SC upholds cancellation of life policy over undisclosed illness

The Supreme Court (SC), in a ruling, upheld the cancellation of a man’s life insurance policy for his failure to disclose his medical condition, reiterating that proof that he intended to deceive the insurer is not required.

This was stated in a decision penned by Associate Justice Japar B. Dimaampao dated 28 January 2026, in which the SC En Banc denied the petition of the Heirs of Indalicio Monera and dismissed their complaint against Manila Bankers Life Insurance Corporation and Meycauayan Rural Bank, Inc.

Indalicio Monera took out loans from Meycauayan Bank, some of which were secured by a mortgage on a parcel of land and a group credit life insurance policy issued by MB Life.

The insurance proceeds under the policy would be paid to the bank if Monera died.

When Monera applied for another credit life insurance policy, he signed a health declaration stating that he had not been sick for seven or more consecutive days or consulted a doctor for any illness in the last five years.

Less than a month after getting the second policy, Monera died. When his loans became due, Meycauayan Bank filed a claim with MB Life, but the insurer denied it after learning that, before applying for the policy, Monera had undergone a procedure to remove a mass and had been diagnosed with cancer that had spread near his right collarbone.

MB Life’s denial of the claims was challenged by the heirs in court. However, both the Regional Trial Court and the Court of Appeals ruled against them, finding that Monera’s failure to disclose his actual medical condition was relevant to the insurer’s decision to issue the policy and therefore justified its cancellation.

This prompted the heirs to appeal to the SC, arguing that MB Life could no longer cancel the policy after it had been in effect for two years.

They also argued that MB Life failed to prove that Monera intended to defraud the insurer.

The SC disagreed, stating that the Insurance Code allows an insurer to cancel an insurance policy when an applicant fails to disclose information, whether intentionally or unintentionally.

It said information is considered material if it could have affected the insurer’s decision to issue the policy.

Monera, in this case, did not state that he had undergone surgery, consulted doctors, and been diagnosed with cancer, even though he declared otherwise in the health declaration form.

The court explained that Monera’s failure to disclose his true health status was material because it would have influenced MB Life’s assessment of his insurance application, including whether to approve it and under what terms.

It also clarified that insurers do not need to prove that the insured intended to deceive them. In insurance contracts, hiding material information is considered fraudulent because the insured knows the information is important but chooses not to disclose it.

The court said concealment is treated the same as making a false statement, even without an actual intent to deceive.

The SC also held that the incontestability rule, which generally bars an insurer from challenging a life insurance policy after it has been in force for two years, does not apply in this case because the policies are short-term.

The first policy had a two-month term, while the second lasted three months.

The high bench also noted a gap in the law on insurance policies in force for less than two years and said that it is up to Congress to determine the requirements for these policies.

In his dissenting opinion, Senior Associate Justice Marvic M.V.F. Leonen said that MB Life should have exercised greater diligence in evaluating Monera’s application before approving the insurance.

Since the policy was a contract of adhesion, or a standard contract that the insured could only accept or reject, it should be interpreted in favor of the insured and strictly against the insurer.

In his separate concurring opinion, Associate Justice Ramon Paul L. Hernando noted that Monera died only about a month after the policy was issued.

Because the two-year incontestability period had not yet set in, MB Life was not barred from questioning the heirs’ claim to the insurance benefits.

In his separate concurring opinion, Associate Justice Jhosep Y. Lopez said the two-year incontestability rule is not inflexible. The Insurance Code allows different rules for group life policies, subject to the Insurance Commissioner’s approval.