Lim v Sunlife G.R. No. L-15774 November 29, 1920

J. Malcolm

Facts:

Luis Lim of Zamboanga applied for a Sun Life policy for Php 5,000. He designated his wife, Pilar, as beneficiary. The first premium of P433 was paid by Lim, then the company issued a "provisional policy." Lim died after the issuance of the provisional policy but before approval of the application.

Pilar brought an action to recover from Sun Life the sum of P5,000, the amount named in the provisional policy. She lost in the trial court hence this appeal.

The "provisional policy" reads as follows:

The above-mentioned life is to be assured in accordance with the terms and conditions contained or inserted by the Company in the policy which may be granted by it in this particular case for four months only from the date of the application, provided that the Company shall confirm this agreement by issuing a policy on said application when the same shall be submitted to the Head Office in Montreal. Should the Company not issue such a policy, then this agreement shall be null and void ab initio, and the Company shall be held not to have been on the risk at all, but in such case the amount herein acknowledged shall be returned.

Issue: WON there was a perfected contract of insurance

Held: No. Petition dismissed.

Ratio:

The policy for four months is expressly made subjected to the affirmative condition that "the company shall confirm this agreement by issuing a policy on said application when the same shall be submitted to the head office in Montreal."

  Should the company not issue such a policy, then this agreement shall be null and void ab initio, and the company shall be held not to have been on the risk." This means that the agreement should not go into effect until the home office of the company should confirm it by issuing a policy. The provisional policy amounts to nothing but an acknowledgment on behalf of the company, that it has received from the person named therein the sum of money agreed upon as the first year's premium upon a policy to be issued upon the application, if the application is accepted by the company.

There can be no contract of insurance unless the minds of the parties have met in agreement. In this case, the contract of insurance was not consummated by the parties.

The general rule concerning the agent's receipt pending approval or issuance of policy is in several points, according to Joyce:

2. Where an agreement is made between the applicant and the agent whether by signing an application containing such condition, or otherwise, that no liability shall attach until the principal approves the risk and a receipt is given buy the agent, such acceptance is merely conditional, and it subordinated to the act of the company in approving or rejecting; so in life insurance a "binding slip" or "binding receipt" does not insure of itself.

The court held that this second point applied to the case.

American jurisprudence tells us of such examples.

Steinle vs. New York Life Insurance Co.-  the amount of the first premium had been paid to an insurance agent and a receipt was given. The paper declared that if the application was accepted by the company, the insurance shall take effect from the date of the application but that if the application was not accepted, the money shall be returned. The court held that there was no perfection of the contract.

Cooksey vs. Mutual Life Insurance Co.- the person applying for the life insurance paid and amount equal to the first premium, but the application and the receipt for the money paid, stipulated that the insurance was to become effective only when the application was approved and the policy issued. There was also no perfection.

A binding receipt is a custom where temporary insurance pending the consideration of the application was given until the policy be issued or the application rejected, and such contracts are upheld and enforced when the applicant dies before the issuance of a policy or final rejection of the application.

However, there was no perfected contract because of the clause in the application and the receipt stipulate expressly that the insurance shall become effective only when the "application shall be approved and the policy duly signed by the secretary at the head office of the company and issued." The premium of 433 must be returned.