UCPB General Insurance v.

MasaganaTelamart (2001)
UCPB GENERAL INSURANCE [UCPB] v. MASAGANA
TELAMART [Masagana]
2001 / Davide, Jr.
FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]
CA disagreed with UCPBs stand that Masaganas tender of
payment of the premiums on 13 July 1992 did not result in the
renewal of the policies, having been made beyond the effective
date of renewal as provided under Policy Condition No. 26:
Renewal Clause. Unless the company at least 45 days in
advance of the end of the policy period mails or delivers to the
assured at the address shown in the policy notice of its
intention not to renew the policy or to condition its renewal
upon reduction of limits or elimination of coverages, the
assured shall be entitled to renew the policy upon payment of
the premium due on the effective date of renewal.
The following facts have been established:
1.
For years, UCPB had been issuing fire policies to
thMasagana, and these policies were annually renewed.
2. UCPB had been granting Masagana a 60-90-day credit
term within which to pay the premiums on the renewed
policies.
3. There was no valid notice of non-renewal of the policies, as
there is no proof that the notice sent by ordinary mail was
received by Masagana, and the copy allegedly sent to Zuellig
was ever transmitted to Masagana.
4. The premiums for the policies were paid by Masagana
within the 60- 90-day credit term and were duly accepted and
received by UCPBs cashier.
ISSUE & HOLDING
WON IC 77 must be strictly applied to UCPBs advantage
despite its practice of granting a 60- to 90-day credit term for
the payment of premiums. NO. MASAGANA WINS THIS TIME.
1999 DECISION SET ASIDE; CA DECISION AFFIRMED
RATIO
SEC. 77. An insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium
thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision
applies.
This was formerly Act 2427, Section 72:
SEC. 72. An insurer is entitled to payment of premium as soon
as the thing insured is exposed to the peril insured against,
unless there is clear agreement to grant the insured credit
extension of the premium due. No policy issued by an
insurance company is valid and binding unless and until the
premium thereof has been paid. (Underscoring supplied)
IC 77 does not restate the portion of IC 72 expressly permitting
an agreement to extend the period to pay the premium.
However, there are exceptions to IC 77.
In case of a life or industrial life policywhenever the grace
period provision applies [Sec. 77]
Any acknowledgment of the receipt of premiumis conclusive
evidence of payment [Sec. 78]
If the parties have agreed to the payment ininstallments of the
premium and partial payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
The insurer may grant credit extensionfor the payment of the
premium [Makati Tuscany Condominium]
Estoppel

IC 77 merely precludes the parties from stipulating that the

policy is valid even if premiums are not paid, but does not
expressly prohibit an agreement granting credit extension, and
such an agreement is not contrary to morals, good customs,
public order or public policy. [Makati Tuscany Condominium v.
CA]
ON EXCEPTION #4. If the insurer has granted the insured a
credit term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy should
be allowed even though the premium is paid after the loss but
within the credit term.
It would be unjust and inequitable if recovery on the policy
would not be permitted against UCPB, which had consistently
granted a 60-90-day credit term for the payment of premiums
despite its full awareness of IC 77. Estoppel bars it from taking
refuge under said section, since Masagana relied in good faith
on such practice.
Insurance Case Digest: Malayan Insurance Co., Inc. V.
Arnaldo (1987)
G.R. No. L-67835 October 12, 1987
Lessons Applicable: Authority to Receive Payment/Effect of
Payment (Insurance)
Laws Applicable: Article 64, Article 65, Section 77, Section
306 of
the
Insurance
Code

FACTS:
June 7, 1981: Malayan insurance co., inc. (MICO) issued
to CoronacionPinca,
Fire
Insurance
Policy
for
her
property effective July 22, 1981, until July 22, 1982
October 15,1981: MICO allegedly cancelled the policy for nonpayment, of the premium and sent the corresponding notice to
Pinca
December 24, 1981: payment of the premium for Pinca was
received by Domingo Adora, agent of MICO
January 15, 1982: Adora remitted this payment to
MICO,together with other payments
January 18, 1982: Pinca's property was completely burned
February 5, 1982: Pinca's payment was returned by MICO to
Adora on the ground that her policy had been cancelled earlier
but Adora refused to accept it and instead demanded for
payment
Under Section 416 of the Insurance Code, the period for
appeal is thirty days from notice of the decision of the
Insurance Commission. The petitioner filed its motion for
reconsideration on April 25, 1981, or fifteen days such notice,
and the reglementary period began to run again after June 13,
1981, date of its receipt of notice of the denial of the said
motion for reconsideration. As the herein petition was filed on
July 2, 1981, or nineteen days later, there is no question that it
is tardy by four days.
Insurance Commission: favored Pinca
MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora
was
authorized
to
receive
it

HELD: YES. petition is DENIED

SEC. 77. An insurer is entitled to payment of the premium as
soon as the thing is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been

paid, except in the case of a life or an industrial life policy

whenever the grace period provision applies.
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant
or insurance broker a policy or contract of insurance shall be
demmed to have authorized such agent or broker to receive on
its behalf payment of any premium which is due on such policy
or contract of insurance at the time of its issuance or delivery
or which becomes due thereon.
Payment to an agent having authority to receive or collect
payment is equivalent to payment to the principal himself; such
payment is complete when the money delivered is into the
agent's hands and is a discharge of the indebtedness owing to
the principal.
SEC. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice thereof to the
insured, and no notice of cancellation shall be effective unless
it is based on the occurrence, after the effective date of the
policy, of one or more of the following:
(a)

non-payment of premium;

(b) conviction of a crime arising out of acts increasing the

hazard insured against;
(c)

discovery of fraud or material misrepresentation;

(d) discovery of willful, or reckless acts or commissions

increasing the hazard insured against;
(e) physical changes in the property insured which result in
the property becoming uninsurable;or
(f)
a determination by the Commissioner that the
continuation of the policy would violate or would place the
insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as
follows:
SEC. 65.
All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or delivered to the
named insured at the address shown in the policy, and shall
state (a) which of the grounds set forth in section sixty-four is
relied upon and (b) that, upon written request of the named
insured, the insurer will furnish the facts on which the
cancellation is based.
A valid cancellation must, therefore, require concurrence of the
following conditions:
(1)

