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Panaton v. Malayan Insurance Co., Inc.:o (Source: Perez book)

Facts:o A personal accident policy was issued covering loss of legs

which was defined in the policy as the amputation of thelegs.

o The insured met an accident resulting in total paralysis ofboth legs.

o The insurer refused to pay because there was no loss oflegs since the legs of the insured were not amputated.

Issues: Was the insurer liable? Should permanent and total paralysisof both legs be considered as equivalent of loss of legs?

Ruling:o The insurer was liable because loss of legs should be

interpreted so as to include the permanent and total paralysisof both legs.

o The interpretation of the term loss of legs as limited to

amputation of both legs to the exclusion of permanent totalparalysis of both legs would be contrary to public good,sound morality and public policy. It would force a desperateman to cause an amputation to be performed since his legsare of no use for life, in order to avail of the benefits of thepolicy.

o The permanent, total paralysis of both legs suffered by theinsured was equivalent to loss of both legs, since it willobviously be bedridden for the rest of his natural life.

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Perez v. CA:

o (Source: Laceda notes)Facts:

o Primitivo B. Perez had been insured with the BF Lifeman Insurance Corporation since1980. Sometime in October 1987, an agent of the insurance corporation, Rodolfo Lalog,

visited Perez and convincedhim to apply for additional insurance coverage of P50,000 toavail of the ongoing promotional discountof P400.00 if the premium were paid annually.Perez accomplished an application form for the additional insurance coverage ofP50,000.00. On the same day, petitioner Virginia A. Perez, Primitivo's wife, paid P2,075.00to Lalog. The receipt issued by Lalog indicated the amount received was a "deposit." Laloglost the application form accomplished by Perez and so on October 28, 1987, he asked thelatter to fill up another application form. Lalog then forwarded the application to the officeof BF Lifeman Insurance Corporation at Gumaca, Quezon which office was supposed toforward thepapers to the Manila office.

o On November 25, 1987, Perez died in an accident. At the time of his death, his applicationpapers for the additional insurance of P50,000.00 were still with the Gumaca office. It wasonly on November 27, 1987 that said papers were received in Manila. Without knowingthat Perez died on November 25, 1987, BF Lifeman Insurance Corporation approved the

application and issued the corresponding policy for the P50,000.00 on December 2, 1987.o Petitioner Virginia Perez went to Manila to claim the benefits under the insurance policies

of the deceased. She was paid P40,000 under the first insurance policy for P20,000 but theinsurance company refused to pay the claim under the additional policy coverage ofP50,000. The insurance company maintained that the insurance for P50,000.00 had notbeen perfected at the time of the death of Primitivo Perez. Consequently, the insurancecompany refunded the amount of P2,075.00 which Virginia Perez had paid.

o TC ruled in favor of Perez ordering the company to pay the insurance proceeds. CAreversed holding that at the time the policy was issued, Primitivo was already dead.

Issue: WON the insurance contract had been perfected.

Held: No.o A contract of insurance, like all other contracts, must be assented to by both parties,

either in person or through their agents and so long as an application for insurance has notbeen either accepted or rejected, it is merely a proposal or an offer to make a contract.

o When Primitivo filed an application for insurance, paid P2,075.00 and submitted the resultsof his medical examination, his application was subject to the acceptance of private

respondent BF Lifeman Insurance Corporation. The perfection of the contract of insurancebetween the deceased and respondent corporation was further conditioned uponcompliance with the following requisites stated in the application form: there shall be nocontract of insurance unless and until a policy is issued on this application and that thesaid policy shall not take effect until the premium has been paid and the policy delivered toand accepted in good health.

o The condition imposed by the corporation that the policy must have been delivered to andaccepted by the applicant while he is in good health can hardly be considered as apotestative or facultative condition. On the contrary, the health of the applicant at the timeof the delivery of the policy is beyond the control or will of the insurance company. Rather,the condition is a suspensive one whereby the acquisition of rights depends upon thehappening of an event which constitutes the condition. In this case, the suspensivecondition was the policy must have been delivered and accepted by the applicant while he

is in good health. There was non-fulfillment of the condition, however, inasmuch as theapplicant was already dead at the time the policy was issued. Hence, the non-fulfillment ofthe condition resulted in the non-perfection of the contract.

o An application is a mere offer which requires the overt act of the insurer for it to ripen intoa contract. Delay in acting on the application does not constitute acceptance even thoughthe insured hasforwarded his first premium with his application.