MANILA BANKERS LIFE INSURANCE CORPORATION, 

Petitioner, v. CRESENCIA P. ABAN,Respondent.

DECISION

DEL CASTILLO, J.:

 G.R. No. 175666, July 29, 2013

F: ung impostor ung insured, in fact beneficiary ung nagayos ng papers- eto ung claim ng insurer to deny
liability- however 3 yrs na which is beyond incontestability.

Sc: here a general application of s48- cannot contest anymore—insurer liable.—rationale stresses more on
duty of the insurer to investigate.—then ditto namention ung orrr “when insurer dies within the period”

The ultimate aim of Section 48 of the Insurance Code is to compel insurers to solicit business from or provide
insurance coverage only to legitimate and bona fide clients, by requiring them to thoroughly investigate those
they insure within two years from effectivity of the policy and while the insured is still alive. If they do not, they
will be obligated to honor claims on the policies they issue, regardless of fraud, concealment or misrepresentation.
The law assumes that they will do just that and not sit on their laurels, indiscriminately soliciting and accepting
insurance business from any Tom, Dick and Harry. 

Factual Antecedents 

On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance
Corporation (Bankers Life), designating respondent Cresencia P. Aban (Aban), her niece,5 as her beneficiary. 

Petitioner issued Insurance Policy No. 747411 (the policy), with a face value of P100,000.00, in Sotero's favor on
August 30, 1993, after the requisite medical examination and payment of the insurance premium.6cralaw virtualaw
library

On April 10, 1996,7 when the insurance policy had been in force for more than two years and seven months,
Sotero died. (INCONTESTIBLE)

Respondent ABAN filed a claim for the insurance proceeds on July 9, 1996. Petitioner conducted an investigation
into the claim,8 and came out with the following findings:

1. Sotero did not personally apply for insurance coverage, as she was illiterate;chanr0blesvirtualawlibrary

2. Sotero was sickly since 1990;chanr0blesvirtualawlibrary

3. Sotero did not have the financial capability to pay the insurance premiums on Insurance Policy No.
747411;chanr0blesvirtualawlibrary

4. Sotero did not sign the July 3, 1993 application for insurance;9 [and] 

5. Respondent was the one .who filed the insurance application, and x x x designated herself as the
beneficiary.10cralaw virtualaw library

For the above reasons, petitioner denied respondent's claim on April 16, 1997 and refunded the premiums paid on the
policy.11cralaw virtualaw library

On April 24, 1997, petitioner filed a civil case for rescission and/or annulment of the policy, which was docketed as
Civil Case No. 97-867 and assigned to Branch 134 of the Makati Regional Trial Court. The main thesis of the
Complaint was that the policy was obtained by fraud, concealment and/or misrepresentation under the Insurance
Code,12 which thus renders it voidable under Article 139013 of the Civil Code.
Respondent filed a Motion to Dismiss14 claiming that petitioner's cause of action was barred by prescription pursuant
to Section 48 of the Insurance Code, which provides as follows: 

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime
of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the
insured or his agent.
During the proceedings on the Motion to Dismiss, petitioner's investigator testified in court, stating among others that
the insurance underwriter who solicited the insurance is a cousin of respondent's husband, Dindo Aban,15 and that it
was the respondent who paid the annual premiums on the policy.16cralaw virtualaw library
 

Petitioner's Arguments 

In praying that the CA Decision be reversed and that the case be remanded to the trial court for the conduct of further
proceedings, petitioner argues in its Petition and Reply24 that Section 48 cannot apply to a case where the beneficiary
under the insurance contract posed as the insured and obtained the policy under fraudulent circumstances. It adds that
respondent, who was merely Sotero's niece, had no insurable interest in the life of her aunt.

Relying on the results of the investigation that it conducted after the claim for the insurance proceeds was filed,
petitioner insists that respondent's claim was spurious, as it appeared that Sotero did not actually apply for insurance
coverage, was unlettered, sickly, and had no visible source of income to pay for the insurance premiums; and that
respondent was an impostor, posing as Sotero and fraudulently obtaining insurance in the latter's name without her
knowledge and consent.

Petitioner adds that Insurance Policy No. 747411 was void ab initio and could not have given rise to rights and
obligations; as such, the action for the declaration of its nullity or inexistence does not prescribe.25cralaw virtualaw
library

Respondent's Arguments 

Respondent, on the other hand, essentially argues in her Comment26 that the CA is correct in applying Section 48. She
adds that petitioner's new allegation in its Petition that the policy is void ab initio merits no attention, having failed to
raise the same below, as it had claimed originally that the policy was merely voidable. 

On the issue of insurable interest, respondent echoes the CA's pronouncement that since it was Sotero who obtained
the insurance, insurable interest was present. Under Section 10 of the Insurance Code, Sotero had insurable interest in
her own life, and could validly designate anyone as her beneficiary. Respondent submits that the CA's findings of fact
leading to such conclusion should be respected. 

