FINALS | INSURANCE LAW | EMERGENCY DIGESTS
1 DEVELOPMENT INSURANCE v. IAC
FACTS:
1. Phil. Union Realty Development Corp.
(PURDC) insured its building against fire with
Development Insurance Corp. (DIC). The
policy contained the following provision: “This
is an open policy as defined in Section 57 of
the Insurance Act. In the event of loss,
whether total or partial, it is understood that
the amount of the loss shall be subject to
appraisal and the liability of the company, if
established, shall be limited to the actual loss,
subject to the applicable terms, conditions,
warranties and clauses of this Policy, and in
no case shall exceed the amount of the
policy."
2. After a fire consumed a part of the building,
with PURDC suffering an appraised value of
loss of P508, 867, PURDC filed its claim with
DIC, but the latter refused.
3. DIC argued that since the building was worth
more than the sum insured, PURDC must be
considered its own insurer for the difference
of the amount and the face value of the policy
and should share pro rata on the loss
sustained.
ISSUE:
WON DIC is liable for the appraised value of actual loss
sustained by PURDC.
HELD:
Yes, it is. As defined in the aforestated provision, which
is now Section 60 of the Insurance Code, "an open
policy is one in which the value of the thing insured is
not agreed upon but is left to be ascertained in case of
loss."
This means that the actual loss, as determined, will
represent the total indemnity due the insured from the
insurer except only that the total indemnity shall not
exceed the face value of the policy. The actual loss
having been ascertained in this case, the Court will
respect such factual determination in the absence of
proof that it was arrived at arbitrarily. There is no such
showing. Hence, applying the open policy clause as
expressly agreed upon by the parties in their contract,
PURDC is entitled to the payment of indemnity under
the said contract in the full amount of the appraised
value of actual loss.
2 ANG v. FULTON FIRE INSURANCE
FACTS:
1. Sept 1953: P&S Department Store (Sally Ang) was
insured with Fulton Fire Insurance Co over stocks
of general merchandise, consisting principally of
dried goods. It contained a stipulation stating “if the
claim is made and rejected but no action is
commenced within 12 months after such rejection,
all benefits under the policy would be forfeited.”
2. Dec 1954: fire consumed the store and Ang filed
claims. However, Fulton denied claims.
3. January 1955: Paulo Ang and 10 others were
charged for arson but was subsequently acquitted.
4. May 1956: Ang filed case against Fulton’s agent.
But this case was dismissed.
5. Ang filed the present case against Fulton. CFI
ruled in favor of Ang, holding that the 12-month
prescription period (from insurer’s denial of claim)
was suspended by the case against the agent.
ISSUE:
whether or not the filing of the previous suit against the
agent suspended the running of the prescriptive period.
HELD:
SC ruled that no, period was not suspended, and action
had already prescribed. CFI ruling set aside, case
dismissed.
The condition contained that claims must be presented
within 12 months or one year after rejection is not
merely a procedural requirement, but is essential to a
prompt settlement of claims against insurance
companies.
It demands that insurance suits be brought by the
insured while the evidence as to the origins and causes
of destruction have not yet disappeared.
Its purpose is to terminate all liabilities in case the
action is not filed by the insured within the period
stipulated.
The action against the agent cannot have any other
legal effect except that of notifying the agent of the
claim if there is no condition in the policy that an action
should be filed by the insured against the agent for his
claim. There is no law giving any effect to such action
upon the principal, and courts cannot by interpretation
extend the clear scope of the agreement beyond what
is agreed upon by the parties.
Contractual limitations in insurance policies prevail
over the statutory limitations, as well as over the
exceptions to the latter, because the rights of the
parties flow from the contract of insurance. Their
contract is the law between the parties, and their
agreement that an action on a claim denied by the
insurer must be brought within one year from the
denial, governs, not the rules on the prescription of
actions.
3 NEW LIFE ENTERPRISES v. CA
FACTS:
1. Julian Sy, owner of New Life, insured his
building in 3 different insurance agencies for
350,000, 1,000,000, and 200,000.
2. When his building and the goods
inside burned down, he claimed for insurance
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
indemnities, but these were rejected by the
three companies for violation of policy
conditions.
3. Sy filed for 3 different suits in the trial court,
where he won all suits against the insurance
companies. The court of appeals reversed the
decision of the trial court.