There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the

effective date of the policy, of one or more of the grounds
mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered
to the named insured, (c) at the address shown in the policy;
(4) It must state (a) which of the grounds mentioned in
Section 64 is relied upon and (b) that upon written request of
the insured, the insurer will furnish the facts on which the
cancellation is based.
All MICO's offers to show that the cancellation was
communicated to the insured is its employee's testimony that
the said cancellation was sent "by mail through our mailing
section." without more

It stands to reason that if Pinca had really received the said

notice, she would not have made payment on the original
policy on December 24, 1981. Instead, she would have asked
for a new insurance, effective on that date and until one year
later, and so taken advantage of the extended period.
Incidentally, Adora had not been informed of the cancellation
either and saw no reason not to accept the said payment
Although Pinca's payment was remitted to MICO's by its agent
on January 15, 1982, MICO sought to return it to Adora only on
February 5, 1982, after it presumably had learned of the
occurrence of the loss insured against on January 18, 1982
make the motives of MICO highly suspicious
Great Pacific v CA G.R. No. L-31845 April 30, 1979
J. De Castro
Facts:
Ngo Hing filed an application with the Great Pacific for a
twenty-year endowment policy in the amount of P50,000.00 on
the life of his one-year old daughter Helen. He supplied the
essential data which petitioner Mondragon, the Branch
Manager, wrote on the form. The latter paid the annual
premium the sum of P1,077.75 going over to the Company, but
he retained the amount of P1,317.00 as his commission for
being a duly authorized agent of Pacific Life.
Upon the payment of the insurance premium, the binding
deposit receipt was issued Ngo Hing. Likewise, petitioner
Mondragon handwrote at the bottom of the back page of the
application form his strong recommendation for the approval of
the insurance application. Then Mondragon received a letter
from Pacific Life disapproving the insurance application. The
letter stated that the said life insurance application for 20-year
endowment plan is not available for minors below seven years
old, but Pacific Life can consider the same under the Juvenile
Triple Action Plan, and advised that if the offer is acceptable,
the Juvenile Non-Medical Declaration be sent to the company.
The non-acceptance of the insurance plan by Pacific Life was
allegedly not communicated by petitioner Mondragon to private
respondent Ngo Hing. Instead, on May 6, 1957, Mondragon
wrote back Pacific Life again strongly recommending the
approval of the 20-year endowment insurance plan to children,
pointing out that since the customers were asking for such
coverage.
Helen Go died of influenza. Ngo Hing sought the payment of
the proceeds of the insurance, but having failed in his effort, he
filed the action for the recovery before the Court of First
Instance of Cebu, which ruled against him.
Issues:
1. Whether the binding deposit receipt constituted a temporary
contract of the life insurance in question
2. Whether Ngo Hing concealed the state of health and
physical condition of Helen Go, which rendered void the policy
Held: No. Yes. Petition dismissed.
Ratio:
The receipt was intended to be merely a provisional insurance
contract. Its perfection was subject to compliance of the
following conditions: (1) that the company shall be satisfied
that the applicant was insurable on standard rates; (2) that if
the company does not accept the application and offers to
issue a policy for a different plan, the insurance contract shall
not be binding until the applicant accepts the policy offered;
otherwise, the deposit shall be refunded; and (3) that if the
company disapproves the application, the insurance applied for
shall not be in force at any time, and the premium paid shall be
returned to the applicant.

The receipt is merely an acknowledgment that the latter's

branch office had received from the applicant the insurance
premium and had accepted the application subject for
processing by the insurance company. There was still approval
or rejection the same on the basis of whether or not the
applicant is "insurable on standard rates." Since Pacific Life
disapproved the insurance application of respondent Ngo Hing,
the binding deposit receipt in question had never become in
force at any time. The binding deposit receipt is conditional and
does not insure outright. This was held in Lim v Sun.
The deposit paid by private respondent shall have to be
refunded by Pacific Life.
2. Ngo Hing had deliberately concealed the state of health of
his daughter Helen Go. When he supplied data, he was fully
aware that his one-year old daughter is typically a mongoloid
child. He withheld the fact material to the risk insured.
The contract of insurance is one of perfect good faith uberrima
fides meaning good faith, absolute and perfect candor or
openness and honesty; the absence of any concealment or
demotion, however slight.
The concealment entitles the insurer to rescind the contract of
insurance
xxx
Perez v. CA
323 SCRA 613 (2000)
Facts:
Primitivo Perez had been insured with the BF Lifeman
Insurance Corporation since 1980 for P20,000.00.
In October 1987, an agent of Lifeman, Rodolfo Lalog, visited
Perez in Quezon and convinced him to apply for additional
insurance coverage of P50,000.00, to avail of the ongoing
promotional discount of P400.00 if the premium were paid
annually.
Primitivo B. Perez accomplished an application form for the
additional insurance coverage. Virginia A. Perez, his wife, paid
P2,075.00 to Lalog. The receipt issued by Lalog indicated the
amount received was a "deposit."
Unfortunately, Lalog lost the application form accomplished by
Perez and so on October 28, 1987, he asked the latter to fill up
another application form. On November 1, 1987, Perez was
made to undergo the required medical examination, which he
passed.
Lalog forwarded the application for additional insurance of
Perez, together with all its supporting papers, to the office of
BF Lifeman Insurance Corporationn in Quezon which office
was supposed to forward the papers to the Manila office.
On November 25, 1987, Perez died while he was riding a
banca which capsized during a storm.
At the time of his death, his application papers for the
additional insurance were still with the Quezon office. Lalog
testified that when he went to follow up the papers, he found
them still in the Quezon office and so he personally brought the
papers to the Manila office of BF Lifeman Insurance
Corporation. It was only on November 27, 1987 that said
papers were received in Manila.
Without knowing that Perez died on November 25, 1987, BF
Lifeman Insurance Corporation approved the application and
issued the corresponding policy for the P50,000.00 on
December 2, 1987
Virginia went to Manila to claim the benefits under the
insurance policies of the deceased. She was paid P40,000.00
under the first insurance policy for P20,000.00 (double
indemnity in case of accident) but the insurance company
refused to pay the claim under the additional policy coverage
of P50,000.00, the proceeds of which amount to P150,000.00
in view of a triple indemnity rider on the insurance policy.