Our Ruling

The Court denies the Petition. 

The Court will not depart from the trial and appellate courts' finding that it was Sotero who obtained the insurance for
herself, designating respondent as her beneficiary. Both courts are in accord in this respect, and the Court is loath to
disturb this. While petitioner insists that its independent investigation on the claim reveals that it was respondent,
posing as Sotero, who obtained the insurance, this claim is no longer feasible in the wake of the courts' finding that it
was Sotero who obtained the insurance for herself. This finding of fact binds the Court. 

With the above crucial finding of fact - that it was Sotero who obtained the insurance for herself - petitioner's case is
severely weakened, if not totally disproved.

Moreover, the results and conclusions arrived at during the investigation conducted unilaterally by petitioner after the
claim was filed may simply be dismissed as self-serving and may not form the basis of a cause of action given the
existence and application of Section 48, as will be discussed at length below. 

Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision,
an insurer is given two years - from the effectivity of a life insurance contract and while the insured is alive - to
discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.

After the two-year period lapses, or or or OR OR!!!! when the insured dies within the period, the insurer
must make good on the policy, even though the policy was obtained by fraud, concealment, or
misrepresentation.

Rationale:

This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit
and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the
detriment of bona fide takers of insurance and the public in general. 

Section 48 regulates both the actions of the insurers and prospective takers of life insurance. It gives insurers enough
time to inquire whether the policy was obtained by fraud, concealment, or misrepresentation; on the other hand, it
forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered - thus deterring
them from venturing into such nefarious enterprise.

At the same time, legitimate policy holders are absolutely protected from unwarranted denial of their claims or delay
in the collection of insurance proceeds occasioned by allegations of fraud, concealment, or misrepresentation by
insurers, claims which may no longer be set up after the two-year period expires as ordained under the law. 

Thus, the self-regulating feature of Section 48 lies in the fact that both the insurer and the insured are given the
assurance that any dishonest scheme to obtain life insurance would be exposed, and attempts at unduly denying a
claim would be struck down. Life insurance policies that pass the statutory two-year period are essentially treated as
legitimate and beyond question, and the individuals who wield them are made secure by the thought that they will be
paid promptly upon claim. In this manner, Section 48 contributes to the stability of the insurance industry.

Section 48 prevents a situation where the insurer knowingly continues to accept annual premium payments on life
insurance, only to later on deny a claim on the policy on specious claims of fraudulent concealment and
misrepresentation, such as what obtains in the instant case.

Thus, instead of conducting at the first instance an investigation into the circumstances surrounding the issuance of
insurance Policy No. 747411 which would have timely exposed the supposed flaws and irregularities attending it as it
now professes, petitioner appears to have turned a blind eye and opted instead to continue collecting the premiums on
the policy. For nearly three years, petitioner collected the premiums and devoted the same to its own profit. It
cannot now deny the claim when it is called to account. Section 48 must be applied to it with full force and
effect. 

After two years, the defenses of concealment or misrepresentation, no matter how patent or well-founded, will no
longer lie.

Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. 

The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or
concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force
for at least two years during the insured’s lifetime. The phrase "during the lifetime" found in Section 48 simply
means that the policy is no longer considered in force after the insured has died. The key phrase in the second
paragraph of Section 48 is "for a period of two years."
IN THIS CASE!

As borne by the records, the policy was issued on August 30. 1993, the insured died on April 10, 1996, and the claim
was denied on April 16, 1997. The insurance policy was thus in force for a period of 3 years, 7 months, and 24 days.
Considering that the insured died after the two-year period, the plaintiff-appellant is, therefore, barred from proving
that the policy is void ab initio by reason of the insured fraudulent concealment or misrepresentation or want of
insurable interest on the part of the beneficiary, herein defendant-appellee. 

Petitioner claims that its insurance agent, who solicited the Sotero account, happens to be the cousin of respondent's
husband, and thus insinuates that both connived to commit insurance fraud. If this were truly the case, then petitioner
would have discovered the scheme earlier if it had in earnest conducted an investigation into the circumstances
surrounding the Sotero policy.

But because it did not and it investigated the Sotero account only after a claim was filed thereon more than two years
later, naturally it was unable to detect the scheme. For its negligence and inaction, the Court cannot sympathize with
its plight. Instead, its case precisely provides the strong argument for requiring insurers to diligently conduct
investigations on each policy they issue within the two-year period mandated under Section 48, and not alter claims
for insurance proceeds are filed with them.

