G.R. No. 228402 & 222912, August 26, 2020
Loyola Life Plans Incorporated (Now Loyola Plans Consolidated Inc.) and Angelita D. Lumiqued, Petitioners, vs. ATR Professional Life Assurance Corporation (Now Asian Life and General Assurance Corporation), Respondent. [Consolidated with G.R. No. 222912]

FACTS

Loyola Life Plans, a pre-need company, had a Group Creditors Life Insurance Agreement with ATR Professional Life Assurance Corporation. On April 28, 2000, Dwight Lumiqued purchased a Timeplan from Loyola, paying the first premium via two checks and cash. An official receipt was issued, stating it was valid for downpayment and that checks were valid only upon clearing. Dwight died on May 1, 2000. ATR denied the insurance claim filed by Dwight’s widow, Angelita, arguing the premium payment was incomplete as the checks were not yet cleared at the time of death. ATR also belatedly alleged forgery of Dwight’s signature on the application. Loyola and Angelita counterclaimed for the insurance proceeds.
The Regional Trial Court ruled in favor of Loyola and Angelita, ordering ATR to pay actual, moral, and exemplary damages plus attorney’s fees. The Court of Appeals affirmed the liability but deleted the awards for moral and exemplary damages and attorney’s fees. Both parties elevated the case to the Supreme Court via consolidated petitions.

ISSUE

The primary issue is whether the insurance coverage was in force at the time of the insured’s death, given that payment included uncleared checks. A secondary issue concerns the propriety of the deleted damages.

RULING

The Supreme Court denied both petitions and affirmed the CA decision with modification, reinstating the award of attorney’s fees. The insurance coverage was effective upon partial payment of the premium on April 28, 2000. The agreement between Loyola and ATR stipulated that coverage commences upon the planholder’s payment of the initial installment. Payment to Loyola’s authorized agent constituted payment to the insurer. The condition on the receipt regarding check clearance was a matter between Loyola and the planholder, not a suspensive condition for the insurance contract’s effectivity. The legal logic is grounded in agency principles and the specific terms of the Group Insurance Agreement, which did not make coverage contingent on fund clearance.
Regarding damages, the Court found no basis for moral and exemplary damages as ATR’s denial, though erroneous, was not attended by gross bad faith. However, attorney’s fees were properly awarded under Article 2208 of the Civil Code, as ATR’s unwarranted refusal to pay the claim compelled the beneficiaries to litigate. The reinstated attorney’s fees are set at P100,000.00. The actual damages of P1,809,360.00 awarded by the RTC were affirmed.