MIRANDA, CLARISSE ANN
INSURANCE DELEON SUMMARY
REPRESENTATION
Sec. 36. A representation may be oral or written.
Representation defined. Representation is a statement made
by the insured at the time of, or prior to, the issuance of the
policy (Sec. 37.), as to an existing or past fact or state of facts,
or concerning a future happening, to give information to the
insurer and otherwise induce him to enter into the insurance
contract.
It may also be made by the insurer but as the insured
seldom desires to avoid the contract, the cases nearly
always involve to representations made by the insured.
Misrepresentation defined
Misrepresentation in insurance is a statement :
(1) as a fact of something which is untrue,
(2) which the insured stated with knowledge that it is untrue
and with an intent to deceive, or which he states positively as
true without knowing it to be true and which has a tendency
to mislead, and
(3) where such fact in either case is material to the risk.
Such a misrepresentation by the insured renders the
insurance contract voidable at the option of the insurer,
even though innocently made and without wrongful intent.
Misrepresentation may be viewed as the active form of
concealment.
Form and nature of representation
(1) Information given concerning risk. —
- It is the duty of the person applying for insurance to give to
the insurer all such information concerning the risk as will be
of use to the latter in estimating its character and in
determining whether or not to assume it.
- This information may be given orally, or written in papers
not connected with the contract
- such as circulars and prospectuses, or in the application or
examiner's report, or it may appear in the policy itself.
(2) Forms basis of contract. — However communicated, the
information thus given forms the basis of the contract as
made.
- It describes, marks out, and defines the risk assumed.
- If the description as relied on by the insurer, proved to be
untrue in any material respect, the insurer may deny liability
saying, "I did not assume this risk, but that which was
described to me."
Hence, arises the reasonable rule that the untruth of any
material representation relied on by the insurer, will avoid the
contract, wholly irrespective of the intent, whether
innocent or fraudulent, with which such
misrepresentation was made
(3) Intended as collateral inducements. — Representations
are made to influence the insurer to accept the risk.
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- Being merely collateral inducements to the contract,
representations may be communicated in any manner
whatsoever that is intelligible.
But they are not a part of the contract unless expressly made
so.
EXAMPLES:
(1) An underwriter who has insured a vessel described as a
steamer cannot be required to pay the loss of a sailing vessel;
nor will he, under a policy written upon the vessel,
represented to be safe in port, be liable for the loss of a vessel
which at the time of the undertaking was at sea and storm
tossed for the simple reason that he had not insured a vessel
in that situation.
(2) The insurer of a brick house is not liable for the loss of a
frame house; nor is he, who insures a man of thirty, liable for
the death of a man who was then fifty-five, even though in
every other respect he may answer to the description of the
person insured, (ibid.)
But the insurer could not decline to pay for the loss of a white
painted house or ship because the one insured was described
as being painted green though otherwise identical in
description with the subject of the loss, (ibid.)
Sec. 37. A representation may be made at the time of,
or before, issuance of the policy,
(a) Time when representation may be made. The very
nature of representation requires that it precede the
execution of the contract, (see Sec. 41.)
The insurer must be induced by the misrepresentation of the
insured to issue the policy at a specified premium. Clearly, a
representation made after the policy is issued could not have
influenced either party to enter into the contract. However, a
representation may be performed after the issuance of the
policy,
(see Sec. 39.)
Sec. 38. The language of a representation is to be interpreted
by the same rules as the language of contracts in general.
Construction of representations
Representations are construed liberally in favor of the
insured
- required to be only substantially true.
- Warranties (Sec. 67.), by contrast, must be literally
true, or the contract will fail.
The circumstances under which representations are usually
made to the insurer justify this rule.
If the representation is written in the policy, the language
in which it is expressed was chosen by the insurer;
If in answer to an inquiry, the agent of the insurer usually
phrases the answer to a question worded by the insurer.
The great number and particularity of the inquiries made and
the nature of the information asked, are such that "no human
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INSURANCE DELEON SUMMARY

being could, with safety, undertake to answer correctly purposes is an

and warrant the correctness of his answers." affirmative
representation.
