Case Digest: Sun Life of Canada v. Sibya, G.R. No. 211212, June 8, 2016
Insurance Law | Incontestability Clause (Section 48)
Kind of Insurance: Life Insurance
Parties:
Petitioner: Sun Life of Canada (Philippines), Inc. (Insurer)
Respondents: Ma. Daisy S. Sibya, Jesus Manuel S. Sibya III, and Jaime Luis S. Sibya (Beneficiaries)
Insured: Atty. Jesus Sibya, Jr.
Insurer: Sun Life of Canada (Philippines), Inc.
Beneficiaries: Ma. Daisy S. Sibya, Jesus Manuel S. Sibya III, and Jaime Luis S. Sibya
This is a Petition for Review on Certiorari filed by Sun Life of Canada (Philippines), Inc. assailing the Court of Appeals’ decision affirming the RTC ruling ordering it to pay life insurance proceeds and damages to the beneficiaries of the insured.
On January 10, 2001, Atty. Jesus Sibya, Jr. applied for a life insurance policy with Sun Life.
In his application, he disclosed that in 1987 he underwent lithotripsy for kidney stones at the National Kidney Institute, and stated that there was “no recurrence.”
He also executed an authorization allowing Sun Life to verify and investigate his medical history.
On February 5, 2001, Sun Life approved the application and issued Insurance Policy No. 031097335 with a face value of ₱1,000,000.00, naming Ma. Daisy S. Sibya, Jesus Manuel S. Sibya III, and Jaime Luis S. Sibya as beneficiaries.
On May 11, 2001, or about three months after issuance of the policy, Atty. Jesus Jr. died due to a gunshot wound.
The beneficiaries filed a claim for the death benefit.
On August 27, 2001, Sun Life denied the claim and refunded the premiums, alleging concealment and misrepresentation of prior medical treatments in 1994 at the National Kidney Transplant Institute.
Sun Life then filed a Complaint for Rescission before the RTC, claiming that had it known of the alleged renal condition, it would not have issued the policy.
The beneficiaries argued that the insured acted in good faith, disclosed his kidney ailment, and authorized investigation of his medical history.
On March 16, 2009, the RTC dismissed Sun Life’s complaint and ordered it to pay the ₱1,000,000.00 death benefit plus damages and attorney’s fees.
The Court of Appeals affirmed the RTC’s ruling, though it absolved Sun Life from alleged violations of certain provisions of the Insurance Code.
Sun Life elevated the case to the Supreme Court.
Whether Sun Life may rescind the life insurance policy on the ground of concealment or misrepresentation when the insured died within the two-year contestability period.
The Supreme Court denied the petition and affirmed the Court of Appeals.
On the Incontestability Clause (Section 48, Insurance Code)
Section 48 gives the insurer two years from the issuance of a life insurance policy, while the insured is alive, to contest the policy on the ground of fraud, concealment, or misrepresentation.
The policy was issued on February 5, 2001.
The insured died on May 11, 2001, only three months after issuance.
Following the doctrine in Manila Bankers Life Insurance Corporation v. Aban, when the insured dies within the two-year period, the insurer loses the right to rescind the policy.
The death of the insured renders the right to rescind nugatory, and the insurer must honor the policy.
On Alleged Concealment or Misrepresentation
Even assuming arguendo that the incontestability clause did not yet bar rescission, the Court found no concealment.
The insured disclosed his kidney ailment and prior treatment in his application.
He provided specific details of the procedure, doctor, hospital, and year.
He signed an authorization allowing Sun Life to investigate his medical history.
Where matters of opinion are involved, such as stating “no recurrence,” answers made in good faith without intent to deceive do not avoid the policy.
Fraudulent intent must be proven to rescind a policy.
Concealment is an affirmative defense, and the burden of proof lies with the insurer.
Sun Life failed to establish by convincing evidence that the insured acted with fraudulent intent.
Atty. Jesus Sibya, Jr. obtained a ₱1,000,000.00 life insurance policy from Sun Life, disclosed his prior kidney treatment, died three months after issuance, and the insurer refused to pay on the ground of alleged concealment. The Supreme Court ruled that under Section 48 of the Insurance Code and the doctrine in Manila Bankers Life Insurance Corporation v. Aban, the insurer could no longer rescind the policy upon the insured’s death within the two-year period, and in any event failed to prove fraudulent concealment.
