Eternal Gardens Memorial vs. Philamlife Case digest Insurance- Commercial Law

 

Eternal Gardens Memorial vs. Philamlife case digest Insurance- Commercial Law

Eternal Gardens Memorial vs. Philamlife Insurance, GR No. 166245, Apr. 9, 2008

 

FACTS: Philippine American Life Insurance Company (Philamlife) entered into an agreement 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. The amount of insurance coverage depended upon the existing balance.

Eternal complied by submitting a a list of insurable balances of its lot buyers for October 1982 which includes John Chuang which was stamped as received by Philam Life.

In 1984, Chuang died with a balance of 100,000 php

In 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 ruled in favor of Eternal. CA Reversed RTC.

ISSUE: W/N Philam's inaction or non-approval meant the perfection of the insurance contract.

HELD: YES. CA is reversed. It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor of the insured and strictly against the insurer in order to safeguard the latter's interest. Thus, in Malayan Insurance Corporation v. CA, this Court held that: Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer. A contract of insurance. being a contract of adhesion. par excellence, any ambiguity therein should be resolved against the insurer; in other words, it should be construed liberally in favor of the insured and strictly against the insurer. Limitations of liability should be regarded with extreme jealousy and must be construed in such a way as to preclude the insurer from noncompliance with its obligations.

 

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