CASE DIGEST : SUN LIFE CANADA VS. SIBYA

G.R. No. 211212, June 08, 2016

SUN LIFE OF CANADA (PHILIPPINES), INC., Petitioner, v. 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. (Atty. Jesus Jr.) applied for life insurance with Sun Life. In his Application for Insurance, he indicated that he had sought advice for kidney problems. On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and issued Insurance Policy No. 031097335. On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As such, Ma. Daisy filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his insurance policy. In a letter dated August 27, 2001, however, Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.'s medical history were not disclosed in his application. The respondents reiterated their claim against Sun Life thru a letter dated September 17, 2001. Sun Life, however, refused to heed the respondents' requests and instead filed a Complaint for Rescission before the RTC and prayed for judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy. In its Complaint, Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance application his previous medical treatment at the National Kidney Transplant Institute in May and August of 1994. For their defense, the respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in his application for insurance. The RTC held that Atty. Jesus Jr. did not commit material concealment and misrepresentation when he applied for life insurance with Sun Life. Aggrieved, Sun Life elevated the case to the CA. The CA affirmed the decision of the RTC. Hence this petition.

ISSUE : Whether or not the CA erred when it affirmed the RTC decision finding that there was no concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance application with Sun Life.

HELD : In Manila Bankers Life Insurance Corporation v. Aban,22 the Court held that if the insured dies within the two-year contestability period, the insurer is bound to make good its obligation under the policy, regardless of the presence or lack of concealment or misrepresentation. 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. In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has two years from its issuance, to investigate and verify whether the policy was obtained by fraud, concealment, or misrepresentation. Upon the death of Atty. Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the policy, Sun Life loses its right to rescind the policy.