G.R. No. 204736 November 28, 2016
MANULIFE PHILIPPINES, INC., Petitioner vs. HERMENEGILDA YBAÑEZ, Respondent

FACTS

Manulife Philippines, Inc. issued two life insurance policies in favor of Dr. Gumersindo Ybañez. The insured died shortly after the policies were issued. Upon investigation of the death claim filed by the beneficiary, Hermenegilda Ybañez (the insured’s widow), Manulife discovered that Dr. Ybañez had prior hospital confinements and medical conditions, including a parotidectomy, hypertension, leptospirosis, and acute pancreatitis, which were not disclosed in his insurance applications. Manulife concluded there was concealment of material facts and rescinded the policies, denying the claim and refunding the premiums.
Hermenegilda contested the rescission. She argued that Manulife’s own agent assisted in filling out the application forms. She also contended that the company physician who conducted the medical examination could have observed the physical scar from the parotidectomy and discovered the other conditions through a proper examination. The Regional Trial Court ruled in favor of Hermenegilda, declaring the rescission invalid. The Court of Appeals affirmed this decision.

ISSUE

Whether Manulife validly rescinded the insurance contracts on the ground of concealment or misrepresentation by the insured.

RULING

The Supreme Court denied Manulife’s petition and affirmed the lower courts’ rulings. The legal logic centers on the requirement to prove the insured’s fraudulent intent to conceal material information. For an insurer to validly rescind a contract based on concealment under Section 27 of the Insurance Code, it must establish by clear and convincing evidence that the concealment was fraudulent, that the fact concealed was material, and that the insured had knowledge of the fact.
The Court found that Manulife failed to discharge this burden of proof. It did not present the insurance agent or the company physician who processed and examined the application to testify on the circumstances of how the forms were accomplished and whether the insured deliberately withheld information. The mere presentation of documentary evidence showing prior medical history was insufficient to prove an intent to defraud. The insurer has the affirmative duty to establish this fraudulent intent. Without such proof, the defense of concealment fails, and the rescission is invalid. Consequently, the insurance contracts remain in force, and the beneficiary is entitled to the proceeds.