Besides, if insurers cannot vouch for the integrity and honesty of their insurance agents/salesmen and the insurance
policies they issue, then they should cease doing business. If they could not properly screen their agents or salesmen
before taking them in to market their products, or if they do not thoroughly investigate the insurance contracts they
enter into with their clients, then they have only themselves to blame. Otherwise said, insurers cannot be allowed to
collect premiums on insurance policies, use these amounts collected and invest the same through the years,
generating profits and returns therefrom for their own benefit, and thereafter conveniently deny insurance claims by
questioning the authority or integrity of their own agents or the insurance policies they issued to their premium-
paying clients. This is exactly one of the schemes which Section 48 aims to prevent.

Insurers may not be allowed to delay the payment of claims by filing frivolous cases in court, hoping that the
inevitable may be put off for years - or even decades — by the pendency of these unnecessary court cases. In the
meantime, they benefit from collecting the interest and/or returns on both the premiums previously paid by the
insured and the insurance proceeds which should otherwise go to their beneficiaries. The business of insurance is a
highly regulated commercial activity in the country,29 and is imbued with public interest.30 "[A]n insurance contract is
a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in
order to safeguard the [former's] interest."31cralaw virtualaw library

WHEREFORE, the Petition is DENIED. The assailed September 28, 2005 Decision and the November 9, 2006
Resolution of the Court of Appeals in CA-G.R. CV No. 62286 are AFFIRMED. 

SO ORDERED.
G.R. No. 211212, June 08, 2016

SUN LIFE OF CANADA (PHILIPPINES), INC., Petitioner, v. MA. DAISY'S. SIBYA, JESUS MANUEL S. SIBYA
III, JAIME LUIS S. SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS SIBYA, JR., Respondents.

FACTS:

On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life insurance with Sun Life. In his
Application for Insurance, he indicated that he had sought advice for kidney problems. Atty. Jesus Jr. indicated the
following in his application:

"Last 1987, had undergone lithotripsy due to kidney stone under Dr. Jesus Benjamin Mendoza at National Kidney
Institute, discharged after 3 days, no recurrence as claimed."

On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and issued Insurance Policy No. 031097335.
The policy indicated the respondents as beneficiaries and entitles them to a death benefit of P1,000,000.00 should
Atty. Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty. Jesus Jr. is still living on the
endowment date.

On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo.

As such, Ma. Daisy filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his insurance
policy.

In a letter dated August 27, 2001, however, Sun Life denied the claim on the ground that the details on Atty. Jesus
Jr.'s medical history were not disclosed in his application. Simultaneously, Sun Life tendered a check representing the
refund of the premiums paid by Atty. Jesus Jr.

The respondents reiterated their claim against Sun Life thru a letter dated September 17, 2001. Sun Life, however,
refused to heed the respondents' requests and instead filed a Complaint for Rescission before the RTC and prayed for
judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy.

In its Complaint, Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance application his previous
medical treatment at the National Kidney Transplant Institute in May and August of 1994. According to Sun Life, the
undisclosed fact suggested that the insured was in "renal failure" and at a high risk medical condition. Consequently,
had it known such fact, it would not have issued the insurance policy in favor of Atty. Jesus Jr.

For their defense, the respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in his application for
insurance. They averred that Atty. Jesus Jr. was in good faith when he signed the insurance application and even
authorized Sun Life to inquire further into his medical history for verification purposes. According to them, the
complaint is just a ploy to avoid the payment of insurance claims.

The Issue: whether or not there was concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance
application with Sun Life? No.

w/n insurer is liable in this case? yes.

Yes. In Manila Bankers Life Insurance Corporation v. Aban, the Court held that if the insured dies within the two-
year contestability period, the insurer is bound to make good its obligation under the policy, regardless of the
presence or lack of concealment or misrepresentation. The Court held:

Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision,
an insurer is given two years - from the effectivity of a life insurance contract and while the insured is alive - to
discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.

After the two-year period lapses, or when the insured dies within the period, the insurer must make good on the
policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that
insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business
must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide
takers of insurance and the public in general.23 (Emphasis ours)

In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has two years from its
issuance, to investigate and verify whether the policy was obtained by fraud, concealment, or misrepresentation.
Upon the death of Atty. Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the
policy, Sun Life loses its right to rescind the policy. As discussed in Manila Bankers, the death of the insured
within the two-year period will render the right of the insurer to rescind the policy nugatory. As such, the
incontestability period will now set in.

(maski 3 months palang set it na; pag namatay na)

Assuming, however, for the sake of argument, that the incontestability period has not yet set in, the Court agrees,
nonetheless, with the CA when it held that Sun Life failed to show that Atty. Jesus Jr. committed concealment and
misrepresentation.

IF--- ISSUE ON W/N MAY CONCEALMENT- HERE WALA PA DIN.

Assuming, however, for the sake of argument, that the incontestability period has not yet set in, the Court agrees,
nonetheless, with the CA when it held that Sun Life failed to show that Atty. Jesus Jr. committed concealment and
misrepresentation.

