The Supreme Court has denied a former government employee's claim for maturity benefits under a Life Endowment Policy (LEP), ruling that he is barred by laches from asserting the claim because he waited about 15 years after separating from government service to attempt to convert his compulsory life insurance into an optional one. The Court affirmed the Court of Appeals decision denying the claim.
The Case
Lopez entered government service on July 1, 1994, as Clerk I at the Provincial Treasurer's Office of Negros Occidental, and was issued the LEP with maturity date on July 1, 2017.
On May 8, 2002, Lopez left government service, without applying for any GSIS benefits. On September 1, 2012, Lopez returned to government service as Legal Officer II in the City Government of Escalante, Negros Occidental. He was then issued an Enhanced Life Policy, with Policy Number LP-72040700235.
On July 14, 2017, Lopez filed with the GSIS Bacolod Branch Office (GSIS Bacolod) an application for Life Insurance Benefit, claiming maturity benefits under the LEP. The application was denied. The GSIS Bacolod cited GSIS Board Resolution No. 234, dated September 7, 2001, which states that a member who is separated or retired from the service for any reason other than dismissal for cause or total permanent disability shall cease to be a life insurance member effective as of the date of separation. The GSIS Bacolod advised Lopez to apply for the cash surrender value (CSV) of the LEP as of his last day of service.
Lopez sought reconsideration, arguing that Board Resolution No. 234 did not apply to him because his insurance policy took effect on July 1, 1994, while the Resolution only became effective on September 7, 2001. The GSIS Bacolod affirmed its earlier decision.
The claim moved through several levels: the Office of the Vice President of the Visayas Operations Group, the Committee on Claims (CoC), and the GSIS Board of Trustees, all of which affirmed the denial. The GSIS Board of Trustees held that compulsory life insurance coverage is only extended to government employees while they are employed, and inevitably terminates upon separation from government service. Lopez then filed a Petition for Review under Rule 43 before the Court of Appeals (CA), which also denied his petition.
The Issue
The Court framed the issue as: Is Lopez entitled to maturity benefits under the LEP?
The Ruling
The Court resolved to deny the Petition for lack of merit. It ruled that an employee separated from government service has the option to convert compulsory life insurance into optional life insurance, but that this right to convert must be exercised within a reasonable period after separation from the service.
The Court held that Lopez is already barred by laches from claiming the maturity benefits under the LEP. Fifteen years after Lopez's separation from the service is not a reasonable period for him to choose to convert his LEP into an optional insurance and claim benefits thereunder.
The dispositive portion reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED. The Decision, dated June 10, 2022, of the Court of Appeals in CA-G.R. SP No. 14196 is AFFIRMED. SO ORDERED."
By the Numbers
- July 1, 1994 — Lopez entered government service and was issued the LEP
- July 1, 2017 — maturity date of the LEP
- May 8, 2002 — Lopez left government service
- September 1, 2012 — Lopez returned to government service as Legal Officer II
- Policy Number LP-72040700235 — Enhanced Life Policy issued on his return
- July 14, 2017 — Lopez filed his application for Life Insurance Benefit
- September 7, 2001 — date of GSIS Board Resolution No. 234
- About 15 years — the period from separation to asserting his claim
- June 10, 2022 — date of the CA decision affirmed by the Court
- G.R. No. 263728
The Court's Reasoning
The Court explained that when a separated employee opts for conversion and pays the premium, the compulsory life insurance shall be deemed converted into an optional insurance at the time of separation from the service, with any premiums in arrears deductible from insurance benefits or paid in another manner acceptable to the GSIS. This interpretation is favorable to the insured since it allows them to remain insured after separation from service, and is consistent with Rule VIII, Section 11 of the IRR of Presidential Decree No. 1146 allowing reinstatement of a lapsed policy.
However, the Court said a separated employee may not convert their compulsory life insurance at any time after separation. The right to convert must be exercised within a reasonable period, otherwise a party may be barred by laches — the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier.
The Court found all four elements of laches present. First, the GSIS issued the LEP and Lopez's separation gave rise to his right to convert. Second, it took Lopez about 15 years to assert his right, and he is presumed to have known his option since it was stipulated in the LEP. Third, the GSIS had no notice that Lopez would still assert his rights after the LEP lapsed. Fourth, granting the claim would prejudice the GSIS since Lopez never paid premiums after separation.
The Court noted that applying laches would not cause injustice to Lopez because he can still claim the CSV of the LEP as of his last day of service. It also held that Lopez's return to government service on September 1, 2012 did not affect the termination of the LEP, as nothing in Presidential Decree No. 1146 and its IRR provides for reinstatement of a lapsed compulsory life insurance upon re-entry, and Lopez was in fact issued a new compulsory life insurance policy upon his re-entry.
Source: Supreme Court Decision, G.R. No. 263728.
This report summarizes a public Supreme Court decision and is not legal advice.