Constantino v. Asia Life Insurance Company
No, the beneficiaries are not entitled to recover for non-payment despite
G.R. No. 1669, August 31, 1950
FACTS:
1. In the first case (G.R. No. L-1669, August 31, 1950),
respondent Corporation was paid P176.04 as annual premium by
Arcadio Constantino in exchange for policy no. 93212 in 1941 for P
3,000 which lasted for 20 years. Petitioner Paz Constantino was
made beneficiary. However after the first payment, no
further premiums were made. Thereafter the insured died on 1944.
2. Later, due to the war (Japanese occupation) Respondent Corporation
had to close down its branch in the country.
3. In the second case (G.R. No. L-1670,August 31, 1950), in the same
way, respondent Corporation issued in 1938 another insurance policy
no. 78145 for Spouses Ruiz and Peralta also for P 3,000, lasting for
20 years.
4. Due to Jap occupation, it became impossible and illegal for the
insured to deal with ALIC. Aside from this the insured borrowed
from the policy P234.00 such that the cash surrender value of the
policy was sufficient to maintain the policy in force only up to Sept.
7, 1942.
5. Both policies contained this provision: All premiums are due in
advance and any unpunctuality in making such payment shall cause
this policy to lapse unless and except as kept in force by the grace
period condition.
6. Paz Constantino and Agustina Peralta claim as beneficiaries, that
they are entitled to receive the proceeds of the policies less all sums
due for premiums in arrears. They also allege that non-payment of
the premiums were caused by the closing of ALICs offices during
the war and the impossible circumstances by the war, therefore, they
should be excused and the policies should not be forfeited. Ruiz died
on 1945. Peralta was the beneficiary. In both cases the plaintiffs
demanded payment but was refused due to Respondent Corporations
refusal on the ground of non-payment of the premiums. Lower court
favored Respondent.
ISSUES:
1. Whether the beneficiaries are entitled to recover the amount insured
despite non-payment caused by the Japanese occupation? NO.
2. Whether the periodic payments of the premiums, those after the first,
is not an obligation of the insured so that it is not a debt enforceable
by the action of the insurer? NO.
HELD:
1.
the presence of war. Due to the express terms of the policy, non-payment of
the premium produces its avoidance.
Contracts of insurance are contracts of indemnity within the terms and
condition found therein. An insurance company for certain considerations
guarantee the insured against loss or damage as may be stipulated, and when
called to pay, the insurer may insist on the fulfillment of said stipulations.
Failure of the insured to do so disqualifies recovery for the loss. Thus the
terms of the policy determines the insurers liability. Compliance to the terms
of the policy is a must as it is a condition precedent to the right of recovery.
Therefore, from the terms of the policy it is clear that non-payment of
premium produces avoidance (forfeiture of the policy).
Moreover, since act 2427, Philippine law on insurance and the Civil Code)
are mostly based from the Civil Code of California, An intention to
supplement our laws with the prevailing principles of the US arises. Thus,
Prof. Vance of Yaled declares that the United States Rule must be followed,
where the contract is not merely suspended but is abrogated by reason of
non-payment of premiumssince the time of payments is peculiar to the
essence of the contract. Further it would be unjust to permit the insurer to
retain the reserve value of the policy or the excess of premiums paid over the
actual risk when the policy was still effective as held in the Statham Case
which was more logical and juridically sound. In said case it was hold that
promptness of payment is essential in the business oflife insurance since all
calculations of the company is based on the hypothesis of prompt payments.
Forfeiture for non-payment is necessary to protect said business from
embarrassment otherwise confusion would abound. And that delinquency
cannot be tolerated nor redeemed except at the option of the company. Lastly
parties contracted both for peace and war times since the policies contained
also wartime days. It follows that the parties contemplated uninterrupted
operation of the contract even if armed conflict ensues. When the life
insurance policy provides that non-payment of premiums will cause its
forfeiture, war does NOT excuse non-payment and does not avoid forfeiture.
2. No, the annual premium is not a debt, nor is it an obligation which the
insurer can maintain an action against the insured; nor its settlement
governed by the rules on payment of debts. A contract of insurance is sui
generis. Though the insured may hold the insurer to the contract by the
fulfillment of the condition, the latter has no power or right to compel the
insured to maintain the contract relation longer than the insured may desire.
It is optional upon the insured.