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision dated November 18, 2013 and Resolution dated February 13, 2014 of the Court of Appeals (CA) in CA-G.R. CV. No. 93269.
In both instances, the CA affirmed the Decision4 dated March 16, 2009 of the Regional Trial Court (RTC) of Makati City, Branch 136, in Civil Case No. 01-1506, ordering petitioner Sun Life of Canada (Philippines), Inc. (Sun Life) to pay Ma. Daisy S. Sibya (Ma. Daisy), Jesus Manuel S. Sibya III, and Jaime Luis S. Sibya (respondents) the amounts of ₱1,000,000.00 as death benefits, ₱100,000.00 as moral damages, ₱100,000.00 as exemplary damages, and ₱100,000.00 as attorney's fees and costs of suit. Insofar as the charges for violation of Sections 241 and 242 of Presidential Decree No. 612, or the Insurance Code of the Philippines, however, the CA modified the decision of the RTC and absolved Sun Life therein.
Statement of Facts of the Case
On January 10, 2001, Atty. Jesus Sibya, Jr. (Atty. Jesus Jr.) applied for life insurance with Sun Life. In his Application for Insurance, he indicated that he had sought advice for kidney problems. Atty. Jesus Jr. indicated the following in his application:
"Last 1987, had undergone lithotripsy due to kidney stone under Dr. Jesus Benjamin Mendoza at National Kidney Institute, discharged after 3 days, no recurrence as claimed."
On February 5, 2001, Sun Life approved Atty. Jesus Jr.'s application and issued Insurance Policy No. 031097335. The policy indicated the respondents as beneficiaries and entitles them to a death benefit of ₱1,000,000.00 should Atty. Jesus Jr. dies on or before February 5, 2021, or a sum of money if Atty. Jesus Jr. is still living on the endowment date.
On May 11, 2001, Atty. Jesus Jr. died as a result of a gunshot wound in San Joaquin, Iloilo. As such, Ma. Daisy filed a Claimant's Statement with Sun Life to seek the death benefits indicated in his insurance policy.
In a letter dated August 27, 2001, however, Sun Life denied the claim on the ground that the details on Atty. Jesus Jr.'s medical history were not disclosed in his application. Simultaneously, Sun Life tendered a check representing the refund of the premiums paid by Atty. Jesus Jr.
The respondents reiterated their claim against Sun Life thru a letter dated September 17, 2001. Sun Life, however, refused to heed the respondents' requests and instead filed a Complaint for Rescission before the RTC and prayed for judicial confirmation of Atty. Jesus Jr.'s rescission of insurance policy.
In its Complaint, Sun Life alleged that Atty. Jesus Jr. did not disclose in his insurance application his previous medical treatment at the National Kidney Transplant Institute in May and August of 1994. According to Sun Life, the undisclosed fact suggested that the insured was in "renal failure" and at a high risk medical condition. Consequently, had it known such fact, it would not have issued the insurance policy in favor of Atty. Jesus Jr.
For their defense, the respondents claimed that Atty. Jesus Jr. did not commit misrepresentation in his application for insurance. They averred that Atty. Jesus Jr. was in good faith when he signed the insurance application and even authorized Sun Life to inquire further into his medical history for verification purposes. According to them, the complaint is just a ploy to avoid the payment of insurance claims.
Ruling of the RTC
On March 16, 2009, the RTC issued its Decision13 dismissing the complaint for lack of merit. The RTC held that Sun Life violated Sections 241, paragraph 1(b), (d), and (e) and 242 of the Insurance Code when it refused to pay the rightful claim of the respondents. Moreover, the RTC ordered Sun Life to pay the amounts of ₱1,000,000.00 as death benefits, ₱100,000.00 as moral damages, ₱100,000.00 as exemplary damages, and ₱100,000.00 as attorney's fees and costs of suit.
The RTC held that Atty. Jesus Jr. did not commit material concealment and misrepresentation when he applied for life insurance with Sun Life. It observed that given the disclosures and the waiver and authorization to investigate executed by Atty. Jesus Jr. to Sun Life, the latter had all the means of ascertaining the facts allegedly concealed by the applicant.
Aggrieved, Sun Life elevated the case to the CA.
Ruling of the CA
On appeal, the CA issued its Decision dated November 18, 2013 affirming the RTC decision in ordering Sun Life to pay death benefits and damages in favor of the respondents. The CA, however, modified the RTC decision by absolving Sun Life from the charges of violation of Sections 241 and 242 of the Insurance Code.
