4 – Violeta Lalican vs. Insular Life Assurance Company, Ltd.

Facts: During his lifetime, Eulogio Lalican applied for an insurance policy with Insular Life through one of its
agents, Josephine Malaluan. He designated Violeta as his primary beneficiary. Eulogio was able to pay the first
several premiums due on the policy. However, he failed to pay the subsequent premium even after the lapse
of the 31-day grace period. This resulted in the lapse of the insurance policy as stipulated in the policy
contract itself.

Eulogio filed an application for the reinstatement of the policy through Malaluan. Unfortunately, this
application was denied because he was not able to pay for the overdue interest on the policy. Later, Eulogio
went to Malaluan’s house to submit another application for reinstatement. This time, he saw to it to deposit
the correct amount of money that will cover all premiums and interest due. As Malaluan was away, her
husband received the second application. On the very same day, Eulogio died. Without knowing about
Eulogio’s death, Malaluan forwarded to Insular Life the second application. However, Insular later found out
about Eulogio’s death so it no longer acted upon the application.

Violeta filed a claim for payment of the full proceeds of the policy with Insular Life. Insular Life informed
Violeta that her claim could not be granted because Eulogio’s policy had not been reinstated before his death.
Insular Life likewise rejected Violeta’s request for reconsideration. Thus, Violeta filed a complaint with the
RTC for death claim benefit against Insular Life. The trial court ruled in favor of Insular Life, noting that the
policy contract clearly provided the terms and conditions for the reinstatement of the policy and that these
terms had not been complied with for Eulogio. The trial court’s decision became final and executory due to
Violeta’s failure to timely file a notice of appeal. Thus, Violeta directly elevated the case before the SC through
a petition for review on certiorari.

Issue: Was Eulogio able to reinstate the lapsed policy prior to his death?

Held: No.

Violeta makes it appear her petition involves a question of law, particularly, whether Eulogio had an existing
insurable interest in his own life until the day of his death. An insurable interest, which is one of the essential
requirements in an insurance contract, is that interest which a person is deemed to have in the subject matter
insured, where he has a relation or connection with or concern in it, such that the person will derive
pecuniary benefit or advantage from the preservation of the subject matter insured and will suffer pecuniary
loss or damage from its destruction, termination, or injury by the happening of the event insured against.
Section 10 of the Insurance Code provides that very person has an insurable interest in his own life. Section
19 of the same code also states that an interest in the life or health of a person insured must exist when the
insurance takes effect, but need not exist thereafter or when the loss occurs.

However, an extensive study of the petition reveals that the matter of Eulogio’s insurable interest is entirely
irrelevant. The true issue is whether he was able to reinstate his policy before he died. The SC ruled in the
negative. The policy contract specifically provided for the conditions for the reinstatement of the policy.
These conditions include: (1) that the policy shall not be deemed reinstated until approved and (2) any
payment made in connection with such an application shall only be deemed deposit and shall not bind Insular
Life until the application is approved. Here, Eulogio’s death prevented full compliance with the conditions
contained in the contract, which he voluntarily signed.

- Monci