X insured his life for P20 million. X, plays golf and regularly exercises everyday, hence is considered in good health. He did not know, however, that his frequent headache is really caused by his being hypertensive. In his application form for a life insurance for himself, he did not put a check to the question if he is suffering from hypertension, believing that because of his active lifestyle, being hypertensive is a remote possibility. While playing golf one day, X collapsed at the fairway and was declared dead on arrival at the hospital. His death certificate stated that X suffered a massive heart attack.
[a] Will the beneficiary of X be entitled to the proceeds of the life insurance under the circumstances, despite the non-disclosure that he is hypertensive at the time of application? (2.5%)
[b] IfX died in an accident instead of a heart attack, would the fact of X’s failure to disclose that he is hypertensive be considered as material information? (2.5%)
Suggested answer only. Not an official answer and not legal advice.
For Question [a], X's beneficiary is entitled to the proceeds. For Question [b], X's failure to disclose hypertension would be material information. Under Section 28 of the Insurance Code, a party must communicate facts within his knowledge that are material
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Quick check
Under Section 28 of the Insurance Code (R.A. No. 10607), what knowledge requirement is necessary to sustain a charge of concealment?
Section 28 requires that the fact concealed must be within the actual knowledge of the party at the time of application.
How is the materiality of a fact determined under Section 31 of the Insurance Code of the Philippines?
Section 31 provides that materiality is determined by the influence of facts upon the insurer in estimating risk.
Why is X's beneficiary entitled to receive the life insurance proceeds despite X's failure to disclose his hypertension?
X did not know he was hypertensive, so he cannot be held liable for concealing an unknown condition.
If an applicant knowingly conceals severe hypertension but later dies in an accident, is the non-disclosure material?
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Which primary statute governs life insurance contracts, concealment rules, and materiality tests in the Philippines?
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Learn more about these topics
1. Concealment Knowledge Rule
Under Section 27 and Section 28 of the Insurance Code of the Philippines (Republic Act Number 10607), concealment is a neglect to communicate that which a party knows and ought to communicate. A charge of concealment can only be sustained if the insured had actual knowledge of the fact alleged to have been concealed at the time of application. Where the applicant is completely unaware of his medical condition, such as innocent ignorance of underlying hypertension, he acts without fraudulent intent or knowledge, preventing the insurer from rescinding the insurance contract on the ground of concealment.
2. Test of Materiality
Under Section 31 of Republic Act Number 10607, materiality is determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries. A medical fact is material if knowledge of it would reasonably influence the insurer in estimating the risk, determining the premium rate, or deciding whether to issue the policy at all. The insurer relies on complete medical disclosure to properly assess underwriting risk.
3. Cause of Death
Under Philippine insurance law, the materiality of a concealed medical fact does not depend on whether that concealed condition actually caused or contributed to the insured's ultimate death. The statutory test of materiality focuses exclusively on the effect of the non-disclosure on the insurer's risk assessment at the time of policy issuance. Consequently, if an applicant intentionally conceals a known material medical condition, such as severe hypertension, the contract may be rescinded by the insurer even if the insured subsequently dies from an entirely unrelated cause, such as an accident.