[G.R. No. L-48049. June 29, 1989.

]
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners, vs. THE COURT OF APPEALS
and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents.

Facts:
Tan Lee Siong, father of petitioners Tan, applied for insurance with PhilamLife, which was subsequently
approved in Nov. 1973 and the petitioners were the beneficiaries. After 1 year and 5 months, Lee Siong
died of hepatoma. Petitioners filed their claim to PhiamLife but was denied and the company rescinded
the policy by reason of alleged misrepresentation and concealment of material facts made by the
deceased in his application of insurance. The premiums paid were refunded.

Then petitioners filed a complaint against PhilamLife with the Office of the Insurance Commissioner.
Insurance commissioner rendered judgment and dismissed the complaint. Petitioners appealed in the
CA. The CA dismissed the appeal. Hence, petitioner filed a petition to the Supreme Court.

Issue:
Whether or not the petitioners claim be denied and the policy be rescinded due to misrepresentation
and concealment

Ruling:
The Supreme Court held Yes and denied the petition.

Section 48. par 2 provides:

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 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 insurer has two years from the date of issuance of the insurance contract or of its last reinstatement
within which to contest the policy, whether or not, the insured still lives within such period. After two
years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no
longer lie.

In this case, the policy was in force for a period of 1 year and 5 months, the insured died before the 2-
year period had lapsed. Therefore, the insurance company is not barred from proving that the policy is
void ab initio by reason of the insured’s fraudulent concealment and misrepresentation.

Philamlife presented evidence that the deceased concealed his consultations and treatments for
hypertension, diabetes and liver disorders, they were misled into accepting the risk and approving his
application. Thus, PhilamLife has the right to rescind the contract of insurance and to deny the claims of
the petitioners by reason of misrepresentation and concealment.