As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical treatment for kidney ailment.
Moreover, he executed an authorization in favor of Sun Life to conduct investigation in reference with his medical
history. The decision in part states:

Records show that in the Application for Insurance, [Atty. Jesus Jr.] admitted that he had sought medical treatment
for kidney ailment. When asked to provide details on the said medication, [Atty. Jesus Jr.] indicated the following
information: year ("1987"), medical procedure ("undergone lithotripsy due to kidney stone"), length of confinement
("3 days"), attending physician ("Dr. Jesus Benjamin Mendoza") and the hospital ("National Kidney Institute").

It appears that [Atty. Jesus Jr.] also signed the Authorization which gave [Sun Life] the opportunity to obtain
information on the facts disclosed by [Atty. Jesus Jr.] in his insurance application. x x x

Given the express language of the Authorization, it cannot be said that [Atty. Jesus Jr.] concealed his medical history
since [Sun Life] had the means of ascertaining [Atty. Jesus Jr.'s] medical record.

With regard to allegations of misrepresentation, we note that [Atty. Jesus Jr.] was not a medical doctor, and his
answer "no recurrence" may be construed as an honest opinion. Where matters of opinion or judgment are called for,
answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue.24
(Citations omitted and italics in the original)

Indeed, the intent to defraud on the part of the insured must be ascertained to merit rescission of the insurance
contract. Concealment as a defense for the 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.25 In the present case, Sun
Life failed to clearly and satisfactorily establish its allegations, and is therefore liable to pay the proceeds of the
insurance.

Moreover, well-settled is the rule that this Court is not a trier of facts. Factual findings of the lower courts are entitled
to great weight and respect on appeal, and in fact accorded finality when supported by substantial evidence on the
record.26
INSULAR LIFE ASSURANCE COMPANY v. PAZ Y. KHU, GR No. 195176, 2016-04-18
ON LIBERAL INTERPRETATION IN INTERPRETING REINSTATEMENT DATE.
SC: ON A CASE WHERE THE ISSUE IS WHEN IS IT CONSIDERED REINSTATED? IMPORTANT AS IT
BECOMES RECKONING PERIOD OF INCONTESTABILITY- HERE ALSO APPLIED LIBERAL
INTERPRETATION THAT LED TO THE CONCLUSION BY SC THAT LAPSED NA UNG PERIOD (BEC IT
WAS RULED THAT IT REINSTATED JUNE 22 PALANG NOT DECEMBER AS CLAIMED BY INSURER.-
THUS INSURER IS LIABLE.
Facts:
On March 6, 1997, Felipe N. Khu, Sr. (Felipe) applied for a life insurance policy with Insular Life under the latter's
Diamond Jubilee Insurance Plan. Felipe accomplished the required medical questionnaire wherein he did not
declare any illness or adverse medical condition. Insular Life thereafter issued him Policy Number A000015683 with
a face value of PI million. This took effect on June 22, 1997.
On June 23, 1999, Felipe's policy lapsed due to non-payment of the premium covering the period from June 22, 1999
to June 23, 2000
On September 7, 1999, Felipe applied for the reinstatement of his policy and paid P25,020.00 as premium
On October 12, 1999, Insular Life advised Felipe that his application for reinstatement may only be considered if he
agreed to certain conditions such as payment of additional premium and the cancellation of the riders pertaining to
premium waiver and accidental death benefits. Felipe agreed to these conditions and on December 27, 1999 paid the
agreed additional premium of P3,054.50
On September 22, 2001, Felipe died
On October 5, 2001, Paz Y. Khu, Felipe Y. Khu, Jr. .and Frederick Y. Khu (collectively, Felipe's beneficiaries or
respondents) filed with Insular Life a claim for benefit under the reinstated policy. This claim was denied.
In its Answer, Insular Life countered that Felipe did not disclose the ailments (viz., Type 2 Diabetes Mellitus,
Diabetes Nephropathy and Alcoholic Liver Cirrhosis with Ascites) that he already had prior to his application for
reinstatement of his insurance policy; and that it would not have reinstated the insurance policy had Felipe disclosed
the material information on his adverse health condition.
It contended that when Felipe died, the policy was still contestable.
In ordering Insular Life to pay Felipe’s beneficiaries, the RTC agreed with the latter’s claim that the insurance policy
was reinstated on June 22, 1999. The RTC cited the ruling in Malayan Insurance Corporation v. Court of
Appeals17 that any ambiguity in a contract of insurance should be resolved strictly against the insurer upon the
principle that an insurance contract is a contract of adhesion. 18 The RTC also held that the reinstated
insurance policy had already become incontestable by the time of Felipe’s death on September 22, 2001 since
more than two years had already lapsed from the date of the policy’s reinstatement on June 22, 1999. The RTC
noted that since it was Insular Life itself that supplied all the pertinent forms relative to the reinstated policy, then it is
barred from taking advantage of any ambiguity/obscurity perceived therein particularly as regards the date when the
reinstated insurance policy became effective.
The CA affirmed the decision of the RTC stating the ruling on the non-contestability of the reinstated insurance
policy on the date the insured died. It declared that contrary to Insular Life’s contention, there in fact exists a genuine
ambiguity or obscurity in the language of the two documents prepared by Insular Life itself, viz., Felipe’s Letter of
Acceptance and Insular Life’s Endorsement; that given the obscurity/ambiguity in the language of these two
documents, the construction/interpretation that favors the insured’s right to recover should be adopted; and that in
keeping with this principle, the insurance policy in dispute must be deemed reinstated as of June 22, 1999
Petitioner’s Arguments Insular Life basically argues that respondents should not be allowed to recover on the
reinstated insurance policy because the two-year contestability period had not yet lapsed inasmuch as the insurance
policy was reinstated only on December 27, 1999, whereas Felipe died on September 22, 2001;24 that the CA
overlooked the fact that Felipe paid the additional extra premium only on December 27, 1999, hence, it is only upon
this date that the reinstated policy had become effective; that the CA erred in declaring that resort to the principles of
statutory construction is still necessary to resolve that question given that the Application for Reinstatement, the
Letter of Acceptance and the Endorsement in and by themselves already embodied unequivocal provisions stipulating
that the two-year contestability clause should be reckoned from the date of approval of the reinstatement;

