SUN INSURANCE OFFICE LTD.

V CA (TAN) 195 SCRA 193 PARAS; March 13, 1991 NATURE Petition for certiorari to review the decision of the CA FACTS - Private respondent Emilio Tan took from the petitioner a Peso 300,000 property insurance policy to cover his interest in the electrical insurance store of his brother housed in a building in Iloilo City on August 15, 1983. Four days after the issuance of the policy, the building including the insured store burned. - On August 20, 1983, Tan filed his claim for fire loss. Sun Insurance, on February 29, 1984, wrote the private respondent denying the claim. On April 3, 1984, private respondent wrote another letter to the insurance company requesting reconsideration of the denial. Tans lawyer wrote another letter to the insurance company inquiring about the April 3 letter which sought for a reconsideration of the denial. In its reply to the lawyers letter, Sun Insurance reiterated its denial of the claim and enclosed therein copies of the two previous denials dated February 29, 1984 and May 17, 1985. - On November 20, 1985, Tan filed a civil case with the RTC. Petition filed a motion to dismiss on the alleged ground that the action has already prescribed based on Condition 27 of the Insurance Policy which stated that the window to file the appropriate action with either the Insurance Commission or in any court of competent jurisdiction is twelve months from the rejection of the claim. RTC denied the motion and the subsequent motion for reconsideration. The CA likewise denied the petition of Sun Insurance. ISSUE 1. WON the court the filing of a motion for reconsideration interrupts the 12 months prescription period to contest the denial of the insurance claim 2. WON the rejection of the claim shall be deemed final only if it contains words to the effect that the denial is final HELD 1. NO - The SC held that Condition 27 of the Insurance policy is very clear and free from any doubt or ambiguity. It has to be taken in its plain, ordinary, and popular sense. The rejection letter of February

29, 1984 was clear and plain. The Court noted that the one year period is likewise in accord with Section 23 of the Insurance Code which states that any condition which limits the time for commencing an action to a period of less than one year when the cause of action accrues is void. The right of action, according to the SC, accrues at the time that the claim is rejected at the first instance. A request for reconsideration of the denial cannot suspend the running of the prescriptive period. The Court noted that the rationale for the one year period is to ensure that the evidence as to the origin and cause of the destruction have not yet disappeared. 2. NO - The Court clarified its ruling in Eagle Star Insurance Co. vs Chia Yu where it ruled that the cause of action in an insurance contract does not accrue until the Insureds claim is finally rejected by the Insurer by stating the use of the word finally cannot be construed to mean the rejection of a petition for reconsideration. What the court referred to in effect is the rejection in the first instance as claimed by Sun Insurance Disposition The decision of the CA is reversed and set aside. The case is dismissed

Fieldmans Insurance v. Songco - Disclosure of Material Facts in Insurance 25 SCRA 70 Facts: > In 1960, Sambat, an agent of Fieldmans Insurance, induced Songco, a man of scant education to enter into a common carrier insurance contract with Fieldman. > During the inducement, a son of Songco butted in and said that they could not accept the type of insurance offered because theirs was an owner-type jeepney and not a common carrier. > Sambat answered that it did not matter because the insurance company was not owned by the government and therefore had nothing to do with rules and regulations of the latter (Fieldman). > The insurance was executed and approved for a year from Sept. 1960-1961. It was renewed in 1961 for another year. > In Oct. 1961, the jeepney collided with a car in Bulacan and as a result, Sonco died. The remaining members of the family claimed the proceeds of the insurance with the company but it refused to pay on the ground that the vehicle was not a common carrier. Issue:

Whether or not the Songcos can claim the insurance proceeds despite the fact that the vehicle concerned was an owner and not a common carrier. Held: Yes. The company is estopped from asserting that the vehicle was not covered. After it had led Federico Songco to believe that he could qualify under the common carrier liability insurance policy, and to enter into a contract of insurance paying the premiums due, it could not thereafter be permitted to change its stand to the detriment of the heirs of the insured. It knew all along that Frederico owned a private vehicle. Its agent Sambat twice exerted the utmost pressure on the insured, a man of scant education, and the company did not object to this.

FILIPINO MERCHANTS INS. v. CA (CHOA TIEK SENG) 179 SCRA 638 REGALADO; November 28, 1989 NATURE Review of the decision of the CA FACTS - Plaintiff insured said shipment with defendant insurance company under said cargo for the goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok, Thailand to Manila against all risks under warehouse to warehouse terms. - Some of the goods arrived in bad condition. Plaintiff made a claim against Filipino Merchants Insurance Company. The latter refused to pay. Plaintiff brought

an action against them. The defendant insurance company presented a third party complaint against the vessel and the arrastre contractor. - Judgment was rendered against the insurance company. On the third party complaint, the third party defendants were ordered to pay the third party plaintiffs. The CA affirmed, but modified the same with regard to the adjudication of the third-party complaint ISSUES 1. WON some fortuity, casualty or accidental cause is needed to be proved despite the all risks policy (as asserted by the insurance company) 2. WON the respondent has an insurable interest HELD 1. NO - The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a willful and fraudulent act of the insured. 7 This is pursuant to the very purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property. - Generally, the burden of proof is upon the insured

to show that a loss arose from a covered peril, but under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy attached and that the cargo was damaged when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to the coverage. As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that the insurance company has the burden of proving that the loss is caused by the risk excepted and for want of such proof, the company is liable. In the present case, there being no showing that the loss was caused by any of the excepted perils, the insurer is liable under the policy. 2. YES - Section 13 of the Insurance Code defines insurable interest in property as every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured. In principle, anyone has an insurable interest in property who derives a benefit from its

existence or would suffer loss from its destruction whether he has or has not any title in, or lien upon or possession of the property y. 16 Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises. - Respondents interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him and the shipper of the goods operates to vest in him an equitable title even before delivery or before be performed the conditions of the sale. - Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying vessels partake of the nature of actual delivery since, from that time, the foreign

buyers assumed the risks of loss of the goods and paid the insurance premium covering them - Moreover, the issue of lack of insurable interest was not raised in petitioners answer. Disposition Petition denied