ISSUE: Did the petitioner violate conditions 3 and 27 of
the three insurance policies, thereby foreiting collection
of indemnities?
HELD: Yes.
RATIO:
Condition 3. The insured shall give notice to the
Company of any insurance or insurances already
effected, or which may subsequently be effected,
covering any of the property or properties consisting of
stocks in trade, goods in process and/or inventories
only hereby insured, and unless such notice be
given and the particulars of such insurance or
insurances be stated therein or endorsed on this
policy pursuant to Section 50 of the Insurance Code,
by or on behalf of the Company before the occurrence
of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided however, that this
condition shall not apply when the total insurance or
insurances in force at the time of loss or damage not
more than P200,000.00.
Sy never disclosed co-insurance in the contracts he
entered into with the three corporations.
The insured is specifically required to disclose the
insurance that he had contracted with other
companies. Sy also contended that the insurance
agents knew of the co-insurance. However, the theory
of imputed knowledge, that the knowledge of
the agent is presumed to be known by the principal, is
not enough.
When the words of the document are readily
understandable by an ordinary reader, there is no need
for construction anymore.
The conformity of the insured to the terms of the policy
is implied with his failure to disagree with the terms of
the contract.
Since Sy, was a businessman, it was incumbent upon
him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap-
The obvious purpose of the aforesaid requirement in
the policy is to prevent over-insurance and thus avert
the perpetration of fraud. The public, as well as the
insurer, is interested in preventing the situation in which
a fire would be profitable to the insured.
“Also, policy condition 15 was used. It stated: 15.. . . if
any false declaration be made or used in support
thereof, . . . all benefits under this Policy shall
be forfeited . . .”
As for condition number 27, the stipulation read:
27. Action or suit clause. — If a claim be made and
rejected and an action or suit be not commenced either
in the Insurance Commission or any court of competent
jurisdiction of notice of such rejection, or in case
of arbitration taking place as provided herein, within
twelve (12) months after due notice of the award made
by the arbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have
been abandoned and shall not thereafter be
recoverable hereunder.
This is regarding Sy’s claim for one of the companies.
Recovery was filed in court by petitioners only on
January 31, 1984, or after more than one (1) year had
elapsed from petitioners' receipt of the insurers' letter
of denial on November 29, 1982. This made it void.
4 ACCFA v. ALPHA INSURANCE
FACTS:
1. Asingan Farmers’ Cooperative Marketing
Assoc Inc wanted to have a guarantee against
loss on account of personal dishonesty,
amounting to larceny or estafa of its
Secretary-Treasurer, Ricardo Ladines. 

2. Alpha Insurance & Surety then issued a
fidelity bond for P5k with Ladines as principal
and Alpha as solidary surety. FACOMA then
assigned its rights to ACCFA (Agricultural
Credit Cooperative and Financing Admin).
3. Ladines misappropriated P11,513 of
FACOMA funds to his personal benefit. On
October 1958, ACCFA notified in writing the
survey company and presented proof of loss.
Surety Alpha refused to pay. ACCFA filed suit
30 May 1960. 

4. Alpha seeks to dismiss due to a provision in
the fidelity bond saying that no action shall be
had unless commenced within one year from
the making of the claim for loss. Another is
that the complaint failed to show an civil or
criminal action filed against Ladines as
required by the conditions of the bond. Last,
Ladines is an indispensable party but was not
joined. 

5. CFI denied dismissal but, upon
reconsideration, reversed and dismissed the
complaint because the action was filed
beyond the contractual limitation period 

ISSUE: Was contractual limitation void due to Sec. 61-
A of Insurance Act? 

HELD: Yes 

 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
RATIO: 
 3.
Fidelity bond is in the nature of a contract of insurance
against loss from misconduct. Subject to Insurance Act
Sec 61-A: A condition, stipulation or agreement in any
policy of insurance, limiting the time for commencing
an 
 action thereunder to a period of less than 1 year
from the time when the cause of action accrues is VOID


Cause of action (1) legal right (2) obligation (3) act or
omission in violation of legal right 
 Insurance Commission or in any court of competent
Cause of action ACCRUED when insurance company
REFUSED to comply with the bond NOT from the time
of 
 filing claim of loss 

Stipulation in contract is VOID because of Sec 61-A 
 been abandoned and shall not thereafter be
Condition of previous conviction was deleted by
express agreement 
 the letter of rejection on April 2, 1984. Thus, the 12-
Surety assumed solidary liability so creditor may go
against any one of the solidary debtors. 
