Phil Phoenix Surety and Ins. Co vs Woodworkers, Inc.

92 SCRA 419 (1979)

MELENCHIO, HERRERA J.,
FACTS:
On 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. However, woodworks did not pay the premium. It was alleged
that Woodworks notified Philippine Phoenix the cancellation of the policy. 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. Woodworks contended that to pay the
premium after the issuance of the policy put an end to the insurance contract and
rendered the policy unenforceable.
ISSUE: Whether or not there was a valid insurance contract despite no premium
payment was paid.

HELD: NO. Policy provides for pre-payment of premium. To constitute an extension of

credit there must be a clear and express agreement therefore and there must be
acceptance of the extension there is none here. Since the premium had not been
paid, the policy must be deemed to have lapsed.

UPCB Genral Insurance Co., Inc. vs Masagana Telemart

333 SCRA 30 (2001)
VITUG, J.,
FACTS:
Plaintiff obtained from defendant five insurance policies on its properties.
Plaintiffs properties were razed by fire. On July 13, 1992, plaintiff tendered, and
defendant accepted, five Equitable Bank Manager's Checks as renewal premium
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 rejected 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
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 or not Section 77 of the Insurance Code must be strictly applied to UCPBs
advantage despite its practice of granting a 60- to 90-day credit term for the payment of
premiums.
RULING:
Section 77 explains that prepayment of premiums is strictly required as a condition to
the validity of the contract. 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 is a negative claim.
Hence, insured is allowed to pay premiums ininstallments not

so prescribed. At the very least, both parties should be deemed in estoppel to question
the arrangement they have voluntarily accepted.