Diego, a cancer survivor, filed an application for a life insurance policy with Garantiya Insurance Company (GIC). He delivered his application and insurance premium to Gabriela, the officer of GIC in charge of approving life insurance policies. Gabriela then approved the application of Diego on June 1, 2020. On January 30, 2023, Diego died in a vehicular accident. When the heirs of Diego claimed the insurance proceeds, GIC denied the claim on the ground that Diego had concealed the fact of his illness. Moreover, Gabriela knew about the illness of Diego but also concealed it from GIC. Is the denial of the insurance claim by GIC proper? Discuss.
Suggested answer only. Not an official answer and not legal advice.
No, the denial of the insurance claim by GIC is not proper. Under Section 48 of the Insurance Code (R.A. No. 10607) and Sun Life of Canada v. Sibya, after a life insurance policy payable on the death of the insured
Unlock the full Commercial and Tax Law answers365 days of full access. GCash, Maya and card accepted.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Under Section 48 of the Insurance Code, when does a life insurance policy become incontestable by the insurer?
A life insurance policy becomes incontestable after being in force during the insured's lifetime for two years.
In Sun Life of Canada versus Sibya, what is the legal effect of the expiration of the two-year contestability period?
The expiration of the two-year contestability period bars the insurer from proving fraudulent concealment or rescinding the policy.
What is the legal effect when an officer authorized to approve insurance policies knows of an applicant's prior illness?
Knowledge acquired by an approving officer during application processing is legally imputed to the insurance company.
May an insurer rescind a life insurance policy for concealment after the two-year contestability period has lapsed?
Choices available with full access.
Which statute governs the rules on insurance contracts, concealment, and incontestability in the Philippines?
Choices available with full access.
Learn more about these topics
1. Incontestability Clause
Under Section 48 of the Insurance Code (Republic Act Number 10607), after a life insurance policy payable on the death of the insured has been in force during the lifetime of the insured for two years from the date of its issue or last reinstatement, the insurer cannot prove that the policy is void ab initio or rescindable on the ground of fraudulent concealment or misrepresentation. The two-year incontestability clause creates a conclusive statutory bar preventing insurance companies from denying death claims or rescinding life insurance contracts after the expiration of the two-year period.
2. Knowledge of Agent
Under general principles of insurance agency law, notice to or knowledge of an officer or agent authorized to approve or issue insurance policies is legally imputed to the insurance company. When an approving officer of the insurer acquires knowledge of a material fact or prior medical condition concerning an applicant during the processing of an insurance application, such knowledge bindingly binds the principal insurer. The insurance company cannot later disclaim knowledge or allege fraudulent concealment by the insured when its own approving officer was fully aware of the material condition.
3. Rescission Time Limit
Under Section 48 of the Insurance Code, an insurer's right to rescind a life insurance contract for concealment or misrepresentation must be exercised prior to the commencement of an action on the contract and strictly within the two-year contestability period. Once the two-year period expires during the lifetime of the insured, the right of the insurer to rescind the contract or deny coverage on grounds of misrepresentation or concealment is completely barred, regardless of whether the concealment was intentional, fraudulent, or executed with the collusion of an insurance officer.