Great Pacific Life vs. CA and Teodoro Cortez ; G.R. L57308, April 23, 1990

FACTS

Teodoro Cortez, upon the solicitation of Mrs. Siega, applied for a 20-year endowment policy for P30,000, and his application was accepted and approved. Thus, a policy was issued in his name. The effective date indicated on the face of the policy was December 25, 1972. The annual premium was P1,416.60. Mrs. Siega assured him that the first premium may be paid within the grace period of thirty (30) days from date of delivery of the policy. The first premium of P1,416.60 was paid by him in three (3) installments. In a letter date June 1, 1973, insurer advised Teodoro that the policy was not in force, and to make in enforceable and operative, he must remit the balance of P1,015.60 to complete the initial annual premium due December 15, 1972, and to see Dr. Remollo for another full medical examination at his own expense. Teodoro immediately informed the insurer that he was cancelling the policy and demanded the return of his premium plus damages. Insurer ignored the demand. Teodoro filed a complaint for damages praying for the refund, moral damages and atty’s fees. TC granted. CA affirmed

ISSUE

W/N Teodoro is entitled for refund.

RULING

Yes. When the petitioner advised private respondent on June 1, 1973, four months after he had paid the first premium, that his policy had never been in force, and that he must pay another premium and undergo another medical examination to make the policy effective, the petitioner committed a serious breach of the contract of insurance if the premium paid by Cortez was unacceptable for being late, it was the company’s duty to return it. By accepting his premiums without giving him the corresponding protection, the company acted in bad faith. Since his policy was in fact inoperative or ineffectual from the beginning, the company was never at risk, hence, it is not entitled to keep the premium. The award of moral damages was also proper because he must have suffered moral shock, serious anxiety and wounded feeling upon being informed that the policy was in fact worthless even after paying the premium.

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