G.R. No. 112329 January 28, 2000
VIRGINIA A. PEREZ, petitioner, vs. COURT OF APPEALS and BF LIFEMAN INSURANCE CORPORATION, respondents.

FACTS

Primitivo B. Perez, already insured with BF Lifeman, was convinced by agent Rodolfo Lalog to apply for an additional P50,000.00 coverage. On October 20, 1987, Perez accomplished the application form, and his wife, Virginia, paid P2,075.00 to Lalog, who issued a receipt marked “deposit.” After Lalog lost the initial form, Perez filled out a new one on October 28 and passed the required medical exam on November 1. The application papers were forwarded to the insurer’s Gumaca office but were not transmitted to the Manila head office promptly.
On November 25, 1987, Perez died in a boating accident. Unaware of his death, BF Lifeman received the application papers in Manila on November 27, approved the application, and issued Policy No. 056300 on December 2. The insurer paid the claim under the existing policy but refused the claim under the new P50,000.00 policy, refunding the P2,075.00 deposit and contending no contract was perfected. BF Lifeman filed an action for rescission and declaration of nullity, while Virginia Perez counterclaimed for the policy proceeds.

ISSUE

Whether a contract of insurance for the additional P50,000.00 coverage was perfected prior to Primitivo Perez’s death.

RULING

No, the contract was not perfected. The Supreme Court affirmed the Court of Appeals, ruling that the insurance contract was null and void. A contract of insurance requires a meeting of minds between the parties. The application form signed by Perez contained a crucial condition: “there shall be no contract of insurance unless and until a policy is issued on this application and that the policy shall not take effect until the first premium has been paid and the policy has been delivered to and accepted by me/us in person while I/we, am/are in good health.” This made the application a mere offer, and the policy’s delivery and acceptance in good health were suspensive conditions.
At the time BF Lifeman approved the application and issued the policy on December 2, 1987, the applicant was already deceased. The suspensive condition of delivery and acceptance in good health could no longer be fulfilled. Thus, there was no valid acceptance of the offer, and consequently, no perfected contract. The Court also found that the delay in processing the application was not gross negligence, as the insurer acted on it within a reasonable time after receiving the papers. The payment made was correctly treated as a deposit, not a full premium that would bind the insurer immediately.