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Vanessa and Carlo, who have been together since 2015, agreed to marry sometime in 2020. On January 26, 2017, Vanessa took out an insurance policy on…

2026 Bar Exam · Commercial & Taxation Law · Question 7 · Essay

The question

Vanessa and Carlo, who have been together since 2015, agreed to marry sometime in 2020. On January 26, 2017, Vanessa took out an insurance policy on the life of Carlo, with Longlife Insurance Company. In the insurance application, Vanessa misrepresented that Carlo was in perfect health, although she was fully aware that he had asthma. On March 21, 2019, or more than two years after Vanessa took out the policy, Carlo figured in a vehicular accident and perished. A few days after Carlo was buried, Vanessa filed an insurance claim with Longlife Insurance Company. Should Longlife Insurance Company pay Vanessa? Explain.

Held

Yes, Longlife Insurance Company should pay Vanessa, under Section 48 of the Insurance and Pre-need Codes.

Explanation

Section 48 of the Insurance and Pre-need Codes provides that if a life insurance policy has been in force during the lifetime of the insured for at least two years from the date of issue, the insurer loses the right to rescind the policy on grounds of fraudulent concealment or misrepresentation by the insured or the insured's agent. This means that any misrepresentation made by the insured or the insured's agent regarding the insured's health or other material facts cannot be used to void the policy after this two-year period has elapsed while the insured was still alive. The purpose of this provision is to protect legitimate policyholders and beneficiaries from unwarranted denial of claims after a reasonable period has passed, ensuring that insurers investigate thoroughly within the first two years of the policy. The phrase "during the lifetime" means that the policy must have been in force for two years while the insured was alive; if the insured dies after this period, the insurer cannot contest the policy on grounds of fraud or misrepresentation.

Application to the facts

In this case, Vanessa took out the insurance policy on Carlo's life on January 26, 2017. Carlo died on March 21, 2019, which is more than two years after the policy was issued. Although Vanessa misrepresented Carlo's health condition by stating he was in perfect health despite knowing he had asthma, this misrepresentation occurred more than two years before Carlo's death. Since the policy was in force for more than two years during Carlo's lifetime, Longlife Insurance Company cannot rescind the policy or deny the claim based on the misrepresentation. Therefore, Vanessa, as the beneficiary, is entitled to the insurance proceeds. The insurer's obligation to pay arises immediately upon presentation of the claim and proof of death, subject to the provisions of Section 248 regarding payment within sixty days.

This is general legal information, not legal advice.