9 Manila Bankers vs. Aban

MANILA BANKERS VS ABAN (G.R. NO.
175666 JULY 29, 2013)

DOCTRINE: CONCEALMENT
LAW APPLIED: SECTION 48 OF THE INSURANCE CODE OF THE

PHILIPPINES
"Section 48. Whenever a right to rescind a contract of insurance is given to the

insurer by any provision of this chapter, such right must be exercised previous to
the commencement of an action on the contract.
"After a policy of life insurance made payable on the death of the insured shall have
been in force during the lifetime of the insured for a period of two (2) years from the
date of its issue or of its last reinstatement, the insurer cannot prove that the policy
is void ab initio or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
Facts:
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila
Bankers Life Insurance Corporation (Bankers Life), designating respondent
Cresencia P. Aban (Aban), her niece, as her beneficiary. Petitioner issued Insurance
Policy No. 747411 (the policy), with a face value of P 100,000.00, in Sotero’s favor on
August 30, 1993, after the requisite medical examination and payment of the
insurance premium. On April 10, 1996, when the insurance policy had been in force
for more than two years and seven months, Sotero died. Respondent filed a claim for
the insurance proceeds on July 9, 1996. Petitioner conducted an investigation into
the claim, and came out with the following findings: 1. Sotero did not personally
apply for insurance coverage, as she was illiterate; 2. Sotero was sickly since 1990;
3. Sotero did not have the financial capability to pay the insurance premiums on
Insurance Policy No. 747411; 4. Sotero did not sign the July 3, 1993 application for
insurance; and 5. Respondent was the one who filed the insurance application, and
designated herself as the beneficiary. For the above reasons, petitioner denied
respondent’s claim on April 16, 1997 and refunded the premiums paid on the policy.
Issue:
Whether or not Manila Bankers is barred from denying the insurance claims based
on fraud or concealment.
Held:
Yes. The “incontestability clause” is a provision in law that after a policy of life
insurance made payable on the death of the insured shall have been in force during
the lifetime of the insured for a period of two (2) years from the date of its issue or of
its last reinstatement, the insurer cannot prove that the policy is void ab initio or is
rescindable by reason of fraudulent concealment or misrepresentation of the
insured or his agent.
The purpose of the law is to give protection to the insured or his beneficiary by
limiting the rescinding of the contract of insurance on the ground of fraudulent
concealment or misrepresentation to a period of only two (2) years from the
issuance of the policy or its last reinstatement.
The insurer is deemed to have the necessary facilities to discover such fraudulent
concealment or misrepresentation within a period of two (2) years. It is not fair for
the insurer to collect the premiums as long as the insured is still alive,
only to raise the issue of fraudulent concealment or misrepresentation
when the insured dies in order to defeat the right of the beneficiary to
recover under the policy.
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and
the insured. Under the provision, an insurer is given two years – from the
effectivity of a life insurance contract and while the insured is alive – to
discover or prove that the policy is void ab initio or is rescindible by reason of the
fraudulent concealment or misrepresentation of the insured or his agent. After the
two-year period lapses, or when the insured dies within the period, the insurer must
make good on the policy, even though the policy was obtained by fraud,
concealment, or misrepresentation. This is not to say that insurance fraud must be
rewarded, but that insurers who recklessly and indiscriminately solicit and obtain
business must be penalized, for such recklessness and lack of discrimination
ultimately work to the detriment of bona fide takers of insurance and the public in
general.

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MANILA BANKERS VS ABAN (G.R. NO.

175666 JULY 29, 2013)

LAW APPLIED: SECTION 48 OF THE INSURANCE CODE OF THE

"Section 48. Whenever a right to rescind a contract of insurance is given to the

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