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G.R. No. L-31845; G.R. No. L-31878 – 89 SCRA 543 – Mercantile Law – Insurance Law – Concealment – Insurance Contract as an Uberrima Fides Contract
In March 1957, Ngo Hing filed an application for a 20-year endowment policy for the life of his one-year old daughter with the Great Pacific Life Assurance Company (Grepalife). Lapulapu Mondragon was the insurance agent who assisted Ngo Hing. The insurance policy was for P50,000.00. The proper form was filled out and Ngo Hing paid the insurance premium. He received a binding deposit receipt in return. Said receipt however was subject to certain conditions, among which is the acceptance of Grepalife.
Grepalife eventually denied the insurance application because the endowment plan by Grepalife is not offered for minors below seven years old. Grepalife, instead made a counter-offer which Ngo Hing failed to accept because Mondragon, instead of communicating the said denial to Ngo Hing, wrote a letter to Grepalife trying to convince Grepalife to allow one-year olds to be covered by endowment plans.
In May 1957, Ngo Hing’s one-year old daughter died. Ngo Hing tried to collect the insurance claim but Grepalife refused as it claimed that the insurance contract was never perfected sans their acceptance.
ISSUE: Whether or not Grepalife should pay the insurance claim.
HELD: No. As properly ruled by the lower court as well as the Court of Appeals, the insurance contract was never completed because Grepalife never accepted the insurance offer. The binding deposit receipt issued to Ngo Hing is only acknowledgement of his application and receipt of his payment for the insurance premium.
The Supreme Court also noted that Ngo Hing failed to disclose the fact that his one-year old daughter was afflicted with a congenital defect. Such congenital defect was withheld by Ngo Hing with bad faith and such risk to be assumed by the insurance company.
The contract of insurance is one of uberrima fides – meaning good faith, absolute and perfect candor or openness and honesty; the absence of any concealment or demotion, however slight not for the insured alone but equally so for the insurer. Concealment is a neglect to communicate that which a party knows and ought to communicate. Whether intentional or unintentional the concealment entitles the insurer to rescind the contract of insurance.
*This case was consolidated with Lapulapu Mondragon vs. Court of Appeals