Musngi v.

West Coast Life

GR 41794
August 30, 1935

Topic: Statement of False Consideration

Facts: Plaintiffs Musngi and Garia filed a suit against West Coast Life to recover the value of the two
insurance policies applied for by Arsenio Garcia (the insured). In applying for the said insurance, the
insured was asked if he consulted a physician or practitioner, and if so, for what ailment or illness; he
answered “None” and “No”, respectively. These answers were one of the causes or considerations for
the issuance of the policies. Upon the death of the insured, the plaintiffs, as beneficiaries, demanded
West Coast to pay the value of the policies. However, West Coast found out that the insured had been
treated by a lady physician in the General Hospital in Manila for different ailments such as incipient
pulmonary tuberculosis, chronic bronchitis, and chronic suppurative pyelocystisis. It contended that the
two policies did not create any valid obligation because they were fraudulently obtained by the insured.
The appealed decision held that the health of the insured, before acceptance of his application and the
issuance of the policies, could neither be discussed nor questioned by the defendant company because
three physicians of the company examined the insured; however, all the physicians signified that the
insured was in good health. Nevertheless, the findings of the company physicians were nit the main
cause for the issuance (or non-issuance) of the policies.
Issues:
1.) W/N the statements of the insured regarding his health were false
2.) W/N such statements were the causes which induced the defendant company to issue the
policies
Held/Ratio:
1.) Yes, the statements of the insured regarding his health were false because at the time of
application, he already knew that he had been suffering from ailments.
2.) Yes, such statements were the causes which induced the defendant company to issue the
policies. The concealment and false statements of the insured constituted fraud; the insurance
company, by reason of such statement, accepted the risk associated with the policy nut for
which it could have rejected. It was further held that the principal question must be whether the
assurer (the insurance company) was misled or deceived into entering a contract of obligation or
in fixing the premium of the insurance by withholding of material information or facts within the
assured’s knowledge or presumed knowledge. Under Art. 1276 of the Civil Code, the statement
of a false consideration shall render the contract void. Such matter is not specifically provided
for by the Insurance Law, and so the general rules of the civil law regarding contracts (there
being a life insurance contract) shall apply. Thus, a valid cause or consideration is a requisite for
a valid insurance contract.