One ground for the rescission of a contract of

BERNARDO ARGENTE VS. WEST COAST LIFE insurance under the Insurance Act is "a
INSURANCE concealment," which in section 25 is defined as "A
neglect to communicate that which a party knows and
FACTS: ought to communicate." Appellant argues that the
alleged concealment was immaterial and insufficient
Bernardo Argente and his wife Vicenta de Ocampo to avoid the policy. We cannot agree. In an action on
signed an application for life insurance with the sum a life insurance policy where the evidence
of P2,000, later amended to P15,000. Both conclusively shows that the answers to questions
applications, with the exception of the names and the concerning diseases were untrue, the truth of falsity
signatures of the applicants, were written by the of the answers become the determining factor. In the
agent of West Coast Life Insurance Co. But all the policy was procured by fraudulent representations,
information contained in the applications were the contract of insurance apparently set forth therein
furnished by Bernardo Argente to the agent. was never legally existent. It can fairly be assumed
that had the true facts been disclosed by the assured,
Pursuant to their applications, Bernardo and Vicenta the insurance would never have been granted.
were examined separately by Dr. Sta. Ana, a
medical examiner for the West Coast Life Insurance In Joyce, The Law of Insurance, second edition,
Co.,. Except for the name and signature, the report volume 3, Chapter LV, is found the following:
was handwritten by Dr. Sta. Ana. The information and
answers to the questions were furnished by the Concealment exists where the assured has
applicants (Bernardo and Vicenta). knowledge of a fact material to the risk, and honesty,
good faith, and fair dealing requires that he should
Later, Vicenta died of cerebral apoplexy. Bernardo communicate it to the assured, but he designated
presented a claim in due form to the West Coast Life and intentionally with holds the same.
Insurance Co. for the payment of the sum of P15,000
the amount of the joint life Insurance policy. Another rule is that if the assured undertakes to state
all the circumstances affecting the risk, a full and fair
statement of all is required.
Following investigation conducted, it was apparently
disclosed that the answers given by the insured in
It is also held that the concealment must, in the
their medical examinations with regard to their health
absence of inquiries, be not only material, but
and previous illness and medical attendance were
fraudulent, or the fact must have been intentionally
untrue. For that reason, the West Coast Life
withheld; so it is held under English law that if no
Insurance Co. refused to pay the claim of Bernardo
inquiries are made and no fraud or design to conceal
Argente and wrote him to the effect that the claim
enters into the concealment the contract is not
was rejected because the insurance was obtained
avoided. And it is determined that even though
through fraud and misrepresentation.
silence may constitute misrepresentation or
concealment it is not itself necessarily so as it is a
The court found from the evidence that the question of fact. Nor is there a concealment justifying
representations made by Bernardo Argente and his a forfeiture where the fact of insanity is not disclosed
wife in their applications to the defendant for life no questions being asked concerning the same.
insurance were false with respect to their estate of
health during the period of five years preceding the
date of such applications, and that they knew the
representations made by them in their applications
were false. The court further found from the evidence IGNACIO SATURNINO VS PHILIPPINE
that the answers given by Bernardo Argente and his AMERICAN LIFE INSURANCE COMPANY
wife at the time of the medical examination by Doctor
Sta. Ana were false with respect to the condition of FACTS:
their health at that time and for a period of several
years prior thereto. Deceased Estefania Saturnino contracted a 20-year
endowment non-medical life insurance with appellee.
ISSUE: This kind of policy dispenses with the medical
examination of the applicant. However, detailed
Whether or not West Coast Life Insurance can information is called for in the application concerning
rescind the insurance contract. the applicant’s health and medical history. The
written application was submitted by Estefania herself
RULING: as witnessed by appellee’s agent. The policy was
issued on the same day. Thereafter, Saturnino died.
Her surviving spouse and minor child, appellants
herein, subsequently demanded payment of the face
value of the policy. The same was rejected and this NG GAN ZEE v. ASIAN CRUSADER LIFE
case was filed before the RTC. ASSURANCE CORPORATION

