CMM DIGEST

Areola vs CA September 22, 1994 Insurance: rescission

(Insurance)

Plaintiff: Santos & Lydia Areola Defendant: CA, Prudential Guarantee & Assurance Inc. Ponente: Romero FACTS: Areola bought from Prudential a personal accident insurance policy covering 1 year (Nov 1984-Nov 1985). June, 1985: Prudential sent insured and endorsement which cancelled flat the policy for non-payment of premium, effective as of inception date. It also returned the premium. Insured confronted the agent, demanded the issuance of an OR. The agent told the insured that the cancellation was a mistake and that he would personally see to its rectification. Nonetheless, insured failed to receive any OR. Insured wrote to Prudential, demanding that he be insured under the same terms and conditions. Prudential (through VP) wrote to insured, stating that the company is verifying whether payment has in fact been remitted. VP apologized for inconvenience. VP wrote another letter: confirming receipt of sum and that the company was amenable to extending the coverage 1 year from date when payment was received (Dec, 1984-Dec 1985). Unfortunately, the insured had already filed a complaint for breach of contract. o Defense of Prudential: By acknowledging the inconvenience they caused, and taking steps to rectify the omission by reinstating the policy prior to the filing of the complaint, it had complied with its obligation, and that there is no more cause of action. ISSUE: WON there is no more cause of action. HELD: There still is! RATIO: Branch managers fraudulent act of misappropriating the premiums paid by the insured is directly attributable to Prudential. Act of reinstating the insurance policy cannot obliterate the injury inflicted on insured. CC 1191 entitles the injured party to damages, regardless of whether he demands fulfillment/rescission of the obligation.