obligation by
claiming concealment because the cause of death was unrelated to the facts
concealed by the insured. Now, this petition.

Issues: 1. WON good faith is a defense in concealment

2. WON the insured’s health history is material in a non-medical insurance

3. WON the facts concealed had no bearing to the cause of insured’s death
Held: 1. No. Under the Code, a neglect to communicate that which a party knows
or ought to communicate is called concealment. The law requires each 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. The materiality is to
be determined not by the event, but solely on 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.

In the case at bar, the information which the insurer failed to disclose were
material and relevant to the approval and issuance of the policy because had they
been revealed, petitioner’s action to his application would have been affected,
either by approving it with a higher premium or rejecting the same, it would have
also warranted a medical examination in order for the petitioner to reasonably
assess the risk involved. Hence, good faith is no defense and as such entitles the
insurer to rescind the contract.

2. Yes. The Court reiterates the ruling in Saturnino vs Philam, that the
waiver of a medical examination by the insurer 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 to issue the policy or not.

3. Yes, it has bearing. It is 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 of the proposed
insurance policy or in making inquiries.