Respondents’ Arguments

Respondents maintain that the phrase "effective June 22, 1999" found in both the Letter of Acceptance and in the
Endorsement is unclear whether it refers to the subject of the sentence, i.e., the "reinstatement of this policy" or to the
subsequent phrase "changes are made on the policy;" that granting that there was any obscurity or ambiguity in the
insurance policy, the same should be laid at the door of Insular Life as it was this insurance company that prepared
the necessary documents that make up the same;27 and that given the CA’s finding which effectively affirmed the
RTC’s finding on this particular issue, it stands to reason that the insurance policy had indeed become incontestable
upon the date of Felipe’s death.28

Issue:
Whether Felipe’s reinstated life insurance policy is already incontestable at the time of his death.
Held:

YES

Indeed, more than two years had lapsed from the time the subject insurance policy was reinstated on June 22,
1999 vis-a-vis Felipe’s death on September 22, 2001.1âwphi1 As such, the subject insurance policy has already
become incontestable at the time of Felipe’s death.

(Held to be the reckoning point is ung june 22)

The Insurance Code pertinently provides that:

Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter,
such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime
of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the
insured or his agent.

The rationale for this provision was discussed by the Court in Manila Bankers Life Insurance Corporation v. Aban,29

Section 48 regulates both the actions of the insurers and prospective takers of life insurance. It gives insurers enough
time to inquire whether the policy was obtained by fraud, concealment, or misrepresentation; on the other hand, it
forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered – thus deterring
them from venturing into such nefarious enterprise. At the same time, legitimate policy holders are absolutely
protected from unwarranted denial of their claims or delay in the collection of insurance proceeds occasioned by
allegations of fraud, concealment, or misrepresentation by insurers, claims which may no longer be set up after the
two-year period expires as ordained under the law.
‘The insurer is deemed to have the necessary facilities to discover such fraudulent concealment or misrepresentation
within a period of two (2) years. It is not fair for the insurer to collect the premiums as long as the insured is still
alive, only to raise the issue of fraudulent concealment or misrepresentation when the insured dies in order to defeat
the right of the beneficiary to recover under the policy.

RULE: At least two (2) years from the issuance of the policy or its last reinstatement, the beneficiary is given the
stability to recover under the policy when the insured dies. The provision also makes clear when the two-year period
should commence in case the policy should lapse and is reinstated, that is, from the date of the last reinstatement’.

YET IN THIS CASE:

In this case, the parties differ as to when the reinstatement was actually approved. Insular Life claims that it approved
the reinstatement only on December 27, 1999. On the other hand, respondents contend that it was on June

22, 1999 that the reinstatement took effect.

The resolution of this issue hinges on the following documents: 1) Letter of Acceptance; and 2) the Endorsement.

Based on the foregoing, we find that the CA did not commit any error in holding that the subject insurance
policy be considered as reinstated on June 22, 1999. This finding must be upheld not only because it accords with
the evidence, but also because this is favorable to the insured who was not responsible for causing the ambiguity or
obscurity in the insurance contract.

