SUN LIFE VS SIBYA

FACTS:
1.ATTY. JESUS SIBYA APPLIED FOR LIFE
INSURANCE. IN HIS APPLICATION HE INDICATED
THAT HE HAD SOUGHT ADVICE FOR KIDNEY
PROBLEMS. (LITHOTRIPSY – KIDNEY STONE)
2.SUNLIFE APPROVED HIS APPLICATION. THE
POLICY INDICATED THAT RESPONDENTS AS
BENEFICIARIES ENTITLES THEM TO A DEATH
BENEFIT OF 1M PESOS SHOULD ATTY DIES ON OR
BEFORE FEB 5, 2021.
3.MAY 2011 – ATTY DIED AS A RESULT OF A
GUNSHOT WOUND
- MA. DAISY FILED A CLAIMANT’S STATEMENT WITH
SUN LIFE.
4.SUN LIFE DENIED THE CLAIM ON THE GROUND
THAT DETAILED ON ATTY’S MEDICAL HISTORY
WERE NOT DISCLOSED IN HIS APPLICATION.
- SUN LIFE TENDERED A CHECK REPRESENTING THE
REFUND OF THE PREMIUMS PAID BY ATTY.
5. SUNLIFE REFUSED THEN FILED FOR JUDICIAL
CONFIRMATION OF ATTY’S RESCISSION OF INSU
POLICY.
- ATTY DID NOT DISCLOSE PREVIOUS MEDICAL
TREATMENT
ISSUE: Whether or not the CA erred when it affirmed the
RTC decision finding that there was no concealment or
misrepresentation when Atty. Jesus Jr. submitted his
insurance application with Sun Life.

HELD: In Manila Bankers Life Insurance Corporation v.

Aban,22 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.
- 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. 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.

EMILIO TAN vs. COURT OF APPEALS G.R. No. 48049, 29

June 1989
FACTS: 
Tan Lee Siong, father of herein petitioners, applied for
life insurance in the amount of P80,000.00 with
respondent company Philippine American Life
Insurance Company. Said application was approved and
a corresponding policy was issued effective November
5, 1973, with petitioners as the beneficiaries.
On April 26, 1975, Tan Lee Siong died of hepatoma.
Hence, petitioners filed with respondent company their
claim for the proceeds of the life insurance policy.
However, the insurance company denied the said claim
and rescinded the policy by reason of the alleged
misrepresentation and concealment of material facts
made by the deceased Tan Lee Siong in his application
for insurance.
The premiums paid on the policy were thereupon
refunded. The petitioners contend that the respondent
company no longer had the right to rescind the contract
of insurance as rescission must allegedly be done
during the lifetime of the insured within two years and
prior to the commencement of action.
ISSUE: Whether or not the insurance company has the
right to rescind the contract of insurance despite the
presence of an incontestability clause
HELD: YES. 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 of
the Insurance Law 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”.
The policy was issued on November 6, 1973 and the
insured died on April 26, 1975. The policy was thus in
force for a period of only one year and five months.
Considering that the insured died before the two-year
period has lapsed, respondent company is not,
therefore, barred from proving that the policy is void ab
initio by reason of the insured’s fraudulent concealment
or misrepresentation. Moreover, respondent company
rescinded the contract of insurance and refunded the
premiums paid on November 11, 1975, previous to the
commencement of this action on November 27, 1975.
WHEREFORE, the petition is hereby DENIED for lack of
merit. The questioned decision of the Court of Appeals
is AFFIRMED.
Case Digest: Manila Bankers vs Aban
FACTS:
On July 3, 1993, Delia Sotero took out a life insurance
policy from Manila Bankers Life Insurance, designating
respondent Cresencia P. Aban, her niece, as her
beneficiary.
Petitioner issued the Insurance 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.
On April 10, 1996, when the insurance policy had been
in force for more than two years and seven months,
Sotero died. Respondent filed a claim for the insurance
proceeds on July 9, 1996. Petitioner, however, denied
the claim and instead refunded the premiums paid on
the policy claiming that the policy was obtained by
fraud, concealment and/or misrepresentation. Petitioner
also filed for rescission.
Respondent filed a Motion to Dismiss claiming that
petitioner’s cause of action was barred by prescription
pursuant to Section 48 of the Insurance Code, which
provides as follows:
“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
rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.”
ISSUE:
            Whether or not Manila Bankers Life Insurance
Corporation can still rescind the insurance contract
RULING:
            No, Manila Bankers Life Insurance Corporation
can no longer rescind the insurance contract.
Allegations of fraud, which are predicated on
respondent’s alleged posing as Sotero and forgery of
her signature in the insurance application, are at once
belied by the trial and appellate courts’ finding that
Sotero herself took out the insurance for herself.
“Fraudulent intent on the part of the insured must be
established to entitle the insurer to rescind the
contract”. In the absence of proof of such fraudulent
intent, no right to rescind arises.
Moreover, Section 48 of the Insurance Code provides
that 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 rescindable 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.
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.
In this case, the records show that the insured died after
the two-year period, hence, the petitioner is already
barred from proving that the policy is void ab initio by
reason of fraudulent concealment or misrepresentation.