Sun Life v. Sibya
REITERATIONFacts
The Antecedents: Atty. Jesus Sibya, Jr. applied for life insurance with Sun Life of Canada (Philippines), Inc. (Sun Life) on January 10, 2001, disclosing a history of kidney problems treated in 1987. Sun Life approved the application and issued Policy No. 031097335 on February 5, 2001, with respondents as beneficiaries. Atty. Jesus Jr. died on May 11, 2001, due to a gunshot wound. The respondent-beneficiaries filed a claim for death benefits. Procedural History: Sun Life denied the claim, tendering a refund of premiums, and filed a complaint for rescission of the policy, alleging non-disclosure of previous medical treatment at the National Kidney Transplant Institute in 1994 for what Sun Life claimed indicated "renal failure." The Regional Trial Court (RTC) dismissed Sun Life's complaint, ordering payment of death benefits and damages, finding no material concealment or misrepresentation due to disclosures and an authorization to investigate provided by Atty. Jesus Jr. The Court of Appeals (CA) affirmed the award of death benefits and damages but absolved Sun Life from violations of Sections 241 and 242 of the Insurance Code. The Petition: Sun Life filed a petition for review on certiorari before the Supreme Court, questioning the CA's affirmation of the RTC's finding that there was no concealment or misrepresentation in Atty. Jesus Jr.'s insurance application.
Issue(s)
Whether the Court of Appeals erred in affirming the RTC decision finding that there was no concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance application with Sun Life. Whether Sun Life lost its right to rescind the insurance policy due to the death of the insured within the two-year contestability period.
Ruling
The petition is denied. The Decision of the Court of Appeals affirming the RTC's order for Sun Life to pay death benefits and damages is affirmed.
Ratio Decidendi
On the issue of concealment and misrepresentation: The Court agreed with the CA that Sun Life failed to show that Atty. Jesus Jr. committed concealment and misrepresentation. The application itself admitted medical treatment for a kidney ailment, and Atty. Jesus Jr. provided specific details of the 1987 treatment, including the procedure, duration, physician, and hospital. Furthermore, he executed an authorization allowing Sun Life to investigate his medical history, thereby giving Sun Life the means to ascertain the facts. The Court noted that Atty. Jesus Jr. was not a medical doctor, and his statement "no recurrence" could be construed as an honest opinion, especially since answers made in good faith without intent to deceive do not avoid a policy even if untrue. The burden of proving concealment as an affirmative defense rests on the insurer, and Sun Life failed to establish its allegations clearly and satisfactorily. On the issue of the contestability period: The Court reiterated the ruling in Manila Bankers Life Insurance Corporation v. Aban 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 concealment or misrepresentation. The insurer is given two years from the policy's effectivity to discover or prove fraud. However, upon the death of the insured within this period, the insurer loses its right to rescind the policy, and the incontestability period sets in. In this case, Atty. Jesus Jr. died only three months after the policy's issuance, well within the two-year period, thus rendering Sun Life's right to rescind nugatory.
Main Doctrine
The insurer loses its right to rescind an insurance policy if the insured dies within the two-year contestability period, as the incontestability period will set in, obligating the insurer to pay the death benefits.