It appears that months prior to issuance of the policy, FACTS:

the deceased was operated on for cancer,
notwithstanding such fact, Saturnino did not make a On May 12, 1962, Kwong Nam applied for a 20-year
disclosure thereof in her application. On the contrary, endowment insurance on his life for the sum of
she stated therein that she did not have, nor had she P20,000.00, with his wife, appellee Ng Gan Zee, as
ever had among other ailments listed in the beneficiary. On the same date, appellant, upon
application, cancer or other tumors; nor undergone receipt of the required premium from the insured,
any operation. approved the application and... issued the
corresponding policy. On December 6, 1963, Kwong
ISSUE: Nam died of cancer of the liver with metastasis. All
premiums had been religiously paid at the time of his
WON Saturnino is entitled to the insurance claim death.
On January 10, 1964, his widow Ng Gan Zee
RULING: presented a claim in due form to appellant for
payment of the face value of the policy. On the same
No. Under the law, each party to a contract of date, she submitted the required proof of death of the
insurance is bound to communicate to the other, in insured. Appellant denied the claim on the ground
good faith, all facts within his knowledge which are that the answers given by the... insured to the
material to the contract, and to which he makes no questions appearing in his application for life
warranty, and which the other has not the means of insurance were untrue.
ascertaining.
Appellee brought the matter to the attention of the
In the instant case, there can be no dispute that the Insurance Commissioner... the latter, after conducting
information given by her in her application was false, an investigation, wrote the appellant that he had
namely, that she had never cancer or tumors or found no material concealment on the part of the
undergone any operation in the preceding five years. insured and that, therefore,... appellee should be paid
It is evident that she is guilty of concealment. the full face value of the policy. This opinion of the
Insurance Commissioner notwithstanding, appellant
As to petitioner’s contention that since the contract refused to settle its obligation.
was a non-medical insurance, concealment of her
previous health conditions were not material is Insurer's argument:
without merit. Because if anything, the waiver of
medical examination renders even more material the Appellant alleged that the insured was guilty of
information required of the applicant concerning misrepresentation when he answered "No" to the
previous conditions of health and diseases suffered, following question appearing in the application for life
for such information necessarily constitutes an insurance:
important factor which the insurer takes into "Has any life insurance company ever refused your
consideration in deciding whether to issue the policy application for insurance or for reinstatement of a
or not. It is logical to assume that if the appellee had lapsed policy or offered you a policy different from
been properly apprised of the insured’s medical that applied for? If, so, name company and date."
history, she would have at least have been made to
undergo medical examination in order to determine The lower court found the argument bereft of factual
her insurability. basis

Lastly, it is argued that if ever there was concealment Ltd. ever refused any application of Kwong Nam for
on Saturnino’s part, the same was not fraudulent for insurance. Neither is there any evidence that any
she was devoid of knowledge that she was operated other insurance company has refused any application
for cancer. The same is not tenable, because the of Kwong Nam for insurance.
concealment of the fact of the operation itself is
Appellant further maintains that when the insured
fraudulent, as there could not have been any mistake
was examined in connection with his application for
about it, aside from the fact that in this jurisdiction,
life insurance, he gave the appellant's medical
concealment, whether intentional or unintentional,
examiner false and misleading information as to his
entitles the insurer to rescind the contract of
ailment and previous operation.
insurance.
Operated on for a Tumor [mayoma] of the stomach. on as a defense of the insurer to avoid liability is an
Claims that Tumor has been associated with ulcer of 'affirmative' defense. The duty to establish such a
stomach. Tumor taken out was hard and of a hen's defense by satisfactory and convincing evidence
egg size. Operation was two [2] years ago in Chinese rests upon the defendant. The evidence before the
General Hospital by Dr. Yap. Now, claims he is Court does... not clearly and satisfactorily establish
completely... recovered. that defense."
According to said report, Dr. Fu Sun Yuan had While it may be conceded that, from the viewpoint of
diagnosed the patient's ailment... as 'peptic ulcer' for a medical expert, the information communicated was
which an operation, known as a 'sub-total gastric imperfect, the same was nevertheless sufficient to
resection' was performed on the patient by Dr. have induced appellant to make further inquiries
Pacifico Yap about the ailment and operation of the insured.
The Surgical Pathology Report of Dr. Elias Section 32 of Insurance Law [Act No. 2427] provides
Pantangco showing that the specimen removed from as follows:
the patient's body was 'a portion of the stomach
measuring 12 cm. and 19 cm. along the lesser "Section 32. The right to information of material facts
curvature with a diameter of 15 cm. along the may be waived either by the terms of insurance or by
greatest dimension. neglect to make inquiries as to such facts where they
are distinctly implied in other facts of which
On the bases of the above undisputed medical data information is communicated."
showing that the insured was operated on for "peptic
ulcer", involving the excision of a portion of the It has been held that where, "upon the face of the
stomach, appellant argues that the insured's application, a question appears to be not answered at
statement in his application that a tumor, "hard and of all or to be imperfectly answered, and the insurers
a hen's egg size,"... was removed during said issue a policy without any further inquiry, they waive
operation, constituted material concealment. the imperfection of the answer and render the
omission to answer... more fully immaterial.
ISSUES:
The fact of the matter is that the defendant was too
Was appellant, because of insured's aforesaid eager to accept the application and receive the...
representation, misled or deceived into entering the insured's premium. It would be inequitable now to
contract or in accepting the risk at the rate of allow the defendant to avoid liability under the
premium agreed upon and if so, can it then rescind circumstances.
the contract? NO.
Principles:
RULING:
Sec. 27 of the Insurance Law, above-quoted,
The lower court answered this question in the nevertheless requires that fraudulent intent on the
negative, and We agree. part of the insured be established to entitle the
insurer to rescind the contract.
"Sec. 27. Such party to a contract of insurance must
communicate to the other, in good faith, all facts And as correctly observed by the lower court,
within his knowledge which are material to the "misrepresentation as a defense of the insurer to
contract, and which the other has not the means of avoid liability is an 'affirmative' defense. The duty to
ascertaining, and as to which he makes no warranty." establish such a defense by satisfactory and
convincing evidence rests upon the defendant. The
Thus, "concealment exists where the assured had evidence before the Court does... not clearly and
knowledge of a fact material to the risk, and honesty, satisfactorily establish that defense."
good faith, and fair dealing requires that he should
communicate it to the assurer, but he designedly and
intentionally withholds the same."
It has also been held "that the concealment must, in UNITED MERCHANTS CORPORATION VS
the absence of inquiries, be not only material, but COUNTRY BANKERS INSURANCE
fraudulent, or the fact must have been intentionally CORPORATION
withheld."
Facts:
Sec. 27 of the Insurance Law, above-quoted,
nevertheless requires that fraudulent intent on the
Petitioner United Merchants Corporation (UMC) is
part of the insured be established to entitle the
engaged in the business of buying, selling, and
insurer to rescind the contract.
manufacturing Christmas lights. UMC leased a
warehouse at 19-B Dagot Street, San Jose
Subdivision, Barrio Manresa, Quezon City, where risk, then the burden of evidence shifted to CBIC to
UMC assembled and stored its products. prove such exception.

