G.R. No.
48049 June 29, 1989
EMILIO TAN, JUANITO TAN, ALBERTO TAN and
ARTURO TAN, petitioners,
vs.
THE COURT OF APPEALS and THE PHILIPPINE
AMERICAN LIFE INSURANCE
COMPANY, respondents.
O.F. Santos & P.C. Nolasco for petitioners.
Ferry, De la Rosa and Associates for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the Court of
Appeals' decision affirming the decision of the Insurance
Commissioner which dismissed the petitioners'
complaint against respondent Philippine American Life
Insurance Company for the recovery of the proceeds
from their late father's policy. The facts of the case as
found by the Court of Appeals are:
Petitioners appeal from the Decision of
the Insurance Commissioner dismissing
herein petitioners' complaint against
respondent Philippine American Life
Insurance Company for the recovery of
the proceeds of Policy No. 1082467 in
the amount of P 80,000.00.
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
Policy No. 1082467 was issued effective
November 6,1973, with petitioners the
beneficiaries thereof (Exhibit A).
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. However, in a letter
dated September 11, 1975, 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rescinded the policy by reason of the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 (Exhibit 3). The
premiums paid on the policy were
thereupon refunded .
Alleging that respondent company's
refusal to pay them the proceeds of the
policy was unjustified and unreasonable,
petitioners filed on November 27, 1975,
a complaint against the former with the
Office of the Insurance Commissioner,
docketed as I.C. Case No. 218.
After hearing the evidence of both
parties, the Insurance Commissioner
rendered judgment on August 9, 1977,
dismissing petitioners' complaint. (Rollo,
pp. 91-92)
The Court of Appeals dismissed ' the petitioners' appeal
from the Insurance Commissioner's decision for lack of
merit
Hence, this petition.
The petitioners raise the following issues in their
assignment of errors, to wit:
A. The conclusion in law of respondent
Court that respondent insurer has the
right to rescind the policy contract when
insured is already dead is not in
accordance with existing law and
applicable jurisprudence.
B. The conclusion in law of respondent
Court that respondent insurer may be
allowed to avoid the policy on grounds
of concealment by the deceased
assured, is contrary to the provisions of
the policy contract itself, as well as, of
applicable legal provisions and
established jurisprudence.
C. The inference of respondent Court
that respondent insurer was misled in
issuing the policy are manifestly
mistaken and contrary to admitted
evidence. (Rollo, p. 7)
The petitioners contend that the respondent 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.
The contention is without merit.
The pertinent section in the Insurance Code provides:
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."
As noted by the Court of Appeals, to wit:
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 two-year 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. Moreover,
respondent company rescinded the
contract of insurance and refunded the
premiums paid on September 11, 1975,
previous to the commencement of this
action on November 27,1975. (Rollo, pp.
99-100)
xxx xxx xxx
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 petitioners state:
Here then is a case of an assured
whose application was submitted
because of repeated visits and
solicitations by the insurer's agent.
Assured did not knock at the door of the
insurer to buy insurance. He was the
object of solicitations and visits.
Assured was a man of means. He could
have obtained a bigger insurance, not
just P 80,000.00. If his purpose were to
misrepresent and to conceal his
ailments in anticipation of death during
the two-year period, he certainly could
have gotten a bigger insurance. He did
not.
Insurer Philamlife could have presented
as witness its Medical Examiner Dr.
Urbano Guinto. It was he who
accomplished the application, Part II,
medical. Philamlife did not.
Philamlife could have put to the witness
stand its Agent Bienvenido S. Guinto, a
relative to Dr. Guinto, Again Philamlife
did not. (pp. 138139, Rollo)
xxx xxx xxx
This Honorable Supreme Court has had
occasion to denounce the pressure and
practice indulged in by agents in selling
insurance. At one time or another most
of us have been subjected to that
pressure, that practice. This court took
judicial cognizance of the whirlwind
pressure of insurance selling-especially
of the agent's practice of 'supplying the
information, preparing and answering th
e application, submitting the application
to their companies, concluding the
transactions and otherwisesmoothing
out all difficulties.