ILLUSTRATIVE CASES:
1. Questions as to the use of liquor. — They will be
construed, if possible, as referring to habitual use and not to
occasional use or even occasional sprees.
Nature of promissory representations
2. Questions as to having any illness. — In a case where the
insured had stated that he had never had "any illness, local The term "promissory representation" is used in two senses:
disease or injury in any organ," it was held that this
representation was substantially true despite the fact that the First Second
insured had been discharged from the army because of it is used to indicate a an undertaking by the
inflammation of the eyes, which, however, had been entirely parol or oral promise insured, inserted in the
cured before the application for the policy. made in connection with policy, but not
the insurance, but not specifically made a
If it is true that there are "about fifty parts of the human incorporated in the warranty, is called also a
body which come under the denomination of organs, policy. The non- "promissory
including, among others, the eyes, the nerves, bones, performance of such a representation." It is,
cartilages, veins, glands of the skin, etc.," then if a finger had promise cannot be however, in such a case,
been broken, the skin injured or a vein cut at any period of the shown by the insurer in merely an executory
applicant's life, the answer given would necessarily constitute defense to an action on term of the contract, and
a misrepresentation the policy, but proof that not properly a
which is not so. the promise was made representation. (Vance,
with fraudulent intent op. cit., p. 396.)
3. Questions as to illness or disease. — They will refer to will serve to defeat the
serious ailments and not to minor indispositions. insurance; and
Gastric discomfort suffered after a drinking spree cannot be
considered a serious ailment but merely a minor indisposition
which appeared to be of an inconsequential nature not only to
an ordinary layman but even to the medical practitioner A promissory representation is, therefore, substantially a
condition or a warranty.
The rules referred to in Section 38 are the provisions of the
Civil Code on "Interpretation of Contracts" from Article 1370 EXAMPLE:
to Article 1379.
An applicant for fire insurance on a building makes a
Sec. 39. A representation as to the future is to be promise contained in the policy that it shall be occupied,
deemed a promise, unless it appears that it was merely a which promise induces the insurer to issue the policy at a
statement of belief or expectation. lower rate.

Kinds of representation. It is clear that the promise is not representation at all but a
A representation may be: term of the contract, the performance of which may be made
a condition of the insurer's liability.
(1) oral or written (Sec. 36.);
(2) made at the time of issuing the policy or before (Sec. 37.); But if the promise is oral, the insurer may not be allowed to
and prove it by the operation of the rule of evidence forbidding
(3)affirmative or promissory. (Sees. 39, 42.) the admission of parol testimony to add prior or
contemporaneous terms to a written instrument. (Rules of
Affirmative Promissory Court, Rule 130, Sec. 9.)
Representation Representation
is any allegation as to is any promise to be The promise, however, may be proved for a different
the existence or non- fulfilled after the purpose, that is, to prove that the insured had made the
existence of a fact when contract has come into promise in bad faith.
the contract begins, (see existence or any
Sec. 42.) statement concerning Effect on policy of expressions of opinion or expectation.
what is to happen during
the existence of the (1) Good faith/bad faith of the insured. —
insurance. A representation of the expectation, intention, belief,
opinion or judgment of the insured, although false,
Thus, the statement of a. will not avoid a policy of insurance
the insured that the b. if there is no actual fraud in inducing the
house to be insured is acceptance of the risk,
used only for residential c. or its acceptance at a lower rate of premium;
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INSURANCE DELEON SUMMARY
This is likewise the rule although the statement is material
to the risk, if such statement is obviously of the foregoing
character since in such case the insurer is not justified in
relying upon such a statement, but is obligated to make
further inquiry.
(2) Liability of the insurer. — As to such representations,
the good faith of the insured furnishes the criterion of
truth, for they can be false only when the intention,
opinion or belief as stated is not honestly entertained.
a. To avoid liability, the insurer must prove both
materiality of the insured's opinion and the
latter's intent to deceive.