On 6 September 1995, UMCs General Manager An insurer who seeks to defeat a claim because of an
Alfredo Tan insured UMCs stocks in trade of exception or limitation in the policy has the burden of
Christmas lights against fire with defendant Country establishing that the loss comes within the purview of
Bankers Insurance Corporation (CBIC) for the exception or limitation. If loss is proved
P15,000,000.00. The Fire Insurance Policy No. F- apparently within a contract of insurance, the burden
HO/95-576 (Insurance Policy) and Fire Invoice No. is upon the insurer to establish that the loss arose
12959A, valid until 6 September 1996. from a cause of loss which is excepted or for which it
is not liable, or from a cause which limits its liability.
On 7 May 1996, UMC and CBIC executed
Endorsement F/96-154 and Fire Invoice No. 16583A In Uy Hu & Co. v. The Prudential Assurance Co.,
to form part of the Insurance Policy. Endorsement Ltd., the Court held that where a fire insurance policy
F/96-154 provides that UMCs stocks in trade were provides that if the claim be in any respect fraudulent,
insured against additional perils, to wit: typhoon, or if any false declaration be made or used in support
flood, ext. cover, and full earthquake. The sum thereof, or if any fraudulent means or devices are
insured was also increased to P50,000,000.00 used by the Insured or anyone acting on his behalf to
effective 7 May 1996 to 10 January 1997. obtain any benefit under this Policy, and the evidence
is conclusive that the proof of claim which the insured
On 9 May 1996, CBIC issued Endorsement F/96-157 submitted was false and fraudulent both as to the
where the name of the assured was changed from kind, quality and amount of the goods and their value
Alfredo Tan to UMC. On 3 July 1996, a fire gutted the destroyed by the fire, such a proof of claim is a bar
warehouse rented by UMC. CBIC designated CRM against the insured from recovering on the policy
Adjustment Corporation (CRM) to investigate and even for the amount of his actual loss.
evaluate UMCs loss by reason of the fire. CBICs
reinsurer, Central Surety, likewise requested the In the present case, as proof of its loss of stocks in
National Bureau of Investigation (NBI) to conduct a trade amounting to P 50,000,000.00, UMC submitted
parallel investigation. its Sworn Statement of Formal Claim together with
the following documents: (1) letters of credit and
On 6 July 1996, UMC, through CRM, submitted to invoices for raw materials, Christmas lights and
CBIC its Sworn Statement of Formal Claim, with cartons purchased; (2) charges for assembling the
proofs of its loss. Christmas lights; and (3) delivery receipts of the raw
materials. However, the charges for assembling the
Christmas lights and delivery receipts could not
ISSUE:
support its insurance claim. The Insurance Policy
provides that CBIC agreed to insure UMCs stocks in
Whether or not UMC is entitled to claim from CBIC trade. UMC defined stock in trade as tangible
the full coverage of its fire insurance policy. personal property kept for sale or traffic. Applying
UMCs definition, only the letters of credit and
RULING: No. invoices for raw materials, Christmas lights and
cartons may be considered.
Burden of proof is the duty of any party to present
evidence to establish his claim or defense by the It has long been settled that a false and material
amount of evidence required by law, which is statement made with an intent to deceive or defraud
preponderance of evidence in civil cases. The party, voids an insurance policy.
whether plaintiff or defendant, who asserts the
affirmative of the issue has the burden of proof to The most liberal human judgment cannot attribute
obtain a favorable judgment. Particularly, in such difference to mere innocent error in estimating
insurance cases, once an insured makes out a prima or counting but to a deliberate intent to demand from
facie case in its favor, the burden of evidence shifts insurance companies payment for indemnity of goods
to the insurer to controvert the insureds prima facie not existing at the time of the fire. This constitutes the
case. In the present case, UMC established a prima so-called fraudulent claim which, by express
facie case against CBIC. CBIC does not dispute that agreement between the insurers and the insured, is a
UMCs stocks in trade were insured against fire under ground for the exemption of insurers from civil
the Insurance Policy and that the warehouse, where liability.
UMCs stocks in trade were stored, was gutted by fire
on 3 July 1996, within the duration of the fire
insurance. However, since CBIC alleged an excepted
BENGUET V CA utmost good faith). One of the conditions in the
marine policy was that the warranted vessel is
equipped with steel centerline bulkhead because of
FACTS: the nature of the cargo. The purpose of the centerline
bulkhead was to prevent the copper concentrates
Petitioner Benguet Exploration, Inc. (Benguet) filed a from shifting while being transported on the ship.
complaint for damages against Seawood Shipping, Upon verification, they found out that the vessel
Inc. (Seawood Shipping) with the RTC of Makati. Sangkulirang No. 3 did not have steel centerline
Then, Petitioner Benguet filed another complaint for bulkhead. As such, they refused Benguet’s demand
damages against respondent Switzerland General because the non-compliance with the condition
