Makati Tuscany Condominium Corp. v.
Court of Appeals
G.R.No.95546, 6 November 1992, 215 SCRA 462
FACTS:
In 1982, private respondent American Home Assurance Co. (AHAC), represented by American International
Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium Corporation (TUSCANY)
Insurance Policy on the latter’s building and premises, for a period beginning 1 March 1982 and ending 1 March
1983. The premium was paid on installments on 12 March 1982, 20 May 1982, 21 June 1982 and 16 November
1982, all of which were accepted by private respondent.
The policy was renewed the following year and payments were made in the same manner.
On 1984, the policy was again renewed and petitioner made two installment payments, both accepted by private
respondent, the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00.
Thereafter, petitioner refused to pay the balance of the premium.
American Home Assurance Co.,consequently filed an action to recover the unpaid balance for Insurance Policy.
Petitioner explained that it discontinued the payment of premiums because the policy did not contain a credit
clause in its favor. Petitioner further claimed that the policy was never binding and valid, and no risk attached to
the policy. It then pleaded a counterclaim for P152,000.00 for the premiums already paid for 1984-85, and in its
answer with amended counterclaim, sought the refund of P924,206.10 representing the premium payments for
1982-85.
The Trial Court dismissed the complaint and counterclaim. The Court of Appeals rendered a decision modifying
the that of the trial court by ordering herein petitioner to pay the balance of the premiums due.
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, otherwise known as the Insurance Code, as amended, which provides:
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.
RULING:
The Supreme Court ruled 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.
Certainly, basic principles of equity and fairness would not allow the insurer to continue collecting and accepting
the premiums, although paid on installments, and later deny liability on the lame excuse that the premiums were
not prepared in full.
The Supreme Court sustained the decision of Court of Appeals that while Section 77 which states that prepayment
of premiums is strictly required as a condition to the validity of the contract, It was 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, 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.
UCPB VS MASAGANA (G.R. NO. 137172 JUNE 15, 1999)
UCPB General Insurance Co. Inc vs Masagana Telamart Inc
G.R. No. 137172 June 15, 1999
Facts: On April 15, 1991, petitioner issued five (5) insurance policies covering respondent’s various property
described therein against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner
evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner
advised respondent’s broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. On April 6,
1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the
policies. On June 13, 1992, fire razed respondent’s property covered by three of the insurance policies petitioner
issued. On July 13, 1992, respondent presented to petitioner’s cashier at its head office five (5) manager’s checks
in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to
May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14,
1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire. On
the same day, July 14, 1992, petitioner returned to respondent the five (5) manager’s checks that it tendered, and at
the same time rejected respondent’s claim for the reasons (a) that the policies had expired and were not renewed,
and (b) that the fire occurred on June 13, 1992, before respondent’s tender of premium payment.
Issue: Whether or not respondent is entitled to compensation despite the renewal of the insurance policy after the
occurrence of the event insured.
Held: No. An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void. 11 The parties may not agree expressly or
impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual
payment.
Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire
occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after
occurrence of the fire.
UCPB General Insurance Co. Inc. v. Masagana Telemart, Inc.
G.R. No. 137172, 4 April 2001, 356 SCRA 307
FACTS:
On April 15, 1991, petitioner issued five (5) insurance policies covering respondent’s various property described
therein against fire, for the period from May 22, 1991 to May 22, 1992. In March 1992, petitioner evaluated the
policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised
respondent’s broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. On April 6, 1992,
petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies.
On June 13, 1992, fire razed respondent’s property covered by three of the insurance policies petitioner issued. On
July 13, 1992, respondent presented to petitioner’s cashier at its head office five (5) manager’s checks in the total
amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993.
No notice of loss was filed by respondent under the policies prior to July 14, 1992. On July 14, 1992, respondent
filed with petitioner its formal claim for indemnification of the insured property razed by fire. On the same day,
July 14, 1992, petitioner returned to respondent the five (5) manager’s checks that it tendered, and at the same time
rejected respondent’s claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the
fire occurred on June 13, 1992, before respondent’s tender of premium payment.
ISSUE:
Whether or not respondent is entitled to compensation despite the renewal of the insurance policy after the
occurrence of the event insured.
RULING:
No. An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual
payment of the premium. Any agreement to the contrary is void. 11 The parties may not agree expressly or
impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual
payment.
Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire
occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after
occurrence of the fire.
Insurance Case Digest: American Home Assurance Co. V. Chua (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
2. W/N Chua violated the policy by his submission of fraudulent documents and non-disclosure of the other
existing insurance contracts or “other insurance clause"
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
2. NO.
purpose for the “other insurance clause” is to prevent an increase in the moral hazard
failure to disclose was not intentional and fraudulent
Section 75
A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid the policy.
