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UCPB General Insurance Co. vs. Masagana Telamart Inc.

GR 137172
June 15, 1999
Section 77 Insurance Code: 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.
Facts:

On 15 April 1991, UCPB General Insurance Co. Inc. (petitioner) issued 5


insurance policies covering Masagana Telamart, Inc.'s (respondent) various
property described therein against fire, from May 22, 1991 to May 22, 1992.

In March 1992, UCPB evaluated the policies and decided not to renew them
upon expiration of their terms on 22 May 1992.

UCPB advised Masagana's broker, Zuellig Insurance Brokers, Inc. of its intention
not to renew the policies.

On April 6, 1992, UCPB gave written notice to Masagana of the non-renewal of


the policies.

On June 13, 1992, fire razed Masagana's property covered by three of the
insurance policies UCPB issued.

On July 13, 1992, Masagana presented to UCPB (5) manager's checks


amounting to P225,753.95, representing premium for the renewal of the policies
from May 22, 1992 to May 22, 1993.

On July 14, 1992, Masagana filed with UCPB its formal claim for indemnification
of the insured property razed by fire. No notice of loss was filed by Masagana
prior to the said date.

On the same day, UCPB returned to Masagana the 5 manager's checks and
rejected Masagana's claim:
That the policies had expired and were not renewed;
That the fire occurred on 13 June 1992, before Masagana's tender
of premium payment.

On July 21, 1992, Masagana filed with the RTC Makati, a civil complaint against
UCPB for the recovery of P18,645,000.00, representing the face value of the
policies covering Masagana's insured property.

On 23 October 1992, after its motion to dismiss had been denied, UCPB 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, the RTC rendered its decision, in favor of Masagana. In due time,
UCPB appealed to the CA.

On September 7, 1998, the CA promulgated its decision affirming that of the


RTC. UCPB appealed, hence, this case.

Issue:
Whether the fire insurance policies issued by UCPB to Masagana covering the period
from May 22, 1991 to May 22,1992 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:
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.
Section 77 of the Insurance Code provides: 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.
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. In the case at
bar, 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 (Masagana) did not
even give the insurer (UCPB) a notice of loss within a reasonable time after occurrence
of the fire. Hence, the Court rendered judgment dismissing Masagana's complaint and
UCPB's counterclaims thereto filed with the RTC.

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