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117 SCRA 187 Mercantile Law Insurance Law Representation Collection of


Premium Even Though Insured is Disqualified (Age)
FACTS: In April 1969, Carmen Lapuz filled out an application form for insurance under
Manila Banker Life Assurance Corporation. She stated that her date of birth was July 11,
1904. Upon payment of the Php 20.00 premium, she was issued the insurance policy in
April 1969. In May 1969, Carmen Lapuz died in a vehicular accident. Regina Edillon, who
was named a beneficiary in the insurance policy sought to collect the insurance
proceeds but Manila Banker denied the claim. Apparently, it is a rule of the insurance
company that they were not to issue insurance policies to persons who are under the age
of sixteen (16) years of age or over the age of sixty (60) years Note, that Lapuz was
already 65 years old when she was applying for the insurance policy.
ISSUE: Whether or not Edillon is entitled to the insurance claim as a beneficiary.
HELD: Yes. Carmen Lapuz did not conceal her true age. Despite this, the insurance
company still received premium from Lapuz and issued the corresponding insurance policy
to her. When the accident happened, the insurance policy has been in force for 45 days
already and such time was already sufficient for Manila Banker to notice the fact that Lapuz
is already over 60 years old and thereby cancel the insurance policy. If Manila Banker failed
to act, it is either because it was willing to waive such disqualification; or, through the
negligence or incompetence of its employees for which it has only itself to blame, it simply
overlooked such fact. Under the circumstances, Manila Banker is already deemed in
estoppel.
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3.
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.

FACTS:
Upon WOODWORKSs 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. PHOENIXs 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. PHOENIXs 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 insurers 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.
Moreover, an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity.
DISPOSITION:
The judgment appealed from was reversed, and PHIL. PHOENIXs complaint
dismissed.