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VIRGINIA A. PEREZ v. CA

FACTS:

Primitivo B. Perez had an existing insurance policy with BF Lifeman Insurance Corporation for P20,000. Perez was convinced by an agent of the insurance corporation to apply for additional insurance coverage of P50,000. Perez filled out an application form and paid a deposit of P2,075.00. However, the agent misplaced the first application form and requested Perez to fill out another one. Perez underwent a medical examination and passed. The agent sent the application and supporting papers to the insurance company's office in Gumaca, Quezon, which was supposed to forward them to the Manila office. Unfortunately, Perez died in a boating accident before the papers could be sent. The papers were eventually received in the Manila office, and the insurance company approved the application and issued a policy for P50,000. Virginia Perez, Primitivo's wife, made a claim for the benefits but was only paid P40,000 under the first policy. The insurance company declined the claim for the additional policy coverage and refunded the amount Virginia Perez had paid. BF Lifeman Insurance Corporation filed a complaint seeking the rescission and nullity of the insurance contract, while Virginia Perez filed a counterclaim for damages. The trial court ruled in favor of Virginia Perez, but the Court of Appeals overturned the decision, stating that the insurance contract was not perfected at the time of Primitivo's death.

ISSUES:

  1. Whether or not there was a consummated contract of insurance between Primitivo B. Perez and BF Lifeman Insurance Corporation for an additional coverage of P50,000.00 at the time of Perez's death.

  2. Whether the condition that the policy be delivered and received by the applicant in good health is potestative and thus null and void.

RULING:

  1. There was no consummated contract of insurance between Primitivo B. Perez and BF Lifeman Insurance Corporation for the additional coverage of P50,000.00. The Court affirmed that the insurance contract was not perfected since at the time Perez died, the policy had not been issued, accepted, or delivered. The acceptance of the application and the delivery of the policy to Perez while he was in good health were conditions precedent for the perfection of the contract.

  2. The condition that the policy be delivered and received by the applicant in good health is not potestative and is therefore valid. The Court held that this condition depends on factors beyond the exclusive control or will of the insurance company. It is a suspensive condition where the acquisition of rights depends upon its fulfillment.

PRINCIPLES:

  • Contract Formation A contract of insurance, like all contracts, must be assented to by both parties. It is formed upon the meeting of the minds which includes the offer and acceptance of an insurance policy.

  • Condition Precedent Insurance contracts may include conditions precedent, such as the delivery and acceptance of the policy while the applicant is in good health, which must be met before the contract is perfected.

  • Potestative Condition A condition is potestative and void if it depends upon the exclusive will of one of the parties. However, conditions involving external factors, such as the health of the applicant, are not considered potestative but are rather suspensive conditions.

  • Nullity of Contract A contract that is null and void is not a contract at all and cannot be subjected to rescission.