G.R. No. 57308 - Great Pacific Life Insurance Corp. vs. Court of Appeals

The petitioner, Great Pacific Life Insurance Corporation, issued a 20-year endowment policy (Policy No. 221944) for P30,000 to the private respondent, Teodoro Cortez.
The application was made upon the solicitation of Margarita Siega, the underwriter for the petitioner, and included the requisite medical examination.
The policy was issued with an effective date of December 25, 1972, but it was delivered on January 25, 1973, by Mrs. Siega.
Cortez was assured that the first premium (P1,416.60 annually) could be paid within a 30-day grace period from the date of delivery.

P400 evidenced by Temporary Receipt No. 19422 (dated February 5, 1973) confirmed by Official Receipt No. 43543 (dated March 6, 1973).
P350 evidenced by Temporary Receipt No. 19448 (dated February 17, 1973) confirmed by Official Receipt No. 43559 (dated March 28, 1973).
P666.60 evidenced by Temporary Receipt No. 19702 (dated February 21, 1973) confirmed by Official Receipt No. 43563 (dated March 28, 1973).

All payments were made within the prescribed grace period, thus ostensibly making the policy enforceable.

In a letter dated June 1, 1973, the petitioner informed Cortez that Policy No. 221944 was not in force.
The petitioner required Cortez to remit an additional amount of P1,015.60 and undergo another full medical examination to activate the policy.
Cortez, contending that he had already paid the premium within the provided grace period, immediately informed the company of his cancellation and demanded a refund of his paid premium along with damages.

Cortez filed a complaint for damages on August 14, 1973, in the Court of First Instance of Negros Oriental (Civil Case No. 5709), seeking:

The court rendered judgment on September 9, 1977, in Cortez’s favor, ordering payment of:

The insurer appealed the decision, and on March 10, 1981, the Court of Appeals affirmed the judgment with the modification reducing moral damages to P10,000.
A motion for reconsideration was filed by the insurer but was denied by the Court of Appeals on June 11, 1981.
This petition for review eventually reached the Supreme Court.

Whether Cortez is entitled to a refund of the premium he paid given that the policy was never in force.
Whether the petitioner’s act of collecting the premium, without providing the insurable interest or effecting the policy, constitutes a breach of the insurance contract.

Whether the acceptance of the premium within the 30-day grace period by the petitioner made the policy operative and enforceable.
Whether the petitioner’s subsequent notification in June 1973, which contradicted the earlier acceptance, can justify the retention of the premium.

Whether the insured’s claim for moral damages is justified due to the delay and the resulting anxiety and shock experienced upon learning of the inoperative status of the policy.
Whether the petitioner’s misrepresentation or failure to inform Cortez adequately about the premium payment deadline amounts to bad faith.