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MANILA BANKERS LIFE INSURANCE CORPORATION v. CRESENCIA P. ABAN

FACTS:

Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance Corporation, designating respondent Cresencia P. Aban as her beneficiary. The policy had a face value of P100,000.00 and was issued on August 30, 1993. On April 10, 1996, Sotero died and Aban filed a claim for the insurance proceeds. The petitioner conducted an investigation and found that Sotero did not personally apply for the insurance coverage, was sickly, did not have the financial capability to pay the insurance premiums, and did not sign the application for insurance. It was also discovered that Aban had filed the insurance application and designated herself as the beneficiary. Based on these findings, the petitioner denied Aban's claim and filed a civil case seeking rescission or annulment of the policy. The trial court dismissed the case, ruling that the petitioner's action was barred by prescription as provided in Section 48 of the Insurance Code. The Court of Appeals affirmed the trial court's decision. Petitioner argued that the policy was obtained through fraud, concealment, or misrepresentation and was void ab initio. Respondent argued that the application of Section 48 was proper and that there was insurable interest as Sotero obtained the insurance and designated her as the beneficiary.

ISSUES:

  1. Whether the Court of Appeals erred in sustaining the order of the trial court dismissing the complaint on the ground of prescription in contravention of pertinent laws and applicable jurisprudence.

  2. Whether the Court of Appeals erred in sustaining the application of the incontestability provision in the Insurance Code by the trial court.

  3. Whether the Court of Appeals erred in denying petitioner's motion for reconsideration.

RULING:

  1. The Court finds no error in the decision of the Court of Appeals sustaining the dismissal of the complaint on the ground of prescription. The complaint was filed beyond the two-year contestability period provided under Section 48 of the Insurance Code.

  2. The Court upholds the application of the incontestability provision in the Insurance Code, affirming that after the lapse of the two-year period, the insurer can no longer contest the policy on grounds of fraud, concealment, or misrepresentation.

  3. The Court denies the petitioner's motion for reconsideration, affirming the rulings of both the trial court and the Court of Appeals that the insurance policy was incontestable after two years, and the factual findings are binding.

PRINCIPLES:

  1. Prescription (Insurance Code, Section 48) After a life insurance policy has been in force for two years, it becomes incontestable and cannot be disputed on grounds of fraudulent concealment, misrepresentation, or void ab initio.

  2. Incontestability Clause Once the incontestable period has lapsed, the insurer is barred from denying claims on the policy based on grounds such as fraud, concealment, or lack of insurable interest, ensuring stability and protection for the insured or beneficiaries.

  3. Burden of Proof It is the insurer’s responsibility to investigate and detect any fraudulent activities or misrepresentations within the contestable period; failure to do so bars them from later contesting the policy.

  4. Contract of Adhesion Doctrine Insurance contracts are construed liberally in favor of the insured and strictly against the insurer to protect the insured's interests.