G.R. No. 177995 - Heirs of Spouses Olarte vs. Office of the President of the Philippines

Petitioner: Philippine American Life and General Insurance Company (“Philamlife”).
Respondents: Eduardo Z. Lumaniog, Celso Z. Lumaniog, and Ruben Z. Lumaniog – the legitimate children and forced heirs of the deceased Faustino Lumaniog.
Subject matter: A claim for payment of life insurance proceeds under Life Insurance Policy No. 1305486 with a face amount of P50,000.00.

On November 25, 1980, Faustino Lumaniog died of a coronary thrombosis while insured by Philamlife.
Respondents continuously pursued their claim for the sum of P641,000.00 (including proceeds and accrued interests) beginning on June 22, 1981, following repeated demands for payment or settlement.
Key Letters and Communications:

March 12, 1982: Petitioner’s denial of the claim was initially communicated in a letter signed by its then Assistant Vice President, Amado Dimalanta, on the ground that the deceased had concealed his medical history of hypertension.
May 25, 1983: A letter from the private respondents requesting reconsideration of the denial was sent.
July 11, 1983: Petitioner reiterated its denial in another letter, emphasizing the alleged concealment in Faustino Lumaniog’s insurance application.
December 1, 1994: A subsequent request for reconsideration was received via a letter from Jose C. Claro, a provincial board member of Camarines Sur.
February 14, 1995: Petitioner finally issued a definitive rejection of the claim by letter, asserting its decision regarding the claim for payment of proceeds.

June 20, 1995: Respondents filed a complaint for recovery of the alleged sum at the Regional Trial Court (RTC) of Libmanan, Camarines Sur (Civil Case No. L-787), arguing that the cause of action arose when the claim was finally rejected.
Petitioner responded with an Answer, counterclaim, and a Motion to Dismiss on the basis of:

Prescription of action due to the lapse of the 10-year period.
Laches.
That the claim had been rejected earlier (as early as July 11, 1983) and the matter should be deemed barred by prescription.

June 7, 1996: The RTC set the case for trial on the merits after considering that evidentiary issues were inherent in the pleadings, thus denying the motion to dismiss.
December 12, 1997: The RTC, in its Order on a petition for reconsideration, ruled that the running of the 10-year prescriptive period was “stopped” on May 25, 1983 and only resumed when the petitioner's final denial was issued on February 14, 1995.

April 30, 1999: The Court of Appeals (CA) rendered a Decision upholding the facts that the prescription period to bring the action commenced on February 14, 1995 – the date when the insurer finally rejected the claim.
The CA Decision emphasized earlier rulings such as Summit Guaranty and Eagle Star Insurance, where the Supreme Court held that a cause of action accrues only upon the final rejection of the claim.
Petition for Review: Petitioner elevated the matter via a petition for review on certiorari under Rule 45 of the Rules of Court, contending that the RTC committed grave abuse of discretion in its adjudication of the prescriptive period.

The proper computation of the prescription period – whether it should run from the initial denial or from the final, explicit rejection issued on February 14, 1995.
The evidentiary basis for setting the prescriptive period, particularly the reliance on the letter dated July 11, 1983, versus the definitive rejection letter of February 14, 1995.
Petitioner's argument that the RTC erred in accepting as factual the respondents’ claims regarding the suspension of the prescriptive period based on their actions and communications.

Whether the complaint for the recovery of life insurance proceeds is barred by the prescription of action.

Specifically, whether the 10-year prescriptive period should be computed as commencing from the initial communications (May 25, 1983) or from the final explicit rejection on February 14, 1995.

Whether an extrajudicial demand (i.e., the successive requests for reconsideration) made after the cause of action accrued had the effect of reviving or suspending the prescriptive period.

The determination includes assessing whether such demands are sufficient to stop the running of the prescriptive period or whether the final rejection by the insurer constitutes the definitive beginning of the prescription period.