Olaguer, Ma. Alyanna C.
INSURANCE
Principle: (Representation) The Insurance Code dispenses with proof of fraudulent intent in
cases of rescission due to concealment, but not so in cases of rescission due to false
representations. When an abundance of available documentary evidence can be referenced to
demonstrate a design to defraud, presenting a singular document with an erroneous entry does
not qualify as clear and convincing proof of fraudulent intent.
Section assigned: Sec. 36. A representation may be oral or written.
Insular Life Assurance Co., Ltd. v. Heirs of Alvarez
G.R. Nos. 207526 & 210156
October 3, 2018
FACTS:
Alvarez applied for and was granted a housing loan by. This loan was secured by a promissory
note, a real estate mortgage over the lot, and a mortgage redemption insurance taken on the life
of Alvarez with UnionBank as beneficiary. Alvarez was among the mortgagors included in the
list of qualified debtors covered by the Group Mortgage Redemption Insurance that UnionBank
had with Insular Life. Alvarez died and subsequently, UnionBank filed with Insular Life a death
claim under Alvarez’s name pursuant to the Group Mortgage Redemption Insurance. Insular
Life denied the claim after determining that Alvarez was not eligible for coverage as he was
supposedly more than 60 years old at the time of his loan’s approval.
With the claim’s denial, the monthly amortizations of the loan stood unpaid. Subsequently, the
lot was foreclosed and sold at a public auction with UnionBank as the highest bidder.
The Heirs of Alvarez filed a complaint for specific performance to demand against Insular Life to
fulfill its obligation as an insurer under the Group Mortgage Redemption Insurance, and for
nullification of foreclosure against UnionBank.
Both Court of Appeals and Regional Trial Court ruled in favor of the Heirs of Alvarez. They
noted that the errors assigned by Insular Life and UnionBank boiled down to the issue of
whether or not Alvarez was guilty of fraudulent misrepresentation as to warrant the
rescission of the Group Mortgage Redemption Insurance obtained by UnionBank on
Alvarez’s life. Insular Life only relied on Alvarez’s Health Statement Form where he wrote
“1942” as his birth year. However, this form alone was insufficient to prove that he fraudulently
intended to misrepresent his age. It noted that aside from the Health Statement Form, Alvarez
had to fill out an application for insurance. This application would have supported the conclusion
that he consistently wrote “1942” in all the documents that he had submitted to UnionBank.
However, the records made no reference to this document.
ISSUE: (Sec 36 only)
WON The Insular Life Assurance Co., Ltd. is obliged to pay UnionBank the balance of Alvarez’s
loan given the claim that he lied about his age at the time of the approval of his loan.
HELD:
Yes, Insular life is liable to pay UnionBank for its failure to prove intent to defraud on the part of
Alvarez.
Citing Section 27 of the Insurance Code, however, Insular Life asserts that in cases of
rescission due to concealment, i.e., when a party “neglect[s] to communicate that which [he or
she] knows and ought to communicate,” proof of fraudulent intent is not necessary. Section 27
of the Insurance Code reads:
“A concealment whether intentional or unintentional entitles the injured party to rescind a
contract of insurance.”
While Insular Life correctly reads Section 27 as making no distinction between intentional and
unintentional concealment, it erroneously pleads Section 27 as the proper statutory anchor of
this case. The Insurance Code distinguishes representations from concealments. What this
case involves, instead, is an allegedly false representation. Section 44 of the Insurance Code
states, “A representation is to be deemed false when the facts fail to correspond with its
assertions or stipulations.” If indeed Alvarez misdeclared his age such that his assertion fails
to correspond with his factual age, he made a false representation, not a concealment.
In relation to Section 44, Section 45 of the Insurance Code reads:
“If a representation is false in a material point, whether affirmative or promissory, the injured
party is entitled to rescind the contract from the time when the representation becomes false.”
Not being similarly qualified as rescission under Section 27, rescission under Section 45
remains subject to the basic precept of fraud having to be proven by clear and
convincing evidence. Consistent with the requirement of clear and convincing evidence, it was
Insular Life’s burden to establish the merits of its own case.
At bar, Insular Life basically relied on the Health Statement form personally
accomplished by Jose Alvarez wherein he wrote that his birth year was 1942. The Court,
however posited that Alvarez must have accomplished and submitted many other
documents when he applied for the housing loan and executed supporting instruments
like the promissory note, real estate mortgage, and Group Mortgage Redemption
Insurance. A design to defraud would have demanded his consistency. He needed to maintain
appearances across all documents. However, the best that Insular Life could come up with
before the Regional Trial Court and the Court of Appeals was a single document. The Court of
Appeals was straightforward, i.e., the most basic document that Alvarez accomplished in
relation to Insular Life must have been an insurance application form. Strangely, Insular Life
failed to adduce even this document — a piece of evidence that was not only commonsensical,
but also one which has always been in its possession and disposal.
Insular Life had all the opportunity to demonstrate Alvarez’s pattern of consistently indicating
erroneous entries for his age. All it needed to do was to inventory the documents submitted by
Alvarez and note the statements he made concerning his age. This was not a cumbersome
task, yet it failed at it. Its failure to discharge its burden of proving must thwart its plea for relief
from this Court.
