FACTS:
On January 10, 2001, Atty. Jesus Sibya, Jr. applied for life insurance with Sun Life. In his Application for Insurance, he indicated that he had sought advice for kidney problems. Sun Life approved the 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. As such, Ma. Daisy filed a Claimant’s Statement with Sun Life to seek the death benefits indicated in his insurance policy.
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.
The respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in his application for insurance.
The RTC held that Atty. Jesus Jr. did not commit material concealment and misrepresentation when he applied for life insurance with Sun Life. It observed that given the disclosures and the waiver and authorization to investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the means of ascertaining the facts allegedly concealed by the applicant.
ISSUE:
Whether or not there was concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance application with Sun Life.
RULING:
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.
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.
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.
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. 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.