In its letter of January 29, 1988 to Virginia A. Perez, the

insurance company maintained that the insurance for
P50,000.00 had not been perfected at the time of the death of
Primitivo Perez. Consequently, the insurance company
refunded the amount of P2,075.00 which Virginia Perez had
paid
Lifeman filed for the rescission and the declaration of nullity.
Perez, on the other hand, averred that the deceased had
fulfilled all his prestations under the contract and all the
elements of a valid contract are present.
RTC ruled in favor of Perez. CA reversed.
Issue: WON there was a perfected additional insurance
contract.
Held: The contract was not perfected.
Insurance is a contract whereby, for a stipulated
consideration, one party undertakes to compensate the other
for loss on a specified subject by specified perils. A contract,
on the other hand, is a meeting of the minds between two
persons whereby one binds himself, with respect to the other
to give something or to render some service.
Consent must be manifested by the meeting of the
offer and the acceptance upon the thing and the cause which
are to constitute the contract. The offer must be certain and the
acceptance absolute. When Primitivo filed an application for
insurance, paid P2,075.00 and submitted the results of his
medical examination, his application was subject to the
acceptance of private respondent BF Lifeman Insurance
Corporation. The perfection of the contract of insurance
between the deceased and respondent corporation was further
conditioned upon compliance with the following requisites
stated in the application form:
"there shall be no contract of insurance unless and until a
policy is issued on this application and that the said policy shall
not take effect until the premium has been paid and the policy
delivered to and accepted by me/us in person while I/We,
am/are in good health."
The assent of private respondent BF Lifeman
Insurance Corporation therefore was not given when it merely
received the application form and all the requisite supporting
papers of the applicant. Its assent was given when it issues a
corresponding policy to the applicant. Under the
abovementioned provision, it is only when the applicant pays
the premium and receives and accepts the policy while he is in
good health that the contract of insurance is deemed to have
been perfected.
It is not disputed, however, that when Primitivo died
on November 25, 1987, his application papers for additional
insurance coverage were still with the branch office of
respondent corporation in Gumaca and it was only two days
later, or on November 27, 1987, when Lalog personally
delivered the application papers to the head office in Manila.
Consequently, there was absolutely no way the acceptance of
the application could have been communicated to the applicant
for the latter to accept inasmuch as the applicant at the time
was already dead.
Enriquez v Sunlife November 29, 1920 G.R. No. L-15895
Malcolm, J.:
Facts:
This is an action brought by the plaintiff ad administrator of the
estate of the late Joaquin Ma. Herrer to recover from the
defendant life insurance company the sum of pesos 6,000 paid

by the deceased for a life annuity. The trial court gave

judgment for the defendant. Plaintiff appeals.
Joaquin Herrer made application to the Sun Life Assurance
Company of Canada through its office in Manila for a life
annuity. Two days later he paid the sum of P6,000 to the
manager of the companys Manila office and was given a
receipt. The application was given to the head office in
Canada. The oofice gave acceptance by cable on November
26, 1917. The policy was issued on December 4.
The attorney, Mr. Torres then wrote to the Manila office of the
company stating that Herrer desired to withdraw his
application. The following day the local office replied to Mr.
Torres, stating that the policy had been issued, and called
attention to the notification. This letter was received by Mr.
Torres on the morning of December 21, 1917 and Mr. Herrer
died on December 20, 1917.
(Whether on the same day the cable was received notice was
sent by the Manila office of Herrer that the application had
been accepted, is a disputed point, which will be discussed
later.)
Issue: WON Herrer received notice of acceptance of his
application.
Held: No. Judgment reversed.
Ratio:
Sunlife averred that that they prepared the letter on November
26, 1917, and handed it to the local manager for signature. The
manager said that he received the application November 26,
1917. He said that on the same day he signed a letter notifying
Mr. Herrer of this acceptance. They said that these letters, after
being signed, were sent to the chief clerk and placed on the
mailing desk for transmission. The witness could not tell if the
letter had every actually been placed in the mails.
The plaintiffs attorney testified to having prepared Herrers will,
and his client mentioned his application for a life annuity. He
said that the only document relating to the transaction in his
possession was the provisional receipt. Rafael Enriquez, the
administrator of the estate, testified that he had gone through
the effects of the deceased and had found no letter of
notification from the insurance company to Mr. Herrer.
Our deduction from the evidence on this issue must be that the
letter of November 26, 1917, notifying Mr. Herrer that his
application had been accepted, prepared, and signed in the
local office of the insurance company and was placed in the
ordinary channels for transmission. But this was never actually
mailed and thus was never received by the applicant.
The law that applies here is the Civil Code Art 1802, because
the Insurance Act is silent as to the methods followed to create
a contract of insurance. Article 1802, not only describes a
contact of life annuity, but but in two other articles, also gives
strong clues as to the proper disposition of the case.
For instance, article 16 of the Civil Code provides that In
matters which are governed by special laws, any deficiency of
the latter shall be supplied by the provisions of this Code. The
special law on the subject of insurance is deficient in
enunciating the principles governing acceptance, the subjectmatter of the Civil code, if there be any, would be controlling. In
the Civil Code is found article 1262 providing that Consent is
shown by the concurrence of offer and acceptance with
respect to the thing and the consideration which are to
constitute the contract. An acceptance made by letter shall not
bind the person making the offer except from the time it came
to his knowledge. The contract, in such case, is presumed to
have been entered into at the place where the offer was
made.