 Case
remanded to CFI with instructions to require defendant
to answer 
 condition contained in
5 SUN LIFE INSURANCE v. CA (1991)
FACTS:
1. Tan took from Sun Insurance a Php 300,000
policy to cover his electrical store in Iloilo city.
2. Tan’s request for an indemnity in 1983 was
repeatedly denied, firstly in 1984.
3. He wrote for a reconsideration in the same
year.
4. This was rejected in 1985, prompting him to
file a civil case in the same year.
5. The insurance company filed a motion to
dismiss due to prescription in 1987, but this
was denied.
6. The company went to the court of appeals to
petition the same thing, but this was denied.
ISSUE:
1. WON the filing of a motion for reconsideration
interrupts the twelve months prescriptive
period to contest the denial of the insurance
claim.
2. WON the rejection of the claim shall be
deemed final only if it contains words to the
effect that denial is final. (ie. the first letter in
1984)
When does the cause of action accrue?
HELD:
1.No
2.No
3. At the time of the first rejection of the insurance
company
RATIO:
1. The policy states in section 27.S
Action or suit clause — If a claim be made and rejected
and an action or suit be not commenced either in the
jurisdiction within twelve (12) months from receipt of
notice of such rejection, or in case of arbitration taking
place as provided herein, within twelve (12) months
after due notice of the award made by
the arbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have
recoverable hereunder.
Respondent Tan admitted that he received a copy of
month prescriptive period started to run from the said
date of April 2, 1984, under section 27.
2. It was clear in the letter.
Ang v. Fulton Fire Insurance Co.- The
an insurance policy
that claims must be presented within one year after
rejection is not merely a procedural requirement but an
important matter essential to a prompt settlement
of claims against insurance companies as it demands
that insurance suits be brought by the insured while the
evidence as to the origin and cause of destruction have
not yet disappeared.
Therefore, there was a necessity of bringing suits
against the Insurer within one year from the rejection of
the claim. (1984) The contention of the respondents
that the one-year prescriptive period does not start to
run until the petition for reconsideration had been
resolved by the insurer (1985), runs counter to the
doctrine.
The provision in the contract was pursuant to Sec.
63. A condition, stipulation or agreement in any policy
of insurance, limiting the time for commencing an
action thereunder to a period of less than one year from
the time when the cause of action accrues, is void.
3. Eagle star- The right of the insured to the payment
of his loss accrues from the happening of the loss.
However, the cause of action in an insurance contract
does not accrue until the insured's claim is finally
rejected by the insurer. This is because before such
final rejection there is no real necessity for bringing suit.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
The cause of action, then, started when the insurer
denied his claim in the first instance(1984). This
rejection of a petition for reconsideration as insisted by
respondents wasn’t the beginning of the cause of
action.
6 LOPEZ v. COMPANIA DE SEGUROS
FACTS:
a. Plaintiff applied with the defendant company
for the insurance of his properties: Biederman
truck tractor and a Winter Weils trailer from
loss or damage in the amount of P20,000.00
and P10,000.00, respectively.
b. During the application, the defendant
company inquired of the plaintiff the ff:
 Has any company in respect of the
insurance of any car or vehicle
 (A) declined, cancelled or refused to
renew your insurance?
 (B) increased your premium
renewal?
c. Plaintiff answered in negative but the truth
was that the American International
Underwriters of the Philippines (AIU) had
already declined similar application for
insurance by the plaintiff with respect of the
above-mentioned vehicles.
d. The defendant issued to the plaintiff two
Commercial Vehicle Comprehensive Policies
covering the said properties.
e. The vehicles mentioned figured in an accident
resulting in the total loss of the tractor and
partial damage to the trailer. Plaintiff demand
upon the defendant for the payment to him the
total amt. of damages resulting from the
accident.
f. On April 28, 1960, defendant rejected the
claim on the ground of concealment of a
material fact: that the insured property
previously been declined insurance by
another company.
g. May 27, 1960, the plaintiff filed with the Office
of the Insurance Commissioner a complaint
against the said company.
h. As suggested, the plaintiff was willing to
submit his claim to arbitration but was
contested by the defendant since "the claim of
the plaintiff cannot be resolved by arbitration,
as recourse to arbitration referred to in the
policy contract, envisioned only differences or
disputes, 'with respect to the amount of the
company's liability,' and not to cases where
the company does not admit its liability to the
insured.
i. With this rejection, the plaintiff filed his
complaint with the CFI of Manila on
September 19,1961.