316 SCRA 677 QUISUMBING; October 13, 1999 NATURE Petition for Review of CA decision FACTS - A contract of group life insurance was executed between petitioner Great Pacific Life Assurance Corporation (hereinafter Grepalife) and Development Bank of the Philippines (hereinafter DBP). Grepalife agreed to insure the lives of eligible housing loan mortgagors of DBP. - In Nov. 1983, Dr. Wilfredo Leuterio, a physician and a housing debtor of DBP applied for membership in the group life insurance plan. In an application form, Dr. Leuterio answered Qs concerning his health condition as follows: Q: Have you ever had, or consulted, a physician for

a heart condition, high blood pressure, cancer, diabetes, lung, kidney or stomach disorder or any other physical impairment? No. Q: Are you now, to the best of your knowledge, in good health? Yes. - Grepalife issued an insurance coverage of Dr. Leuterio, to the extent of his DBP mortgage indebtedness of P86,200.00. In Aug. 1984, Dr. Leuterio died due to "massive cerebral hemorrhage." DBP submitted a death claim to Grepalife. Grepalife denied the claim because Dr. Leuterio was not physically healthy when he applied for an insurance. Grepalife insisted that Dr. Leuterio did not disclose he had been suffering from hypertension, which caused his death. Allegedly, such non-disclosure constituted concealment that justified the denial of the claim. - Herein respondent Medarda Leuterio, widow, filed a complaint with RTC against Grepalife for "Specific Performance with Damages." Dr. Mejia, who issued the death certificate, testified that Dr. Leuterio complained of headaches presumably due to high blood pressure. The inference was not conclusive because Dr. Leuterio was not autopsied, hence, other causes were not ruled out. - RTC ruled in favor of respondent widow and against

Grepalife. CA sustained the RTC decision. Hence, the present petition. ISSUES 1. WON CA erred in holding petitioner liable to DBP as beneficiary in a group life insurance contract from a complaint filed by the widow of the decedent/mortgagor 2. WON CA erred in not finding that Dr. Leuterio concealed that he had hypertension, which would vitiate the insurance contract 3. WON CA erred in holding Grepalife liable for P86,200.00 without proof of the actual outstanding mortgage payable by the mortgagor to DBP HELD 1. NO Ratio Insured, being the person with whom the contract was made, is primarily the proper person to bring suit. Subject to some exceptions, insured may thus sue, although the policy is taken wholly or in part for the benefit of another person named or unnamed, and although it is expressly made payable to another as his interest may appear or otherwise. Although a policy issued to a mortgagor is taken out for the benefit of the mortgagee and is made payable to him, yet the mortgagor may sue thereon in his

own name, especially where the mortgagee's interest is less than the full amount recoverable under the policy. (See Sec. 8, Insurance Code) Reasoning [a] The insured private respondent did not cede to the mortgagee all his rights or interests in the insurance, the policy stating that: In the event of the debtor's death before his indebtedness with the Creditor (DBP) shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the creditor and the balance of sum assured, if there is any, shall then be paid to the beneficiary/ies designated by the debtor. When DBP submitted the insurance claim against Grepalife, the latter denied payment thereof, interposing the defense of concealment committed by the insured. Thereafter, DBP collected the debt from the mortgagor and took the necessary action of foreclosure on the residential lot of private respondent. [b] Since a policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover it whatever the insured might have recovered, the widow of the decedent Dr.

Leuterio may file the suit against the insurer, Grepalife. 2. NO Ratio The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract. Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by satisfactory and convincing evidence rests upon the insurer. In the case at bar, the petitioner failed to clearly and satisfactorily establish its defense, and is therefore liable to pay the proceeds of the insurance. Reasoning [a] The insured, Dr. Leuterio, had answered in his insurance application that he was in good health and that he had not consulted a doctor or any of the enumerated ailments, including hypertension; when he died the attending physician had certified in the death certificate that the former died of cerebral hemorrhage, probably secondary to hypertension. From this report, petitioner Grepalife refused to pay the insurance claim. It alleged that the insured had concealed the fact that he had hypertension. [b] Contrary to Grepalifes allegations, there was no sufficient proof that the insured had suffered from

hypertension. Aside from the statement of the insured's widow who was not even sure if the medicines taken by Dr. Leuterio were for hypertension, the appellant had not proven nor produced any witness who could attest to Dr. Leuterio's medical history. [c] Grepalife had failed to establish that there was concealment made by the insured, hence, it cannot refuse payment of the claim. 3. NO - Considering the supervening event that DBP foreclosed in 1995 their residential lot, in satisfaction of mortgagor's outstanding loan, the insurance proceeds shall inure to the benefit of the heirs of the deceased person or his beneficiaries. Equity dictates that DBP should not unjustly enrich itself at the expense of another. Hence, it cannot collect the insurance proceeds, after it already foreclosed on the mortgage. The proceeds now rightly belong to Dr. Leuterio's heirs represented by his widow, herein private respondent. - The Court ruled this issue based on the clear provisions of the policy. The mortgagor paid the premium according to the coverage of his insurance, which states that: "The policy states that upon

receipt of due proof of the Debtor's death during the terms of this insurance, a death benefit in the amount of P86,200.00 shall be paid In the event of the debtor's death before his indebtedness with the creditor shall have been fully paid, an amount to pay the outstanding indebtedness shall first be paid to the Creditor and the balance of the Sum Assured, if there is any shall then be paid to the beneficiary/ies designated by the debtor." From this, it is clear that Grepalife is liable and that Dr. Leuterios heirs must get the proceeds. Disposition Petition DENIED. CA Decision AFFIRMED with modification.