The Civil Code rule, that an acceptance made by letter shall

bind the person making the offer only from the date it came to
his knowledge avoids uncertainty and tends to security.
Also, U.S. jurisprudence states that the courts who take this
view have expressly held that an acceptance of an offer of
insurance not actually or constructively communicated to the
proposer does not make a contract. Only the mailing of
acceptance, it has been said, completes the contract of
insurance.
The law applicable to the case is found to be the second
paragraph of article 1262 of the Civil Code providing that an
acceptance made by letter shall not bind the person making
the offer except from the time it came to his knowledge. Also,
that according to the provisional receipt, three things had to be
accomplished by the insurance company before there was a
contract: (1) There had to be a medical examination of the
applicant; (2) there had to be approval of the application by the
head office of the company; and (3) this approval had in some
way to be communicated by the company to the applicant. The
further admitted facts are that the head office in Montreal did
accept the application, did cable the Manila office to that effect,
did actually issue the policy and did actually write the letter of
notification and place it in the usual channels for transmission
to the addressee.
The fact as to the letter of notification thus fails to concur with
the essential elements of the general rule pertaining to the
mailing and delivery of mail matter as announced by the
American courts, namely, when a letter or other mail matter is
addressed and mailed with postage prepaid there is a
rebuttable presumption of fact that it was received by the
addressee as soon as it could have been transmitted to him in
the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption.
For instance, a letter will not be presumed to have been
received by the addressee unless it is shown that it was
deposited in the post-office, properly addressed and stamped.
The contract for a life annuity was not perfected because it has
not been proved satisfactorily that the acceptance of the
application ever came to the knowledge of the applicant.
xxx
Insurance Case Digest: Enriquez V. Sun Life Assurance
Co. Of Canada (1920)
G.R. No. L-15895
November 29, 1920
Lessons Applicable: Perfection (Insurance)
FACTS:
September 24, 1917: Joaquin Herrer made application to the
Sun Life Assurance Company of Canada through its office in
Manila for a life annuity
2 days later: he paid P6,000 to the manager of the company's
Manila office and was given a receipt
according to the provisional receipt, 3 things had to be
accomplished by the insurance company before there was a
contract:
(1) There had to be a medical examination of the applicant;
-check
(2) there had to be approval of the application by the head
office of the company; and - check
(3) this approval had in some way to be communicated by the
company to the applicant - ?
November 26, 1917: The head office at Montreal, Canada gave
notice of acceptance by cable to Manila but this was not mailed
December 4, 1917: policy was issued at Montreal
December 18, 1917: attorney Aurelio A. Torres wrote to the
Manila office of the company stating that Herrer desired to
withdraw his application

December 19, 1917: local office replied to Mr. Torres, stating

that the policy had been issued, and called attention to the
notification of November 26, 1917
December 21, 1917 morning: received by Mr. Torres
December 20, 1917: Mr. Herrer died
Rafael Enriquez, as administrator of the estate of the late
Joaquin Ma.Herrer filed to recover from Sun Life Assurance
Company of Canada through its office in Manila for a life
annuity
RTC: favored Sun Life Insurance
ISSUE: W/N Mr. Herrera received notice of acceptance of his
application thereby perfecting his life annuity
HELD: NO. Judgment is reversed, and the Enriquez shall have
and recover from the Sun Life the sum of P6,000 with legal
interest from November 20, 1918, until paid, without special
finding as to costs in either instance. So ordered.
Civil Code
Art. 1319 (formerly Art.1262)
Art. 1319. Consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a
counter-offer.
Acceptance made by letter or telegram does not bind the
offerer except from the time it came to his knowledge. The
contract, in such a case, is presumed to have been entered
into in the place where the offer was made.
not perfected because it has not been proved satisfactorily that
the acceptance of the application ever came to the knowledge
of the applicant
UCPB General Insurance v. MasaganaTelamart (2001)
UCPB GENERAL INSURANCE [UCPB] v. MASAGANA
TELAMART [Masagana]
2001 / Davide, Jr.
FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]
CA disagreed with UCPBs stand that Masaganas tender of
payment of the premiums on 13 July 1992 did not result in the
renewal of the policies, having been made beyond the effective
date of renewal as provided under Policy Condition No. 26:
Renewal Clause. Unless the company at least 45 days in
advance of the end of the policy period mails or delivers to the
assured at the address shown in the policy notice of its
intention not to renew the policy or to condition its renewal
upon reduction of limits or elimination of coverages, the
assured shall be entitled to renew the policy upon payment of
the premium due on the effective date of renewal.
The following facts have been established:
1.
For years, UCPB had been issuing fire policies to
thMasagana, and these policies were annually renewed.
2. UCPB had been granting Masagana a 60-90-day credit
term within which to pay the premiums on the renewed
policies.
3. There was no valid notice of non-renewal of the policies, as
there is no proof that the notice sent by ordinary mail was
received by Masagana, and the copy allegedly sent to Zuellig
was ever transmitted to Masagana.
4. The premiums for the policies were paid by Masagana
within the 60- 90-day credit term and were duly accepted and
received by UCPBs cashier.

