#31 PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY, vs.

WOODWORKS,
INC. G.R. No. L-25317 August 6, 1979

FACTS:

Upon WOODWORKS’s application, PHIL. PHOENIX issued in its favor a fire
insurance policy whereby PHIL. PHOENIX insured WOODWORKS’ building,
machinery and equipment for a term of one year from against loss by fire. The
premium and other charges amounted to P10,593.36.
It is undisputed that WOODWORKS did not pay the premium stipulated in the Policy
when it was issued nor at any time thereafter. Before the expiration of the one-year
term, PHIL. PHOENIX notified WOODWORKS of the cancellation of the Policy
allegedly upon request of WOODWORKS. The latter has denied having made such a
request. PHIL. PHOENIX credited WOODWORKS with the amount of P3,110.25 for
the unexpired period of 94 days, and claimed the balance of P7,483.11 representing
, earned premium. Thereafter, PHIL. PHOENIX demanded in writing for the payment
of said amount. 
WOODWORKS disclaimed any liability contending, in essence, that
it need not pay premium “because the Insurer did not stand liable for any indemnity
during the period the premiums were not paid.” For this reason, PHIL. PHOENIX
commenced action in the CFI of Manila. Judgment was rendered in PHIL. PHOENIX’s
favor . From this adverse Decision, WOODWORKS appealed to the Court of Appeals
which certified the case to SC on a question of law.

ISSUE:
May the insurer collect the earned premiums?

HELD:
NO. The Courts findings are buttressed by Section 77 of the Insurance Code
(Presidential Decree No. 612, promulgated on December 18, 1974), which now
provides that “no contract of insurance issued by an insurance company is valid and
binding unless and until the premium thereof has been paid, notwithstanding any
agreement to the contrary.”
Since the premium had not been paid, the policy must be deemed to have lapsed.
The non-payment of premiums does not merely suspend but put, an end to an
insurance contract, since the time of the payment is peculiarly of the essence of the
contract.
In fact, if the peril insured against had occurred, PHIL. PHOENIX, as insurer, would
have had a valid defense against recovery under the Policy it had issued. Explicit in
the Policy itself is PHIL. PHOENIX’s agreement to indemnify WOODWORKS for loss
by fire only “after payment of premium,” Compliance by the insured with the terms
of the contract is a condition precedent to the right of recovery.
The burden is on an insured to keep a policy in force by the payment of premiums,
rather than on the insurer to exert every effort to prevent the insured from allowing
a policy to elapse through a failure to make premium payments. The continuance of
the insurer’s obligation is conditional upon the payment of premiums, so that no
recovery can be had upon a lapsed policy, the contractual relation between the
parties having ceased.
#30 Tibay, et. al v Court of Appeals
GR No. 119655, 24 May 1996
Bellosillo, [J.]

Facts:

1. In January 22 1987, the Petitioner Violeta Tibay (and Nicolas Roralso)

obtained a fire insurance policy for their 2-storey from the Private Respondent
Fortune Life Insurance Co. The said policy covers the period from January 23, 1987
until January 23, 1988 or one year for P600, 000 and at the agreed premium of P2,
983.50. On January 23 or the next day, petitioner made a partial payment of the
premium with P600.

2. Unfortunately, on March 8 1987, the said building was burned to the ground. It
was only two days after the fire that Petitioner Violeta advanced the full payment of
the policy premium which was accepted by the insurer. On this same day, petitioner
likewise filed the claim that was then referred to the insurer's adjuster.
Investigation of the cause of fire commenced and the petitioner submitted the
required proof of loss.

3. Despite that, the private respondent Fortune refused to pay the insurance
claim saying it as not liable due to the non-payment by petitioner of the full amount
of the premium as stated in the policy.

4. The petitioner then brought the matter to the Insurance Commission but
nothing good came out. Hence this case filed.

5. The trial court rule in favor of the petitioner. Upon appeal, the Court of Appeals
reversed the lower court's decision and held that Fortune is not liable but ordered it
to return the premium paid with interest to the petitioner. Hence, this petition for
review.

Issue: W/N the partial payment of the premium rendered the insurance policy
ineffective?

