SUN INSURANCE OFFICE v. CA

FACTS:

On August 15, 1983, Emilio Tan obtained a P300,000.00 property insurance policy from the petitioner to cover his interest in his brother's electrical supply store in Iloilo City. Four days after the policy was issued, the insured store was burned down. Tan filed a claim for fire loss with the petitioner on August 20, 1983 but was denied on February 29, 1984. Tan sought reconsideration, but the insurer's denial remained unchanged. On November 20, 1985, Tan filed Civil Case No. 16817 with the Regional Trial Court of Iloilo, seeking to recover from the insurance claim. The petitioner filed a motion to dismiss, alleging that the action had already prescribed. The trial court denied the motion to dismiss, and the petitioner's motion for reconsideration was also denied. The petitioner appealed to the Court of Appeals, but their petition was denied. A motion for reconsideration was filed but was also denied. The petitioner then filed a petition for review with the Supreme Court.

ISSUES:

  1. Whether the filing of a motion for reconsideration interrupts the twelve-month prescriptive period to contest the denial of an insurance claim.

  2. Whether the rejection of the claim shall be deemed final only if it contains words to the effect that the denial is final.

RULING:

  1. The filing of a motion for reconsideration does not interrupt the twelve-month prescriptive period to contest the denial of an insurance claim.

  2. The rejection of the claim shall be deemed final regardless of whether it contains words to the effect that the denial is final.

PRINCIPLES:

  • Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used.

  • If the terms of an insurance policy are clear and unambiguous, they must be taken and understood in their plain, ordinary, and popular sense.

  • The twelve-month prescriptive period to contest the denial of an insurance claim starts to run from the date of receipt of notice of rejection.

  • The filing of a motion for reconsideration does not interrupt the prescriptive period.