Pacific v CA G.R. No. L-41014 November 28, 1988 J. Paras

Facts: An open fire insurance policy, was issued to Paramount Shirt Manufacturing by Oriental Assurance Corporation to indemnify P61,000.00, caused by fire to the factorys stocks, materials and supplies. The insured was a debtor of Pacific Banking in the amount of (P800,000.00) and the goods described in the policy were held in trust by the insured for Pacific Banking under trust receipts. The policy was endorsed to Pacific Banking as mortgagee/ trustor of the properties insured, with the knowledge and consent of private respondent to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation". A fire broke out on the premises destroying the goods contained in the building. The bank sent a letter of demand to Oriental for indemnity.

The company wasnt ready to give since it was awaiting the adjusters report. The company then made an excuse that the insured had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, as a result, determination of the liability of private respondent could not be made. Pacific Banking filed in the trial court an action for a sum of money for P61,000.00 against Oriental Assurance. At the trial, petitioner presented communications of the insurance adjuster to Asian Surety revealing undeclared co-insurances with the following: P30,000 with Wellington Insurance; P25,000 with Empire Surety and P250,000 with Asian Surety undertaken by insured Paramount on the same property covered by its policy with Oriental whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan P50,000.00 with South Sea and P25.000.00 with Victory. The defense of fraud, in the form of non-declaration of co-insurances which was not pleaded in the answer, was also not pleaded in the Motion to Dismiss. The trial court denied the respondents motion. Oriental filed another motion to include additional evidence of the co-insurance which could amount to fraud. The trial court still made Oriental liable for P 61,000. The CA reversed the trial court decision. Pacific Banking filed a motion for reconsideration of the said decision of the respondent Court of Appeals, but this was denied for lack of merit.

Issues: 1. WON unrevealed co-insurances Violated policy conditions No. 3 2. WON the insured failed to file the required proof of loss prior to court action.

Held: Yes. Petition dismissed.

Ratio: 1. Policy Condition No. 3 explicitly provides: 3. The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on

behalf of the Company before the occurrence of any loss or damage, all benefit under this policy shall be forfeited. The insured failed to reveal before the loss three other insurances. Had the insurer known that there were many co-insurances, it could have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud. Concrete evidence of fraud or false declaration by the insured was furnished by the petitioner itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of co-insurances taken over the subject property. As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy. Petitioner points out that Condition No. 3 in the policy in relation to the "other insurance clause" supposedly to have been violated, cannot certainly defeat the right of the petitioner to recover the insurance as mortgagee/assignee. Hence, they claimed that the purpose for which the endorsement or assignment was made was to protect the mortgagee/assignee against any untoward act or omission of the insured. It would be absurd to hold that petitioner is barred from recovering the insurance on account of the alleged violation committed by the insured. It is obvious that petitioner has missed all together the import of subject mortgage clause which specifically provides: Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglect except fraud or misrepresentation, or arsonof the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same. The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. Concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation. Undoubtedly, it is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right. Petitioner further stressed that fraud which was not pleaded as a defense in private respondent's answer or motion to dismiss, should be deemed to have been waived. It will be noted that the fact of fraud was tried by express or at least implied consent of the parties. Petitioner did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence.

2. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Twenty-four days after the fire did petitioner merely wrote letters to private respondent to serve as a notice of loss. It didnt even furnish other documents. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore there was no cause of action. It appearing that insured has violated or failed to perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the here

INSULAR LIFE ASSURANCE CO. v. EBRADO 80 SCRA 181 MARTIN; October 28, 1977 NATURE Appeal from judgment of RTC. FACTS - Buenaventura Ebrado obtained a whole-life insurance policy from Insular, for P5,882.00 with a rider for accidental death benefits for the same

amount. He designated Carponia Ebrado as the revocable beneficiary, referring to her as the wife. - Afterwards, he died as a result of an accident when he was hit by a falling branch of a tree. Carponia filed a claim for the proceeds as the designated beneficiary in the policy, although she admits that she and Buenaventura were merely living as husband and wife without the benefit of marriage. The legal wife, Pascuala Vda De Ebrado, also filed her claim as the widow of the deceased. - Insular then filed an interpleader in court (CFI Rizal) to determine to whom the proceeds should be paid. CFI declared that Carponia was disqualified from becoming beneficiary of the insured and directing the Insular to pay the proceeds to the estate of Buenaventura. ISSUE 1. WON a common-law wife named as beneficiary in the insurance policy of a legally married man claim the proceeds of the same HELD 1. NO Ratio The prohibition that husband and wife cannot donate to each other applies to common-law relationships. As the appointment of a beneficiary in