YES.
1. Insurance is a contract whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or
contingent event. The consideration is the premium, which must be paid at the time,
way and manner as stated in the policy, and if not so paid as in this case, the policy is
therefore forfeited by its own terms. In this case, the policy taken out by the
petitioner provides for payment of premium in full. Since the petitioner only made
partial payment with the remaining balance paid only after the fire or peril insured
against has occurred, the insurance contract therefore did not take effect barring the
insured from claiming or collecting from the loss of her building.
#29 American Home Assurance Co. V. Chua (1999)
G.R. No. 130421 June 28, 1999

FACTS:

• April 5, 1990: Antonio Chua renewed the fire insurance for

its stock-in-trade of his business, Moonlight Enterprises with American Home
Assurance Companyby issuing a check of P2,983.50 to its agent James Uy who
delivered the Renewal Certificate to him.
• April 6, 1990: Moonlight Enterprises was completely razed by
fire with an est. loss of P4,000,000 to P5,000,000
• April 10, 1990: An official receipt was issued and subsequently,
a policy was issued covering March 25 1990 to March 25 1991
• Antonio Chua filed an insurance claim with American Home
and 4 other co-insurers (Pioneer Insurance and Surety Corporation, Prudential
Guarantee and Assurance, Inc. and Filipino Merchants Insurance Co)
• American Home refused alleging the no premium was paid
• RTC: favored Antonio Chua for paying by way of check a day
before the fire occurred
• CA: Affirmed
ISSUE:
1. W/N there was a valid payment of premium considering that the check was
cashed after the occurrence of the fire since the renewal certificate issued
containing the acknowledgement receipt

HELD:petition is partly GRANTED modified by deleting the awards of P200,000 for

loss of profit, P200,000 as moral damages and P100,000 as exemplary damages, and
reducing the award of attorney’s fees from P50,000 to P10,000

1. YES.

• Section 77 of the Insurance Code

• 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 life or an industrial life policy whenever the grace period
provision applies
• Section 66 of the Insurance Code - not applicable since not
termination but renewal
• renewal certificate issued contained the acknowledgment that
premium had been paid
• Section 306 of the Insurance Code provides that any insurance
company which delivers a policy or contract of insurance to an insurance agent or
insurance broker shall be deemed 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
• best evidence of such authority is the fact that petitioner
accepted the check and issued the official receipt for the payment. It is, as well,
bound by its agent’s acknowledgment of receipt of payment
• Section 78 of the Insurance Code
• 
An acknowledgment in a policy or contract of insurance of
the receipt of premium is conclusive evidence of its payment, so far as to make the
policy binding, notwithstanding any stipulation therein that it shall not be binding
until the premium is actually paid.
• This Section establishes a legal fiction of payment and should
be interpreted as an exception to Section 77

#28 vUCPB v Masagana G.R. No. 137172. April 4, 2001

C.J. Davide

Facts:

Plaintiff [herein Respondent] obtained from defendant [herein Petitioner] five (5)
insurance policies on its properties. All five (5) policies reflect on their face the
effectivity term: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992."On
June
13,1992,plaintiffs properties were razed by fire. On July 13, 1992, plaitiff tendered, a
nddefendant accepted, five (5) Equitable Bank Manager's Checks as renewal premiu
m payments for which Official Receipt Direct Premium was issued by defendant.
Masagana made its formal demand for indemnification for the burned insured
properties. On the same day, defendant returned the five (5) manager's checks
stating in its letter) that it was rejecting Masagana's claim on the following grounds:

"a) Said policies expired last May 22, 1992 and were not renewed for another term;
b) Defendant had put plaintiff and its alleged broker on notice of non-renewal
earlier; and
c) The properties covered by the said policies were burned in a fire that took place
last June 13, 1992, or before tender of premium payment."

Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to
Petitioner’s advantage despite its practice of granting a 60- to 90-day credit term for
the payment of premiums.

Held: No. Petition denied.

Ratio:
Section 77 of the Insurance Code provides: No policy or contract of insurance issued
by an insurance company is valid and binding unless and until the premium thereof
has been paid…
An exception to this section is Section 78 which provides: Any acknowledgment in a
policy or contract of insurance of the receipt of premium is conclusive evidence of
its payment, so far as to make the policy binding, notwithstanding any stipulation
therein that it shall not be binding until premium is actually paid.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance

contract to provide a credit term within which to pay the premiums. That
agreement is not against the law, morals, good customs, public order or public
policy. The agreement binds the parties.
It would be unjust if recovery on the policy would not be permitted against
Petitioner, which had consistently granted a 60- to 90-day credit term for the
payment of premiums. Estoppel bars it from taking refuge since Masagana relied in
good faith on such practice. Estoppel then is the fifth exception.