ISSUE & HOLDING

WON IC 77 must be strictly applied to UCPBs advantage
despite its practice of granting a 60- to 90-day credit term for
the payment of premiums. NO. MASAGANA WINS THIS TIME.
1999 DECISION SET ASIDE; CA DECISION AFFIRMED
RATIO
SEC. 77. An insurer is entitled to payment of the premium as
soon as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance
company is valid and binding unless and until the premium
thereof has been paid, except in the case of a life or an
industrial life policy whenever the grace period provision
applies.
This was formerly Act 2427, Section 72:
SEC. 72. An insurer is entitled to payment of premium as soon
as the thing insured is exposed to the peril insured against,
unless there is clear agreement to grant the insured credit
extension of the premium due. No policy issued by an
insurance company is valid and binding unless and until the
premium thereof has been paid. (Underscoring supplied)
IC 77 does not restate the portion of IC 72 expressly permitting
an agreement to extend the period to pay the premium.
However, there are exceptions to IC 77.
In case of a life or industrial life policywhenever the grace
period provision applies [Sec. 77]
Any acknowledgment of the receipt of premiumis conclusive
evidence of payment [Sec. 78]
If the parties have agreed to the payment ininstallments of the
premium and partial payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
The insurer may grant credit extensionfor the payment of the
premium [Makati Tuscany Condominium]
Estoppel
IC 77 merely precludes the parties from stipulating that the
policy is valid even if premiums are not paid, but does not
expressly prohibit an agreement granting credit extension, and
such an agreement is not contrary to morals, good customs,
public order or public policy. [Makati Tuscany Condominium v.
CA]
ON EXCEPTION #4. If the insurer has granted the insured a
credit term for the payment of the premium and loss occurs
before the expiration of the term, recovery on the policy should
be allowed even though the premium is paid after the loss but
within the credit term.
It would be unjust and inequitable if recovery on the policy
would not be permitted against UCPB, which had consistently
granted a 60-90-day credit term for the payment of premiums
despite its full awareness of IC 77. Estoppel bars it from taking
refuge under said section, since Masagana relied in good faith
on such practice.
Insurance Case Digest: Eternal Gardens Memorial Park Corp.
v. Philippine American Life Insurance Corp. (2008)
FACTS:
December 10, 1980: Philippine American Life Insurance
Company (Philamlife) entered into an agreement denominated
as Creditor Group Life Policy No. P-19202 with Eternal
Gardens Memorial Park Corporation (Eternal)
Under the policy (renewable annually), the clients of Eternal
who purchased burial lots from it on installment basis would be
insured by Philamlife
amount of insurance coverage depended upon the existing
balance
Eternal complied by submitting a letter dated December 29,
1982, a list of insurable balances of its lot buyers for October
1982 which includes John Chuang which was stamped as
received by Philam Life

August 2, 1984, Chuang died with a balance of 100,000 php

April 25, 1986: Philamlife had not furnished Eternal with any
reply on its insurance claim so its demanded its claim
According to Philam Life, since the application was submitted
only on November 15, 1984, after his death, Mr. John Uy
Chuang was not covered under the Policy since his application
was not approved. Moreover, the acceptance of the premiums
are only in trust for and not a sign of approval.
RTC: favored Eternal
CA: Reversed RTC
ISSUE: W/N Philam's inaction or non-approval meant the
perfection of the insurance contract.
HELD: YES. CA reversed
construed in favor of the insured and in favor of the effectivity
of the insurance contract
Upon a partys 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
Moreover, the mere inaction of the insurer on the insurance
application must not work to prejudice the insured
The termination of the insurance contract by the insurer must
be explicit and unambiguous
Xxx
Makati Tuscany v CA G.R. No. 95546 November 6, 1992
J. Bellosillo
Facts:
American International Underwriters issued a policy in favor of
Makati Tuscany Condominium Corporation with a total
premium of P466,103.05. The company issued a replacement
policy. Premium was again paid. In 1984, the policy was again
renewed and private respondent issued to petitioner another
policy. The petitioner paid 152,000 pesos then refused to
furnish the balance.
The company filed an action to recover the unpaid balance of
P314,103.05.
The condominium administration explained that it discontinued
the payment of premiums because the policy did not contain a
credit clause in its favor and that the acceptance of premiums
didnt waive any of the company rights to deny liability on any
claim under the policy arising before such payments or after
the expiration of the credit clause of the policy and prior to
premium payment, loss wasnt covered.
Petitioner sought for a refund. The trial court dismissed the
complaint and counterclaim owing to the argument that
payment of the premiums of the policies were made during the
lifetime or term of said policies, so risk attached under the
policies.
The Court of Appeals ordered petitioner to pay the balance of
the premiums owing to the reason that it was part of an
indivisible obligation.
Petitioner now asserts that its payment by installment of the
premiums for the insurance policies invalidated them because
of the provisions of Sec. 77 of the Insurance Code disclaiming
liability for loss for occurring before payment of premiums.
Issue: Whether payment by installment of the premiums due
on an insurance policy invalidates the contract of insurance, in
view of Sec. 77 of P.D. 612

Sec. 77. An insurer is entitled to the payment of the premium

as soon as the thing is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or
contract of insurance issued by an insurance company is valid
and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies.
Petitioner concluded that there cannot be a perfected contract
of insurance upon mere partial payment of the premiums
because under Sec. 77 of the Insurance Code, no contract of
insurance is valid and binding unless the premium thereof has
been paid, notwithstanding any agreement to the contrary. As a
consequence, petitioner seeks a refund of all premium
payments made on the alleged invalid insurance policies.
We hold that the subject policies are valid even if the premiums
were paid on installments. The records clearly show that
petitioner and private respondent intended subject insurance
policies to be binding and effective notwithstanding the
staggered payment of the premiums. The initial insurance
contract entered into in 1982 was renewed in 1983, then in
1984. In those three (3) years, the insurer accepted all the
installment payments. Such acceptance of payments speaks
loudly of the insurer's intention to honor the policies it issued to
petitioner.
Quoting the CA decision:
While the import of Section 77 is that prepayment of premiums
is strictly required as a condition to the validity of the contract,
we are not prepared to rule that the request to make
installment payments duly approved by the insurer, would
prevent the entire contract of insurance from going into effect
despite payment and acceptance of the initial premium or first
installment. Section 78 of the Insurance Code in effect allows
waiver by the insurer of the condition of prepayment by
making an acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of payment so
far as to make the policy binding despite the fact that
premium is actually unpaid. Section 77 merely precludes the
parties from stipulating that the policy is valid even if premiums
are not paid, but does not expressly prohibit an agreement
granting credit extension. So is an understanding to allow
insured to pay premiums in installments not so proscribed.
The reliance by petitioner on Arce vs. Capital Surety and
Insurance Co. is unavailing because the facts therein are
substantially different from those in the case at bar. In Arce, no
payment was made by the insured at all despite the grace
period given. Here, petitioner paid the initial installment and
thereafter made staggered payments resulting in full payment
of the 1982 and 1983 insurance policies. For the 1984 policy,
petitioner paid two (2) installments although it refused to pay
the balance.
It appearing from the peculiar circumstances that the parties
actually intended to make three (3) insurance contracts valid,
effective and binding, petitioner may not be allowed to renege
on its obligation to pay the balance of the premium after the
expiration of the whole term. Moreover, as correctly observed
by the appellate court, where the risk is entire and the contract
is indivisible, the insured is not entitled to a refund of the
premiums paid if the insurer was exposed to the risk insured
for any period, however brief or momentary.
Xxx
GREAT PACIFIC LIFE VS CA
GEAGONIA VS CA
3RD BATCH OF CASES

Held: Judgment affirmed.