We call attention to what this Honorable Court said in
Insular Life v. Feliciano, et al., 73 Phil. 201; at page 205:
It is of common knowledge that the
selling of insurance today is subjected to
the whirlwind pressureof modern
salesmanship.
 Insurance companies send detailed
instructions to their agents to solicit and
procure applications.
These agents are to be found all over
the length and breadth of the land. They
are stimulated to more active efforts by
contests and by the keen competition
offered by the other rival insurance
companies.
They supply all the information, prepare
and answer the applications, submit the
applications to their companies,
conclude the transactions, and
otherwise smooth out all difficulties.
The agents in short do what the
company set them out to do.
The Insular Life case was decided some
forty years ago when the pressure of
insurance salesmanship was not
overwhelming as it is now; when the
population of this country was less than
one-fourth of what it is now; when the
insurance companies competing with
one another could be counted by the
fingers. (pp. 140-142, Rollo)
xxx xxx xxx
In the face of all the above, it would be
unjust if, having been subjected to the
whirlwind pressure of insurance
salesmanship this Court itself has long
denounced, the assured who dies within
the two-year period, should stand
charged of fraudulent concealment and
misrepresentation." (p. 142, Rollo)
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.
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.
The petitioners argue that no evidence was presented to
show that the medical terms were explained in a
layman's language to the insured. They state that the
insurer should have presented its two medical field
examiners as witnesses. Moreover, the petitioners allege
that the policy intends that the medical examination must
be conducted before its issuance otherwise the insurer
"waives whatever imperfection by ratification."
We agree with the Court of Appeals which ruled:
On the other hand, petitioners argue
that no evidence was presented by
respondent company to show that the
questions appearing in Part II of the
application for insurance were asked,
explained to and understood by the
deceased so as to prove concealment
on his part. The same is not well taken.
The deceased, by affixing his signature
on the application form, affirmed the
correctness of all the entries and
answers appearing therein. It is but to
be expected that he, a businessman,
would not have affixed his signature on
the application form unless he clearly
understood its significance. For, the
presumption is that a person intends the
ordinary consequence of his voluntary
act and takes ordinary care of his
concerns. [Sec. 5(c) and (d), Rule 131,
Rules of Court].
The evidence for respondent company
shows that on September 19,1972, the
deceased was examined by Dr.
Victoriano Lim and was found to be
diabetic and hypertensive; that by
January, 1973, the deceased was
complaining of progressive weight loss
and abdominal pain and was diagnosed
to be suffering from hepatoma, (t.s.n.
August 23, 1976, pp. 8-10; Exhibit 2).
Another physician, Dr. Wenceslao Vitug,
testified that the deceased came to see
him on December 14, 1973 for
consolation and claimed to have been
diabetic for five years. (t.s.n., Aug.
23,1976, p. 5; Exhibit 6) Because of the
concealment made by the deceased of
his consultations and treatments for
hypertension, diabetes and liver
disorders, respondent company was
thus misled into accepting the risk and
approving his application as medically
 standard (Exhibit 5- C) and dispensing SO ORDERED.
with further medical investigation and
examination (Exhibit 5-A). For as long G.R. No. 175666 July 29, 2013
as no adverse medical history is
revealed in the application form, an MANILA BANKERS LIFE INSURANCE
applicant for insurance is presumed to CORPORATION, Petitioner.
be healthy and physically fit and no vs.
further medical investigation or CRESENCIA P. ABAN, Respondent.
examination is conducted by respondent
company. (t.s.n., April 8,1976, pp. 6-8).
DECISION
(Rollo, pp. 96-98)
DEL CASTILLO, J.:
There is no strong showing that we should apply the
"fine print" or "contract of adhesion" rule in this case.