In the Letter of Acceptance, Khu declared that he was accepting "the imposition of an extra/additional x x x premium
of P5.00 a year per thousand of insurance; effective June 22, 1999". It is true that the phrase as used in this

particular paragraph does not refer explicitly to the effectivity of the reinstatement. But the Court notes that the
reinstatement was conditioned upon the payment of additional premium not only prospectively, that is, to cover the

remainder of the annual period of coverage, but also retroactively, that is for the period starting June 22, 1999.
Hence, by paying the amount of P3,054.50 on December 27, 1999 in addition to the P25,020.00 he had earlier paid
on September 7, 1999, Khu had paid for the insurance coverage starting June 22, 1999. At the very least, this
circumstance has engendered a true lacuna.

In the Endorsement, the obscurity is patent. In the first sentence of the Endorsement, it is not entirely clear whether
the phrase "effective June 22, 1999" refers to the subject of the sentence, namely "the reinstatement of this policy," or
to the subsequent phrase "changes are made on the policy."

The court below is correct. Given the obscurity of the language, the construction favorable to the insured will be
adopted by the courts.

Accordingly, the subject policy is deemed reinstated as of June 22, 1999. Thus, the period of contestability has
lapsed.35

It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor
of the insured and strictly against the insurer in order to safeguard the latter’s interest. Thus, in MalayanInsurance
Corporation v. Court of Appeals, this Court held that:

Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any
ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of
insurance, being a contract of adhesion, par excellence, any ambiguity therein should be resolved against the
insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer.
Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude
the insurer from noncompliance with its obligations.
INCONTESTABILITY CLAUSE:

INSURACE CODE PROVISION:

Sec. 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter,
such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime
of the insured for a period of two years from the date of its issue or of its last reinstatement, ----the insurer cannot
prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation
of the insured or his agent.

CONFLICTING DECISION- ACC TO CENIZA.

GR: RULE IF 2 YRS NA EPEKTIB, INCONTESTABLE NA- E BAKIT SA FLORENDO DI NAKACLAIM?

PERO SA SIBIA CASE NAKACLAIM?

FLORENDO CASE:---MAY CONCEALMENT THEN WITHIN 11 MONTHS NAICONTEST- INSURER

CANNOT CLAIM AND NOT LIABLE UNG INSURER--- HELD TO BE CONTESTIBLE EVEN DIED

VS.

SIBIA CASE: CITING MANILA BANKERS INTERPRETATION OF S48---WITHIN 3 MONTHS

NAICONTEST- CAN CLAIM AND LIABLE INSURER

In short naiba ruling sa sibia and manila bankers in a way na maski within 2 years ung death ( IN FACT 3 MONTHS)
liable pa din si insurer—THIS CASE CONSIDERS NA UPON DEATH- INCONTESTABILITY SETS IN (IN
SHORT- IT SOMEHOW ADDED SA SECTION 48 UNG UPON DEATH- SETS IN NA INCONTESTABILITY)

WAY TO ANSWER- ACCORDING TO CENIZE- FOR CENIZA PURPOSES ONLY

SECTION 48-AND FLORENDO –WHICH IS THE GENERAL RULE

THEN MAKE MENTION OF THE RULING IN SIBIA

NOTE HOWEVER,

FLORENDO IS A 2012 CASE

WHILE MANILA BANKERS IS A 2013 CASE – IT LAYS DOWN THE EXPLANATION OF S48

SUNLIFE VS SIBIA- FOLLOWED MANILA BANKERS 2016

INSULAR LIFE- FOLLOWED MANILA BANKERS 2016

ADD TO FLORENDO RULING

The Court cannot agree. The comprehensive pension plan that Philam Plans issued contains a one-year
incontestability period. It states:

VIII. INCONTESTABILITY

After this Agreement has remained in force for one (1) year, we can no longer contest for health reasons any claim
for insurance under this Agreement, except for the reason that installment has not been paid (lapsed), or that you are
not insurable at the time you bought this pension program by reason of age. If this Agreement lapses but is reinstated
afterwards, the one (1) year contestability period shall start again on the date of approval of your request for
reinstatement.35 1âwphi1

The above incontestability clause precludes the insurer from disowning liability under the policy it issued on the
ground of concealment or misrepresentation regarding the health of the insured after a year of its issuance.

Since Manuel died on the eleventh month following the issuance of his plan,36 the one year incontestability period
has not yet set in. Consequently, Philam Plans was not barred from questioning Lourdes’ entitlement to the benefits
of her husband’s pension plan.
+

G.R. No. 205206, March 16, 2016

BANK OF THE PHILIPPINE ISLANDS AND FGU INSURANCE CORPORATION (PRESENTLY KNOWN AS
BPI/MS INSURANCE CORPORATION), Petitioners, v. YOLANDA LAINGO, Respondent.

On 20 July 1999, Rheozel Laingo (Rheozel), the son of respondent Yolanda Laingo (Laingo), opened a "Platinum 2-in-1 Savings
and Insurance" account with petitioner Bank of the Philippine Islands (BPI) in its Claveria, Davao City branch.

