MANILA BANKERS LIFE INSURANCE CORPORATION v. CRESENCIA P.

ABAN

G.R. No. 175666, July 29, 2013

FACTS OF THE CASE: 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, as her
beneficiary. Later on, petitioner issued the insurance policy with a face value of
100k.
Sotero died, 2 years and 7 months after the issuance of the said policy. Thus,
respondent filed a claim for the insurance proceeds but was denied due to the
findings of the insurance company that the insured did not personally apply for the
insurance coverage; that the insured was sickly since 1990; also the insured did not
have the financial capability to pay the insurance; and it was the respondent who
was the one who filed the insurance application and designated herself as the
beneficiary.
Petitioner then filed a civil case for rescission and/or annulment of the policy
as they contended that the policy was obtained by fraud, concealment and/or
misrepresentation under the Insurance Code.

ISSUE TO BE RESOLVED: WON INCONTESTABILITY PROVISION(SECTION

48) IS APPLICABLE IN THE CASE AT BAR;

RULING OF THE CASE: 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 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."
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.
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.

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.
 VIOLETA R. LALICAN, Petitioner, v. THE INSULAR LIFE ASSURANCE
COMPANY LIMITED, AS REPRESENTED BY THE PRESIDENT VICENTE R.
AVILON

G.R. NO. 183526 : August 25, 2009]

FACTS OF THE CASE: Eugolio Lalican applied for an insurance policy with herein
respondent, to which Violeta was the named beneficiary.
Under the terms of the policy, Eulogio was to pay the premiums on a quarterly
basis, with a grace period of 31 days for the payment of each premium subsequent
to the first. Further, if any premium was not paid on or before the due date, the
policy would be in default, and if the premium remained unpaid until the end of the
grace period, the policy would automatically lapse and become void.
Eulogio failed to pay premium due on January 24 th and even after the lapse of
the grace period, he still did not pay. Therefore, the policy lapsed and became void.
Eulogio subsequently filed an application for reinstatement of the policy and
together with the payment submitted it to his agent, who issued him a deposit
receipt for the amount he deposited. However, a while later, Eulogio died of cardio-
respiratory arrest secondary to electrocution.
The Application for Reinstatement was forwarded to the Insular Life Regional
Office but was no longer acted upon, as the former was informed that Eulogio had
already passed away.

ISSUE TO BE RESOLVED: WON EULOGIO WAS ABLE TO REINSTATE THE

LAPSED INSURANCE POLICY ON HIS LIFE BEFORE HIS DEATH;

RULING OF THE COURT: NO, The policy remained lapsed and void, not having
been reinstated in accordance with the Policy Contract and Application for
Reinstatement before Eugulio’s death. Violeta, therefore, cannot claim any death
benefits from Insular Life; however she is entitled to receive the full refund of the
payments made by Eugulio thereon.