If the representation is one of fact, all the insurer need to
prove is its falsity and materiality as defined in Sections 44,
45, and 46. The intent to deceive is presumed.
EXAMPLES:
(1) The insured may express an opinion that his house is of a
certain value, or that his body is wholly free from a certain
disease.
Here, the insurer knows that the insured's opinion may be
mistaken but the fact that such opinion is honestly entertained
may be of great value to him in estimating the risk.
But the policy will not be avoided even if the opinion turns
out to be erroneous,
(2) In response to a question, an applicant for a motor
vehicle insurance replied: "I am a very good driver."
The statement is not fraudulent as it is merely an expression
of opinion. But if in fact the applicant does not know how to
drive, he is guilty of fraudulent misrepresentation of material
fact. (Sees. 44, 45.)
When representation deemed a mere expression of opinion.
An oral representation as to a future event or condition, over
which the insured has no control, with reference to property
or life insured, will be deemed a mere expression of opinion
which will avoid a contract only when made in bad faith.
EXAMPLE:
The insured made an oral promise that the building insured
shall be occupied. The subsequent failure to fulfill the
promise if made in good faith, will not avoid the policy even
though the risk be increased by the building's being
unoccupied.
Sec. 40. A representation cannot qualify an express
provision in a contract of insurance; but it may qualify an
implied warranty,
Effect of representation on express provisions of policy.
A representation cannot qualify an express provision or an
express warranty in a contract of insurance.
- This is so because a representation is not a part of
the contract but only a collateral inducement to it.
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- A representation, however, may qualify an implied
warranty.
EXAMPLES:
(1) If the policy expressly provides that the house insured is
used as a warehouse, any representation made by the insured
prior to the issuance of the policy to the effect that the house
was used only as a residence is not a defense in the action for
recovery of the amount of insurance.
(2) If the insured makes a representation that the vessel
insured was deficient for the voyage because it was not duly
manned, such representation may qualify the implied
warranty that the vessel is seaworthy,
Sec. 41. A representation may be altered or withdrawn
before the insurance is effected, but not afterwards.
When representation may be altered or withdrawn.
A representation, not being a part of the contract of insurance,
may be altered or withdrawn before the contract actually
takes effect but not afterwards since the insurer has already
been led by the representation in assuming the risk
contemplated in the contract.
Sec. 42. A representation must be presumed to refer to
the date on which the contract goes in effect.
Time to which representation refers
Representations refer only to the time of making the contract.
As already shown, statements promissory of conditions to
exist subsequent to the completion of the contract may be
conditions or warranties. They cannot be representation.
Hence, conditions represented as existing must be so during
the making of the contract but not necessarily afterwards, and
representations found to be untrue may be withdrawn prior to
the completion of the contract but not afterwards. (Sec. 41.)
It results that there is no false representation, if it is true at
the time the contract takes effect although false at the time it
was made and vice versa, there is false representation if it is
true at the time it was made but false at the time the contract
takes effect.
EXAMPLES:
(1) If the insured represented that his vessel was in
Tokyo, when in fact it was in Hongkong, but at the taking into
effect of the contract, it was already in Tokyo, there is no
misrepresentation. Conversely, the contract is avoided even if
the representation was true at the time it was made, but false
at the time the contract takes effect.
Assuming the representation that the vessel was in Tokyo to
be true but on the date of the execution of the contract the
vessel was no longer in Tokyo but in Hongkong and is
shipwrecked there, the insurer is not liable under the policy
on the ground of false representation. In other words, a
representation is a "continuing representation" until the
contract takes effect,
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INSURANCE DELEON SUMMARY
(2) At the time X applied for a life insurance policy on June
10, 2002, he had never suffered from any of the enumerated
diseases including pneumonia. On July 12, 2002, he became
ill with pneumonia and completely recovered on July 25,
2002.
When the policy was delivered and the first premium paid on
July 30, 2002, X did not disclose his having been sick with
pneumonia. Is there false representation?
