Tan v.

Court of Appeals, 174 SCRA 403 Facts: Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P80,000.00 with Philippine American Life Insurance Company. He later on died of hepatoma. Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy. However, the insurance company denied petitioners claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased. The premiums paid on the policy were thereupon refunded. Alleging that respondent companys refusal to pay them the proceeds of the policy was unjustified and unreasonable, petitioners filed a complaint with the Office of the Insurance Commissioner but was later on dismissed. The Court of Appeals affirmed the decision and dismissed the complaint for lack of merit. Hence, this petition. Petitioners contend that the insurance 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. According to the petitioners, the Insurance Law was amended and the second paragraph of Section 48 added to prevent the insurance company from exercising a right to rescind after the death of the insured. Issue: whether the insurer has the right to rescind the policy contract when the insured is already dead Held: 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 insureds 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. Considering that the insured died before the twoyear period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insureds fraudulent concealment or misrepresentation. 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. 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.

Development Insurance Corporation vs. Intermediate Appellate Court, 143 SCRA 62

Facts: A fire occurred in the building of Philippine Union Realty Development Corporation which damaged or destroyed a portion of the 7th floor particularly a Hitachi elevator control panel. It sued for recovery of damages worth P508,867 from Development Insurance Corporation on the basis of an insurance contract between them. The petitioner allegedly failed to answer on time and was declared in default by the trial court. A judgment of default was subsequently rendered on the strength of the evidence submitted ex parte by the private respondent, which was allowed full recovery of its claimed damages. Petitioner contends that the insurance covered only the building and not the elevators. It was found that the heat and moisture caused by the fire damaged although they did not actually burn the elevators. Petitioner, citing Condition 17 of the policy, argues the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity of only P67,629.31, the rest of the loss to be shouldered by it alone.

Issue: Whether the insured should account for the difference between the value of the thing insured and the face value of the policy

Held: The Court notes that the policy is an open policy. As defined in Sec. 60 of the Insurance code, an open policy is one in which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss. This means that the actual loss, as determined, will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not exceed the face value of the policy. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract, we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of P508,867.00. Decision affirmed.