 Against the above complaint, the defendant-
appellee filed on September 29, 1961 a
motion to dismiss on the ground of
prescription. The latter argued that the
plaintiff's claim had already prescribed since it
was not filed within twelve months from its
rejection by the insurance company as
stipulated under paragraph 9 of the General
Conditions of Commercial Vehicle
Comprehensive Policy Nos. 5598 and 5599,
to wit:
If a claim be made and rejected and an action or suit
be not commenced within twelve months after such
rejection or (in case of an arbitration taking place as
provided herein) within twelve months after the
arbitrator, arbitrators, or umpire shall have made their
award then the claim shall for all purposes be deemed
to have been abandoned and shall not thereafter be
recovered hereunder.
ISSUE: Whether the complaint filed by the plaintiff-
appellant with the Office of the Insurance Comm. on
May 27,1960 a commencement of an "action or suit"
within the meaning and intent of general condition? No.
RATIO:
 "Action" and "suit":
Rule 2, Section 1 of the Rules of Court
Section 1. Action defined.—Action means an ordinary
suit in a Court of Justice by which one party prosecutes
another for the enforcement or protection of a right, or
the prevention or redress of a wrong. (Emphasis
supplied.)
Jurisprudence
Suit is the prosecution or pursuit of some claim or
demand in a court of justice or any proceeding in a
court of justice in which a plaintiff pursues his remedy
to recover a right or claim. (Emphasis supplied.)
- Upon the authorities, therefore, it is settled that the
terms "action" and "suit" are synonymous. Moreover, it
is clear that the determinative or operative fact which
converts a claim into an "action or suit" is the filing of
the same with a "court or justice." Filed elsewhere, as
with some other body or office not a court of justice, the
claim may not properly be categorized under either
term.
 An "action or suit" is essentially "for the
enforcement or protection of a right, or the
prevention or redress of a wrong." (Rule 2,
Sec. 1, Rules of Court). There is nothing in the
Insurance Law, which empowers the
Insurance Commissioner to adjudicate on
disputes relating to an insurance company's
liability to an insured under a policy issued by
the former to the latter. The validity of an
insured's claim under a specific policy, its
amount, and all such other matters as might
involve the interpretation and construction of
the insurance policy, are issues which only a
regular court of justice may resolve and settle.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
Consequently, the complaint filed by the
appellant herein with the Office of the
Insurance Commission could not have been
an "action or suit."
7 MAYER STEEL PIPES v. CA
FACTS:
1. Hong Kong Government Supplies
Department contracted Mayer Steel Pipe
Corporation to manufacture and supply
various steel pipes and fittings.
2. Prior to the shipping, Mayer insured these
pipes and fittings against all risks with South
Sea Surety and Insurance Co., Inc. and
Charter Insurance Corp., with Industrial
Inspection Inc. appointed as third-party
inspector.
3. After examining the pipes and fittings,
Industrial Inspection certified that they are in
good order condition. However, when the
goods reached Hong Kong, it was discovered
that a substantial portion thereof was
damaged.
4. The trial court found in favor of the insured.
However, when the case was elevated to the
CA, it set aside the decision of the trial court
and dismissed the complaint on the ground of
prescription.
5. It held that the action was barred under Sec.
3(6) of the Carriage of Goods by Sea Act
(COGSA) since it was filed only on April 17,
1986, more than two years from the time the
goods were unloaded from the vessel.
ISSUE:
Whether or not the action is barred by prescription
HELD:
Sec. 3(6) of the COGSA states that the carrier and the
ship shall be discharged from all liability for loss or
damage to the goods if no suit is filed within one year
after delivery of the goods or the date when they should
have been delivered. Under this provision, only the
carrier’s liability is extinguished if no suit is brought
within one year. But the liability of the insurer is not
extinguished because the insurer’s liability is based not
on the contract of carriage but on the contract of
insurance.
