G.R. No. 211212 . June 08, 2016
SUN LIFE OF CANADA (PHILIPPINES), INC., PETITIONER, VS. MA. DAISY S. SIBYA, JESUS MANUEL S. SIBYA III, JAIME LUIS S. SIBYA, AND THE ESTATE OF THE DECEASED ATTY. JESUS SIBYA, JR., RESPONDENTS.

FACTS

On January 10, 2001, Atty. Jesus Sibya, Jr. applied for a life insurance policy with Sun Life of Canada (Philippines), Inc. In his application, he disclosed that he had undergone lithotripsy for a kidney stone in 1987 and claimed no recurrence. Sun Life approved the application and issued Policy No. 031097335 on February 5, 2001, naming his wife and children as beneficiaries with a death benefit of One Million Pesos (P1,000,000.00). Atty. Sibya died from a gunshot wound on May 11, 2001. Upon the beneficiaries’ claim, Sun Life denied payment in August 2001, alleging material concealment regarding undisclosed medical treatments in 1994, and instead tendered a refund of premiums paid. Sun Life subsequently filed a Complaint for Rescission before the Regional Trial Court (RTC).
The respondents argued that Atty. Sibya committed no misrepresentation, having acted in good faith by disclosing his known kidney condition and authorizing Sun Life to verify his medical history. The RTC dismissed Sun Life’s complaint, ordering it to pay the death benefit plus damages, finding no material concealment. The Court of Appeals (CA) affirmed the liability for the death benefit and damages but absolved Sun Life from charges of violating specific sections of the Insurance Code concerning unfair claim settlement practices.

ISSUE

Whether the Court of Appeals erred in affirming the lower court’s finding that there was no concealment or misrepresentation by the insured, Atty. Jesus Sibya, Jr., in his insurance application.

RULING

The Supreme Court denied the petition and affirmed the assailed CA decision. The legal logic rests on the incontestability clause under Section 48 of the Insurance Code. The Court, citing Manila Bankers Life Insurance Corporation v. Aban, held that when an insured dies within the two-year contestability period, the insurer is obligated to honor the policy regardless of any alleged concealment or misrepresentation. The rationale is to penalize insurers who recklessly solicit business without thorough investigation while alive. Here, Atty. Sibya died merely three months after policy issuance, well within the contestable period. Consequently, Sun Life was precluded from disputing the policy’s validity based on the insured’s representations. The insurer’s remedy was to investigate the applicant’s health within the two years while he was living. Having failed to do so, it must pay the claim. The award of damages was sustained due to Sun Life’s unjust refusal to pay a valid claim.