The ultimate aim of Section 48 of the Insurance Code is
(Sweet Lines, Inc. v. Teves, 83 SCRA 361 [1978]). The
to compel insurers to solicit business from or provide
petitioners cite:
insurance coverage only to legitimate and bona fide
clients, by requiring them to thoroughly investigate those
It is a matter of common knowledge that
they insure within two years from effectivity of the policy
large amounts of money are collected
and while the insured is still alive. If they do not, they will
from ignorant persons by companies
be obligated to honor claims on the policies they issue,
and associations which adopt high
regardless of fraud, concealment or misrepresentation.
sounding titles and print the amount of
The law assumes that they will do just that and not sit on
benefits they agree to pay in large
their laurels, indiscriminately soliciting and accepting
black-faced type, following such
insurance business from any Tom, Dick and Harry.
undertakings by fine print conditions
which destroy the substance of the
Assailed in this Petition for Review on Certiorari 1 are the
promise. All provisions, conditions, or
September 28, 2005 Decision2 of the Court of Appeals'
exceptions which in any way tend to
(CA) in CA-G.R. CV No. 62286 and its November 9,
work a forfeiture of the policy should be
2006 Resolution3 denying the petitioners Motion for
construed most strongly against those
Reconsideration.4
for whose benefit they are inserted, and
most favorably toward those against
whom they are meant to operate. Factual Antecedents
(Trinidad v. Orient Protective Assurance
Assn., 67 Phil. 184) On July 3, 1993, Delia Sotero (Sotero) took out a life
insurance policy from Manila Bankers Life Insurance
There is no showing that the questions in the application Corporation (Bankers Life), designating respondent
form for insurance regarding the insured's medical Cresencia P. Aban (Aban), her niece,5 as her beneficiary.
history are in smaller print than the rest of the printed
form or that they are designed in such a way as to Petitioner issued Insurance Policy No. 747411 (the
conceal from the applicant their importance. If a warning policy), with a face value of P100,000.00, in Soteros
in bold red letters or a boxed warning similar to that favor on August 30, 1993, after the requisite medical
required for cigarette advertisements by the Surgeon examination and payment of the insurance premium. 6
General of the United States is necessary, that is for
Congress or the Insurance Commission to provide as On April 10, 1996,7 when the insurance policy had been
protection against high pressure insurance in force for more than two years and seven months,
salesmanship. We are limited in this petition to Sotero died. Respondent filed a claim for the insurance
ascertaining whether or not the respondent Court of proceeds on July 9, 1996. Petitioner conducted an
Appeals committed reversible error. It is the petitioners' investigation into the claim,8 and came out with the
burden to show that the factual findings of the following findings:
respondent court are not based on substantial evidence
or that its conclusions are contrary to applicable law and 1. Sotero did not personally apply for insurance
jurisprudence. They have failed to discharge that coverage, as she was illiterate;
burden.
2. Sotero was sickly since 1990;
WHEREFORE, the petition is hereby DENIED for lack of
merit. The questioned decision of the Court of Appeals is
AFFIRMED.
 3. Sotero did not have the financial capability to
pay the insurance premiums on Insurance Policy
No. 747411;
4. Sotero did not sign the July 3, 1993
application for insurance;9 and
5. Respondent was the one who filed the
insurance application, and x x x designated
herself as the beneficiary.10
For the above reasons, petitioner denied respondents
claim on April 16, 1997 and refunded the premiums paid
on the policy.11
On April 24, 1997, petitioner filed a civil case for
rescission and/or annulment of the policy, which was
docketed as Civil Case No. 97-867 and assigned to
Branch 134 of the Makati Regional Trial Court. The main
thesis of the Complaint was that the policy was obtained
by fraud, concealment and/or misrepresentation under
the Insurance Code,12 which thus renders it voidable
under Article 139013 of the Civil Code.
Respondent filed a Motion to Dismiss14 claiming that
petitioners cause of action was barred by prescription
pursuant to Section 48 of the Insurance Code, which
provides as follows:
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
rescindible by reason of the fraudulent concealment or
misrepresentation of the insured or his agent.
