Case Summary (G.R. No. 188144)
Policy Issuance and Initial Premium Payments
Teodoro Cortez applied for an endowment policy for P30,000 facilitated by insurance underwriter Margarita Siega. The application was accepted, and Policy No. 221944 was issued, indicating an effective date of December 25, 1972. Cortez was assured that the first premium, amounting to P1,416.60, could be paid within a 30-day grace period following the policy's delivery. He made the premium payment in three installments, all within the designated timeframe.
Notification of Policy Status and Subsequent Actions
On June 1, 1973, Great Pacific Life Insurance Corporation notified Cortez that his policy was not in force and demanded the balance of the full premium along with an additional medical examination. This prompted Cortez to cancel his policy and seek a refund of his premium plus damages. Subsequently, on August 14, 1973, he initiated legal proceedings against the insurer, seeking the return of the premium and additional compensation for moral damages and legal fees.
Lower Court Judgment and Appeal Outcomes
After trial, the Court of First Instance favored Cortez, ordering the insurer to refund his premium and compensating him for moral damages, litigation expenses, and attorney’s fees. The insurance company appealed this decision, leading to the Court of Appeals partially affirming the lower court's ruling but reducing the awarded moral damages.
Legal Issue and Court's Finding
The primary legal issue revolves around Cortez's entitlement to a refund of his premium. The appellate court affirmed that the policy was enforceable as Cortez had paid the full premium within the grace period. The court highlighted that the insurance company’s failure to inform Cortez adequately regarding the policy's activation created a significant breach of contract, leading the court to assert that the insurer acted in bad faith by failing to return the premium when the policy was inoperative.
Applicable Law and Conclusions
Sections 79, 81, and 82 of Presidential Decree No. 612, or the Insurance Code of 1978, were cited to support the finding that Cortez was entitled to a full refund of his premium. Since the policy was ineffective from the start, the company had no right to retain the premium. The court also est
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Case Overview
- This case pertains to a claim for refund of the first premium on an endowment policy that was purportedly ineffective, despite the insured having made premium payments.
- The petitioner, Great Pacific Life Insurance Corporation, disputes the enforceability of the policy issued to private respondent Teodoro Cortez.
Parties Involved
- Petitioner: Great Pacific Life Insurance Corporation
- Respondents: The Hon. Court of Appeals; Teodoro Cortez (Private Respondent)
Factual Background
- Teodoro Cortez applied for a 20-year endowment policy for P30,000, solicited by underwriter Margarita Siega.
- The policy was issued on December 25, 1972, but delivered to Cortez on January 25, 1973.
- The annual premium was set at P1,416.60, with a grace period of 30 days for payment.
- Cortez paid the premium in three installments within the grace period, documented by temporary receipts and official receipts from the insurer's Home Office.
- On June 1, 1973, the insurer notified Cortez that the policy was not in force and requested additional premium payment and another medical examination.
Legal Proceedings
- Following the insurer's notification, Cortez canceled the policy and demanded a refund of his premium plus damages.
- When the insurer did not respond, Cortez filed a complaint for damages in the Court of First Instance of Negros Oriental.
- The court ruled in favor of Cortez, ordering the ins