EDILLON VS MANILA BANKERS

FACTS:
Carmen O, Lapuz, 64, applied with respondent insurance corporation for
insurance coverage against accident and injuries. She paid the sum of P20.00
representing the premium for which she was issued the corresponding receipt
signed by an authorized agent of the respondent insurance corporation. Upon
the filing of said application and the payment of the premium on the policy
applied for, the respondent insurance corporation issued to Carmen O. Lapuz
its Certificate of Insurance No. 128866.
During the effectivity of Certificate of Insurance No. 12886, Carmen O. Lapuz
died in a vehicular accident in the North Diversion Road.
Petitioner Regina L. Edillon, a sister of the insured and who was the named
beneficiary in the policy, filed her claim for the proceeds of the insurance,
submitting all the necessary papers and other requisites with the private
respondent. Her claim having been denied, Regina L. Edillon instituted this
action in the Court of First Instance of Rizal.
The respondent insurance corporation relies on a provision contained in the
Certificate of Insurance, excluding its liability to pay claims under the policy
in behalf of "persons who are under the age of sixteen (16) years of age or
over the age of sixty (60) years ..." It is pointed out that the insured being
over sixty (60) years of age when she applied for the insurance coverage, the
policy was null and void, and no risk on the part of the respondent insurance
corporation had arisen therefrom.
The trial court sustained the contention of the private respondent and
dismissed the complaint. It was reasoned out that a policy of insurance being
a contract of adhesion, it was the duty of the insured to know the terms of the
contract he or she is entering into; the insured in this case, upon learning from
its terms that she could not have been qualified under the conditions stated
in said contract, what she should have done is simply to ask for a refund of
the premium that she paid.
ISSUE:
Whether or not the acceptance by the insurance corporation of the premium
and the issuance of the corresponding certificate of insurance should be
deemed a waiver of the exclusionary condition of coverage stated in the policy.
HELD:
Yes. The age of the insured Carmen 0. Lapuz was not concealed to the
insurance company. Her application for insurance coverage which was on a
printed form furnished by private respondent and which contained very few
items of information clearly indicated her age of the time of filing the same to
be almost 65 years of age.
Despite such information which could hardly be overlooked in the application
form, considering its prominence thereon and its materiality to the coverage
applied for, the respondent insurance corporation received her payment of
premium and issued the corresponding certificate of insurance without
question. Under the circumstances, the insurance corporation is already
deemed in estoppel. It inaction to revoke the policy despite a departure from
the exclusionary condition contained in the said policy constituted a waiver of
such condition.
It is usually held that where the insurer, at the time of the issuance of a policy
of insurance, has knowledge of existing facts which, if insisted on, would
invalidate the contract from its very inception, such knowledge constitutes a
waiver of conditions in the contract inconsistent with the known facts, and the
insurer is stopped thereafter from asserting the breach of such conditions.
To allow a company to accept one's money for a policy of insurance which it
then knows to be void and of no effect, though it knows as it must, that the
assured believes it to be valid and binding, is so contrary to the dictates of
honesty and fair dealing.
... is that although one of conditions of an insurance policy is that "it shall not
be valid or binding until the first premium is paid", if it is silent as to the mode
of payment, promissory notes received by the company must be deemed to
have been accepted in payment of the premium. In other words, a
requirement for the payment of the first or initial premium in advance or actual
cash may be waived by acceptance of a promissory note...
Hence, Petition granted.
INSULAR LIFE vs FELICIANO
FACTS:
Evaristo Feliciano, who died on September 29, 1935, was suffering with
advanced pulmonary tuberculosis when he signed his applications for
insurance with the petitioner on October 12, 1934. On that same date Doctor
Trepp, who had taken X-ray pictures of his lungs, informed the respondent
Dr. Serafin D. Feliciano, brother of Evaristo, that the latter "was already in a
very serious ad practically hopeless condition."
Nevertheless the question contained in the application — "Have you ever
suffered from any ailment or disease of the lungs, pleurisy, pneumonia or
asthma?" — appears to have been answered , "No" And above the signature
of the applicant, following the answers to the various questions propounded
to him.
The false answer above referred to, as well as the others, was written by the
Company's soliciting agent Romulo M. David, in collusion with the medical
examiner Dr. Gregorio Valdez, for the purpose of securing the Company's
approval of the application. Agent David bribed Medical Examiner Valdez with
money which the former borrowed from the applicant's mother by way of
advanced payment on the premium.
The insured signed the application he, as well as the members of his family,
told the agent and the medical examiner that he had been sick and coughing
for some time and that he had gone three times to the Santol Sanatorium and
had X-ray pictures of his lungs taken; but that in spite of such information the
agent and the medical examiner told them that the applicant was a fit subject
for insurance.
The petitioner insists that upon the facts of the case the policies in question
are null and void ab initio and that all that the respondents are entitled to is
the refund of the premiums paid thereon.
ISSUE:
Whether the insurance policies in question are void ab initio for being
fraudulently procured by the respondents.
RULING:
YES. From all the facts and circumstances of this case, the court is constrained
to conclude that the insured was a co-participant, and co-responsible with
Agent David and Medical Examiner Valdez, in the fraudulent procurement of
the policies in question and that by reason thereof said policies are void ab
initio.
When Evaristo Feliciano, the applicant for insurance, signed the application in
blank and authorized the soliciting agent and/or medical examiner of the
Company to write the answers for him, he made them his own agents for that
purpose, and he was responsible for their acts in that connection. If they
falsified the answers for him, he could not evade the responsibility for the
falsification. He was not supposed to sign the application in blank. He knew
that the answers to the questions therein contained would be "the basis of the
policy," and for that every reason he was required with his signature to vouch
for truth thereof.