Ratio:

Finman General Assurance Corporation vs. C.A. (G.R. No.

100970. September 02, 1992)
28MAY

FINMAN
GENERAL
ASSURANCE
CORPORATION, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and JULIA
SURPOSA, respondents.
Aquino and Associates for petitioner.
Public Attorneys Office for private respondent.
Ponente: NOCON
FACTS:
[P]etitioner filed this petition alleging grove abuse of discretion
on the part of the appellate court in applying the principle of
expressouniusexclusioalterius in a personal accident
insurance policy since death resulting from murder and/or
assault are impliedly excluded in said insurance policy
considering that the cause of death of the insured was not
accidental but rather a deliberate and intentional act of the
assailant in killing the former as indicated by the location of the
lone stab wound on the insured. Therefore, said death was
committed with deliberate intent which, by the very nature of a
personal accident insurance policy, cannot be indemnified.
ISSUE:
Whether or not death petitioner is correct that results from
assault or murder deemed are not included in the terms
accident and accidental.
HELD:
NO. Petition for certiorari with restraining order and preliminary
injunction was denied for lack of merit.
RATIO:
The terms accident and accidental as used in insurance
contracts have not acquired any technical meaning, and are
construed by the courts in their ordinary and common
acceptation. Thus, the terms have been taken to mean that
which happen by chance or fortuitously, without intention and
design, and which is unexpected, unusual, and unforeseen. An
accident is an event that takes place without ones foresight or
expectation an event that proceeds from an unknown
cause, or is an unusual effect of a known cause and, therefore,
not expected.
[I]t is well settled that contracts of insurance are to be
construed liberally in favor of the insured and strictly against
the insurer. Thus ambiguity in the words of an insurance
contract should be interpreted in favor of its beneficiary.
PERLA COMPANIA DE SEGUROS, INC vs. CA and CAYAS
G.R. No. 78860
May 28, 1990
FACTS: Cayas was the registered owner of a Mazda bus
which was insured with petitioner PERLA COMPANIA DE
SEGUROS, INC (PCSI). The bus figured in an accident in
Cavite, injuring several of its passengers. One of them, Perea,
sued Cayas for damages in the CFI, while three others agreed
to a settlement of P4,000.00 each with Cayas.
After trial, the court rendered a decision in favor of Perea,
Cayas ordered to compensate the latter with damages. Cayas
filed a complaint with the CFI, seeking reimbursement from
PCSI for the amounts she paid to ALL victims, alleging that the
latter refused to make such reimbursement notwithstanding the
fact that her claim was within its contractual liability under the
insurance policy.
The decision of the CA affirmed in toto the decision of the RTC
of Cavite, the dispositive portion of which states:
IN VIEW OF THE FOREGOING, judgment is hereby rendered
ordering defendant PCSI to pay plaintiff Cayas the sum of
P50,000.00 under its maximum liability as provided for in the
insurance policy;
In this petition for review on certiorari, petitioner seeks to limit
its liability only to the payment made by private respondent to
Perea and only up to the amount of P12,000.00. It altogether
denies liability for the payments made by private respondents
to the other 3 injured passengers totaling P12,000.00.

ISSUE: how much should PCSI pay?

HELD: The decision of the CA is modified, petitioner only to
pay Cayas P12,000,000.00
The insurance policy provides:
5. No admission, offer, promise or payment shall be made by
or on behalf of the insured without the written consent of the
Company
It being specifically required that petitioners written consent be
first secured before any payment in settlement of any claim
could be made, private respondent is precluded from seeking
reimbursement of the payments made to the other 3 victims in
view of her failure to comply with the condition contained in the
insurance policy.
Also, the insurance policy involved explicitly limits petitioners
liability to P12,000.00 per person and to P50,000.00 per
accident
Clearly, the fundamental principle that contracts are respected
as the law between the contracting parties finds application in
the present case. Thus, it was error on the part of the trial and
appellate courts to have disregarded the stipulations of the
parties and to have substituted their own interpretation of the
insurance policy.
We observe that although Cayas was able to prove a total loss
of only P44,000.00, petitioner was made liable for the amount
of P50,000.00, the maximum liability per accident stipulated in
the policy. This is patent error. An insurance indemnity, being
merely an assistance or restitution insofar as can be fairly
ascertained, cannot be availed of by any accident victim or
claimant as an instrument of enrichment by reason of an
accident.
PACIFIC
BANKING
CORPORATION
ORIENTAL ASSURANCE
Pacific Banking Corporation
vs.
CA
&
Oriental
[GR. No. L-41014 28 November 1988]

VS.

CA

&

Assurance

Facts: An open Fire Policy issued to Paramount Shirt

Manufacturing for Php61,000 on the following: stocks, materils,
supplies, furniture, fixture, machinery, equipment contained on
the 1st to 3rd floors. Insurance is for a year starting 21
OCTOBER 1964.
Paramount Shirt is debtor of Pacific Banking amounting to
Php800,000. Goods in policy were held in trust by Paramount
for Pacific under thrust receipts. Fire broke out on 4 January
1964.
Pacific sent letter of demand to Oriental. Insurance Adjuster of
Oriental notified Pacific to submit proof of loss pursuant to
Policy Condition 11. Pacific did not accede but asked
Insurance Adjuster to verify records form Bureau of Customs.
Pacific filed for sum of money against Oriental. Oriental alleged
that Pacific prematurely filed a suit, for neither filing a formal
claim over loss pursuant to policy nor submitting any proof of
loss.
Trial court decided in favor of Pacific. Decision based on
technicality. The defense of lack of proof of loss and defects
were raised for the 1st time. (On presentation of evidences by
Pacific, it was revealed there was violation of Condition No.3,
there were undeclared co-insurances under same property

