ETERNAL GARDENS vs PHILAMLIFE
G.R. No. 166245 April 9, 2008
LEGAL CONCEPTS/ DEFINITION OF TERMS
When the terms of insurance contract contain limitations on liability, courts should construe them in such a way as
to preclude the insurer from non-compliance with his obligation.
Indemnity and liability insurance policies are construed in accordance with the general rule of resolving any
ambiguity therein in favor of the insured, where the contract or policy is prepared by the insurer
Being a contract of adhesion, the terms of an insurance contract are to be construed strictly against the party which
prepared the contract, the insurer. By reason of the exclusive control of the insurance company over the terms and
phraseology of the insurance contract, ambiguity must be strictly interpreted against the insurer and liberally in
favor of the insured, especially to avoid forfeiture
Minor discrepancies or inconsistencies do not impair the essential integrity of the prosecution’s evidence as a
whole or reflect on the witnesses’ honesty.
The test is whether the testimonies agree on essential facts and whether the respective versions corroborate and
substantially coincide with each other so as to make a consistent and coherent whole.
ISSUE:
Whether or not Philamlife should pay the 100K insurance proceeds
RELEVANT FACTS:
Philamlife entered into an agreement with petitioner Eternal Gardens Memorial Park Corporation (Eternal).
Under the policy, the clients of Eternal who purchased burial lots from it on installment basis would be insured by
Philamlife. The amount of insurance coverage depended upon the existing balance of the purchased burial lots. The
policy was to be effective for a period of one year, renewable on a yearly basis.
Eternal was required under the policy to submit to Philamlife a list of all new lot purchasers, together with a
copy of the application of each purchaser, and the amounts of the respective unpaid balances of all insured lot
purchasers. One of those included in the list as "new business" was a certain John Chuang. His balance of payments
was PhP 100,000. On August 2, 1984, Chuang died.
After more than a year, Philamlife had not furnished Eternal with any reply to the latter’s insurance claim.
This prompted Eternal to demand from Philamlife the payment of the claim for PhP 100,000 on April 25, 1986.
In response to Eternal’s demand, Philamlife denied Eternal’s insurance claim in a letter dated May 20, 1986.
Consequently, Eternal filed a case before the Makati City Regional Trial Court (RTC) for a sum of money
against Philamlife.
RULING:
Yes. An examination of the provision of the POLICY under effective date of benefit, would show ambiguity
between its two sentences. The first sentence appears to state that the insurance coverage of the clients of Eternal
already became effective upon contracting a loan with Eternal while the second sentence appears to require Philamlife
to approve the insurance contract before the same can become effective.
It must be remembered that an insurance contract is a contract of adhesion which must be construed liberally
in favor of the insured and strictly against the insurer in order to safeguard the latter’s interest
On the other hand, the seemingly conflicting provisions must be harmonized to mean that upon a party’s
purchase of a memorial lot on installment from Eternal, an insurance contract covering the lot purchaser is created and
the same is effective, valid, and binding until terminated by Philamlife by disapproving the insurance application.
The second sentence of the Creditor Group Life Policy on the Effective Date of Benefit is in the nature of a
resolutory condition which would lead to the cessation of the insurance contract. Moreover, the mere inaction of the
insurer on the insurance application must not work to prejudice the insured; it cannot be interpreted as a termination of
the insurance contract. The termination of the insurance contract by the insurer must be explicit and unambiguous.
