Gloria v. Philamlife Insurance Co.

73 OG 8660

Facts:

>  In 1966, Roberto Narito applied for a 100T life insurance policy with Philamlife Insurance Company.  Narito was examined by Dra. Vergel de dios, the insurer’s medical examiner.

>  She opined that Narito was insurable.  Her opinion was confirmed by Dr. Orobia, the Associate Medical Director of the insurer.

>  On Oc. 31, 1966, an agent of the insured prepared an application for the life insurance whose annual premium was P1,178.  On the same date, the application was signed by Narito.

>  Narito paid the first annual premium on the policy applied for.  The insurer’s application form contained a so-called “Binding Receipt” which was detachable.

>  It is not sure whether or not Narito was given the Binding Receipt upon his payment of the first premium, but what is certain that he was handed a Cashier’s Receipt.

>  From the time the insured received  the application form its agent on Nov. 5, 1966, up to Dec. 6, 1966, it did not take any action with regard to the controverted insurance coverage.

>  On Dec. 6, 1966, Narito was shot and killed.  The beneficiaries submitted a claim to the insurer.  After an underwriting analysis conducted by the insurer, it found out that Narito was unacceptable as an insurance risk.  The claim was denied.

Issue:

Whether or not  the beneficiaries can claim.

Held:

YES.

The application for insurance signed by the deceased contained the following stipulation: “The binding receipt must NOT be issued unless a binding deposit is paid which must be at least equal to the first full premium.” The preponderance of evidence is to the effect that the binding receipt was not issued to the deceased when he paid the company’s agent, the first annual premium of P1,178.  Hence the rights of the beneficiaries and the obligation of the company have to be determined solely in the application for insurance an in the Cashier’s receipt.

The application for insurance contained the following clause: “There shall be no contract of insurance unless a policy is issued on this application and the full first premium thereon actually paid.”  It should be conceded that there shall be a contract of insurance once the first premium is paid and a policy is issued.  There is no question that the first premium was paid.

The problem is to resolve whether or not it can be said that the policy has been issued.  IN this connection, what may be noted is that, in contrast to the requirement of actual payment of the premium, it was NOT required that the policy be actually issued.  An assuming that no policy had indeed been issued, it should still be held that the application for insurance was approved by the company, with the actual issuance of the policy being a mere technicality.  When an insurer accepts and retains the first premium for an unreasonable length of time, it should be presumed that the insurer had assumed the risk.  It should therefore be liable for loss before the application is subsequently rejected.  In the case at bar, the company did NOT act on the application for insurance, one way or the other, from Nov. 2 to Dec. 5, 1966, and no justification for the delay had been proven.

Hence, it should be held that the application for insurance of the deceased had been approved prior to his death, although the policy had not actually been issued, for which reason, the company should be liable to the beneficiaries.