LUCERO VDA. DE SINDAYEN v. INSULAR LIFE ASSURANCE CO.

G.R. No. 41702 | September 4, 1935

FACTS: Arturo Sindayen was a linotype operator in the Bureau of Printing. On one Christmas
vacation in Tarlac, he made a written application to Insular Life for a policy of insurance on his life
and this was done through the company’s agent, Cristobal Mendoza. It was also agreed that the
policy, when and if issued, should be delivered to his aunt, Felicidad Estrada who will complete the
payment of the first annual premium.

In line with this application, he was examined by the company’s doctor who made a favorable report
and days after, the company accepted the risk and issued the policy and mailed it to its agent
instructing him on its delivery. Now, on January 12, Arturo complained of a severe headache and
remained at home. 3 days later, he consulted a doctor and they found that he was suffering from
acute nephritis and uremia. Sadly, the illness did not yield to treatment and Arturo died on January
19.

3 days before his death or on January 16, the agent, Cristobal received the policy, and just one day
before Arturo’s death, it was delivered to Felicidad upon her payment of the balance. The agent in
fact asked Felicidad if her nephew was in good health and having no knowledge about what’s
happening to Arturo in Manila, she replied that she believed so.

The day after the death of Arturo or on January 20, the agent learned about the death of Arturo and
called Felicidad to ask her to return the policy. However, he did not return or at least offer to return
the premium paid.

TAKE NOTE: Paragraph 3 of the application (relevant to the main contention of the company)
provides:
3. That the said policy shall not take effect until the first premium has been paid and the
policy has been delivered to and accepted by me, while I am in good health.

ISSUE: Whether the insurance policy took effect. YES. Delivery of the policy is the final act of
consummation of the contract and the condition as to the good health is waived by the
company.

FIRST CONTENTION: There was no proper delivery because it was not delivered to and accepted by
the insured.

RULING: Delivery to the insured in person is not necessary. Delivery may be made by mail or to a
duly constituted agent.

SECOND CONTENTION: The company is invoking the 3rd paragraph of the application saying that the
policy did not take effect because at the time of its delivery by the agent, the insured was not in good
health.

RULING: In resolving this contention, the Supreme Court discussed 2 lines of cases from
Jurisprudence.

The first line holds that good health is a condition precedent to a valid delivery. There can be no valid
delivery to the insured unless he is in good health at that time. This condition precedent goes to the
very essence of the contract and cannot be waived by the agent making the delivery of policy.

The second line holds otherwise. Delivery of the policy is the final act of consummation of the
contract and the condition as to the good health is waived by the company. An agent to whom a life
insurance policy, similar to the one involved in this case, was sent with instructions to deliver it to the
insured has the authority to bind the company by making such delivery even though the insured was
not in good health at the time of delivery.

Second Line of Cases should be followed

In fact, the Supreme Court made a scenario here. If Arturo did not die and was able to recover from
the illness but was killed in a vehicular accident months after, if the first line of cases would be
followed, the company can just invoke the illness at the time of delivery and allege that the policy
never took effect.

The Supreme Court said that it is difficult to imagine that the insurance company would take such a
position in the face of the common belief of the insuring public that when the policy is delivered, in
the absence of fraud or other grounds for rescission, the contract of insurance is consummated.
It is in the interest not only of the applicant but of all insurance companies as well that there should
be some act which gives the applicant the definite assurance that the contract has been
consummated.

A cloud will be thrown over the entire insurance business if the condition of health of the insured at
the time of delivery of the policy may be required into years afterwards with the view to avoiding the
policy on the ground that it never took effect because of an alleged lack of good health, at the time of
delivery.

For public interest, as well as in the interest of the insurance companies themselves - the
delivery of the policy to the insured by an agent of the company who is authorized to make
delivery or without delivery is the final act which binds the company (and the insured as well)
in the absence of fraud or other legal ground for rescission.