Tan vs. CA, 174 SCRA 403 (1989)

FACTS:

Tan Lee Siong was issued a policy by Philamlife on Nov. 6, 1973 for P80,000. On April 26, 1975, Tan died of hepatoma.  His beneficiaries then filed a claim with Philamlife for the proceeds of the insurance.The claim was denied on the ground of misrepresentation and concealment of material facts.  

The beneficiaries contend that Philamlife can no longer rescind the contract on the ground of misrepresentation as rescission must allegedly be done “during the lifetime of the insured” within two years and prior to the commencement of the action following the wording of Sec. 48, par. 2.

ISSUE:

Whether Philamlife can rescind the contract

YES. The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners’ interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts.

There is no showing that the questions in the application form for insurance regarding the insured’s medical history are in smaller print than the rest of the printed form or that they are designed in such a way as to conceal from the applicant their importance. If a warning in bold red letters or a boxed warning similar to that required for cigarette advertisements by the Surgeon General of the United States is necessary, that is for Congress or the Insurance Commission to provide as protection against high pressure insurance salesmanship.

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