An insurance contract is a contract whereby one party,
for a consideration known as the premium, agrees to
indemnify another for loss or damage which he may
suffer from a specified peril. An “all risks” insurance
policy covers all kinds of loss other than those due to
willful and fraudulent act of the insured. Thus, when
private respondents issued the “all risks” policies to
Mayer, they bound themselves to indemnify the latter
in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with
Article 1144 of the New Civil Code.
8 MALAYAN INSURANCE v. CRUZ-
ARNALDO
DOCTRINE:
A valid cancellation of policy requires the concurrence
of the following conditions:
1. Prior notice of cancellation to insured
2. Notice must be based on the occurrence after
effective date of policy of one or more of the
grounds mentioned
3. Must be in writing, mailed or delivered to the
insured at the address shown in the policy
Must state the grounds relied upon provided in Sec. 64
of the Insurance Code and upon request of insured, to
furnish facts on which cancellation is based
Facts:
1. On June 7, 1981, the petitioner (hereinafter
called MICO issued to the private respondent,
P14,000.00 effective July 22, 1981, until July
22, 1982.
2. On October 15,1981, MICO allegedly
cancelled the policy for non-payment, of the
premium and sent the corresponding notice to
Pinca.
3. On December 24, 1981, payment of the
premium for Pinca was received by Domingo
Adora, agent of MICO.
4. On January 15, 1982, Adora remitted this
payment to MICO,together with other
payments.
5. On January 18, 1982, Pinca's property was
completely burned.
6. On February 5, 1982, Pinca's payment was
returned by MICO to Adora on the ground that
her policy had been cancelled earlier. But
Adora refused to accept it.
7. In due time, Pinca made the requisite
demands for payment, which MICO rejected.
She then went to the Insurance Commission.
It is because she was ultimately sustained by
the public respondent that the petitioner has
come to us for relief.
ISSUE:
Whether or not petitioner liable, for it alleged that the
insurance policy was already cancelled due to non-
payment of premium.
HELD:
On the merits, it must also fail. MICO's arguments that
there was no payment of premium and that the policy
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
had been cancelled before the occurence of the loss
are not acceptable. Its contention that the claim was
allowed without proof of loss is also untenable.
The petitioner relies heavily on Section 77 of the
Insurance Code providing that:
SEC. 77. An insurer is entitled to payment of the
premium as soon as the thing 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 above provision is not applicable because
payment of the premium was in fact eventually made in
this case. Notably, the premium invoice issued to Pinca
at the time of the delivery of the policy on June 7, 1981
was stamped "Payment Received" of the amoung of
P930.60 on "12-24-81" by Domingo Adora. This is
important because it suggests an understanding
between MICO and the insured that such payment
could be made later, as agent Adora had assured
Pinca. In any event, it is not denied that this payment
was actually made by Pinca to Adora, who remitted the
same to MICO.
It is not disputed that the premium was actually paid by
Pinca to Adora on December 24, 1981, who received it
on behalf of MICO, to which it was remitted on January
15, 1982. What is questioned is the validity of Pinca's
payment and of Adora's authority to receive it.
MICO's acknowledgment of Adora as its agent defeats
its contention that he was not authorized to receive the
premium payment on its behalf. It is clearly provided in
Section 306 of the Insurance Code that:
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance
agant or insurance broker a policy or contract of
insurance shall be demmed to have authorized such
agent or broker to receive on its behalf payment of any
premium which is due on such policy or contract of
insurance at the time of its issuance or delivery or
which becomes due thereon.
On the other hand Article 64 (except "nonpayment of
premium") provided the cancellation was made in
accordance therewith and with Article 65.
Section 64 reads as follows:
SEC. 64. No policy of insurance other than life shall be
cancelled by the insurer except upon prior notice
thereof to the insured, and no notice of cancellation
shall be effective unless it is based on the occurrence,
after the effective date of the policy, of one or more of
the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing
the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions
increasing the hazard insured against;
(e) physical changes in the property insured which
result in the property becoming uninsurable;or
(f) a determination by the Commissioner that the
continuation of the policy would violate or would place
the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides
as follows:
SEC. 65. All notices of cancellation mentioned in the
preceding section shall be in writing, mailed or
delivered to the named insured at the address shown
in the policy, and shall state (a) which of the grounds
set forth in section sixty-four is relied upon and (b) that,
upon written request of the named insured, the insurer
will furnish the facts on which the cancellation is based.
