G.R. No. L-31845; April 30, 1979
On March 14, 1957, the private respondent Ngo Hing (Hing) filed an application with Great Pacific Life (Pacific Life) for a twenty year endowment policy on the life of his one-year old daughter. Hing gave the amount of the annual premium to the Branch Manager of Pacific Life, petitioner Mondragon. A binding deposit receipt was thereafter issued to Hing, likewise the Mondragon handwrote at the bottom of the page of his insurance application a strong recommendation for approval. Then on April 30, 1957, Mondragon received a letter from Pacific Life informing him of the disapproval of the application stating that the policy is not available to persons below 7 years old and instead recommended a different policy for the approval of Hing.
Mondragon did not communicate the disapproval to Hing and instead wrote back to Pacific Life strongly recommending the approval of the policy. It was then that Hing’s daughter died because of influenza. Hing tried to collect the proceeds of the insurance, which Pacific Life refused to pay.
The CFI ruled in favor of the suit for recovery of money filed by Hing and ordered the payment of the insurance proceeds.
1. Whether or not the binding deposit receipt constituted a temporary contract of life insurance;
2. Whether or not Hing concealed the state of health and physical condition of his daughter.
1. NO. The fine print at the back of the binding deposit receipt provides that it only constitutes a temporary contract only when the company is satisfied that the applicant is insurable according to the standard rates or upon offer and acceptance of a different policy. Said binding deposit receipt does not bind the company if the application was eventually rejected. It is merely conditional and does not insure outright. In this case, since Pacific Life eventually disapproved the application, the binding deposit receipt in question had never become in force at any time.
As held in earlier cases, “a contract of insurance, … must be assented to by both parties either in person or by their agents….”
2. YES. The facts show that when Hing supplied the data for the insurance application, he was fully aware that his one-year old daughter was a mongoloid child—a congenital defect which could not be hidden or disguised. Nevertheless, Hing withheld such material fact from the company, which he knows he had the responsibility to disclose. The contract of insurance is one of perfect good faith (uberrima fides) meaning good faith; absolute and perfect candor or openness and honesty; the absence of any concealment or deception however slight. Concealment is the neglect to communicate that which a party knows and ought to communicate. The concealment entitles the insurer to rescind the contract of insurance.
Wherefore, the Court held that no insurance contract was perfected between the parties.