by | Dec 1, 2021

Doctrine: Insurers are required to thoroughly investigate those they insure within two years from effectivity of the policy and while the insured is still alive. If they do not, they are obligated to honor claims on the policies they issue, regardless of fraud, concealment, or misrepresentation.




G.R. NO. 175666 | July 29, 2013



CRESENCIA P. ABAN, respondent.


Ponente: Del Castillo, J.





In 1993, Delia Sotero took out a life insurance policy from Manila Bankers Life Insurance Corporation designating Cresencia Aban, her niece, as a beneficiary. On August 30, 1993, petitioner issued an insurance policy with a face value of ₱100,000.00, after the required medical examination and premium payment.


On April 10, 1996, two years and seven months later, Sotero died. This made Aban file for the insurance proceeds three months later. The insurance company, Manila Bankers Life, denied Aban’s claim and refunded the premiums paid on the insurance policy.


Manila Bankers Life filed a civil case before the court for rescission and/or annulment of the insurance policy claiming that it was obtained by fraud, concealment, and/or misrepresentation under the Insurance Code.


This was later dismissed by the trial court and the Court of Appeals by reason that the petitioner may no longer prove that the insurance policy contested in this case was void ab initio or rescindable for fraudulent concealment or misrepresentation after the lapse of more than two years from its issuance. Hence, this made the insurance company file before the Supreme Court.


The high court likewise denied the petition of Manila Bankers Life. The “incontestability clause” under Section 48 of the Insurance Code provides that 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 or is rescindable 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.


The purpose of the law is to give protection to the insured or his beneficiary by limiting the rescinding of the contract of insurance on the ground of fraudulent concealment or misrepresentation to a period of only two (2) years from the issuance of the policy or its last reinstatement.


Here, Manila Bankers Life was not able to investigate the circumstances surrounding the insurance policy entered by Sotero within two years after the death of the latter. They only filed a case contesting the policy two years after the death of Sotero.


For its negligence and inaction, the Supreme Court cannot sympathize with its plight. Therefore, the petition was denied.



Digested by Ameena Macaan, 3 – JD, S.Y. 2020-2021, Mindanao State University – College of Law (Iligan Extension)