Insurance, Co., Ltd. (Switzerland Insurance). The two rendered the marine insurance policy null and void
cases were consolidated. Switzerland Insurance filed from the beginning. Switzerland refunded the
a third-party complaint against Seawood Shipping, premium paid by Benguet.
praying that the latter be ordered to indemnify it for
whatever might be adjudged against it in favor of b. Witness Fabian stated that the vessel was indeed
petitioner. Thereafter, the cases were jointly tried. not equipped with a steel centerline bulkhead. This
was a steel separation of a vessel for the purpose of
Petitioner Benguet first presented its employees as preventing the vessel from sinking, especially in a
witnesses. heavy weather. He also explained that the weight of
the cargo might have been increased by the rains
a. Witness Lumibao explained that respondent which occurred during the loading, and the shortage
Seawood was chartered by Benguet to transport upon unloading might be due to the moisture which
copper concentrates. The bill of lading stated that the evaporated during the voyage.
cargo, consisting of 2,243.496 wet metric tons of
copper concentrates, was loaded on board c. Witness Dio testified on the same factual
Sangkulirang No. 3. It was insured by Switzerland allegations.
(marine insurance policy). When the cargo was
unloaded in Japan however, the surveyor reported RTC dismissed Benguet’s complaint and
that the cargo was 355 metric tons short of the Switzerland’s third-party complaint against Seawood.
amount stated in the bill of lading. For this reason, CA affirmed the decision.
Benguet made a claim of loss to Seawood and
Switzerland. Both of the latter refused the demand. Petitioner Benguet now contends that the CA gravely
On cross-examination, Witness Lumibao admitted erred in ruling that it failed to establish the loss or
that he did not see the actual loading of the cargo shortage of the cargo, because such loss was
and that his knowledge was limited to what was sufficiently established by documentary and
contained in the bill of lading. Some other person (a testimonial evidence, as well as admissions of private
third-party entity) undertook the weighing of the respondents. The cargoes have been properly
cargo, and Lumibao was only informed by telephone identified by the bill of lading, Certificate of Weight,
of the cargos’ weight before and after loading. and Mates receipt, all of which stating that 2,243.496
wet metric tons of copper concentrates were loaded.
b. Witness Cayabyab said he was present when the
cargo was loaded on the ship, as evidenced by ISSUE:
Certificate of Loading, Certificate of Weight, and the
Mates Receipt. He described the process of loading Whether or not genuineness and due execution of
and unloading, where trucks carrying the materials the documents presented, i.e., Bill of Lading,
are used to determine the exact weight of the Certificate of Loading, Certificate of Weight, Mates
carriage. Although he was present at the site, he did Receipt, were properly established by the testimony
not know how many trucks were used to load the of its witness, and that as a result, there is a prima
entire cargo of the copper concentrates. Thus, he facie presumption that their contents are true.
could not tell with certainty that no spillage took place
during the loading. RULING: NO. The contents of such documents can
be rebutted.
Respondent Switzerland presented its employees as
witnesses. The admission of the due execution and genuineness
of a document simply means that the party whose
a. Witness Pantoja stated that the figure of 2,243.496 signature it bears admits that he signed it or that it
wet metric tons in the policy of Benguet was taken was signed by another for him with his authority; that
from latter’s declaration. They relied on the value of at the time it was signed it was in words and figures
the cargo declared by the insured on the basis of the exactly as set out in the pleading of the party relying
principle uberrimae fidei (the insured must act in the upon it; that the document was delivered; and that
any formal requisites required by law, such as a seal, shipment and as between the consignor and a
an acknowledgment, or revenue stamp, which it receiving carrier, the fact must outweigh the recital.
lacks, are waived by him. When the law makes use of Resultingly, the admissions elicited from appellant’s
the phrase genuineness and due execution of the witnesses that they could not confirm the accuracy of
instrument it means nothing more than that the the figures indicated in their documentary evidence
instrument is not spurious, counterfeit, or of different with regard to the actual weight of the cargo loaded
import on its face from the one executed. at the port of origin and that unloaded at the port of
destination, in effect rebuts the presumption in favor
Execution can only refer to the actual making and of the figure indicated in the bill of lading.
delivery, but it cannot involve other matters without
enlarging its meaning beyond reason. The only object SC affirmed the decision of CA.
of the rule was to enable a plaintiff to make out a
prima facie, not a conclusive case, and it cannot
preclude a defendant from introducing any defense
on the merits which does not contradict the execution
of the instrument introduced in evidence.