During the proceedings on the Motion to Dismiss,
petitioners investigator testified in court, stating among
others that the insurance underwriter who solicited the
insurance is a cousin of respondents husband, Dindo
Aban,15and that it was the respondent who paid the
annual premiums on the policy.16
Ruling of the Regional Trial Court
On December 9, 1997, the trial court issued an
Order17 granting respondents Motion to Dismiss, thus:
WHEREFORE, defendant CRESENCIA P. ABANs
Motion to Dismiss is hereby granted. Civil Case No. 97-
867 is hereby dismissed.
SO ORDERED.18
In dismissing the case, the trial court found that Sotero,
and not respondent, was the one who procured the
insurance; thus, Sotero could legally take out insurance
on her own life and validly designate as she did
respondent as the beneficiary. It held further that under
Section 48, petitioner had only two years from the
effectivity of the policy to question the same; since the
policy had been in force for more than two years,
petitioner is now barred from contesting the same or
seeking a rescission or annulment thereof.
Petitioner moved for reconsideration, but in another
Order19 dated October 20, 1998, the trial court stood its
ground.
Petitioner interposed an appeal with the CA, docketed as
CA-G.R. CV No. 62286. Petitioner questioned the
dismissal of Civil Case No. 97-867, arguing that the trial
court erred in applying Section 48 and declaring that
prescription has set in. It contended that since it was
respondent and not Sotero who obtained the
insurance, the policy issued was rendered void ab initio
for want of insurable interest.
Ruling of the Court of Appeals
On September 28, 2005, the CA issued the assailed
Decision, which contained the following decretal portion:
WHEREFORE, in the light of all the foregoing, the
instant appeal is DISMISSED for lack of merit.
SO ORDERED.20
The CA thus sustained the trial court. Applying Section
48 to petitioners case, the CA held that petitioner may
no longer prove that the subject policy was void ab initio
or rescindible by reason of fraudulent concealment or
misrepresentation after the lapse of more than two years
from its issuance. It ratiocinated that petitioner was
equipped with ample means to determine, within the first
two years of the policy, whether fraud, concealment or
misrepresentation was present when the insurance
coverage was obtained. If it failed to do so within the
statutory two-year period, then the insured must be
protected and allowed to claim upon the policy.
Petitioner moved for reconsideration, 21 but the CA
denied the same in its November 9, 2006
Resolution.22Hence, the present Petition.
Issues
Petitioner raises the following issues for resolution:
I On the issue of insurable interest, respondent echoes
WHETHER THE COURT OF APPEALS ERRED IN
SUSTAINING THE ORDER OF THE TRIAL COURT
DISMISSING THE COMPLAINT ON THE GROUND OF
PRESCRIPTION IN CONTRAVENTION (OF)
PERTINENT LAWS AND APPLICABLE
JURISPRUDENCE.
II
WHETHER THE COURT OF APPEALS ERRED IN
SUSTAINING THE APPLICATION OF THE
INCONTESTABILITY PROVISION IN THE INSURANCE
CODE BY THE TRIAL COURT.
III
WHETHER THE COURT OF APPEALS ERRED IN
DENYING PETITIONERS MOTION FOR
RECONSIDERATION.23
Petitioners Arguments
In praying that the CA Decision be reversed and that the
case be remanded to the trial court for the conduct of
further proceedings, petitioner argues in its Petition and
Reply24 that Section 48 cannot apply to a case where the
beneficiary under the insurance contract posed as the
insured and obtained the policy under fraudulent
circumstances. It adds that respondent, who was merely
Soteros niece, had no insurable interest in the life of her
aunt.
Relying on the results of the investigation that it
conducted after the claim for the insurance proceeds
was filed, petitioner insists that respondents claim was
spurious, as it appeared that Sotero did not actually
apply for insurance coverage, was unlettered, sickly, and
had no visible source of income to pay for the insurance
premiums; and that respondent was an impostor, posing
as Sotero and fraudulently obtaining insurance in the
latters name without her knowledge and consent.
