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UCPB General Insurance [GR 137172, First Division, Pardo (J): 4 concur

vs. 15

Masagana June

Telamart

Inc. 1999]

Facts: On 15 April 1991, UCPB General Insurance Co. Inc. (UCPBGen) issued 5 insurance policies covering Masagana Telamart, Inc.'s various property described therein against fire, for the period from 22 May 1991 to 22 May 1992. In March 1992, UCPBGen evaluated the policies and decided not to renew them upon expiration of their terms on 22 May 1992. UCPBGen advised Masagana's broker, Zuellig Insurance Brokers, Inc. of its intention not to renew the policies. On 6 April 1992, UCPBGen gave written notice to Masagana of the non-renewal of the policies at the address stated in the policies. On 13 June 1992, fire razed Masagana's property covered by three of the insurance policies UCPBGen issued. On 13 July 1992, Masagana presented to UCPBGen's cashier at its head office 5 manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from 22 May 1992 to 22 May 1993. No notice of loss was filed by Masagana under the policies prior to 14 July 1992. On 14 July 1992, Masagana filed with UCPBGen its formal claim for indemnification of the insured property razed by fire. On the same day, 14 July 1992, UCPBGen returned to Masagana the 5 manager's checks that it tendered, and at the same time rejected Masagana's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on 13 June 1992, before Masagana's tender of premium payment. On 21 July 1992, Masagana filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against UCPBGen for recovery of P18,645,000.00, representing the face value of the policies covering Masagana's insured property razed by fire, and for attorney's fees. On 23 October 1992, after its motion to dismiss had been denied, UCPBGen filed an answer to the complaint. It alleged that the complaint "fails to state a cause of action"; that UCPBGen was not liable to Masagana for insurance proceeds under the policies because at the time of the loss of Masagana's property due to fire, the policies had long expired and were not renewed. After due trial, on 10 March 1993, the Regional Trial Court, Branch 58, Makati, rendered decision, (1) authorizing and allowing Masagana to consign/deposit with this Court the sum of P225,753.95 (refused by UCPBGen) as full payment of the corresponding premiums for the replacement-renewal policies; (2) declaring Masagana to have fully complied with its obligation to pay the premium thereby rendering the replacement-renewal policy effective and binding for the duration 22 May 1992 until 22 May 1993; and, ordering UCPBGen to deliver forthwith to Masagana the said replacement-renewal policies; (3) declaring two of the policies in force from 22 August 1991 up to 23 August 1992 and 9 August 1991 to 9 August 1992, respectively; and (4) ordering UCPBGen to pay Masagana the sums of: (a) P18,645,000.00 representing the latter's claim for indemnity under three policies and/or its replacement-renewal policies; (b) 25% of the total amount due as and for attorney's fees; (c) P25,000.00 as necessary litigation expenses; and, (d) the costs of suit. In due time, UCPBGen appealed to the Court of Appeals. On 7 September 1998, the Court of Appeals promulgated its decision affirming that of the Regional Trial Court with the modification that item 3 of the dispositive portion was deleted, and the award of attorney's fees was reduced to 10% of the total amount due. The Court of Appeals held that following previous practise, Masagana was allowed a 60 to 90 day credit term for the renewal of its policies, and that the acceptance of the late premium payment suggested an understanding that payment could be made later. UCPBGen appealed. Issue: Whether the fire insurance policies issued by UCPBGen to the Masagana covering the period 22 May 1991 to 22 May 1992, had expired on the latter date or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a latter date after the occurrence of the risk (fire) insured against. Held: The answer is easily found in the Insurance Code. 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. 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. The case of Malayan Insurance Co., Inc. vs. Cruz-Arnaldo is not applicable. In that case, payment of the premium was in fact actually made on 24 December 1981, and the fire occurred on 18 January 1982. Here, the payment of the premium for renewal of the policies was tendered on 13 July 1992, a month after the fire occurred on 13 June 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire. Hence, the Supreme Court reversed and set aside the decision of the Court of Appeals in CA-GR CV 42321. In lieu thereof, the Court rendered judgment dismissing Masagana's complaint and UCPBGen's counterclaims thereto filed with the Regional Trial Court, Branch 58, Makati City, in Civil Case 92-2023, without costs.

Makati Tuscany Condominium [GR 95546, First Division, Bellosillo (J): 3 concur, 1 on leave

Corporation 6

vs.

Court November

of

Appeals 1992]

Facts: Sometime in early 1982, American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., (AIUI) issued in favor of Makati Tuscany Condominium Corporation (Tuscany) Insurance Policy AH-CPP-9210452 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. 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 AHAC. On 10 February 1983, AHAC issued to Tuscany Insurance Policy No. AH-CPP-9210596, which replaced and renewed the previous policy, for a term covering 1 March 1903 to 1 March 1984. The premium in the amount of P466,103.05 was again paid on installments on 13 April 1983, 13 July 1983, 3 August 1983, 9 September 1983, and 21 November 1983. All payments were likewise accepted by AHAC. On 20 January 1984, the policy was again renewed and AHAC issued to Tuscany Insurance Policy AH-CPP-9210651 for the period 1 March 1984 to 1 March 1985. On this renewed policy, Tuscany made two installment payments, both accepted by AHAC, the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for P100,000.00. Thereafter, Tuscany refused to pay the balance of the premium. Consequently, AHAC filed an action to recover the unpaid balance of P314,103.05 for Insurance Policy AH-CPP-9210651. In its answer with counterclaim, Tuscany admitted the issuance of Insurance Policy AH-CPP-9210651. It explained that it discontinued the payment of premiums because the policy did not contain a credit clause in its favor and the receipts for the installment payments covering the policy for 1984-85, as well as the two (2) previous policies, stated the following reservations: (2) Acceptance of this payment shall not 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 (3) Subject to no loss prior to premium payment. If there be any loss such is not covered. Tuscany 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. After some incidents, Tuscany and AHAC moved for summary judgment. On 8 October 1987, the trial court dismissed the complaint and the counterclaim. Both parties appealed from the judgment of the trial court. Thereafter, the Court of Appeals rendered a decision modifying that of the trial court by ordering Tuscany to pay the balance of the premiums due on Policy AH-CPP-921-651, or P314,103.05 plus legal interest until fully paid, and affirming the denial of the counterclaim. Tuscany filed the petition. Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance. Held: NO. The subject policies are valid even if the premiums were paid on installments. The records clearly show that Tuscany and AHAC 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 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 Tuscany. 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 prepaid in full. Thus, while the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, the Court 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. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. It appearing from the peculiar circumstances that the parties actually intended to make the three (3) insurance contracts valid, effective and binding, Tuscany may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy (AH-CPP9210651) in March 1985. Moreover, 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.