Automatic Insurance Coverage
ETERNAL GARDENS MEMORIAL PARK CORPORATION vs.
THE
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
G.R. No. 166245, 9 April 2008
FACTS:
Respondent insurance company entered into a Creditor
Group Life Policy agreement with Eternal Gardens
Memorial. Under said policy, the clients of Eternal who
purchased burial lots from
it on installment basis would be insured by Philamlife. The
amount of insurance coverage depended upon the existing
balance of the purchased burial lots. The policy was to be
effective for a period of one year, renewable on a yearly
basis. As required under the said policy, Eternal submitted
a list of all new lot purchasers, including the application of
each purchaser and their corresponding unpaid balances.
Included in this list is a certain John Chuang.
When Chuang died, Eternal sent a letter, together with the
pertinent papers, to Philamlife which served as an
insurance claim for Chuang’s death. Philamlife required
that Eternal submit certain documents relative to its
insurance claim for Chuang’s death. Eternal transmitted
said documents which Philamlife was able to received.
However, after more than one year, Philamlife did not
anymore reply to Eternal’s insurance claim. This prompted
Eternal to demand the insurance claims. However,
Philamlife denied the said claim, prompting Eternal to file
a case before the RTC of Makati.
ISSUE:
Whether or not Philamlife assumed the risk of loss without
approving the application.
HELD:
YES. 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. The second sentence of Creditor Group Life
Policy No. P-1920 on the Effective Date of Benefit is in the
nature of a resolutory condition which would lead to the
cessation of the insurance contract. Moreover, the mere
inaction of the insurer on the insurance application must
not work to prejudice the insured; it cannot be interpreted
as a termination of the insurance contract. The
termination of the insurance contract by the insurer must
be explicit and unambiguous.
More often than not, insurance contracts are contracts of
adhesion containing technical terms and conditions of the
industry, confusing if at all understandable to laypersons,
that are imposed on those who wish to avail of insurance.
As such, insurance contracts are imbued with public
interest that must be considered whenever the rights and
obligations of the insurer and the insured are to be
delineated. Hence, in order to protect the interest of
insurance applicants, insurance companies must be
obligated to act with haste upon insurance applications, to
either deny or approve the same, or otherwise be bound to
honor the application as a valid, binding, and effective
insurance contract.
WHEREFORE, we GRANT the petition
When estoppel not applied to insurance contracts
JAMES STOKES vs. MALAYAN INSURANCE CO., INC.
G.R. No. L-34768, 24 February 1984
127 SCRA 766
FACTS:
Daniel Adolfson had a subsisting Malayan car insurance
policy with coverage against own damage as well as 3rd
party liability when his car figured in a vehicular accident
with another car, resulting to damage to both vehicles. At
the time of the accident, Adolfson’s car was being driven
by James Stokes, who was authorized to do so by Adolfson.
Stokes, an Irish tourist who had been in the Philippines for
only 90 days, had a valid and subsisting Irish driver’s
license but without a Philippine driver’s license.
Adolfson filed a claim with Malayan but the latter refused
to pay contending that Stokes was not an authorized
driver under the “Authorized Driver” clause of the
insurance policy in relation to Section 21 of the Land
Transportation Office.
ISSUE:
Whether or not Malayan is liable to pay the insurance
claim of
Adolfson
HELD:
NO. A contract of insurance is a contract of indemnity
upon the terms and conditions specified therein. When the
insurer is called upon to pay in case of loss or damage, he
has the right to insist upon compliance with the terms of
the contract. If the insured cannot bring himself within the
terms and conditions of the contract, he is not entitled as
a rule to recover for the loss or damage suffered. For the
terms of the contract constitute the measure of the
insurer’s liability, and compliance therewith is a condition
precedent to the right of recovery.
At the time of the accident, Stokes had been in the
Philippines for more than 90 days. Hence, under the law,
he could not drive a motor vehicle without a Philippine
driver’s license. He was therefore not an “authorized
driver” under the terms of the insurance policy in
question, and Malayan was right in denying the claim of
the insured.
Acceptance of premium within the stipulated period for
payment thereof, including the agreed period of grace,
merely assures continued effectivity of the insurance
policy in accordance with its terms. Such acceptance does
not estop the insurer from interposing any valid defense
under the terms of the insurance policy.
The principle of estoppel is an equitable principle rooted
upon natural justice which prevents a person from going
back on his own acts and representations to the prejudice
of another whom he has led to rely upon them. The
principle does not apply to the instant case. In accepting
the premium payment of the insured, Malayan was not
guilty of any inequitable act or representation. There is
nothing inconsistent between acceptance of premium due
under an insurance policy and the enforcement of its
terms.
WHEREFORE, the appealed judgment is reversed. The
complaint
is dismissed. Costs against appellees