Petitioner adds that Insurance Policy No. 747411 was
void ab initio and could not have given rise to rights and
obligations; as such, the action for the declaration of its
nullity or inexistence does not prescribe.25
Respondents Arguments
Respondent, on the other hand, essentially argues in her
Comment26 that the CA is correct in applying Section 48.
She adds that petitioners new allegation in its Petition
that the policy is void ab initio merits no attention, having
failed to raise the same below, as it had claimed
originally that the policy was merely voidable.
the CAs pronouncement that since it was Sotero who
obtained the insurance, insurable interest was present.
Under Section 10 of the Insurance Code, Sotero had
insurable interest in her own life, and could validly
designate anyone as her beneficiary. Respondent
submits that the CAs findings of fact leading to such
conclusion should be respected.
Our Ruling
The Court denies the Petition.
The Court will not depart from the trial and appellate
courts finding that it was Sotero who obtained the
insurance for herself, designating respondent as her
beneficiary. Both courts are in accord in this respect, and
the Court is loath to disturb this. While petitioner insists
that its independent investigation on the claim reveals
that it was respondent, posing as Sotero, who obtained
the insurance, this claim is no longer feasible in the
wake of the courts finding that it was Sotero who
obtained the insurance for herself. This finding of fact
binds the Court.
With the above crucial finding of fact that it was Sotero
who obtained the insurance for herself petitioners
case is severely weakened, if not totally disproved.
Allegations of fraud, which are predicated on
respondents alleged posing as Sotero and forgery of her
signature in the insurance application, are at once belied
by the trial and appellate courts finding that Sotero
herself took out the insurance for herself. "Fraudulent
intent on the part of the insured must be established to
entitle the insurer to rescind the contract." 27 In the
absence of proof of such fraudulent intent, no right to
rescind arises.
Moreover, the results and conclusions arrived at during
the investigation conducted unilaterally by petitioner after
the claim was filed may simply be dismissed as self-
serving and may not form the basis of a cause of action
given the existence and application of Section 48, as will
be discussed at length below.
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.
Section 48 regulates both the actions of the insurers and
prospective takers of life insurance. It gives insurers
enough time to inquire whether the policy was obtained
by fraud, concealment, or misrepresentation; on the
other hand, it forewarns scheming individuals that their
attempts at insurance fraud would be timely uncovered
thus deterring them from venturing into such nefarious
enterprise. At the same time, legitimate policy holders
are absolutely protected from unwarranted denial of their
claims or delay in the collection of insurance proceeds
occasioned by allegations of fraud, concealment, or
misrepresentation by insurers, claims which may no
longer be set up after the two-year period expires as
ordained under the law.
Thus, the self-regulating feature of Section 48 lies in the
fact that both the insurer and the insured are given the
assurance that any dishonest scheme to obtain life
insurance would be exposed, and attempts at unduly
denying a claim would be struck down. Life insurance
policies that pass the statutory two-year period are
essentially treated as legitimate and beyond question,
and the individuals who wield them are made secure by
the thought that they will be paid promptly upon claim. In
this manner, Section 48 contributes to the stability of the
insurance industry.
Section 48 prevents a situation where the insurer
knowingly continues to accept annual premium
payments on life insurance, only to later on deny a claim
on the policy on specious claims of fraudulent
concealment and misrepresentation, such as what
obtains in the instant case. Thus, instead of conducting
at the first instance an investigation into the
circumstances surrounding the issuance of Insurance
Policy No. 747411 which would have timely exposed the
supposed flaws and irregularities attending it as it now
professes, petitioner appears to have turned a blind eye
and opted instead to continue collecting the premiums
on the policy. For nearly three years, petitioner collected
the premiums and devoted the same to its own profit. It
cannot now deny the claim when it is called to account.
Section 48 must be applied to it with full force and effect.
