CASE DIGEST : MANILA BANKERS LIFE INSURANCE VS ABAN

G.R. No. 175666, July 29, 2013

MANILA BANKERS LIFE INSURANCE CORPORATION, Petitioner, v. CRESENCIA P. ABAN,Respondent

FACTS : On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Manila Bankers Life Insurance Corporation. Petitioner issued Insurance Policy No. 747411 (the policy), with a face value of P100,000.00, 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. petitioner denied respondent's claim on April 16, 1997 and refunded the premiums paid on the policy. On April 24, 1997, petitioner filed a civil case for rescission and/or annulment of the policy. The main thesis of the Complaint was that the policy was obtained by fraud, concealment and/or misrepresentation under the Insurance Code. Respondent filed a Motion to Dismiss claiming that petitioner's cause of action was barred by prescription pursuant to Section 48 of the Insurance Code.On December 9, 1997, the trial court issued an Order granting respondent's Motion to Dismiss. Petitioner interposed an appeal with the CA. The CA sustained the trial court. Hence this petition.

ISSUE : WON THE COURT OF APPEALS ERRED IN SUSTAINING THE APPLICATION OF THE INCONTESTABILITY PROVISION IN THE INSURANCE CODE BY THE TRIAL COURT

HELD : 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. Section 48 regulates both the actions of the insurers and prospective takers of life insurance. It gives insurers enough time to inquire whether the policy was obtained by fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming individuals that their attempts at insurance fraud would be timely uncovered - thus deterring them from venturing into such nefarious enterprise. At the same time, legitimate policy holders are absolutely protected from unwarranted denial of their claims or delay in the collection of insurance proceeds occasioned by allegations of fraud, concealment, or misrepresentation by insurers, claims which may no longer be set up after the two-year period expires as ordained under the law.