Rescission of Insurance Contracts, Concealment, Misrepresentation, and Breach of Warranties;

The “Incontestable Clause” in Life Insurance Policies

BERNARDO ARGENTE v. WEST COAST LIFE INSURANCE

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

FACTS:

In February 1925, Bernardo Argente and his wife applied for a joint life insurance under
West Coast Life Insurance Company (West Coast). 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. West Coast Life denied the subsequent insurance claim filed by Argente as it
averred 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
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:

Did the misrepresentations of Vicenta bar Bernardo from recovering from the policy?

RULING: YES.

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.