The Court therefore agrees fully with the appellate
courts pronouncement that
the "incontestability clause" is a provision in law that
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 (2) 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
rescindible by reason of fraudulent concealment or
misrepresentation of the insured or his agent.
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.
The insurer is deemed to have the necessary facilities to
discover such fraudulent concealment or
misrepresentation within a period of two (2) years. It is
not fair for the insurer to collect the premiums as long as
the insured is still alive, only to raise the issue of
fraudulent concealment or misrepresentation when the
insured dies in order to defeat the right of the beneficiary
to recover under the policy.
At least two (2) years from the issuance of the policy or
its last reinstatement, the beneficiary is given the stability
to recover under the policy when the insured dies. The
provision also makes clear when the two-year period
should commence in case the policy should lapse and is
reinstated, that is, from the date of the last
reinstatement.
After two years, the defenses of concealment or
misrepresentation, no matter how patent or well-
founded, will no longer lie.
Congress felt this was a sufficient answer to the various
tactics employed by insurance companies to avoid
liability.
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."
As borne by the records, the policy was issued on
August 30, 1993, the insured died on April 10, 1996, and
the claim was denied on April 16, 1997. The insurance
policy was thus in force for a period of 3 years, 7
months, and 24 days. Considering that the insured died
after the two-year period, the plaintiff-appellant is,
therefore, barred from proving that the policy is void ab
initio by reason of the insureds fraudulent concealment
or misrepresentation or want of insurable interest on the
part of the beneficiary, herein defendant-appellee.
Well-settled is the rule that it is the plaintiff-appellants
burden to show that the factual findings of the trial court
are not based on substantial evidence or that its
conclusions are contrary to applicable law and
jurisprudence. The plaintiff-appellant failed to discharge
that burden.28
Petitioner claims that its insurance agent, who solicited
the Sotero account, happens to be the cousin of
respondents husband, and thus insinuates that both
connived to commit insurance fraud. If this were truly the
case, then petitioner would have discovered the scheme
earlier if it had in earnest conducted an investigation into
the circumstances surrounding the Sotero policy. But
because it did not and it investigated the Sotero account
only after a claim was filed thereon more than two years
later, naturally it was unable to detect the scheme. For
its negligence and inaction, the Court cannot sympathize
with its plight. Instead, its case precisely provides the
strong argument for requiring insurers to diligently
conduct investigations on each policy they issue within
the two-year period mandated under Section 48, and not
after claims for insurance proceeds are filed with them.
Besides, if insurers cannot vouch for the integrity and
honesty of their insurance agents/salesmen and the
insurance policies they issue, then they should cease
doing business. If they could not properly screen their
agents or salesmen before taking them in to market their
products, or if they do not thoroughly investigate the
insurance contracts they enter into with their clients, then
they have only themselves to blame. Otherwise said,
insurers cannot be allowed to collect premiums on
insurance policies, use these amounts collected and
invest the same through the years, generating profits
and returns therefrom for their own benefit, and
thereafter conveniently deny insurance claims by
questioning the authority or integrity of their own agents
or the insurance policies they issued to their premium-
paying clients. This is exactly one of the schemes which
Section 48 aims to prevent.
Insurers may not be allowed to delay the payment of
claims by filing frivolous cases in court, hoping that the
inevitable may be put off for years or even decades
by the pendency of these unnecessary court cases. In
the meantime, they benefit from collecting the interest
and/or returns on both the premiums previously paid by
the insured and the insurance proceeds which should
otherwise go to their beneficiaries. The business of
insurance is a highly regulated commercial activity in the
country,29 and is imbued with public interest. 30 "An
insurance contract is a contract of adhesion which must
be construed liberally in favor of the insured and strictly
against the insurer in order to safeguard the formers
interest."31
WHEREFORE, the Petition is DENIED. The assailed
September 28, 2005 Decision and the November 9,
2006 Resolution of the Court of Appeals in CA-G.R. CV
No. 62286 are AFFIRMED.
SO ORDERED.