The CA ruled that the evidence on records show that there was no fraudulent intent on the part of Atty. Jesus Jr. in submitting his insurance application. Instead, it found that Atty. Jesus Jr. admitted in his application that he had sought medical treatment for kidney ailment..
Sun Life filed a Motion for Partial Reconsideration dated December 11, 2013 but the same was denied in a Resolution21 dated February 13, 2014.
Undaunted, Sun Life filed an appeal by way of petition for review on certiorari under Rule 45 of the Rules of Court before this Court.
The Issue
Essentially, the main issue of the instant case is whether or not the CA erred when it affirmed the RTC decision finding that there was no concealment or misrepresentation when Atty. Jesus Jr. submitted his insurance application with Sun Life.
Ruling of the Court
The petition has no merit.
In Manila Bankers Life Insurance Corporation v. Aban, the Court held 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 the presence or lack of concealment or misrepresentation. The Court held:
Section 48 serves a noble purpose, as it regulates the actions of both the insurer and the insured. Under the provision, an insurer is given two years - from the effectivity of a life insurance contract and while the insured is alive - to discover or prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or when the insured dies within the period, the insurer must make good on the policy, even though the policy was obtained by fraud, concealment, or misrepresentation. This is not to say that insurance fraud must be rewarded, but that insurers who recklessly and indiscriminately solicit and obtain business must be penalized, for such recklessness and lack of discrimination ultimately work to the detriment of bona fide takers of insurance and the public in general. (Emphasis ours)
In the present case, Sun Life issued Atty. Jesus Jr.'s policy on February 5, 2001. Thus, it has two years from its issuance, to investigate and verify whether the policy was obtained by fraud, concealment, or misrepresentation.
Upon the death of Atty. Jesus Jr., however, on May 11, 2001, or a mere three months from the issuance of the policy, Sun Life loses its right to rescind the policy.
As discussed in Manila Bankers, the death of the insured within the two-year period will render the right of the insurer to rescind the policy nugatory. As such, the incontestability period will now set in.
Assuming, however, for the sake of argument, that the incontestability period has not yet set in, the Court agrees, nonetheless, with the CA when it held that Sun Life failed to show that Atty. Jesus Jr. committed concealment and misrepresentation.
As correctly observed by the CA, Atty. Jesus Jr. admitted in his application his medical treatment for kidney ailment. Moreover, he executed an authorization in favor of Sun Life to conduct investigation in reference with his medical history. The decision in part states:
Records show that in the Application for Insurance, [Atty. Jesus Jr.] admitted that he had sought medical treatment for kidney ailment. When asked to provide details on the said medication, [Atty. Jesus Jr.] indicated the following information: year ("1987"), medical procedure ("undergone lithotripsy due to kidney stone"), length of confinement ("3 days"), attending physician ("Dr. Jesus Benjamin Mendoza") and the hospital ("National Kidney Institute").
It appears that [Atty. Jesus Jr.] also signed the Authorization which gave [Sun Life] the opportunity to obtain information on the facts disclosed by [Atty. Jesus Jr.] in his insurance application. x x x
x x x x
Given the express language of the Authorization, it cannot be said that [Atty. Jesus Jr.] concealed his medical history since [Sun Life] had the means of ascertaining [Atty. Jesus Jr.'s] medical record.
With regard to allegations of misrepresentation, we note that [Atty. Jesus Jr.] was not a medical doctor, and his answer "no recurrence" may be construed as an honest opinion. Where matters of opinion or judgment are called for, answers made in good faith and without intent to deceive will not avoid a policy even though they are untrue. (Citations omitted and italics in the original)
Indeed, the intent to defraud on the part of the insured must be ascertained to merit rescission of the insurance contract. Concealment as a defense for the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the provider or insurer. In the present case, Sun Life failed to clearly and satisfactorily establish its allegations, and is therefore liable to pay the proceeds of the insurance.
Moreover, well-settled is the rule that this Court is not a trier of facts. Factual findings of the lower courts are entitled to great weight and respect on appeal, and in fact accorded finality when supported by substantial evidence on the record.26
WHEREFORE, the petition for review is DENIED. The Decision dated November 18, 2013 and Resolution dated February 13, 2014 of the Court of Appeals in CA-G.R. CV. No. 93269 are hereby AFFIRMED.
SO ORDERED.