Wellington, Empire, Asian. The only declared co-insurances

were Malayan, South Sea, and Victory)
CA reversed decision. Concealment of other co-insurances is a
misrepresentation and can easily be fraud.
Issues: (1) Whether or not unrevealed con-insurances is a
violation of Policy Condition No.3
(2) Whether or not there was premature filing of action
Held: (1) Yes. Policy Condition 3 provides that the insured must
give notice of any insurance already in effect or subsequently
be in effect covering same property being insured. Failure to
do so, the policy shall be forfeited.
Failure to reveal before the loss of the 3 other insurances is a
clear misrepresentation or a false declaration. The material fact
was asked for but was not revealed. Representations of facts
are the foundations of the contract. Pacific itself provided for
the evidences in trial court that proved existence of
misrepresentation.
(2) Yes. Policy Condition 11 is a sine qua non requirement for
maintaining action. It requires that documents necessary to
prove and estimate the loss should be included with notice of
loss. Pacific failed to submit formal claim of loss with
supporting documents but shifted the burden to the insurance
company. Failing to submit claim is failure for insurance
company to reject claim. Thus, a lack of cause of action to file
suit.
Furthermore, the mortgage clause in the policy specifically
provides that the policy is invalidated by reasons of FRAUD,
MISREPRESENTATION and FRAUD. Concealment can easily
be fraud or misrepresentation.
The insured PARAMOUNT is not entitled to proceeds.
Moreso, Pacific as indorsee of policy is not entitled.
PRUDENTIAL GUARANTEE AND ASSURANCE INC. v.
TRANS-ASIA SHIPPING LINES, INC.
G.R. NO. 151890; June 20, 2006
FACTS:
TRANS-ASIA is the owner of the vessel M/V Asia Korea. In
consideration of payment of premiums, PRUDENTIAL insured
M/V Asia Korea for loss/damage of the hull and machinery
arising from perils, inter alia, of fire and explosion for the sum
of P40 Million, beginning on July 1, 1993 up to July 1, 1994.
On October 25, 1993, while the policy was in force, a fire broke
out while M/V Asia Korea was undergoing repairs at the port of
Cebu. On October 26, 1993 plaintiff TRANS-ASIA filed its
notice of claim for damage sustained by the vessel. On August
13, 1996, the adjuster, Richards Hogg International, Inc.
completed is survey report determining the amount of loss
sustained by TRANS-ASIA. PRUDENTIAL denied the claim of
TRANS-ASIA for alleged breach of insurance policy conditions,
that TRANS-ASIA violated an express and material warranty in
the insurance contract that M/V ASIA KOREA is required to
be CLASSED AND CLASS MAINTAINED.
ISSUE:
Whether or not TRANS-ASIA violated a material warranty in
the insurance contract that the vessel should be classed and
class maintained.
HELD:
NO. PRUDENTIAL failed to establish that TRANS-ASIA
violated and breached the policy condition on WARRANTED
VESSEL CLASSED AND CLASS MAINTAINED, as contained
in the subject insurance contract.
We are not unmindful of the clear language of Sec. 74 of the
Insurance Code which provides that, "the violation of a material
warranty, or other material provision of a policy on the part of
either party thereto, entitles the other to rescind." It is generally

accepted that "[a] warranty is a statement or promise set forth

in the policy, or by reference incorporated therein, the untruth
or non-fulfillment of which in any respect, and without
reference to whether the insurer was in fact prejudiced by such
untruth or non-fulfillment, renders the policy voidable by the
insurer." However, it is similarly indubitable that for the breach
of a warranty to avoid a policy, the same must be duly shown
by the party alleging the same. We cannot sustain an
allegation that is unfounded. Consequently, PRUDENTIAL, not
having shown that TRANS-ASIA breached the warranty
condition, CLASSED AND CLASS MAINTAINED, it remains
that TRANS-ASIA must be allowed to recover its rightful claims
on the policy.
CATHAY INSURANCE CO., petitioner, vs. HON. COURT OF
APPEALS,
and
REMINGTON
INDUSTRIAL
SALES
CORPORATION
G.R. No. 76145 June 30, 1987 CATHAY INSURANCE CO.,
petitioner, vs. HON. COURT OF APPEALS, and REMINGTON
INDUSTRIAL SALES CORPORATION, respondents.
FACTS:
A complaint was filed by private respondent corporation
against petitioner (then defendant) company seeking collection
of the sum of P868,339.15 representing private respondent's
losses and damages incurred in a shipment of seamless steel
pipes under an insurance contract in favor of the said private
respondent as the insured, consignee or importer of aforesaid
merchandise while in transit from Japan to the Philippines on
board vessel SS "Eastern Mariner." The total value of the
shipment was P2,894,463.83 at the prevailing rate of P7.95 to
a dollar in June and July 1984, when the shipment was made.
The trial court decided in favor of private respondent
corporation by ordering petitioner to pay it the sum of
P866,339.15 as its recoverable insured loss equivalent to 30%
of the value of the seamless steel pipes; ordering petitioner to
pay private respondent interest on the aforecited amount at the
rate of 34% or double the ceiling prescribed by the Monetary
Board per annum from February 3, 1982 or 90 days from
private respondent's submission of proof of loss to petitioner
until paid as provided in the settlement of claim provision of the
policy; and ordering petitioner to pay private respondent certain
amounts for marine surveyor's fee, attorney's fees and costs of
the suit.
ISSUE: WON the rusting of steel pipes in the course of a
voyage is a "peril of the sea" in view of the toll on the cargo of
wind, water, and salt conditions.
RULING:
There is no question that the rusting of steel pipes in the
course of a voyage is a "peril of the sea" in view of the toll on
the cargo of wind, water, and salt conditions. At any rate if the
insurer cannot be held accountable therefor, We would fail to
observe a cardinal rule in the interpretation of contracts,
namely, that any ambiguity therein should be construed against
the maker/issuer/drafter thereof, namely, the insurer. Besides
the precise purpose of insuring cargo during a voyage would
be rendered fruitless. Be it noted that any attack of the 15-day
clause in the policy was foreclosed right in the pre-trial
conference.
Blue Cross v Olivares G.R. No. 169737, February 12, 2008
J. Corona
Facts:
Neomi Olivares applied for a health care program with
Blue Cross for the amount of 12,000 pesos. 38 days after she