Yes, and, therefore, the insurer is entitled to rescind the
contract, (see Sec. 45.)
(3) But the truth of the statement made by the insured at the
date of the application that, for example, his age at his nearest
birthday is thirty-five, is surely to be tested as of the date of
the application. It would be absurd to say that this
representation was fatally false because at the time of the
acceptance of the application and the completion of the
contract it was no longer
true.
Sec. 43. When a person insured has no personal
knowledge of a fact, he may nevertheless repeat information
which he has upon the subject, and which he believes to be
true, with the explanation that he does so on the information
of others; or he may submit the information, in its whole
extent, to the insurer; and in neither case is he responsible for
its truth, unless it proceeds from an agent of the insured,
whose duty it is to give the information.
Effect where information obtained from third persons
Under this section, the insured is given discretion to
communicate to the insurer what he knows of a matter of
which he has no personal knowledge.
- If the representation turns out to be false,
- he is not responsible therefor,
- provided he gives explanation that he does so on the
information of others.
EXAMPLE:
If the insured has no personal knowledge of the cause of the
death of his parents because they died when the insured was
still an infant, he may report information obtained from
friends and relatives, expressly stating that he does not
possess knowledge personally but through others.
In this case, the insured is not responsible for the truth of the
information.
On the other hand, where a party orders insurance, and
afterwards receives information material to the risk, or has
knowledge of a loss, he ought to communicate it to his agent
as soon as, with due and reasonable diligence, it can be
communicated for the purpose of countermanding the order,
or laying the circumstances before the insurer. If he omits to
do so, the policy
is avoided.
Effect where information obtained from agent of
insured/insurer.
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(1) Agent of the insured. —
a. If the information proceeds from an
agent of the insured,
b. whose duty it is in the ordinary course of
business to communicate such information
to his principal,
c. and it was possible for the agent under such
circumstances in the exercise of due
diligence
d. to have made such communication before
the making of the contract, the insured will
be liable for the truth.
EXAMPLE:
A captain of a ship is bound to communicate its loss to the
owner and if the latter effects an insurance on the ship "lost
ornot lost" in ignorance of the antecedent loss due to the fraud
or negligence of the captain, the insured cannot recover on the
policy
(2) Agent of the insurer. — It must be borne in mind that the
same principle applies to the insurer though in the nature of
things, the question does not occur so frequently.
EXAMPLE:
If an insurer would effect an insurance upon a vessel "lost or
not lost," when his agent under a duty of disclosing to the
insurer, knew that the vessel had, in fact, arrived safely, the
insurance would be void, and the insured would be entitled to
a return of premium.
Sec. 44. A representation is to be deemed false when
the facts fail to correspond with its assertions or stipulations.
When representation deemed false.
Section 44 defines misrepresentation, (see also the definition
under Sec. 36.)
Unlike in the case of warranties (see Sec. 67.), representations
are not required to be literally true; they need only be
substantially true.
In order that a policy shall be avoided, a representation relied
upon must be false in a substantial and material respect.
(Sec. 45.)
A representation is substantially true when it is true in every
particular material to the risk, or is so far true that the conduct
of the insurer would not have been different if the exact truth
had been alleged.
Where a representation partly fails but is true or is complied
with so far as is essential to the risk insured
against, the policy remains in force.
In marine insurance, substantial truth of a representation is
not sufficient.
The insured is required to state the exact and whole truth in
relation to all matters that he represents, or upon inquiry
discloses or assumes to disclose.
EXAMPLES:
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(1) Confinement in childbirth is not a "personal ailment"
within the representation made by a married woman that she
had not consulted a physician "in regard to a personal
ailment" during seven years prior to her application
(2) Failure of insured to include an illness occasioned by a
fall from a tree from which he had completely recovered, was
held not to avoid the policy, although the application blank
reads:
"Detail all illness, disease, operations, accidents or injuries
you have since childhood."
