By: Atty. Gregorio B. Austral, CPA
Utmost good faith
A breadwinner must protect his income to ensure its continuation in the event that he cannot continue providing for his family due to death or disability. For a person who provides his family an income of P30,000.00 a month, it is suggested that he gets an insurance protection of P7,200,000.00 for his family to continue receiving P30,000.00 income from the insurance proceeds reinvested at 5% per annum.
In getting an insurance policy, however, we must be very careful not just in the selection of the company but also in completing the insurance application. As held in a long line of cases, insurance is a contract uberrima fides, which means that it is a contract of utmost good faith. Concealment of an information which is material for both the insurer and the insured in deciding whether to enter into the contract or not entitles the other party to rescind the contract within the contestability period of two (2) years.
A case in point is Florendo vs. Philam Plans, Inc., G.R. No. 186983, Feb. 22, 2012. In this case, Manuel signed a printed declaration in his insurance application that he has never been treated for heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment in the last five years and he was in good health and physical condition. The application requires him to declare the date of confinement, name of hospital or clinic, name of attending physician and the findings if such was a fact. Manuel left this portion blank.
After nine (9) months from the issuance of his insurance policy, Manuel died of blood poisoning. Subsequently, Manuel’s wife filed a claim with the insurance company, which was denied because the latter found that, at the time of his application, Manuel was on maintenance medicine for his heart and had an implanted pacemaker. Further, he suffered from diabetes mellitus and was taking insulin.
The Court affirmed the dismissal of the insurance claim since Manuel was guilty of concealment. Pursuant to Section 27 of the Insurance Code, Manuel’s concealment entitles Philam Plans to rescind its contract of insurance with him.
Concealment is the neglect to communicate that which a party knows and ought to communicate. The insured need not die of the disease he had failed to disclose to the insurer; it is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries [Sunlife Assurance v. Court of Appeals, 245 SCRA 268 (1995)].
In applying for insurance, do not just take for granted the question: Have you ever consulted a physician? When you answer “No”, you have to be very sure that you have not visited your physician for checkup at least for the past five (5) years. If something happens to you within two (2) years from issuance of your policy or from its last reinstatement, the insurance company will require your beneficiary to submit an Attending Physician Statement. To complete the said statement, your doctor will simply pull out your medical records and disclose the number of your visits to his clinic, his diagnosis of your medical condition, the number of years you have been in that condition, and the medications he prescribed to you. Your doctor can disclose these matters because in your insurance application, you are required to waive confidentiality of your medical information in favor of the insurance company. This document, along with other records to be submitted, will enable the insurance company to determine if you committed concealment or misrepresentation. In case there is a finding of concealment or misrepresentation, such as when indeed you have consulted your doctor for hypertension but you said you have not consulted a doctor for the past five (5) years, the insurance company will deny the insurance claim. This can be done by the insurance within two (2) years from issuance of the policy. Beyond this period, the policy becomes incontestable and the company is liable despite the concealment or misrepresentation.
As we develop and implement our own financial plan for the year 2015, it is important that we observe utmost good faith in our dealings. Lord Mansfield said, “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.” Uberrima fides.