insurance may be considered a donation, one cannot name as beneficiary his common-law wife. Reasoning - It is quite unfortunate that the Insurance Code does not contain any specific provision grossly resolutory of the prime question at hand. - Rather, general rules of civil law should be applied to resolve the issue. Art.2011, CC states: The contract of insurance is governed by special laws. Matters not expressly provided for in such special laws shall be regulated by this Code. Thus, when not otherwise specifically provided for by the Insurance Law, the contract of life insurance is governed by the general rules of the civil law regulating contracts. - Also, Art.2012 any person who is forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life insurance policy by the person who cannot make a donation to him. Common-law spouses are, definitely, barred from receiving donations from each other. - Art.739, CC: The following donations shall be void: 1. Those made between persons who were guilty of adultery or concubinage at the time of donation; - In essence, a life insurance policy is no different from a civil donation insofar as the beneficiary is

concerned. Both are founded upon the same consideration: liberality. A beneficiary is like a donee, because from the premiums of the policy which the insured pays out of liberality, the beneficiary will receive the proceeds or profits of said insurance. As a consequence, the proscription in Art.739 CC should equally operate in life insurance contracts. The mandate of Art.2012 cannot be laid aside: any person who cannot receive a donation cannot be named as beneficiary in the life insurance policy of the person who cannot make the donation. - Policy considerations and dictates of morality rightly justify the institution of a barrier between commonlaw spouses in regard to property relations since such relationship ultimately encroaches upon the nuptial and filial rights of the legitimate family. There is every reason to hold that the bar in donations between legitimate spouses and those between illegitimate ones should be enforced in life insurance policies since the same are based on similar consideration. - So long as marriage remains the threshold of family laws, reason and morality dictate that the impediments imposed upon married couple should likewise be imposed upon extra-marital relationship.

If legitimate relationship is circumscribed by these legal disabilities, with more reason should an illicit relationship be restricted by these disabilities. Disposition Decision AFFIRMED.

CONSUEGRA v. GSIS 37 SCRA 315 ZALDIVAR; January 30, 1971 NATURE Appeal from the decision of the Court of First Instance of Surigao del Norte awarding the 8/16 part of the proceeds of the deceased Consuegras retirement benefits to Rosario Diaz. FACTS - The late Jose Consuegra, at the time of his death, was employed as a shop foreman of the office of the District Engineer in the province of Surigao del Norte. In his lifetime, Consuegra contracted two marriages, the first with herein respondent Rosario Diaz, solemnized in the parish church of San Nicolas de Tolentino, Surigao, Surigao, on July 15, 1937, out of which marriage were born two children, namely, Jose Consuegra, Jr. and Pedro Consuegra, but both predeceased their father; and the second, which was

contracted in good faith while the first marriage was subsisting, with herein petitioner Basilia Berdin, on May 1, 1957 in the same parish and municipality, out of which marriage were born seven children, namely, Juliana, Pacita, Maria Lourdes, Jose, Rodrigo, Lenida and Luz, all surnamed Consuegra. - Being a member of the Government Service Insurance System (GSIS, for short) when Consuegra died on September 26, 1965, the proceeds of his life insurance under policy No. 601801 were paid by the GSIS to petitioner Basilia Berdin and her children who were the beneficiaries named in the policy. - However, Consuegra did not designate any beneficiary who would receive the retirement insurance benefits due to him. Respondent Rosario Diaz, the widow by the first marriage, filed a claim with the GSIS asking that the retirement insurance benefits be paid to her as the only legal heir of Consuegra, considering that the deceased did not designate any beneficiary with respect to his retirement insurance benefits. Petitioner Basilia Berdin and her children, likewise, filed a similar claim with the GSIS, asserting that being the beneficiaries named in the life insurance policy of Consuegra, they are the only ones entitled to receive the retirement

insurance benefits due the deceased Consuegra. Resolving the conflicting claims, the GSIS ruled that the legal heirs of the late Jose Consuegra were Rosario Diaz, his widow by his first marriage who is entitled to one-half, or 8/16, of the retirement insurance benefits, on the one hand; and Basilia Berdin, his widow by the second marriage and their seven children, on the other hand, who are entitled to the remaining one-half, or 8/16, each of them to receive an equal share of 1/16. - Dissatisfied with the foregoing ruling and apportionment made by the GSIS, Basilia Berdin and her children filed on October 10, 1966 a petition for mandamus with preliminary injunction in the Court of First Instance of Surigao. - The CFI of Surigao ruled in favor of respondent Rosario Diaz and upheld the ruling of GSIS in all aspect. Thus, Basilia Berdin and her children appealed said decision to the Supreme Court. ISSUE WON GSIS was correct in awarding half of the retirement benefit of the deceased to Rosario Diaz, the first wife, notwithstanding the fact that the petitioners were named as beneficiaries of the life insurance

