THIRD DIVISION

[G.R. No. L-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.

SYLLABUS

1.MERCANTILE LAW; INSURANCE; INCONTESTABILITY CLAUSE;

CONSTRUED. — 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.
2.ID.; ID.; ID.; DEFENSE OF CONCEALMENT STILL LIES WITHIN THE TWO
YEAR PERIOD FROM ISSUANCE OF CONTRACT OR LAST REINSTATEMENT.
— 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.
3.REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; FAILURE ON THE PART
OF PETITIONER TO SHOW THAT FINDINGS OF FACT OF RESPONDENT
COURT ARE NOT BASED ON SUBSTANTIAL EVIDENCE. — We are limited in
this petition to ascertaining whether or not the respondent Court of Appeals
committed reversible error. It is the petitioners' burden to show that the factual
findings of the respondent court are not based on substantial evidence or that
its conclusions are contrary to applicable law and jurisprudence. They have
failed to discharge that burden.
 DECISION

GUTIERREZ, JR., J : p

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. LLjur

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 P80,000.00.
"On September 23, 1973, Tan Lee Siong, father of herein petitioners,
applied for life insurance in the amount of P80,000.00 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 3, 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.cdrep

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 rescindible
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 P80,000.00. 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 Bievenido S.
Guinto, a relative to Dr. Guinto, Again Philamlife did not." (pp. 138-139,
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 the
application, submitting the application to their
companies,concluding the transactions and otherwise smoothing 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 pressure of modern
salesmanship.' "
" 'Insurance companies send detailed instructions to their
agents to solicit and procure application.' "
" '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. LexLib
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
consultation 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 with further medical investigation and
examination (Exhibit 5-A). For as long as no adverse medical history is
revealed in the application form, and applicant for insurance is
presumed to be healthy and physically fit and no further medical
investigation or examination is conducted by respondent company.
(t.s.n., April 8, 1976, pp. 6-8)." (Rollo, pp. 96-98)
There is no strong showing that we should apply the "fine print" or "contract of
adhesion" rule in this case. (Sweet Lines, Inc. v. Teves, 83 SCRA 361 [1978]).
The petitioners cite:
cdphil
 "It is a matter of common knowledge that large amounts of
money are collected from ignorant persons by companies and
associations which adopt high sounding titles and print the
amount of benefits they agree to pay in large black-faced type,
following such undertakings by fine print conditions which destroy
the substance of the promise. All provisions, conditions, or
exceptions which in any way tend to work a forfeiture of the policy
should be construed most strongly against those for whose benefit
they are inserted, and most favorably toward those against whom
they are meant to operate. (Trinidad v. Orient Protective Assurance
Assn., 67 Phil. 184)
There is no showing that the questions in the application form for insurance
regarding the insured's medical history are in smaller print than the rest of the
printed form or that they are designed in such a way as to conceal from the
applicant their importance. If a warning in bold red letters or a boxed warning
similar to that required for cigarette advertisements by the Surgeon General of
the United States is necessary, that is for Congress or the Insurance
Commission to provide as protection against high pressure insurance
salesmanship. We are limited in this petition to ascertaining whether or not the
respondent Court of Appeals committed reversible error. It is the petitioners'
burden to show that the factual findings of the respondent court are not based
on substantial evidence or that its conclusions are contrary to applicable law
and jurisprudence. They have failed to discharge that burden.
WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned
decision of the Court of Appeals is AFFIRMED. Cdpr

SO ORDERED.
(Tan v. Court of Appeals, G.R. No. L-48049, [June 29, 1989], 256 PHIL 158-
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166)