The Platinum 2-in-1 Savings and Insurance account is a savings account where depositors are automatically covered by an
insurance policy against disability or death issued by petitioner FGU Insurance Corporation (FGU Insurance), now known as
BPI/MS Insurance Corporation. BPI issued Passbook No. 50298 to Rheozel corresponding to Savings Account No. 2233-0251-
11. A Personal Accident Insurance Coverage Certificate No. 043549 was also issued by FGU Insurance in the name of Rheozel
with Laingo as his named beneficiary.

On 25 September 2000, Rheozel died due to a vehicular accident as evidenced by a Certificate of Death issued by the Office of
the Civil Registrar General of Tagum City, Davao del Norte.

Since Rheozel came from a reputable and affluent family, the Daily Mirror headlined the story in its newspaper on 26 September
2000.

On 27 September 2000, Laingo instructed the family's personal secretary, Alice Torbanos (Alice) to go to BPI, Claveria, Davao
City branch and inquire about the savings account of Rheozel. Laingo wanted to use the money in the savings account for
Rheozel's burial and funeral expenses.

Alice went to BPI and talked to Jaime Ibe Rodriguez, BPI's Branch Manager regarding Laingo's request.

Due to Laingo's credit standing and relationship with BPI, BPI accommodated Laingo who was allowed to withdraw P995,000
from the account of Rheozel. A certain Ms. Laura Cabico, an employee of BPI, went to Rheozel's wake at the Cosmopolitan
Funeral Parlor to verify some information from Alice and brought with her a number of documents for Laingo to sign for the
withdrawal of the P995,000.

More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn Laingo-Concepcion, while arranging Rheozel's
personal things in his room at their residence in Ecoland, Davao City, found the Personal Accident Insurance Coverage
Certificate No. 043549 issued by FGU Insurance. Rhealyn immediately conveyed the information to Laingo.

Laingo sent two letters dated 11 September 2003 and 7 November 2003 to BPI and FGU Insurance requesting them to process
her claim as beneficiary of Rheozel's insurance policy. On 19 February 2004,

FGU Insurance sent a reply-letter to Laingo denying her claim. FGU Insurance stated that Laingo should have filed the claim
within three calendar months from the death of Rheozel as required under Paragraph 15 of the Personal Accident Certificate of
Insurance which states:

The Issue

The main issue for our resolution is whether or not Laingo, as named beneficiary who had no knowledge of the existence of the
insurance contract, is bound by the three calendar month deadline for filing a written notice of claim upon the death of the
insured.

Sc: No.

The Court's Ruling

Petitioners contend that the words or language used in the insurance contract, particularly under paragraph 15, is clear and plain
or readily understandable by any reader which leaves no room for construction. Petitioners also maintain that ignorance about the
insurance policy does not exempt respondent from abiding by the deadline and petitioners cannot be faulted for respondent's
failure to comply.

Respondent, on the other hand, insists that the insurance contract is ambiguous since there is no provision indicating how the
beneficiary is to be informed of the three calendar month claim period. Since petitioners did not notify her of the insurance
coverage of her son where she was named as beneficiary in case of his death, then her lack of knowledge made it impossible for
her to fulfill the condition set forth in the insurance contract.

In the present case, the source of controversy stems from the alleged non-compliance with the written notice of insurance claim
to FGU Insurance within three calendar months from the death of the insured as specified in the insurance contract.

Laingo contends that as the named beneficiary entitled to the benefits of the insurance claim she had no knowledge that
Rheozel was covered by an insurance policy against disability or death issued by FGU Insurance that was attached to
Rheozel's savings account with BPI.

Laingo argues that she dealt with BPI after her son's death, when she was allowed to withdraw funds from his savings
account in the amount of P995,000. However, BPI did not notify her of the attached insurance policy. Thus, Laingo
attributes responsibility to BPI and FGU Insurance for her failure to file the notice of insurance claim within three
months from her son's death.

We agree.

BPI offered a deposit savings account with life and disability insurance coverage to its customers called the Platinum 2-in-
1 Savings and Insurance account. This was a marketing strategy promoted by BPI in order to entice customers to invest
their money with the added benefit of an insurance policy. Rheozel was one of those who availed of this account, which not
only included banking convenience but also the promise of compensation for loss or injury, to secure his family's future.

HERE, BPI tied up with its affiliate, FGU Insurance, as its partner. Any customer interested to open a deposit account under this
2-in-1 product, after submitting all the required documents to BPI and obtaining BPI's approval, will automatically be given
insurance coverage. Thus, BPI acted as agent of FGU Insurance with respect to the insurance feature of its own marketed
product.