HELD YES - The GSIS offers two separate and distinct systems of benefits to its members, one is the life insurance and the other is the retirement insurance. These two distinct systems of benefits are paid out from two distinct and separate funds that are maintained by the GSIS. Thus, it doesnt necessarily mean that the beneficiaries in the life insurance are also the beneficiaries in the retirement insurance. - Consuegra started in the government service sometime during the early part of 1943, or before 1943. In 1943 Com. Act 186 was not yet amended, and the only benefits then provided for in said Com. Act 186 were those that proceed from a life insurance. Upon entering the government service Consuegra became a compulsory member of the GSIS, being automatically insured on his life, pursuant to the provisions of Com. Act 186 which was in force at the time. During 1943 the operation of the Government Service Insurance System was suspended because of the war, and the operation was resumed sometime in 1946. When Consuegra designated his beneficiaries in his life insurance he could not have intended those beneficiaries of his life

insurance as also the beneficiaries of his retirement insurance because the provisions on retirement insurance under the GSIS came about only when Com. Act 186 was amended by Rep. Act 660 on June 16, 1951. Hence, it cannot be said that because herein appellants were designated beneficiaries in Consuegra's life insurance they automatically became the beneficiaries also of his retirement insurance. - The provisions of subsection (b) of Section 11 of Commonwealth Act 186, as amended by Rep. Act 660, clearly indicate that there is need for the employee to file an application for retirement insurance benefits when he becomes a member of the GSIS, and he should state in his application the beneficiary of his retirement insurance. Hence, the beneficiary named in the life insurance does not automatically become the beneficiary in the retirement insurance unless the same beneficiary in the life insurance is so designated in the application for retirement insurance. - In the case of the proceeds of a life insurance, the same are paid to whoever is named the beneficiary in the life insurance policy. As in the case of a life insurance provided for in the Insurance Act, the

beneficiary in a life insurance under the GSIS may not necessarily be an heir of the insured. The insured in a life insurance may designate any person as beneficiary unless disqualified to be so under the provisions of the Civil Code. And in the absence of any beneficiary named in the life insurance policy, the proceeds of the insurance will go to the estate of the insured. - On the other hand, the beneficiary of the retirement insurance can only claim the proceeds of the retirement insurance if the employee dies before retirement. If the employee failed or overlooked to state the beneficiary of his retirement insurance, the retirement benefits will accrue to his estate and will be given to his legal heirs in accordance with law, as in the case of a life insurance if no beneficiary is named in the insurance policy. Disposition Petition Denied. It is Our view, therefore, that the respondent GSIS had correctly acted when it ruled that the proceeds of the retirement insurance of the late Jose Consuegra should be divided equally between his first living wife Rosario Diaz, on the one hand, and his second wife Basilia Berdin and his children by her. SSS v. DAVAC

17 SCRA 863 BARRERA: July 30, 1966 NATURE APPEAL from a resolution Of the Social

PHIL. AMERICAN LIFE INSURANCE v. PINEDA 175 SCRA 416 PARAS; July 19, 1989 NATURE Petition for review on certiorari the orders of CFI Judge Pineda FACTS - In 1968, Private Respondent Rodolfo Dimayuga procured an ordinary life insurance policy from the petitioner company and designated his wife and children as irrevocable beneficiaries. On Feb. 22, 1980, Dimayuga filed with the CFI a petition to amend the designation of the beneficiaries in his life policy from irrevocable to revocable. Petitioner filed an Urgent Motion to reset hearing as well as its comment and/or Opposition to the respondents petition. - Respondent Judge denied petitioners Urgent Motion, thus allowing private respondent to adduce

evidence, the consequence of which was the issuance of the questioned Order granting the petition. Petitioner then filed a MFR which was also denied hence this petition. ISSUE 1. WON the designation of the irrevocable beneficiaries could be changed or amended without the consent of all the irrevocable beneficiaries 2. WON the irrevocable beneficiaries herein, one of whom is already deceased while the others are all minors could validly give consent to the change or amendment in the designation of the irrevocable beneficiaries HELD 1. NO - Based on the provision of their contract and the law applicable, it is only with the consent of all the beneficiaries that any change or amendment in the policy concerning the irrevocable beneficiaries may be legally and validly effected. Both the law and the Policy do not provide for any other exception. Reasoning - Since the policy was procured in 1968, the applicable law in this case is the Insurance Act and under that law, the beneficiary designated in a life

insurance contract cannot be changed without the consent of the beneficiary because he has a vested interest in the policy. - The Beneficiary Designation Indorsement in the policy in the name of Dimayuga states that the designation of the beneficiaries is irrevocable: no right or privilege under the Policy may be exercised, or agreement made with the Company to any change in or amendment to the Policy, without the consent of the said beneficiary/beneficiaries. - Contracts which are the private laws of the contracting parties should be fulfilled according to the literal sense of their stipulations, if their terms are clear and leave no room for doubt as to the intention of the contracting parties, for contracts are obligatory, no matter in what form they may be, whenever the essential requisites for their validity are present. - Finally, the fact that the contract of insurance does not contain a contingency when the change in the designation of beneficiaries could be validly effected means that it was never within the contemplation of the parties. 2. NO - The parent-insured cannot exercise rights and/or

privileges pertaining to the insurance contract, for otherwise, the vested rights of the irrevocable beneficiaries would be rendered inconsequential. The alleged acquiescence of the 6 children beneficiaries cannot be considered an effective ratification to the change of the beneficiaries from irrevocable to revocable. They were minors at the time, and could not validly give consent. Neither could they act through their father-insured since their interests are quite divergent from one another. Disposition questioned Orders of respondent judge are nullified and set aside.

CANILANG v. CA (GREAT PACIFIC LIFE ASSURANCE CORP.) 223 SCRA 443 FELICIANO; June 17, 1993 NATURE Petition for review on certiorari of the decision of the Court of Appeals FACTS - June 18, 1982 Jaime Canilang was diagnosed by Dr. Claudio to have sinus tachycardia. He was directed by the doctor to take a tranquilizer (Trazepam) and a beta-blocker drug (Aptin).

