68. SUN LIFE INSURANCE OFFICE, LTD. v.

CA
(Claims Settlement – Prescription of Action)
Luciano, Noel

Facts:
1. On Aug. 15, 1983, Emilio Tan took from Sun Life a P300,000 property insurance
policy to cover his interest in the electrical supply store of his brother housed in a
building.
2. Four days after the issuance of the policy, the building was burned including the
insured store.
3. Tan then filed his claim for loss of the fire on Aug. 20, 1983.
a. This was denied by Sun Lif on Feb 29, 1984
4. Tan sought reconsideration of the denial on April 3, 1984. Sun Life denied.
5. On Nov. 1985, Tan filed this civil case against Sun Life. Sun Life filed a motion to
dismiss on the ground that the action had already prescribed.
a. Sun Life argued that under Condition 27 of the policy, if a claim be made and
ejected and an action or suit be not commenced within 12 months from
receipt of notice of such rejection, then the claim shall for all purposes be
deemed abandoned.
6. RTC denied the motion to dismiss. Sun Life went to CA but its petition was
dismissed. Hence, this petition

Issues:
1. WON the filing of a motion for reconsideration interrupts the 12 months
prescriptive period to contest the denial of the insurance claim.
2. WON the rejection of the claim shall be deemed final only if it contains words to
the effect that denial is final.

Held:
1. NO, the MR does not interrupt the 12 months prescriptive period to contest as
stated in the policy
2. In this case, the insured was definitely advised of the denial of his claim.

Condition 27 of the policy is very clear and free from any doubt or ambiguity.
Tan admitted that he received a copy of the rejection on April 2, 1984. Thus, the 12-
month prescriptive period started to run from said date. Such is the plain meaning and
intention of Condition 27. It is apparent that Condition 27 was stipulated pursuant to
Sec. 63 of the Insurance Code.

The condition contained in an insurance policy that claims must be presented within
one year after rejection is not merely a procedural requirement but an important matter
essential to a prompt settlement of claims against insurance companies as it demands
that insurance suits be brought by the insured while the evidence as to the origin and
cause of destruction have not yet disappeared. (Ang v. Fulton Fire Insurance)
 As such, In case the claim was denied by the insurer but the insured filed a petition
for reconsideration, the prescriptive period should be counted from the date the claim
was denied at the first instance by the insurance company and not from the denial of the
reconsideration.

If the one year period was to be reckoned from the resolution of the MR, then this
runs counter to the declared purpose for requiring that an action or suit be filed in the
Insurance Commission or court of competent jurisdiction.

The insured was definitely advised of the denial of his claim. The denial of the
claim was clearly manifested in the first letter sent by Sun Life. In fact, the letter reads:
“For your information, we have referred all these matters to our lawyers for their opinion
as to the compensability of your claim, particularly referring to the above violations. It is
their opinion and in fact their strong recommendation to us to deny your claim. By this
letter, we do not intend to waive or relinquish any of our rights or defenses under our
policies of insurance”

CA decision reversed as set aside. Complaint is dismissed as it is barred by

prescription.