Case Summary (G.R. No. 195176)
Key Dates
• June 22, 1997 – Original policy takes effect
• June 23, 1999 – Policy lapses for non-payment
• September 7, 1999 – Application for reinstatement and initial premium payment
• October 12, 1999 – Insurer’s conditions for reinstatement communicated
• December 27, 1999 – Additional premium paid by insured
• January 7, 2000 – Issuance of Endorsement approving reinstatement “effective June 22, 1999”
• September 22, 2001 – Insured’s date of death
• December 12, 2003 – RTC decision ordering payment of proceeds and damages
• June 24, 2010 – CA decision affirming enforcement of reinstatement date, deleting non-pecuniary awards
• February 6, 2017 – Supreme Court decision
Factual Background
Felipe N. Khu, Sr. applied for and received a one-million-peso life policy effective June 22, 1997. After premium non-payment, the policy lapsed on June 23, 1999. On September 7, 1999, he sought reinstatement and paid P25,020.00. Insular Life imposed extra premium and cancelled certain riders; Felipe consented and paid an additional P3,054.50 on December 27, 1999. The insurer issued an endorsement on January 7, 2000 stating the reinstatement was “effective June 22, 1999.” Felipe died on September 22, 2001; his beneficiaries filed a death-benefit claim, which Insular Life denied, rescinding the policy for alleged concealment of medical conditions.
Procedural History
The RTC found in favor of the beneficiaries, holding that the policy was reinstated on June 22, 1999 and thus became incontestable by the date of death. It awarded the face amount, moral damages, attorney’s fees, and litigation expenses. The CA affirmed the reinstatement date and incontestability but deleted the awards for moral damages, attorney’s fees, and litigation expenses. Insular Life then filed a petition for review on certiorari.
Issue
Whether the reinstated life insurance policy became incontestable by the time of the insured’s death, given the contested date of reinstatement approval.
Applicable Law
Section 48, Insurance Code: an insurer may not contest a life policy for fraud, concealment, or misrepresentation after it has been in force for two years from its issue or last reinstatement.
Civil Code, Article 1377: ambiguities in a contract must not favor the party who caused them.
Petitioner’s Arguments
– The policy was reinstated only on December 27, 1999, when the extra premium was paid, so the two-year contestability period had not expired by the insured’s death on September 22, 2001.
– The reinstatement documents contain clear, unequivocal provisions specifying that contestability begins upon insurer approval, without need for interpretive construction.
– Felipe concealed material health conditions, entitling Insular Life to rescind the contract and deny the claim.
Respondents’ Arguments
– The phrase “effective June 22, 1999” in both the Letter of Acceptance and the Endorsement is ambiguous as to whether it refers to the reinstatement date or merely to policy changes.
– Where an insurer drafts ambiguous documents, any obscurity must be resolved against it, favoring the insured’s position.
– Under the CA’s factual findings, the contestability period had lapsed by the insured’s death.
Analysis
Reinstatement occurs upon insurer approval of the appl
...continue readingCase Syllabus (G.R. No. 195176)
Facts
- On March 6, 1997, Felipe N. Khu, Sr. applied for a life insurance policy under Insular Life’s Diamond Jubilee Insurance Plan and completed a medical questionnaire denying any illness.
- Insular Life issued Policy No. A000015683 with a face value of ₱1,000,000, effective June 22, 1997.
- The policy lapsed on June 23, 1999 for non-payment of premium covering June 22, 1999 to June 23, 2000.
- On September 7, 1999, Felipe applied for reinstatement and paid ₱25,020, declaring only a change in occupation.
- By letter dated October 12, 1999, Insular Life conditioned reinstatement on payment of additional premium and cancellation of the accidental death benefit and premium-waiver riders; Felipe agreed.
- On December 27, 1999, Felipe paid the additional premium of ₱3,054.50.
- On January 7, 2000, Insular Life issued Endorsement No. PN-A000015683 approving reinstatement “effective June 22, 1999,” imposing extra premium and deleting riders, and adjusting annual premiums to ₱28,000.
- The insured paid subsequent annual premiums on June 23, 2000 (₱28,000) and July 2, 2001 (₱28,000).
- Felipe died on September 22, 2001; the death certificate cited end-stage renal failure, hepatic failure, congestive heart failure, diffuse myocardial ischemia, diabetes neuropathy, alcoholism, and pneumonia.
- On October 5, 2001, Felipe’s beneficiaries filed a claim for death benefits; Insular Life denied the claim and rescinded the policy for alleged concealment of pre-existing illnesses.
- The beneficiaries then sued for specific performance and damages, seeking declaration of policy validity and payment of proceeds.
Procedural History
- The Regional Trial Court, Branch 39, Cagayan de Oro City, rendered judgment on December 12, 2003 in favor of the beneficiaries, ordering Insular Life to pay ₱1,000,000 with interest, ₱20,000 moral damages, ₱30,000 attorney’s fees, and ₱10,000 litigation expenses. It held that reinstatement took effect June 22, 1999 and that the policy was incontestable at the insured’s death.
- Insular Life appealed to the Court of Appeals (CA-GR. CV No. 81730). On June 24, 2010, the CA affirmed the non-contestability ruling, deleted the awards for moral damages, attorney’s fees, and litigation expenses, and dismissed the appeal.
- A motion for partial reco