- August 3, 1982 Jaime consulted Dr. Claudio again and was diagnosed to have acute bronchitis. - August 4, 1982 Jaime applied for a nonmedical insurance policy with Great Pacific Life Assurance Company. He named his wife Thelma as his beneficiary. He was issue the policy with a face value of P19,700 effective August 9, 1982. - August 5, 1983 Jaime died of congestive heart failure, anemia and chronic anemia. Thelma filed her claim but the insurance company refused to grant it on the ground that Jaime had concealed information. - Thelma filed a complaint against Great Pacific to recover the insurance proceeds. She testified that she was not aware of her husbands ailments and that she thought he had died from a kidney disorder. - Great Pacific presented as witness Dr. Quismorio who testified that Jaimes insurance application was the basis of his medical declaration and she explained that an applicant was required to undergo medical examination only if the applicant had disclosed that he had previously been consulted with a doctor and had been hospitalized. - The Insurance Commissioner ordered Great Pacific to pay Thelma the insurance proceeds, including attorneys fees, holding that Jaimes illness was not

that serious as to Great Pacifics decision to insure him and that there was no concealment on the part of Jaime with regard to his illness. Petitioners Claim: > Thelma argues that the non-disclosure of Jaime did not amount to fraud. > She also argues that the CA erred in not holding that the issue in the case agreed upon between the parties before the Insurance Commission is whether or not Jaime 'intentionally' made material concealment in stating his state of health; Respondents Comments: > The CA reversed the Insurance Commissioners decision, holding that the use of the word 'intentionally" by the Insurance Commissioner in defining and resolving the issue agreed upon by the parties at pre-trial before the Insurance Commissioner was not supported by the evidence and that the issue agreed upon by the parties had been whether Jaime made a material concealment as to the state of his health at the time of the filing of insurance application, justifying the denial of the claim. > It also found that the failure of Jaime to disclose previous medical consultation and treatment

constituted material information which should have been communicated to Great Pacific to enable the latter to make proper inquiries. ISSUES 1. WON Jaime intentionally withheld information from Great Pacific 2. WON the information withheld would have been material to Great Pacifics decision to grant Jaime the insurance policy HELD 1. YES Ratio Section 27 of the Insurance Code of 1978 is properly read as referring to "any concealment without regard to whether such concealment is intentional or unintentional. The restoration in 1985 by B.P. Blg. 874 of the phrase "whether intentional or unintentional" merely underscored the fact that all throughout (from 1914 to 1985), the statute did not require proof that concealment must be "intentional" in order to authorize rescission by the injured party. Reasoning - Art. 27 of the 1978 Insurance Code reads that a concealment entitles the injured party to rescind a contract of insurance, which does not include the words whether intentional or unintentional from the

previous statutes. The Insurance Commissioner relied on this deletion in arguing that the statute intended to limit the kinds of concealment which generate a right to rescind on the part of the injured party to "intentional concealments." - In the case at bar, the nature of the facts not conveyed to the insurer was such that the failure to communicate must have been intentional rather than merely inadvertent. > Jaime could not have been unaware that his heart beat would at times rise to high and alarming levels and that he had consulted a doctor twice two months before applying for non-medical insurance. > The last medical consultation took place just the day before the insurance application was filed. 2. YES Ratio Materiality relates rather to the "probable and reasonable influence of the facts" upon the party to whom the communication should have been made, in assessing the risk involved in making or omitting to make further inquiries and in accepting the application for insurance; that "probable and reasonable influence of the farts" concealed must, of course, be determined objectively, by the judge

ultimately. Reasoning - The information which Jaime failed to disclose was material to the ability of Great Pacific to estimate the probable risk he presented as a subject of life insurance. - Had Canilang disclosed his visits to his doctor, the diagnosis made and the medicines prescribed by such doctor, in the insurance application, it may be reasonably assumed that Great Pacific would have made further inquiries and would have probably refused to issue a non-medical insurance policy or, at the very least, required a higher premium for the same coverage. - As held in the case of Saturnino vs. PhilippineAmerican Life Insurance, the waiver of medical examination in a non-medical insurance contract renders even more material the information inquired of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. Disposition the Petition for Review is DENIED for lack of merit and the Decision of the Court of Appeals

dated 16 October 1989 in C.A.-G.R. SP No. 08696 is hereby AFFIRMED

PACIFIC BANKING CORP v. CA (ORIENTAL ASSURANCE CORPORATION) 168 SCRA 1 PARAS; November 28, 1988 NATURE Petition for review on certiorari of the CA decision, which set aside the decision of CFI Manila, which had in turn granted the complaint for a sum of money in civil case filed by Pacific Banking against Oriental Assurance. FACTS - October 21,1963: an open Fire Policy was issued to the Paramount Shirt Manufacturing Co. (insured), by which Oriental Assurance Corporation bound itself to indemnify the insured for any loss or damage, not exceeding P61,000.00, caused by fire to its property consisting of stocks, materials and supplies usual to a shirt factory, including furniture, fixtures, machinery and equipment while contained in the ground, second and third floors of the building situated at number 256 Jaboneros St., San Nicolas, Manila, for a period of one year commencing from

that date to October 21, 1964. - Insured was at the time of the issuance of the policy and is up to this time, a debtor of Pacific Banking in the amount of not less P800,000.00 and the goods described in the policy were held in trust by the insured for the Pacific Banking under thrust receipts. - Said policy was duly endorsed to Pacific Banking as mortgagee/trustor of the properties insured, with the knowledge and consent of Oriental Assurance to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation". - While the aforesaid policy was in full force and effect, a fire broke out on the subject premises destroying the goods contained in its ground and second floors. Counsel for the Pacific Banking sent a letter of demand to Oriental Assurance for indemnity due to the loss of property by fire. Oriental Assurance informed counsel that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster, H.H. Bayne Adjustment Company. - Said insurance adjuster notified counsel for the Pacific Banking that the insured under the policy had not filed any claim with it, nor submitted proof of

