Eternal Gardens Memorial Park Corporation vs.

The Philippine American Life Insurance Company

G.R. No. 166245
April 9, 2008

Facts:
On December 10, 1980, respondent Philippine American Life Insurance Company (Philamlife) entered into an
agreement denominated as Creditor Group Life Policy No. P-19202 with petitioner Eternal Gardens Memorial Park
Corporation (Eternal). Under the policy, the clients of Eternal who purchased burial lots from it on installment basis
would be insured by Philamlife. The amount of insurance coverage depended upon the existing balance of the
purchased burial lots. The policy was to be effective for a period of one year, renewable on a yearly basis.
Eternal sent a letter dated August 20, 19845 to Philamlife, which served as an insurance claim for Chuang’s death. In
reply, Philamlife wrote Eternal a letter on November 12, 1984, 6 requiring Eternal to submit the following documents
relative to its insurance claim for Chuang’s death: (1) Certificate of Claimant (with form attached); (2) Assured’s
Certificate (with form attached); (3) Application for Insurance accomplished and signed by the insured, Chuang, while
still living; and (4) Statement of Account showing the unpaid balance of Chuang before his death.Eternal transmitted
the required documents through a letter dated November 14, 1984, 7 which was received by Philamlife on November
15, 1984.
After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance claim. This
prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986. 8
In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim in a letter dated May 20, 1986. The letter
stated that no application for group insurance was transmitted prior to the death of Chuang but it was only submitted
after the latter’s death thus, he is not covered under the Policy. Consequently, Eternal filed a case before the Makati
City Regional Trial Court (RTC) for a sum of money against Philamlife.

Issues:
1. Whether or not there was a valid insurance coverage.
2. Whether or not Philamlife assumed the risk of loss without approving the application.

Ruling:
1. Yes. The fact of the matter is, the letter dated December 29, 1982, which Philamlife stamped as received, states that
the insurance forms for the attached list of burial lot buyers were attached to the letter. Such stamp of receipt has the
effect of acknowledging receipt of the letter together with the attachments. Such receipt is an admission by Philamlife
against its own interest.13 The burden of evidence has shifted to Philamlife, which must prove that the letter did not
contain Chuang’s insurance application. However, Philamlife failed to do so; thus, Philamlife is deemed to have
received Chuang’s insurance application.

2. Yes. This question must be answered in the affirmative.

As earlier stated, Philamlife and Eternal entered into an agreement denominated as Creditor Group Life Policy No. P-
1920 dated December 10, 1980. In the policy, it is provided that:
EFFECTIVE DATE OF BENEFIT.
The insurance of any eligible Lot Purchaser shall be effective on the date he contracts a loan with
the Assured. However, there shall be no insurance if the application of the Lot Purchaser is not
approved by the Company.
An examination of the above provision would show ambiguity between its two sentences. The first sentence appears
to state that the insurance coverage of the clients of Eternal already became effective upon contracting a loan with
Eternal while the second sentence appears to require Philamlife to approve the insurance contract before the same can
become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally in favor
of the insured and strictly against the insurer in order to safeguard the latter’s interest. Clearly, the vague contractual
provision, in Creditor Group Life Policy No. P-1920 dated December 10, 1980, must be construed in favor of the
insured and in favor of the effectivity of the insurance contract.
On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a party’s purchase of
a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and the same
is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application. The second
sentence of Creditor Group Life Policy No. P-1920 on the Effective Date of Benefit is in the nature of a resolutory
condition which would lead to the cessation of the insurance contract.