GR 48049; (June, 1989) (Digest)
G.R. No. 48049 June 29, 1989
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners, vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents.
FACTS
The petitioners are the beneficiaries of a life insurance policy issued by respondent Philippine American Life Insurance Company (Philamlife) to their father, Tan Lee Siong, effective November 6, 1973. Tan Lee Siong died of hepatoma on April 26, 1975. Upon filing their claim, Philamlife denied it and rescinded the policy on September 11, 1975, refunding the premiums paid. The insurer alleged that the deceased committed fraudulent concealment and misrepresentation in his application by failing to disclose his medical history, including prior consultations and treatments for hypertension, diabetes, and liver disorders. The Insurance Commissioner dismissed the petitioners’ complaint, a decision affirmed by the Court of Appeals.
ISSUE
Whether the respondent insurance company validly rescinded the life insurance policy on the ground of concealment by the insured, notwithstanding the insured’s death occurring within two years from the policy’s issuance.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The legal logic centers on the application of the incontestability clause under Section 48 of the Insurance Code. The petitioners argued that rescission could no longer be exercised after the insured’s death. The Court clarified that the second paragraph of Section 48 states an insurer cannot prove a policy is void ab initio due to fraudulent concealment after it has been in force “for a period of two years from the date of its issue… during the lifetime of the insured.” Here, the policy was in force for only one year and five months before the insured’s death. Therefore, the two-year period had not lapsed, and the incontestability clause did not attach, preserving Philamlife’s right to rescind.
Furthermore, the rescission was exercised prior to the commencement of any judicial action, as required by the first paragraph of Section 48. On the substantive issue of concealment, the Court upheld the factual findings of the lower courts, which were based on substantial evidence. The deceased’s concealment of his serious medical conditions was material, as it misled the insurer into approving the application as a standard risk without further medical investigation. The Court found no merit in the petitioners’ arguments regarding alleged high-pressure sales tactics or that the application form constituted a contract of adhesion with concealed fine print, as the questions regarding medical history were not shown to be obscurely presented. The insurer validly rescinded the contract due to the insured’s material concealment.