loss which is a clear violation of Policy Condition No.11, and for which reason, determination of the liability of Oriental Assurance could not be had. Pacific Banking's counsel replied asking the insurance adjuster to verify from the records of the Bureau of Customs the entries of merchandise taken into the customs bonded warehouse razed by fire as a reliable proof of loss. - For failure of the insurance company to pay the loss as demanded, Pacific Banking field before CFI an action for a sum of money against the Oriental Assurance, in the principal sum of P61,000.00 issued in favor of Paramount Shirt Manufacturing Co. Oriental Assurance defenses (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof, either to the Oriental Assurance or its adjuster H.H. Bayne Adjustment Co. Pacific Banking > presented evidence that insured has undeclared co-insurances with the following: P30,000.00 with Wellington Insurance; P25,000. 00 with Empire Surety and P250,000.00 with Asian Surety;

undertaken by insured Paramount on the same property covered by its policy with Oriental Assurance whereas the only co-insurances declared in the subject policy are those of P30,000.00 with Malayan, P50,000.00 with South Sea, and P25.000.00 with Victory - NOTE: the defense of fraud and/or violation of nondeclaration of co-insurances was not pleaded in the answer, also not pleaded in the Motion to Dismiss. - CFI denied Oriental Assurance's motion on the ground that since the defense was raised for the first time, it must be deemed to have waived the requirement of proof of loss. Case was submitted for decision. But upon MR, Oriental Asurance was allowed to present additional evidence, "in order to prove that 'insured has committed a violation of condition No. 3 of the policy in relation to the other Insurance Clause.' " CFI eventually adjudged Oriental Assurance liable to the Pacific Banking under the said contract of insurance. - Court of Appeals reversed. Pacific Banking's MR denied. ISSUES 1. WON insured is guilty of fraud 2. WON mortgagee/assignee can still claim from the

insurance HELD 1. YES - The crux of the controversy centers on two points: (a) unrevealed co-insurances which violated policy conditions No. 3; and (b) failure of the insured to file the required proof of loss prior to court action. - Policy Condition No. 3 explicitly provides: The Insured shall give notice to the Company of any insurance already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this policy shall be forfeited. - It is not disputed that the insured failed to reveal before the loss three other insurances. By reason of said unrevealed insurances, the insured had been guilty of a false declaration; a clear misrepresentation and a vital one because where the insured had been asked to reveal but did not, that was deception. Otherwise stated, had the insurer known that there were many co-insurances, it could

have hesitated or plainly desisted from entering into such contract. Hence, the insured was guilty of clear fraud. - Pacific Banking's contention that the allegation of fraud is but a mere inference or suspicion is untenable. Concrete evidence of fraud or false declaration by the insured was furnished by the Pacific Banking itself when the facts alleged in the policy under clauses "Co-Insurances Declared" and "Other Insurance Clause" are materially different from the actual number of co-insurances taken over the subject property. Consequently, the whole foundation of the contract fails, the risk does not attach and the policy never becomes a contract between the parties. Representations of facts are the foundation of the contract and if the foundation does not exist, the superstructure does not arise. Falsehood in such representations is not shown to vary or add to the contract, or to terminate a contract which has once been made, but to show that no contract has ever existed (Tolentino). A void or inexistent contract is one which has no force and effect from the very beginning, as if it had never been entered into, and which cannot be validated either by time or by ratification.

- As the insurance policy against fire expressly required that notice should be given by the insured of other insurance upon the same property, the total absence of such notice nullifies the policy. - Argument that notice of co-insurances may be made orally is preposterous and negates policy condition No. 20 which requires every notice and other communications to the insurer to be written or printed. 2. NO - Subject mortgage clause pecifically provides: Loss, if any, under this policy, shall be payable to the PACIFIC BANKING CORPORATION Manila mortgagee/trustor as its interest may appear, it being hereby understood and agreed that this insurance as to the interest of the mortgagee/trustor only herein, shall not be invalidated by any act or neglect except fraud or misrepresentation, or arson of the mortgagor or owner/trustee of the property insured; provided, that in case the mortgagor or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ trustor shall, on demand pay the same. - The paragraph clearly states the exceptions to the general rule that insurance as to the interest of the

mortgagee, cannot be invalidated; namely: fraud, or misrepresentation or arson. - Concealment of the aforecited co-insurances can easily be fraud, or in the very least, misrepresentation. It is but fair and just that where the insured who is primarily entitled to receive the proceeds of the policy has by its fraud and/or misrepresentation, forfeited said right, with more reason Pacific Banking which is merely claiming as indorsee of said insured, cannot be entitled to such proceeds. - The fact of fraud was tried by express or at least implied consent of the parties. Pacific Banking did not only object to the introduction of evidence but on the contrary, presented the very evidence that proved its existence. - Be that as it may, SC has ample authority to give beyond the pleadings where in the interest of justice and the promotion of public policy, there is a need to make its own finding to support its conclusion. Otherwise stated, the Court can consider a fact which surfaced only after trial proper. - Generally, the cause of action on the policy accrues when the loss occurs, but when the policy provides that no action shall be brought unless the claim is