Query: But is it not the right of the insurer to determine
the nature of the injury or illness or its ultimate effect on the
insurable character of the life proposed before deciding
whether or not to enter into the contract? (see Sec. 46.)
(3) A statement that the applicant is in good health is held not
to mean that he is in perfect health, but that he is not aware of
any disease of such a serious nature as to impair his health
permanently.
That he is temporarily ill because of some passing malady
does not render his representation substantially untrue,
Construction of representation as affirmative.
A representation written in the policy even in such form as to
admit of its being construed as an executory agreement or
promissory representation (Sec. 39.) will rather be construed,
when possible, as an affirmative representation of a present
fact (see Sec. 42.) in order to save the policy from avoidance.
EXAMPLE:
The insured states that a building is used for a certain
purpose or that no smoking is allowed on the premises.
The truth of the representation at the time the contract
takes effect is sufficient to validate the insurance which will
not be affected by a subsequent change in the use to which
the building is put or in the practice as to smoking in the
premises,
Sec. 45. 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. The right to rescind granted by
this Code to the insurer is waived by the acceptance of
premium payments despite knowledge of the ground for
rescission,
Effect of falsity of representation.
Fraud or intent to misrepresent facts is not essential to entitle
the injured party to rescind a contract of insurance on the
ground of false representation.
To be deemed false, it is sufficient if the representation fails
to correspond with the facts (Sec. 44.) in a material point.
(Sec. 45.)
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Representations of fact are the foundation of the contract; and
if the foundation does not exist, the superstructure does not
arise.
In other words, the minds of the parties never meet.
EXAMPLES:
(1) An applicant for life insurance denied in his application
that any member of his family had been sick or that he himself
had the disease, although he knew that a brother and a sister
of his had died previously of pulmonary tuberculosis and he
himself was already spitting blood at the time he filed his
application.
The misrepresentation is material and sufficient to
avoid the contract of insurance even if not intentional.
(2) But it is not misrepresentation for the insured to state that
he did not drink beer or other intoxicants if he drank but very
seldom
Here, the representation is false but not in a material
point.
Effect of collusion or fraud of agent of insurer.
(1) Collusion with insured. — Collusion between the agent
and the insured in misrepresenting the facts will vitiate the
policy even though the agent is acting within the apparent
scope of his authority.
When there is collusion, the agent thereby ceases to represent
his principal, and represents himself; so the insurer is not
estopped from avoiding the policy.
(2) Principal of agent. — Likewise, where the insured merely
signed the application form and made the agent of the insurer
fill the same for him, it was held that by doing so, the insured
made the agent of the insurer his own agent.
But where the insurer required its medical examiner to put the
questions and fill out the answers in his own handwriting, the
writer of the application is not the agent of the insured.
The insurer is liable when its agent writes a false answer into
the application without the knowledge of the insured. (45
C.J.S. 179.)
Sec. 46. The materiality of a representation is determined by
the same rules as the materiality of a concealment.
Materiality of representation.
(1) Test of materiality. — The materiality of the
representation is to be determined not by the event,
- but solely by the probable and reasonable influence of the
facts upon the party to whom the representation is made,
- in forming his estimates of the disadvantages of the
proposed contract or in making his inquiries.
(2) Materiality, a judicial question. — Who determines the
materiality of the representation?
- It is not left to the insurance company to say after the loss
has occurred that it would or would not have issued the policy
had an answer been truly given.
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- No sound principle of law would permit a determination of
this question solely upon the say so of the company.
- The matter misrepresented must be of that character which
the court can say would reasonably affect the insurer's
judgment.
- No misrepresentation of a mere trifling matter in the
applicant's health if he might honestly be mistaken about it,
will render the statement false so as to avoid the policy,
merely because an insurance company says that it would not
have issued the policy otherwise.
Concealment and misrepresentation compared.
(1) In concealment, the insured withholds information of
material facts from the insurer, whereas in misrepresentation,
the insured makes erroneous statements of facts with the
intent of inducing the insurer to enter into the insurance
contract.
(2) The materiality of a concealment is determined by the
same rules as applied in cases of misrepresentation.
