BERNARDO ARGENTE, plaintiff-appellant, vs.

WEST COAST LIFE INSURANCE CO., defendant-appellee.

G.R. No. L-24899 March 19, 1928

 In February 1925, Bernardo Argente and his wife applied for a joint life insurance under West Coast Life Insurance
Company (West Coast) for P2000 which they later amended to increase to P15,000. The couple was examined by the
insurance company doctor (Doctor Sta. Ana). The couple disclosed to the doctor that they never had any serious
medical histories; that they were never confined; that Vicenta De Ocampo (wife of Argente) was not an alcoholic.
Doctor Sta. Ana then recommended the approval of the application. In May 1925, the couple were issued with the
insurance policy. In November 1925, Vicenta died of cerebral apoplexy.

 Argente filed an insurance claim for P15,000 but it was denied because upon investigation of the insurance company,
it was found that the application made in June was attended by fraud because the couple failed to disclose the fact
that each of them were actually confined prior to their application; that Vicenta in particular was diagnosed for
alcoholism and ultimately for psycho-neurosis; that in sum, their statement as to their health and previous illnesses
within the last 5-7 years prior to their application were untrue.

 Argente conceded to the allegations of West Coast however he stated that those facts were actually disclosed to Dr.
Sta. Ana, however, Dr. Sta. Ana connived with the insurance agent (Jose del Rosario) hence he failed to record them
in the medical reports. Further, Argente averred that if West Coast did have the right to rescind the insurance, it
should have done so prior to the filing of a suit involving the insurance claim.
ISSUE + RULING: Whether Argente is entitled to the insurance claim
NO. He is not entitled to the insurance claim because he concealed material facts which deceived the insurer. One ground
for the rescission of a contract of insurance under the Insurance Act is "a concealment," which in section 25 is defined as
"A neglect to communicate that which a party knows and ought to communicate."
In an action on a life insurance policy where the evidence conclusively shows that the answers to questions concerning
diseases were untrue, the truth or falsity of the answers become the determining factor. If the policy was procured by
fraudulent representations, the contract of insurance apparently set forth therein was never legally existent. It can fairly be
assumed that had the true facts been disclosed by the assured, the insurance would never have been granted.
The basis of the rule vitiating the contract in case of concealment is that it misleads or deceives the insurer into accepting
the risk, or accepting it at the rate of premium agreed upon. The insurer, relying upon the belief that the assured will
disclose every material within his actual or presumed knowledge, is misled into a belief that the circumstance withheld
does not exist, and he is thereby induced to estimate the risk upon a false basis that it does not exist. The allegations of
Argente do not have a leg to stand on, Dr. Sta. Ana has no motive whatsoever and such alleged illicit act will only destroy
his reputation as a physician.
ISSUE + RULING: Whether West Coast is precluded from rescinding the insurance contract because it failed to
rescind prior to the filing of this case
NO, West Coast is not precluded to rescind. As to the Argente's allegation regarding the failure of West Coast to rescind
the insurance prior to the filing of this case, there are two answers:
1. The failure of West Coast to rescind the contract cannot prejudice any defense to the suit which concealment may
furnish.
2. Prior to the filing of this case, West Coast already sent a notice to Argente advising him that the insurance contract was
void because it had been procured through fraudulent representations. West Coast also offered to refund the premium
upon the return of the policy for cancellation. This operates as a rescission to the contract of insurance