first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment. - In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the Oriental Assurance (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Likewise, insured was required "at his own expense to produce, procure and give to the company all such further particulars, plans, specifications, books, vouchers, invoices, duplicates or copies thereof, documents, proofs and information with respect to the claim". - Evidence adduced shows that 24 days after the fire, Pacific Banking merely wrote letters to Oriental Assurance to serve as a notice of loss, thereafter, the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. Instead, Pacific Banking shifted upon Oriental Assurance the burden of fishing out the necessary information to ascertain the particular account of the

articles destroyed by fire as well as the amount of loss. - Oriental Assurance and its adjuster notified Pacific Banking that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. Despite the notice, the latter remained unheedful. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that Oriental Assurance could not be deemed to have finally rejected Pacific Banking's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of Pacific Banking's right can be attributable to Oriental Assurance. As before such final rejection, there was no real necessity for bringing suit. Pacific Banking should have endeavored to file the formal claim and procure all the documents, papers, inventory needed by Oriental Assurance or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. Indeed, the law does not encourage unnecessary litigation.

- Pacific Banking prematurely filed the civil case and dismissal thereof was warranted under the circumstances. While it is a cardinal principle of insurance law that a policy or contract of insurance is to be construed liberally in favor of the insured and strictly as against the insurer company yet, contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous, they must be taken and understood in their plain, ordinary and popular sense. - Contracts of insurance are contracts of indemnity upon the terms and conditions specified in the policy. The parties have a right to impose such reasonable conditions at the time of the making of the contract as they may deem wise and necessary. The agreement has the force of law between the parties. The terms of the policy constitute the measure of the insurer's liability, and in order to recover, the insured must show himself within those terms. The compliance of the insured with the terms of the policy is a condition precedent to the light of recovery. - It appearing that insured has violated or failed to

perform the conditions under No. 3 and 11 of the contract, and such violation or want of performance has not been waived by the insurer, the insured cannot recover, much less the herein Pacific Banking. Courts are not permitted to make contracts for the parties; the function and duty of the courts is simply to enforce and carry out the contracts actually made. Disposition Petition dismissed. CA affirmed.

SUNLIFE ASSURANCE COMPANY v. CA (SPS. BACANI) 245 SCRA 268 QUIASON; June 22, 1995 NATURE A petition for review on certiorari. FACTS - April 15, 1986: Robert John B. Bacani procured a life insurance contract for himself from SUNLIFE (petitioner) valued at P100K. The designated beneficiary was his mother, Bernarda Bacani (respondent). - June 26, 1987: the insured died in a plane crash. Bernarda Bacani filed a claim with Sunlife, seeking the benefits of the insurance policy taken by her son. Petitioner conducted an investigation and its findings

prompted it to reject the claim on the ground that the insured did not disclose facts material to the issuance of the policy. The insured gave false statements in the application when he answered in the negative to the question have you ever had or sought advice for urine, kidney, bladder disorder? - Sunlife discovered that two weeks prior to the issuance, insured was diagnosed with renal failure, was confined, and underwent tests. - November 17, 1988: Bacani and her husband filed for specific performance against Sunlife. RTC granted the plea on the ground that that the facts concealed by the insured were made in good faith and under the belief that they need not be disclosed, and that the disclosure was not material since the policy was non-medical. - Sunlife appealed to the CA, but the latter denied the appeal on the ground that the cause of death was unrelated to the facts concealed by the insured. Petitioners Claim > The insured did not disclose facts relevant to the issuance of the policy, thus rescission of the contract may be invoked by the insurance company. Respondents Comments

> The actual cause of death was not relevant to the concealed information, and the policy was entered into by the insured in good faith. ISSUE WON the concealment renders the insurance policy rescissible HELD YES Ratio The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. Reasoning SEC. 26 (IC) A neglect to communicate that which a party knows and ought to communicate, is called a concealment. SEC. 31 (IC) Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries - The information which the insured failed to disclose was material and relevant to the approval and the issuance of the insurance policy. The matters

concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding adjustment for a higher premium or rejecting the same. - Good faith is no defense in concealment. It appears that such concealment was deliberate on the part of the insured. - The waiver of a medical examination [in a nonmedical insurance contract] renders even more material the information required of the applicant concerning previous condition of health and diseases suffered, for such information necessarily constitutes an important factor which the insurer takes into consideration in deciding whether to issue the policy or not. - Anent the finding that the facts concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed insurance policy or in making inquiries Disposition Petition is granted and the decision of CA is reversed and set aside.

TAN v. CA ( PHILIPPINE AMERICAN LIFE INSURANCE COMPANY) 174 SCRA 403 GUTIERREZ; June 29, 1989 NATURE Review on certiorari of the decision of the Court of Appeals affirming the decision of the Insurance Commissioner 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 was issued effective November 6, 1973 - On April 26,1975, Tan Lee Siong died of hepatoma (Exhibit B). Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy -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 - Petitioners filed on November 27, 1975, a

complaint against the former with the Office of the Insurance Commissioner. Commissioner denied petition. CA affirmed Commissioners decision ISSUE WON according to Sec. 48 of the Insurance Code, insurance company is barred from rescinding contract HELD - 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. - 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

- 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 twoyear 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. - The petitioners contend that there could have been no concealment or misrepresentation by their late father because Tan Lee Siong did not have to buy insurance. He was only pressured by insistent salesmen to do so -The legislative answer to the arguments posed by

the petitioners is the "incontestability clause" added by the second paragraph of Section 48. 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