DEVICES TO DELIMIT SUBJECT MATTER OF INSURANCE

A.

Concealment
1. Definition
Concealment is a neglect to communicate that which a party knows and
ought to communicate to the other party.
2. Requisites
For concealment to vitiate a contract of insurance, several requisites must
be present: (1) The matter concealed must be material and (2) There must
be an obligation for the insured to reveal the concealed matter to the
insurer.
The fraudulent intent on the part of the insured must be established to
warrant recission of the insurance contract. Concealment as a defense for
the health provider or insurer to avoid liability is an affirmative defense and
the duty to establish such defense by satisfactory and convincing
evidence rests upon the provider or insurer. The liability of the health care
provider attaches once the member is hospitalized for the disease or injury
covered benefits which he has prepaid. (Philamcare vs CA, 379 SCRA
356)
3. Test of Materiality
A fact is material if knowledge of it would have affected the decision of the
insurer to enter into the contract, in estimating the risk, or in fixing the
premium. (Great Pacific vs. CA, 89 SCRA 543)
Where the person procuring the insurance concealed the fact that the
insured was a Mongoloid, the concealment is material and gives to the
insurer the right to rescind. Material concealment can rescind the
insurance contract, whether intentional or unintentional. (ibid.)
Where the person procuring life insurance on the life of an illiterate old
woman concealed the advanced stage of lung cancer of the insured who
died of said disease seven months later, the insurer may rescind the
policy. Lack of understanding by the illiterate insured of the statements
and her application as to her state of good health does not negate the
insurers right to rescind. (Tang vs. CA 90 SCRA 236)
The waiver of a medical examination in a non-medical insurance contract
renders even more material the information required of the applicant
concerning previous condition of health and diseases suffered. (Sunlife vs.
CA, 245 SCRA 268)

4. Consequences of Concealment
Concealment vitiates the contract of insurance and entitles the insurer to
rescind even if the death of or loss was due to a cause not at all relatedto
the concealed matter. This is the rule whether the concealment is
intentional or unintentional. (Sec. 1, BP 874)
The right to rescind should be exercised previous to the commencement
of an action on the contract. Besides, the cancellation of health care
agreements as in insurance policies require the concurrence of the
following conditions: (1) Prior notice of cancellation to insured; (2) Notice
must be based on the occurrence after effective date of the policy of one
or more of the grounds mentioned; (3) Must be in writing, mailed or
delivered to the insured at the address shown in the policy; (4) Must state
the grounds relied upon provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which cancellation is based.
(Philamcare vs. CA, 379 SCRA 356)

a.) Exceptions
1.) Incontestability Clause
In life insurance after a policy has been in force for atleast two years, the
insurer cannot rescind the policy due to fraudulent concealment or
misrepresentation of the insured.
If the insured dies within two years from the effectivity of the policy,
recission due to concealment or misrepresentation of material matters
may still be invoked by the insurer. (Tan vs. CA, 174 SCRA 403)
2.) Certain Concealment in Marine Insurance
The following matters although concealed will not vitiate the contract of
marine insurance except when they caused the loss:
1.
2.
3.
4.
5.

National character of insured

Liability of insured thing to capture or detention
Liability to seizure from breach of foreign laws
Want of necessary documents
Use of false or simulated papers

B.

Representation
1.) Definition
A representation is an oral or written statement of a fact or condition,
affecting the risk, made by the insured to the insurer tending to induce the
insurer to assume the risk.
If the insured misstated his age, the amount payable under the policy will
be adjusted to his correct age. (Sec. 227 [d], Insurance Code).
2. Classes
There are two classes of representation: (a) affirmative which is an
affirmative of a fact existing when the contract begins, and (b)
promissory, which is a promise to be performed after the policy is issued.
Representation may also be (1) objective, or representation or present
and past events susceptible of exact and actual knowledge and correct
statement, and (2) subjective or opinions, beliefs or intentions of the
insured.
3. Differentiated from Warranty
Warranty is distinguished from representation in the following respects:
(a) Warranties are parts of contracts; representation are mere collateral
inducements;
(b) Warranties are written on the policy, actually or by reference;
representations may or may not;
(c) Warranties are conclusively presumed material; representations
must be proved to be material;
(d) Warranties must be strictly complied with; representations require
only substantial truth or compliance.
5. Consequences of Misrepresentation
If the representation is false on a material point, the injured party is
entitled to rescind from the time when the representation becomes false.

C.

Warranty
1. Define
A warranty is a statement or promise set forth in the policy or by reference
incorporated therein, the untruth or non-fulfillment of which in any respect,

and without reference to whether the insurer was in fact prejudiced by

such untruth or non-fulfillment, renders the policy voidable.

2. Classes
There are two classes of warranties: (1) the express, and (2) the implied
3. Express Warranty
An express warranty is an agreement expressed in a policy whereby the
assured stipulates that certain facts relating to the risk are or shall be true,
or certain acts relating to the same subject have been or shall be done.
An express warranty must appear on the face of the policy of insurance, or
in an authentic document, clearly incorporated therein and made part
thereof by explicit reference, or by words clearly evidencing such intention.
4. Implied Warranty
Only found in marine insurance, implied warranties are warranties deemed
included in the contract, although not expressly mentioned therein.
These implied warranties in marine insurance are: (1) sea- worthiness; (2)
non-deviation from the agreed voyage, and (3) non-indulgence in illegal
ventures.
5. Effect of Breach of Warranty
All breaches of warranty give to the insurer the right to rescind.
6. Construction of Warranties
Not only are warranties strictly construed against the insurer but they
should, likewise, by themselves be reasonably interpreted. (American vs.
Tantuco, 365 SCRA 740)