Case Summary (G.R. No. L-48049)
Assigned Issues on Rescission and Misrepresentation
Petitioners contend:
A. An insurer may not rescind a life policy after the insured’s death.
B. PhilamLife’s avoidance of the policy on grounds of the deceased’s concealment contradicts the policy’s terms and established law.
C. The finding that the insurer was misled lacks evidentiary support.
Statutory Framework: Section 48’s Rescission and Incontestability Provisions
Section 48 of the Insurance Code grants the insurer the right to rescind a contract before suit and bars defenses of misrepresentation or concealment after two years “during the lifetime” of the insured. The first paragraph requires exercise of rescission rights prior to commencement of action; the second renders policies incontestable on health grounds if in force for two years during the insured’s life.
Interpretation of “During the Lifetime” and Two-Year Period
The Court held that “during the lifetime of the insured for a period of two years” means the policy must remain in force for two full years before death to invoke incontestability. Here, the insured died after only one year and five months, so PhilamLife retained the right to prove voidness ab initio. Furthermore, rescission occurred on September 11, 1975—prior to the beneficiaries’ suit on November 27, 1975—satisfying the pre-action requirement.
Petitioners’ Arguments on Solicitation and Omitted Witnesses
Petitioners argue that Tan Lee Siong applied only under insistent solicitation from agents, had no personal motive to conceal, and could have procured a larger policy if seeking to defraud. They further assert that PhilamLife failed to present its medical examiner and agent as witnesses to establish concealment.
Acknowledgment of Insurance Sales Practices
The petition references Supreme Court recognition of aggressive, high-pressure insurance salesmanship—where agents supply information, prepare applications, and smooth transaction difficulties—potentially compromising applicants’ understanding.
Legislative Purpose of the Incontestability Clause
Congress enacted the two-year incontestability provision to counteract insurer tactics to avoid liability through late challenges to material misrepresentations. Petitioners’ reading—that insurers could never rescind post-mortem—would yield unjust results, allowing fraudulent policies to stand.
Evaluation of Alleged Concealment and Evidence
PhilamLife introduced medical evidence showing the insured was diabetic, hypertensive, and suffering from hepatoma at or before the application date, which was undisclosed in the application. Under Rules 131(5)(c) and (d), the insured’s signature on the application presumes he understood and affirmed its contents. Concealment of significant medical history misled th
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Procedural Background
- Petitioners filed Complaint No. 218 with the Insurance Commissioner on November 27, 1975, seeking recovery of P80,000 under Policy No. 1082467.
- Insurance Commissioner dismissed the complaint on August 9, 1977.
- Court of Appeals affirmed the dismissal for lack of merit.
- Petitioners elevated the case via petition for review on certiorari (G.R. No. L-48049) to the Supreme Court.
Facts of the Case
- Tan Lee Siong applied for an P80,000 life insurance policy with Philippine American Life Insurance Company on September 23, 1973.
- Policy No. 1082467 was issued effective November 6, 1973, naming Emilio, Juanito, Alberto and Arturo Tan as beneficiaries.
- The insured died of hepatoma on April 26, 1975.
- On September 11, 1975, the insurer rescinded the policy and refunded premiums, alleging misrepresentation and concealment of material facts.
- Petitioners’ claim for proceeds was denied, prompting administrative and judicial appeals.
Issues Presented
- Whether an insurer may rescind a life insurance policy after the death of the insured.
- Whether concealment or misrepresentation defenses are barred by the incontestability clause once the policy has been in force.
- Whether the Court of Appeals erred in finding that petitioners’ late father concealed material medical history.
Relevant Legal Provision
- Section 48, Ins