(3) A concealment on the part of the insured has the same
effect as a misrepresentation and gives the insurer a right to
rescind the contract.
(4) Whether intentional or not, the injured party is entitled to
rescind a contract of insurance on ground of concealment or
false representation.
(5) Since the contract of insurance is said to be one of utmost
good faith on the part of both parties to the agreement, the
rules on concealment and representation apply likewise to the
insurer.
Sec. 47. The provisions of this chapter apply as well to
a modification of a contract of insurance as to its original
formation, (a)
Applicability of Sections 26 to 48.
The provisions of Sections 26 to 35 governing concealment
and Sections 36 to 48 governing representations apply not
only to the original formation of the contract but also to a
modification of the same during the time it is in force.
Thus, where the insurer is induced to modify the insurance
policy as to the rate of premium by a misrepresentation
on the part of the insured in a material point, the insurer
is entitled to rescind such modification.
Sec. 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
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reason of the fraudulent concealment or misrepresentation of
the insured or his agent
When an insurer must exercise his right to rescind
(1) In general. — A contract of insurance may be
rescinded on the ground of concealment, or false
representation, or breach of warranty. - - An action
to rescind a contract, as contemplated by the first
paragraph of Section 48, is founded upon and
presupposes the existence of the contract, which is
rescinded.
- Hence, a defense to an action to recover insurance
that the policy was obtained through false
representations, fraud and deceit is not in the
nature of an action to rescind and is, therefore,
not barred by the provision.
- There is no time limit imposed for interposing this
defense.
(2) In non-life policy. — Under the first paragraph of
Section 48, in order that the insurer may rescind a
contract of insurance, such right must be exercised
prior to the commencement of an action on the
contract.
- In other words, the insurer is no longer entitled to
rescind a contract of insurance after the insured has
filed an action to collect the amount of the insurance.
- It has beenheld, however, that where any of the
material representations is false, the insurer's tender
of the premiums and notice that the policy is
cancelled before commencement of the suit thereon,
operates to rescind a contract of insurance.
(3) In life policy. — With reference to life insurance
contracts, the foregoing rulings should be understood to be
qualified by the second paragraph of Section 48.
- By virtue of the second paragraph, the defenses
mentioned are available only during the first two
years of a life insurance policy.
Incontestability of life policies.
Clauses in life insurance policies known as incontestable
clauses stipulating that the policy shall be incontestable after
a stated period are in general use, and are now required by
statutes in force in many states.
- They create a kind of contractual statute of
limitations on certain defenses that may be raised by
the insurer.
Incontestability - means that after the requisites are shown
to exist, the insurer shall be estopped from contesting the
policy or setting up any defense, except as is allowed, on the
ground of public policy.
Theory and object of the incontestable clause
(1) As to the insurer. — The theory is that an insurer should
have a reasonable opportunity to investigate the
statements which the applicant makes in procuring his
policy and that after a definite period,
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INSURANCE DELEON SUMMARY
- The insurer should not be permitted to question the validity
of the policy (ibid., p. 577.),
- either by affirmative action or by defense to a suit brought
on the life policy by the beneficiary.
(2) As to the insured. — The clause has as its object to give
the greatest possible assurance to a policyholder that his
beneficiaries would receive payment without question as to
the validity of the policy
- or the existence of the coverage once the period of
contestability passes.
- It is designed to protect the policyholder or beneficiary from
a
lawsuit contesting the validity of the policy after a
considerable time has passed and evidence of the facts
surrounding the purchase may be unavailable.
- It is a sufficient answer to the various tactics
employed by insurance companies to avoid liability.
Requisites for incontestability.
Under our law, in order that the insurance shall be
incontestable, the following requisites must be present:
(1) The policy is a life insurance policy;
(2) It is payable on the death of the insured; and
(3) It has been in force during the lifetime of the insured for
at least two (2) years from its date of issue or of its last
reinstatement.3
The period of two (2) years for contesting a life insurance
policy by the insurer may be shortened but it cannot be
extended by stipulation.
