Tan vs. Court of Appeals (Insurance Law)

Tan vs. Court of Appeals

174 SCRA 403 (G.R. No. 48049)

June 29, 1989

Petitioners:       Emilio Tan, Juanito Tan, Alberto Tan and Arturo Tan

Respondent:     Court of Appeals and the Philippine American Life Insurance Company

J. Gutierrez Jr.:

FACTS:

On September 23, 1973, Tan Lee Siong, father of herein petitioner, applied for life insurance in the amount of ₱80,000.00 with respondent Philippine American Life Insurance Company. Said application was approved and Policy No. 1082467 was issued effective November 6, 1973, with petitioners the beneficiaries thereof.

On April 26, 1975, Tan Lee Siong died of Hepatoma. Petitioner then filed with respondent company their claim for the proceeds of the life insurance policy. However, in a letter dated September 11, 1975, respondent company denied petitioner’s claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Sion in his application for insurance the premium paid on the policy were thereupon refunded.

Petitioners filed on November 27, 1975, a complaint against the former with the Office of the Insurance Commissioner.

The Petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

ISSUE:

Whether the respondent company had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

HELD:

Yes. The [Petitioner’s] contention is without merit. The so-called “incontestability clause” precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insurer’s lifetime. The phrase “during the lifetime” found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is “for a period of two years.”

As noted by the Court of Appeals, to wit: “The policy was issued on November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27, 1975.”

The insurer has two years from the date of 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.

Great Pacific Life Assurance Company vs. Court of Appeals 89 SCRA 543 (Insurance Law)

Great Pacific Life Assurance Company vs. Court of Appeals

89 SCRA 543 (G.R. No. L-31845 and L-31878)

April 30, 1979

Petitioners:       Great Pacific Life Assurance Company (G.R. No. L-31845), Lapulapu Mondragon (G.R. No. L-31878)

Respondent:     Court of Appeals (both in G.R. No. L-31845 and L-31878), Ngo Hing (G.R. No. L-31878)

J. De Castro:

FACTS:

On March 4, 1957 respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company for twenty-year endowment policy for ₱50,000.00 on the life of his one-year old Helen Go.

Upon payment of the insurance premium, a binding deposit receipt was issued to Hing by the branch manager of the insurer in Cebu.

On May 28, 1957, the child died of influenza with complication of broncho pneumonia.

ISSUE:

Whether the binding deposit receipt constituted a temporary contract of the life insurance in question.

HELD:

No. The provisions printed on the Binding Receipt show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions:

1.  That the company shall be satisfied that the applicant was insurable on standard rates;

2.  That if the company does not accept the application and offers to issue a policy for different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise the deposit shall be refunded; and

3.  That if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant;

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely acknowledgment on behalf of the company, that the latter’s branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is “insurable on standard rates.”

Since Pacific Life disapproved the insurance application of Hing, the binding deposit receipt in question had never become in force at any time.

Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. As held by this court, where an agreement is made between the applicant and the agent no liability shall attach until the principal approves the risk and receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, “a binding slip” or “binding receipt” does not insure by itself. (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264)

It bears repeating that through the intra-company communication of April 30, 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action, which private respondent failed to accept.

In the absence of a meeting of the minds between Pacific Life and Hing over the 20 year endowment life insurance in the amount of ₱50,000.00 in favor of the latter’s one year old daughter, and with non-compliance of the above-quoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life.