In this case, respondents presented evidence which

casts doubt on the veracity of these documents.
Respondent Switzerland Insurance presented Export
Declaration No. 1131/85 (Exh. 11) which petitioners
own witness, Rogelio Lumibao, prepared, in which it
was stated that the copper concentrates to be
transported to Japan had a gross weight of only
2,050 wet metric tons or 1,845 dry metric tons, 10
percent more or less. On the other hand, Certified
Adjusters, Inc., to which Switzerland Insurance had
referred petitioners claim, prepared a report which
showed that a total of 2,451.630 wet metric tons of
copper concentrates were delivered at the loading
point. Moreover, it is to be pointed out that there were
no actual weighing made at Benguet’s site. The
procedure done was that after weighing the trucks
before and after unloading at the loading point, Philex
Poro Point Installation, the weight of the load was
determined and entered on Philex Trip Ticket which
was later on copied and entered by the truck driver
on Benguet’s Transfer Slip.

Considering the discrepancies in the various

documents showing the actual amount of copper
concentrates transported to the loading point and
loaded in the vessel, there is no evidence of the
exact amount of copper concentrates shipped. Thus,
whatever presumption of regularity in the transactions
might have risen from the genuineness and due
execution of the Bill of Lading, Certificate of Weight,
Certificate of Loading, and Mates Receipt was
successfully rebutted by the evidence presented by
respondent Switzerland Insurance which showed
disparities in the actual weight of the cargo
transported to Poro Point and loaded on the vessel.
This fact is compounded by the admissions made by
Lumibao and Cayabyab that they had no personal
knowledge of the actual amount of copper
concentrates loaded on the vessel.

CA correctly held that recitals in the bill of lading as to

the goods shipped raise only a rebuttable
presumption that such goods were delivered for