G.R. No.

183526 August 25, 2009

VIOLETA R. LALICAN, Petitioner,
vs.
THE INSULAR LIFE ASSURANCE COMPANY LIMITED, AS REPRESENTED BY THE PRESIDENT VICENTE R. AVILON,
Respondent.

Topic: Cancellation and Reinstatement of Policy

Yellow highlight: Doctrine/s

Facts:
● Violeta - widow of deceased Eulogio Lalican
● Eugelio applied for an insurance policy with Insular Life
● 1997 April: Insular life issued Policy No. 9011992 in favor of him
○ 20-year endowment variable income package flexi plan (500k amount)
○ 2 riders valued at 500k each - so the policy amounted to 1.5 million
○ Violeta named as primary beneficiary
○ Payable quarterly until end of policy
○ Payable every April, July, October ,January 24th (Php8,062.00)
○ Default if failed to pay - With 31 days grace period - nonpayment at the end of grace period, the
policy will automatically lapse and become void
● Eugelio subsequently failed to pay the premiums - lapsed after grace period and became void
● May 1998: filed an Application for Reinstatement (at Cabanatuan District Office)
● Insular: “although paid 8,062 - still, may interest amounting to Php322.48, so pay for it and file another
application.” (while hindi pa na re reinstate, nag accrue na yung months that passed by, so nag ka
balance ulit and interest)
● September 1998: filed for a second application plus Php 17,500.00 as payment dun sa months and
interests - since nasa business errand si Malaluan (agent of Insular), his wife received it nalang and issued
a receipt.
● On the same day - Eugelio died of cardio-respiratory arrest (na electrocute siya.)
● Malaluan - not knowing Eugolio’s death - forwarded sa Insular yung application - when Insular learned
of Eugelio’s death, they stopped acting upon the application na
● Violeta tried to collect yung policy but Insular said no, may provision sa policy that says, “the policy would
only be considered reinstated upon approval of the application by Insular Life during the applicant’s
"lifetime and good health," and whatever amount the applicant paid in connection thereto was
considered to be a deposit only until approval of said application.”
● They gave back the payments made by Eugelio nalang (check)
● Violeta tried to ask for reconsideration, ayaw parin, and nag issue ulit ng check for the payments made
by Eugelio
● Violeta’s counsel nag send ng demand letter - Insular said “sige we’ll re-evaluate Violeta’s claim.”
● Without waiting for the result of re-evaluation, Violeta filed a case sa RTC to recover 1.5 million (amount
nung policy)

RTC - In favor of Insular

● Cited provision regarding reinstatement, and automatic lapse
● Ruled that Eugelio did not pay the premiums
● Failure of Eugelio daw sa requirements para sa reinstatement
● “Contract is the law between the parties” “unambiguous, made in layman’s terms”
● “No such automatic reinstatement - the issuance of receipt is not tantamount to the reinstatement of
the policy

● Violeta filed an instant petition sa SC, her counsel died shortly after filing the petition
○ Cited: Section 19 of the Insurance Code, which provides:
Section. 19. x x x [I]nterest in the life or health of a person insured must exist when the insurance
takes effect, but need not exist thereafter or when the loss occurs.
 ● Counsel filed wrong remedy (reply instead of notice of appeal) sabi ni violeta deteriorating health daw
kasi ni counsel

Issues:
1. WON the policy was reinstated???
2. In the matter of Eugelio’s insurable interest in his life, even after he died

Ruling:
1. NO
2. Irrelevant in the case

● Re: Insurable Interest (nilagay ko lang in case itanong ni Atty.)

“the matter of insurable interest is entirely irrelevant in the case at bar. It is actually beyond question
that while Eulogio was still alive, he had an insurable interest in his own life, which he did insure under
Policy No. 9011992.”

● Re: reinstatement
Ruling of RTC “... lapsed because of failure to pay premiums…”, SC said: the filing of application for
reinstatement is an admission that the policy indeed lapsed na

Reinstatement: To reinstate a policy means to restore the same to premium-paying status after it has
been permitted to lapse.

Eugelio’s Policy: You may reinstate this policy at any time within three years after it lapsed if the
following conditions are met:
1. the policy has not been surrendered for its cash value or the period of extension as a term
insurance has not expired;
2. evidence of insurability satisfactory to [Insular Life] is furnished;
3. overdue premiums are paid with compound interest at a rate not exceeding that which would
have been applicable to said premium and indebtedness in the policy years prior to
reinstatement; and
4. indebtedness which existed at the time of lapsation is paid or renewed.

Additional condition for reinstatement (in the policy mismo)

“I/We agree that said Policy shall not be considered reinstated until this application is approved by the
Company during my/our lifetime and good health and until all other Company requirements for the
reinstatement of said Policy are fully satisfied.”

“I/We further agree that any payment made or to be made in connection with this application shall be
considered as deposit only…”

Therefore the policy could only be considered reinstated if processed and approved by the Company,
during Eugelio’s lifetime and good health.

DOCTRINE: "The stipulation in a life insurance policy giving the insured the privilege to reinstate it upon
written application does not give the insured absolute right to such reinstatement by the mere filing of
an application. The insurer has the right to deny the reinstatement if it is not satisfied as to the
insurability of the insured and if the latter does not pay all overdue premium and all other indebtedness
to the insurer.”

Eugelio’s death just hours after filing the application does not constitute a special circumstance - it
cannot override the clear and express provisions of the Policy Contract and Application for
Reinstatement, and operate to remove the prerogative of Insular Life.

Limitation of agents’ powers: Agents not allowed to modify the policies.