applied, she suffered from a stroke. Ailments due to preexisting conditions were excluded from the coverage. She was
confined in Medical City and discharged with a bill of Php
34,000. Blue Cross refused to pay unless she had her
physicians certification that she was suffering from a preexisting condition. When Blue Cross still refused to pay, she
filed suit in the MTC. The health care company rebutted by
saying that the physician didnt disclose the condition due to
the patients invocation of the doctor-client privilege. The MTC
dismissed for a lack of cause of action because the physician
didnt disclose the condition. In the RTC, the spouses were
awarded the amount of the hospital bills plus 60,000 in
damages. This was under the ratio that the burden to prove
that Neomi had a pre-existing condition was under Blue Cross.
The CA denied the motion for reconsideration of the health
care company.
Issues:
1. Whether petitioner was able to prove that respondent
Neomi's stroke was caused by a pre-existing condition and
therefore was excluded from the coverage of the health care
agreement.
2. Whether it was liable for moral and exemplary damages and
attorney's fees.
Held: No. Yes. Petition dismissed.
Ratio:
1. Philamcare Health Systems, Inc. v. CA- a health care
agreement is in the nature of a non-life insurance. It is an
established rule in insurance contracts that when their terms
contain limitations on liability, they should be construed strictly
against the insurer. These are contracts of adhesion the terms
of which must be interpreted and enforced stringently against
the insurer which prepared the contract. This doctrine is
equally applicable to health care agreements.
The agreement defined a pre-existing condition as:
a disability which existed before the commencement date of
membership whose natural history can be clinically
determined, whether or not the Member was aware of such
illness
or
condition.
Such
conditions
also
include disabilitiesexisting prior to reinstatement date in the
case of lapse of an Agreement.
Under this provision, disabilities which existed before the
commencement of the agreement are excluded from its
coverage if they become manifest within one year from its
effectivity.
Petitioners still averred that the non-disclosure of the preexisting condition made a presumption in its favor.
Respondents still maintained that the petitioner had the duty to
prove its accusation.
Petitioner never presented evidence to prove its presumption
that the Doctors report would work against Neomi. They only
perceived that the invocation of the privilege made the report
adverse to Neomi and such was a disreputable presumption.
They should have made an independent assessment of
Neomis condition when it failed to obtain the report. They
shouldnt have waited for the attending physicians report to
come out.
Section 3 (e), Rule 131 of the Rules of Court states:
Under the rules of court, Rule 131, Sec. 3.
Disputable presumptions. The following presumptions are
satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
(e) That evidence willfully suppressed would be adverse if
produced.
The exception on presenting evidence applies when the
suppression is an exercise of a privilege.

Hence, Neomi had the privilege not to present the Doctors

report under the doctor-client privilege.
2. The court quoted the CA and RTC decision stating that the
refusal of petitioner to pay respondent Neomi's bills smacks of
bad faith, as its refusal [was] merely based on its own
perception that a stroke is a pre-existing condition. Also, there
was factual bases in the RTC and CA for the award of the
damages.
Sun v CA G.R. No. 89741 March 13, 1991
J. Paras
Facts:
Tan took from Sun Insurance a Php 300,000 policy to cover his
electrical store in Iloilo city. Tans request for an indemnity in
1983 was repeatedly denied, firstly in 1984. He wrote for a
reconsideration in the same year. This was rejected in 1985,
prompting him to file a civil case in the same year. The
insurance company filed a motion to dismiss due to
prescription in 1987, but this was denied. The company went
to the court of appeals to petition the same thing, but this was
denied.
Issue:
1. WON the filing of a motion for reconsideration interrupts the
twelve months prescriptive period to contest the denial ofthe
insurance claim.
2. WON the rejection of the claim shall be deemed final only if
it contains words to the effect that denial is final. (ie. the first
letter in 1984)
3. When does the cause of action accrue?
Held:
1.No
2.No
3. At the time of the first rejection of the insurance company
Ratio:
1. The policy states in section 27.
Action or suit clause If a claim be made and rejected and an
action or suit be not commenced either in the
InsuranceCommission or in any court of competent jurisdiction
within twelve (12) months from receipt of notice of such
rejection, or in case of arbitration taking place as provided
herein, within twelve (12) months after due notice of the award
made by the arbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have been abandoned and
shall not thereafter be recoverable hereunder.
Respondent Tan admitted that he received a copy of the letter
of rejection on April 2, 1984. Thus, the 12-month prescriptive
period started to run from the said date of April 2, 1984, under
section 27.
2. It was clear in the letter.
Ang v. Fulton Fire Insurance Co.- The condition contained in an
insurance policy that claims must be presented within one year
after rejection is not merely a procedural requirement but an
important matter essential to a prompt settlement of claims
against insurance companies as it demands that insurance
suits be brought by the insured while the evidence as to the
origin and cause of destruction have not yet disappeared.
Therefore, there was a necessity of bringing suits against the
Insurer within one year from the rejection of the claim. (1984)
The contention of the respondents that the one-year
prescriptive period does not start to run until the petition for
reconsideration had been resolved by the insurer (1985), runs
counter to the doctrine.
The provision in the contract was pursuant to Sec. 63.
A condition, stipulation or agreement in any policy of insurance,
limiting the time for commencing an action thereunder to a

period of less than one year from the time when the cause of
action accrues, is void.
3. Eagle star- The right of the insured to the payment of his
loss accrues from the happening of the loss. However, the
cause of action in an insurance contract does not accrue until
the insured's claim is finally rejected by the insurer. This is
because before such final rejection there is no real necessity
for bringing suit.
The cause of action, then, started when the insurer denied his
claim in the first instance(1984). This rejection of a petitionfor
reconsideration as insisted by respondents wasnt the
beginning of the cause of action.