The phrase "during the lifetime"- means that the policy is
no longer considered in force after the insured
has died. The key phrase is "for a period of two years."
Effect when policy becomes incontestable.
When a policy of life insurance becomes incontestable, the
insurer may not refuse to pay the same by claiming that:
(1) the policy is void ab initio; or
(2) it is rescissible by reason of the fraudulent concealment of
the insured or his agent, no matter how patent or well-
founded;or
(3) it is rescissible by reason of the fraudulent
misrepresentations of the insured or his agent.
Since the law speaks of a policy in force for two years, the
expression "void ab initio" should be understood in the sense
of "voidable" and the fraud contemplated should refer to fraud
in the inducement.
In case of reinstated policy, the period of contestability should
be counted from the date of reinstatement and not from the
date of the issuance of the policy.
A policy of insurance, after it has lapsed or become
forfeited, as for nonpayment of premiums or breach of a
warranty or condition, may be revived or reinstated pursuant
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to a provision contained in the policy or the agreement of the
parties.
EXAMPLE:
X procured insurance on his life through fraudulent
concealment or misrepresentations.
(1) If X dies within two years from the issuance of the
policy, the rule on incontestability does not apply because the
law says that the policy must have been in force during the
lifetime of the insured for a period of two years. Hence, his
beneficiary cannot recover on the policy.
(2) Whether or not X is dead or alive, the insurer cannot
exercise the right after two years from the time the policy is
issued. The fraud committed by X is cured by the lapse of the
said two-year period.
But if the policy is payable not upon the death of the
insured but upon maturity by lapse of a certain period of time,
the insurer can still ask for its annulment or rescission.
ILLUSTRATIVE CASE:
Insurer's approval of application for reinstatement was made
after insured's death but before her death, insured had already
complied with the conditions for reinstatement.
Facts: During the pendency of her application for the
reinstatement of her life policy which lapsed on January 14,
1971 for nonpayment of premium, D (insured) died for a
cause described as "acute renal failure." The approval of the
application was made by R (insurer) after her death. It
appears, however, that D, before her death, had already
complied with the conditions for reinstatement, namely;
payment of the back premiums and submission of proof of
insurability (a Health Statement).
Issue: Did D's death pending approval of her application for
reinstatement operate to avoid the policy?
Held: No. The approval of her application was merely
a mechanical act which should be granted upon compliance
with the conditions mentioned. Since, in fact, R approved her
application, the original policy is deemed reinstated as of the
effective premium due shown in the policy, that is, January
14,
1971.
The argument that the approval of the application is the
effective date of the policy would allow R to determine the
effective date and where loss has already occurred, will
permit R to avoid the terms and conditions of the original
policy and result in the undermining of the actual conditions
which are the fundamental basis of all insurance.
Defenses not barred by incontestable clause
The incontestability of a policy under the law is not absolute;
- otherwise, a beneficiary of any person who had
procured a life policy more than two years before his
death would automatically be entitled to the
proceeds upon that person's death.
 MIRANDA, CLARISSE ANN 8
INSURANCE DELEON SUMMARY

- Incontestability only deprives the insurer of those

defenses which arise in connection with the
formation and operation of the policy prior to loss.

The insurer may still contest the policy by way of defense

to a suit brought upon the policy or by action to rescind
the same, on any of the following grounds:

(1) That the person taking the insurance lacked insurable

interest as required by law;
(2) That the cause of the death of the insured is an excepted
risk;
(3) That the premiums have not been paid
(4) That the conditions of the policy relating to military or
naval service have been violated
(5) That the fraud is of a particularly vicious type, as where
the policy was taken out in furtherance of a scheme to murder
the insured, or where the insured substitutes another person
for the medical examination, or where the beneficiary
feloniously
kills the insured;
(6) That the beneficiary failed to furnish proof of death or to
comply with any condition imposed by the policy after the
loss has happened; or
(7) That the action was not brought within the time specified,