#27 UCPB General Insurance v. Masagana Telamart (1999)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

1999 / Pardo

FACTS
In 1991, UCPB issued 5 fire insurance policies covering Masagana
Telamart’s various properties for the period from 22 May 1991 to 22 May 1992.
On March 1992[~2 months before policy expiration], UCPB evaluated the policies
and decided not to renew them upon expiration of their terms on 22 May
1992. UCPB advised Masagana’s broker of its intention not to renew the policies.
On April 1992 [~1 month before policy expiration], UCPB gave written notice to
Masagana of the non-renewal of the policies. On June 1992 [policy already
expired], Masagana’s propertycovered by 3 UCPB-issued policies was razed by
fire.
On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager’s checks,
representing premium for the renewal of the policies for another year.
It was only on the following day, 14 July 1992, when Masagana filed with
UCPB a formal claim for indemnification of the insured property razed by fire. On
the same day, UCPB returned the 5 manager’s checks, and rejected Masagana’s
claim since the policies had expired and were not renewed, and the fire
occurred on 13 June 1992 (or before tender of premium payment).
Masagana filed a civil complaint for recovery of the face value of
the policies covering the insured property razed by fire. RTC ruled in favor
of Masagana, as it found it to have complied with the obligation to pay the
premium; hence, the replacement-renewal policy of these policies are effective
and binding for another year.
 CA affirmed RTC, holding that following previous practice, Masagana was
allowed a 60-90 day credit term for the renewal of its policies, and that
the acceptance of the late premium payment suggested that payment could be
made later.

ISSUE & HOLDING

WON the fire insurance policies had expired on 22 May 1992, or had been extended
or renewed by an implied credit arrangement though actual payment of premium
was tendered on a later date after the occurrence of the risk insured against.

RATIO

An insurance policy, other than life is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void.The parties
may not agree expressly or impliedly on the extension of credit or time to pay the
premium and consider the policy binding before actual payment.

CA DECISION REVERSED

#26 Makati Tuscany V. Ca

G.R. No. 95546 November 6, 1992

FACTS:

American Home Assurance Co. (AHAC), represented by American International

Underwriters (Phils.), Inc., issued in favor of Makati Tuscany Condominium
Corporation (Tuscany) on the latter's building and premises, for a period beginning
1 March 1982 and ending 1 March 1983, with a total premium of P466,103.05.
Premium were paid on installments on:

March 12 1982
May 20 1982
June 21 1982
November 16 1982

February 10 1983: AHAC replaced and renewed the previous policy, for a term
covering 1 March 1983 to 1 March 1984. Premium of P466,103.05 was again paid on
installments on:
• April 13 1983
• July 13 1983
• August 3 1983
• September 9 1983
• November 21 1983
• January 20 1984: policy was again renewed for the period March 1 1984
to March 1 1985
• Tuscany only paid two installment payments
• February 6 1984 for P52k
• June 6 1984 for P100k
• AHAC filed an action to recover the unpaid balance of P314,103.05

RTC: dismissed the complaint

While it is true that the receipts issued to the defendant contained the
aforementioned reservations, it is equally true that payment of the premiums of the
three aforementioned policies (being sought to be refunded) were made during the
lifetime or term of said policies, hence, it could not be said, inspite of the
reservations, that no risk attached under the policies counterclaim for refund is not
justified
•
CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible
obligation to pay the entire premium; insurance contract became valid and binding
upon payment of the first premium

ISSUE:
1. W/N payment by installment of the premiums due on an insurance policy
invalidates the contract of insurance on the basis of:
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.

HELD:

NO. 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, and such an agreement is not contrary to morals, good
customs, public order or public policy. At the very least, both parties should be
deemed in estoppel to question the arrangement they have voluntarily accepted.
It 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 2 installments although it refused to pay the balance. -
appearing that they actually intended to make 3 insurance contracts valid