American Home is estopped because its loss adjusters had previous knowledge of the co-insurers
The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose
awareness of the other insurance contracts binds petitioner
no legal and factual basis for the award of P200,000 for loss of profit
no such fraud or bad faith = no moral damages
grant of attorney’s fees as part of damages is the exception rather than the rule
award attorney’s fees where it deems just and equitable that it be so granted
reduced to P10,000
Sps. Antonio Tibay and Violeta Tibay et. al. v. Court of Appeals
G.R. No. 119655, 24 May 1996, 257 SCRA 126
FACTS:
On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued Fire
Insurance Policy in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential building
located Makati City, together with all their personal effects therein. The insurance was for P600,000.00 covering
the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the total premium of P2,983.50,
petitioner Violeta Tibay only paid P600.00 thus leaving a considerable balance unpaid.
On 8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March 1987
Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim on the fire
insurance policy. In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for violation of Policy
Condition No. 2 and of Sec. 77 of the Insurance Code.
On 3 March 1988 Violeta and the other petitioners sued FORTUNE for damages in the amount of P600,000.00
representing the total coverage of the fire insurance policy plus 12% interest per annum, P 100,000.00 moral
damages, and attorney’s fees equivalent to 20% of the total claim.
On 19 July 1990 the trial court ruled for petitioners and adjudged FORTUNE liable for the total value of the
insured building and personal properties in the amount of P600,000.00 plus interest at the legal rate of 6% per
annum from the filing of the complaint until full payment, and attorney’s fees equivalent to 20% of the total
amount claimed plus costs of suit.
On 24 March 1995 the Court of Appeals reversed the court a quo by declaring FORTUNE not to be liable to
plaintiff-appellees therein but ordering defendant-appellant to return to the former the premium of P2,983.50 plus
12% interest from 10 March 1987 until full payment.
Hence this petition for review with petitioners contending mainly that contrary to the conclusion of the appellate
court, FORTUNE remains liable under the subject fire insurance policy inspite of the failure of petitioners to pay
their premium in full.
ISSUE:
Whether a fire insurance policy is valid, binding and enforceable upon mere partial payment of premium?
RULING:
The Supreme Court finds no merit in the petition. Hence, it affirms the decision of the Court of Appeals.
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 and in the way and manner specified in the policy, and if not so paid, the policy will lapse and be forfeited by
its own terms.
Clearly the Policy entered into between Sps. Antonio and Violeta Tibay and Fortune Life and General Insurance
Co. provides for payment of premium in full. Accordingly, where the premium has only been partially paid and the
balance paid only after the peril insured against has occurred, the insurance contract did not take effect and the
insured cannot collect at all on the policy. This is fully supported by Sec. 77 of the Insurance Code which provides:
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.
Thus, no vinculum juris whereby the insurer bound itself to indemnify the assured according to law ever resulted
from the fractional payment of premium. The insurance contract itself expressly provided that the policy would be
effective only when the premium was paid in full. It would have been altogether different were it not so stipulated.
Ergo, petitioners had absolute freedom of choice whether or not to be insured by FORTUNE under the terms of its
policy and they freely opted to adhere thereto.
*Case digest by Karen S. Tindugan, LLB-4, Andres Bonifacio Law School, SY 2018-2019
Insurance Case Digest: Philippine Phoenix Surety & Insurance Co. V. Woodworks Inc (1979)
FACTS:
July 21, 1960: Woodworks, Inc. was issued a fire policy for its building machinery and
equipment by Philippine Phoenix Surety & Insurance Co. for P500K covering July 21, 1960 to July 21, 1961.
Woodworks did not pay the premium totalling to P10,593.36.
April 19, 1961: It was alleged that Woodworks notified Philippine Phoenix the cancellation of the Policy
so Philippine Phoenix credited P3,110.25 for the unexpired period of 94 days and demanded in writing the
payment of P7,483.11
Woodworks refused stating that it need not pay premium "because the Insurer did not stand liable for any
indemnity during the period the premiums were not paid."
Philippine Phoenix filed with the CFI to recover its earned premium of P7,483.11
Woodworks: to pay the premium after the issuance of the policy put an end to the insurance contract
and rendered the policy unenforceable
CFI: favored Philippine Phoenix
ISSUE: W/N there was a valid insurance contract despite no premium payment was paid
HELD: NO. Reversed
Policy provides for pre-payment of premium. To constitute an extension of credit there must be a clear and
express agreement therefor and there nust be acceptance of the extension - none here
Since the premium had not been paid, the policy must be deemed to have lapsed.
failure to make a payment of a premium or assessment at the time provided for, the policy shall become
void or forfeited, or the obligation of the insurer shall cease, or words to like effect, because the contract so
prescribes and because such a stipulation is a material and essential part of the contract. This is true, for
instance, in the case of life, health and accident, fire and hail insurance policies
Explicit in the Policy itself is plaintiff's agreement to indemnify defendant 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.