Moreover, from the facts of the case we cannot escape the conclusion that the
insured acted in connivance with the soliciting agent and the medical examiner
of the Company in accepting the policies in question. When the applicant
signed the application he was "having difficulty in breathing, . . . with a very
high fever." He had gone three times to the Santol Sanatorium and had X-ray
pictures taken of his lungs. He therefore knew that he was not "a proper
subject for life insurance." When he accepted the policy, he knew that he was
not in good health. Nevertheless, he not only accepted the first policy of
P20,000 but then and there applied for and later accepted another policy of
P5,000.
The SC also believed that it was impossible for Feliciano to not have read the
answers contained in the copy of the application attached to the policy before
he accepted the same and paid premium thereon. He must have notice that
the answers to the questions therein asked concerning his clinical history were
false, and yet he accepted the first policy and applied for another. By accepting
the policy he became charged with knowledge of its contents, whether he
actually read it or not. He knew, or was chargeable with knowledge, from the
very terms of the two policies sued upon (one of which is printed in English
and the other in Spanish) that the soliciting agent and the medical examiner
had no power to bind the Company by any verbal promise or oral
representation. The insured, therefore, had no right to rely — and we cannot
believe he relied in good faith — upon the oral representation. The insured,
therefore, had no right to rely — and we cannot believe he relied in good faith
— upon the oral representation of said agent and medical examiner that he
(the applicant) was a fit subject for insurance notwithstanding that he had
been and was still suffering with advanced pulmonary tuberculosis.
TAN CHAY HENG vs WEST COAST LIFE INSURANCE
FACTS:
In the month of April, 1925, on his application the defendant accepted and
approved a life insurance policy of for the sum of P10,000 in which the plaintiff
was the sole beneficiary. The policy was issued upon the payment by the said
Tan Ceang of the first year's premium. The defendant agreed to pay the
plaintiff as beneficiary the amount of the policy upon the receipt of the proofs
of the death of the insured while the policy was in force.
On May 10, 1925, Tan Chang died without any premium being due or unpaid.
In June, 1925, plaintiff submitted the proofs of the death of Tan Ceang with a
claim for the payment of the policy which the defendant refused to pay, for
which he prays for a corresponding judgment, with legal interest from the date
of the policy, and costs.
West Coast refused on the ground that the policy was obtained by Tan Caeng
with the help of agents Go Chuilian, Francisco Sanchez and Dr. Locsin of West
Coast.
West Coast said that it was made to appear that Tan Caeng was single, a
merchant, health and not a drug user, when in fact he was married, a laborer,
suffering form tuberculosis and addicted to drugs.
West Coast now denies liability based on these misrepresentations.
Tan Chay contends that West Coast may not rescind the contract because an
action for performance has already been filed.
Trial court found for Tan Chay holding that an insurer cannot avoid a policy
which has been procured by fraud unless he brings an action to rescind it
before he is sued thereon.
ISSUE:
WON West Coast’s action for rescission is therefore barred by the collection
suit filed by Tan Chay.
Held:
NO. Precisely, the defense of West Cast was that through fraud in its
execution, the policy is void ab initio, and therefore, no valid contract was
ever made. Its action then cannot be fore rescission because an action to
rescind is founded upon and presupposes the existence of the contract.
Hence, West Coast’s defense is not barred by Sec. 47.
In the instant case, it will be noted that even in its prayer, the defendant does
not seek to have the alleged insurance contract rescinded. It denies that it
ever made any contract of insurance on the life of Tan Caeng, or that any such
a contract ever existed, and that is the question which it seeks to have litigated
by its special defense. In the very nature of things, if the defendant never
made or entered into the contract in question, there is no contract to rescind,
and, hence, section 47 upon which the lower court based its decision in
sustaining the demurrer does not apply.
As stated, an action to rescind a contract is founded upon and presupposes
the existence of the contract which is sought to be rescinded. If all of the
material matters set forth and alleged in the defendant's special plea are true,
there was no valid contract of insurance, for the simple reason that the minds
of the parties never met and never agreed upon the terms and conditions of
the contract. We are clearly of the opinion that, if such matters are known to
exist by a preponderance of the evidence, they would constitute a valid
defense to plaintiff's cause of action. Upon the question as to whether or not
they are or are not true, we do not at this time have or express any opinion,
but we are clear that section 47 does not apply to the allegations made in the
answer, and that the trial court erred in sustaining the demurrer.

TAN vs CA
FACTS:
On September 23,1973, Tan Lee Siong, father of herein petitioners, applied
for life insurance in the amount of P 80,000.00 with respondent 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. Petitioners then filed with
respondent company their claim for the proceeds of the life insurance policy.
On September 11, 1975, respondent company denied petitioners' claim and
rescinded the policy by reason of the alleged misrepresentation and
concealment of material facts made by the deceased Tan Lee Siong in his
application for insurance. The premiums paid on the policy were thereupon
refunded.
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:
W/N 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. Section 48. Whenever a right to rescind a contract of insurance is given
to the insurer by any provision of this chapter, such right must be exercised
previous to the commencement of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall
have been in force during the lifetime of the insured for a period of two years
from the date of its issue or of its last reinstatement, the insurer cannot prove
that the policy is void ab initio or is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or his agent.
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 insured'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."
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 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.
WHEREFORE, the petition is hereby DENIED for lack of merit