Under the law, an agent is one who binds himself to render some service or to do something in representation of
another.8 In Doles v. Angeles,9 we held that the basis of an agency is representation. The question of whether an agency has been
created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial
evidence. The question is ultimately one of intention. Agency may even be implied from the words and conduct of the parties and
the circumstances of the particular case. For an agency to arise, it is not necessary that the principal personally encounter the
third person with whom the agent interacts. The law in fact contemplates impersonal dealings where the principal need not
personally know or meet the third person with whom the agent transacts: precisely, the purpose of agency is to extend the
personality of the principal through the facility of the agent.

In this case, since the Platinum 2-in-1 Savings and Insurance account was BPI's commercial product, offering the insurance
coverage for free for every deposit account opened, Rheozel directly communicated with BPI, the agent of FGU Insurance.

BPI not only facilitated the processing of the deposit account and the collection of necessary documents but also the necessary
endorsement for the prompt approval of the insurance coverage without any other action on Rheozel's part. Rheozel did not
interact with FGU Insurance directly and every transaction was coursed through BPI.

In Eurotech Industrial Technologies, Inc. v. Cuizon,10 we held that when an agency relationship is established, the agent acts for
the principal insofar as the world is concerned. Consequently, the acts of the agent on behalf of the principal within the scope of
the delegated authority have the same legal effect and consequence as though the principal had been the one so acting in the
given situation.

BPI, as agent of FGU Insurance, had the primary responsibility to ensure that the 2-in-1 account be reasonably carried out with
full disclosure to the parties concerned, particularly the beneficiaries. Thus, it was incumbent upon BPI to give proper notice
of the existence of the insurance coverage and the stipulation in the insurance contract for filing a claim to Laingo, as
Rheozel's beneficiary, upon the latter's death.

Articles 1884 and 1887 of the Civil Code state:

chanRoblesvirtualLawlibrary

Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the damages which, through his non-
performance, the principal may suffer.
He must also finish the business already begun on the death of the principal, should delay entail any danger.

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal.

In default, thereof, he shall do all that a good father of a family would do, as required by the nature of the business.
The provision is clear that an agent is bound to carry out the agency. The relationship existing between principal and agent is a
fiduciary one, demanding conditions of trust and confidence. It is the duty of the agent to act in good faith for the advancement of
the interests of the principal. In this case, BPI had the obligation to carry out the agency by informing the beneficiary, who
appeared before BPI to withdraw funds of the insured who was BPI's depositor, not only of the existence of the insurance
contract but also the accompanying terms and conditions of the insurance policy in order for the beneficiary to be able to
properly and timely claim the benefit.

Upon Rheozel's death, which was properly communicated to BPI by his mother Laingo, BPI, in turn, should have fulfilled
its duty, as agent of FGU Insurance, of advising Laingo that there was an added benefit of insurance coverage in
Rheozel's savings account.

An insurance company has the duty to communicate with the beneficiary upon receipt of notice of the death of the insured. This
notification is how a good father of a family should have acted within the scope of its business dealings with its clients. BPI is
expected not only to provide utmost customer satisfaction in terms of its own products and services but also to give assurance
that its business concerns with its partner entities are implemented accordingly.

IN SUM:

There is a rationale in the contract of agency, which flows from the "doctrine of representation," that notice to the agent
is notice to the principal,11 Here, BPI had been informed of Rheozel's death by the latter's family. Since BPI is the agent of FGU
Insurance, then such notice of death to BPI is considered as notice to FGU Insurance as well.

FGU Insurance cannot now justify the denial of a beneficiary's insurance claim for being filed out of time when notice of death
had been communicated to its agent within a few days after the death of the depositor-insured.

In short, there was timely notice of Rheozel's death given to FGU Insurance within three months from Rheozel's death as
required by the insurance company.

The records show that BPI had ample opportunity to inform Laingo, whether verbally or in writing, regarding the existence of the
insurance policy attached to the deposit account. First, Rheozel's death was headlined in a daily major newspaper a day after his
death. Second, not only was Laingo, through her representative, able to inquire about Rheozel's deposit account with BPI two
days after his death but she was also allowed by BPI's Claveria, Davao City branch to withdraw from the funds in order to help
defray Rheozel's funeral and burial expenses. Lastly, an employee of BPI visited Rheozel's wake and submitted documents for
Laingo to sign in order to process the withdrawal request. These circumstances show that despite being given many opportunities
to communicate with Laingo regarding the existence of the insurance contract, BPI neglected to carry out its duty.

Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the insurance policy, Laingo had no
means to ascertain that she was entitled to the insurance claim.

It would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its duty to properly notify her that she was a
beneficiary.

Thus, as correctly decided by the appellate court, BPI and FGU Insurance shall bear the loss and must compensate Laingo for the
actual damages suffered by her family plus attorney's fees. Likewise, FGU Insurance has the obligation to pay the insurance
proceeds of Rheozel's personal accident insurance coverage to Laingo, as Rheozel's named beneficiary.chanrobleslaw