G.R. No. 166245 April 9, 2008
Lessons Applicable: Exception to Perfection (Insurance)
FACTS:
- December 10, 1980: Philippine American Life Insurance Company (Philamlife) entered into an agreement denominated as Creditor Group Life Policy No. P-19202 with Eternal Gardens Memorial Park Corporation (Eternal)
- Under the policy (renewable annually), the clients of Eternal who purchased burial lots from it on installment basis would be insured by Philamlife
- amount of insurance coverage depended upon the existing balance
- Eternal complied by submitting a letter dated December 29, 1982, a list of insurable balances of its lot buyers for October 1982 which includes John Chuang which was stamped as received by Philam Life
- August 2, 1984, Chuang died with a balance of 100,000 php
- April 25, 1986: Philamlife had not furnished Eternal with any reply on its insurance claim so its demanded its claim
- According to Philam Life, since the application was submitted only on November 15, 1984, after his death, Mr. John Uy Chuang was not covered under the Policy since his application was not approved. Moreover, the acceptance of the premiums are only in trust for and not a sign of approval.
- RTC: favored Eternal
- CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance contract.
HELD: YES. CA reversed
- construed in favor of the insured and in favor of the effectivity of the insurance contract
- Upon a party’s purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application
- Moreover, the mere inaction of the insurer on the insurance application must not work to prejudice the insured
- The termination of the insurance contract by the insurer must be explicit and unambiguous