My aunt availed of an insurance policy in February 2015. Unfortunately, she suffered a stroke and passed away in November 2015. My cousin was named as my aunt’s insurance beneficiary, so she filed her application after my aunt’s burial. To her dismay, her claim was denied because, according to the insurance company, my aunt did not disclose in her insurance application form that she had kidney concerns, when the insurance company found medical records showing that she had undergone some kidney procedures in the past. The company instead returned the premium paid by my aunt.
My cousin is contemplating on reiterating her claims, but she is worried that it will again be denied for the same reason. We would just like to know if it is really possible for an insurance company to deny a claim even if the undeclared facts are not even related to the actual cause of death of the insured. I hope you can shed light.
Dear Ms. Blueberry,
Contracts are consensual in nature. It requires the meeting of the minds between the parties thereto especially as to the object and cause or consideration thereof (Articles 1305 and 1319, New Civil Code of the Philippines). A contract of insurance is no exception. It is required that both parties, the insurer and the insured, give their absolute consent to the terms and conditions of such agreement.
Nevertheless, it bears stressing that in contracts of insurance, the parties are required to communicate those which they know and those which they ought to communicate. Neglect to do so amounts to concealment, and concealment, whether intentional or unintentional, entitles the injured party to rescind the contract (Sections 26 and 27, Presidential Decree 1460, as amended, otherwise known as the Insurance Code of 1978).
Moreover, the law requires for each party to a contract of insurance to communicate to the other party, in good faith, all facts that are within his knowledge which are material to the contract, facts which he makes no warranty and those which the other party has not the means of ascertaining (Section 28, Ibid.).
In your letter, it appears that the insurance application form that was filled up by your late aunt required disclosure of information as to her health, particularly that involving the condition of her kidneys. Since she did not disclose the fact that she had kidney concerns, contrary to the medical records which were discovered by the insurer showing that she had undergone past kidney procedures, such would most likely result in the denial of your cousin’s insurance claims. As already mentioned, under the law, concealment of facts affecting the contract of insurance gives rise to the right of the injured party to cancel or rescind the contract. It does not matter whether such concealment was made intentionally or unintentionally.
The circumstance that the information that was concealed is not related to the actual cause of death of the insured cannot also be given weight in favor of your cousin. Section 28 of the Insurance Code requires disclosure of such mentioned facts not only for the reason that it will be the cause of the loss, damage or death of the insured, but in order for the insurer to properly evaluate the premiums to be imposed on the applicant as well as to determine whether it will, ultimately, approve or deny the insurance application. The Supreme Court also reiterated in the case of Sunlife Assurance Company of Canada vs. Court of Appeals (G.R. No. 105135 June 22, 1995), that: “x x x Anent the finding that the facts concealed had no bearing to the cause of death of the insured, 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 (Henson v. The Philippine American Life Insurance Co., 56 O.G. No. 48 ). x x x”
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to firstname.lastname@example.org