[Answer / discuss the question below. Or see 2014 bar exam Commercial Law Instructions; 2014 Commercial Law essay and multiple choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 and 29; See also 2014 Bar Exam: Information, Discussions, Tips, Questions and Results]
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Ilocos Bankers Life Insurance Corporation (Ilocos Life) designating Creencia Aban (Aban), her niece, as her beneficiary. Ilocos Life issued Policy No. 747, with a face value of P100,000.00, in Sotero’s favor on August 30, 1993, after the requisite medical examination and payment of the premium.
On April 10, 1996, Sotero died. Aban filed a claim for the insurance proceeds on July 9, 1996. Ilocos Life conducted an investigation into the claim and came out with the following findings:
1. Sotero did not personally apply for insurance coverage, as she was illiterate.
2. Sotero was sickly since 1990.
3. Sotero did not have the financial capability to pay the premium on the policy.
4. Sotero did not sign the application for insurance.
5. Aban was the one who filed the insurance application and designated herself as the beneficiary.
For the above reasons and claiming fraud, Ilocos Life denied Aban’s claim on April 16, 1997, but refunded the premium paid on the policy. (6%)
(A) May Sotero validly designate her niece as beneficiary?
(B) May the incontestability period set in even in cases of fraud as alleged in this case?
(C) Is Aban entitled to claim the proceeds under the policy?