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Title XI.

Loan
54. Sun Life of Canada (Phils) Inc. v. Sandra Tan Kit, et.al, G.R. No. 183272, October
15, 2004
By: Javier, Elojra Carmiel D.

DOCTRINE: Compensatory interest is defined as penalty or indemnity for damages


imposed by law or by the courts under the Article 2209 and 2212 of the Civil Code and
is due only if the obligor is proven to have failed to comply with his obligation.

FACTS: Respondent Tan Kit is the widow and designated beneficiary of Norberto Tan
Kit, whose application for a life insurance policy with a face value of Php 300,000 was
granted by the Petitioner Sun Life on October 28, 1999. On February 19, 2001, or within
the constestability period, Norberto died of cancer and the respondent filed a claim
under the subject policy.

However the petitioner denied the claim on the account of Norberto's failure to fully and
faithfully disclose in his insurance application certain material and relevant information
about his health and smoking history as Norberto answered no regarding smoking for
the last 12 months. The petitioner opined that its liability is limited to the refund of all
premiums paid and issued a check worth Php 13,080.93 representing the premium
refund. Respondent Tan Kit refused to accept the check and insisted on the payment of
the insurance proceeds.

The RTC ruled in favor of the respondent and ordered the payment of the face value of
Php 300,000 however the CA reversed the said ruling and ordered the reimbursement
of the premium refund worth Php 13,080.93 with an interest of 12% per annum from the
time of the death of the insured until fully paid.

ISSUE/S: Whether or not the petitioner is liable to pay interest on the premium to be
refunded to the respondents?

RULING: No, the petitioner is not liable to pay compensatory interest to the respondent
Tan Kit. The petitioner did not unreasonably deny or withhold the insurance proceeds as
it was satisfactorily established that Norberto was guilty of concealment.

The court defines compensatory interest as penalty or indemnity for damages imposed
by law or by the courts under the Article 2209 and 2212 of the Civil Code and is due
only if the obligor is proven to have failed to comply with his obligation. In this case, the
CA incorrectly imposed compensatory interest on the premium refund reckoned from
the time of death of the insured until fully paid. The respondents were given notice that
the subject policy was rescinded due to concealment and the petitioner tendered the
refund of premium by attaching a check representing the refund. However, the
respondent refused to accept the same as they were seeking for the release of the
proceeds of the policy.The court finds that the petitioner did not incur delay or
unjustifiably deny the claim hence should not be made liable to pay compensatory
interest.