A valid cancellation must, therefore, require
concurrence of the following conditions:
(1) There must be prior notice of cancellation to the
insured;
(2) The notice must be based on the occurrence, after
the effective date of the policy, of one or more of the
grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or
delivered to the named insured, (c) at the address
shown in the policy;
(4) It must state (a) which of the grounds mentioned in
Section 64 is relied upon and (b) that upon written
request of the insured, the insurer will furnish the facts
on which the cancellation is based.
There is no proof that the notice, assuming it complied
with the other requisites mentioned above, was actually
mailed to and received by Pinca. All MICO's offers to
show that the cancellation was communicated to the
insured is its employee's testimony that the said
cancellation was sent "by mail through our mailing
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
section." without more. The petitioner then says that its
"stand is enervated (sic) by the legal presumption of
regularity and due performance of duty." (not realizing
perhaps that "enervated" means "debilitated" not
"strengthened").
On the other hand, there is the flat denial of Pinca, who
says she never received the claimed cancellation and
who, of course, did not have to prove such denial
Considering the strict language of Section 64 that no
insurance policy shall be cancelled except upon prior
notice, it behooved MICO's to make sure that the
cancellation was actually sent to and received by the
insured.
Adora. incidentally, had not been informed of the
cancellation either and saw no reason not to accept the
said payment.
9 STA. ANA v. COMMERCIAL UNION
INSURANCE
FACTS:
1. In 1923, Sta. Ana built his house in Pasig and
insured it against fire for (1) P3,000 to
Phoenix Assurance Company and (2) P6,000
to Guardian Assurance Company, Limited, for
a period of one year.
2. In November 1925, Santa Ana mortgaged this
house to Garcia for P5,000, for a period of two
years, the contract being drawn up as a retro
sale for the sum of P5,000. The 2 policies
were endorsed to Garcia.
3. In December 1925, Santa Ana reinsured said
house with the defendant companies, the
Globe and Rutgers Fire Insurance Company
of New York,
and the Commercial Union Assurance Comp
any Limited of London, through their commo
n agent duly authorized to represent them in
the Philippine Islands, the Pacific Commercial
Company which was to be effective for one
year.
4. On September 20, 1926, Santa Ana took out
another insurance policy on the house in
question for P6,000 in the "Filipinas,
Compania de Seguros, which issued the one-
year policy upon receiving from Sta. Ana
premium thereon.
5. 12 years before the expiration of the policies
issued by the Phoenix Assurance Company
and the Guardian Assurance Company,
Limited for P3,000 and P6,000 respectively,
the entire house was burned.
6. Santa Ana gave notice in due time of the loss
to each and every one
of the companies in which he had insured th
e house and demanded payment of the
respective policies.
7. The insurance companies refused payment
on the ground that the claim of P21,000 filed
by him was fraudulent, being in excess of the
real value of the insured property; that none
of said companies had been informed of
the existence of the other policies in the
other companies, and that the fire was
intentional.
8. Sta.Ana filed civil cases in RTC against The
Commercial Union Assurance Company,
Limited in case No. 31263; the Globe and
Rutgers Fire Insurance Company of New
York in case No. 31264; and the Phoenix
Assurance Company, Limited, the Guardian
Assurance Company, Limited, and the
"Filipinas, Compania de Seguros", incase No.
31322. All the defendants are absolved in
their alleged liabilities by the RTC. Hence this
petition.
ISSUE:
Can the insured claim against the insurance
companies?
HELD: NO.
Without deciding whether notice of other insurance
upon the same property must be given in writing, or
whether a verbal notice is sufficient to render an
insurance valid which requires such notice, whether
oral or written, the SC held that in the absolute absence
of such notice when it is one of the conditions specified
in the fire insurance policy, the policy is null and void.
Since the policy is null and void, plaintiff cannot recover
from the defendants insurance companies.
 The SC upheld the finding of the trial court
that the policies provide that no other
insurance should be admitted upon the
property thereby assured without the consent
of said companies duly given by
endorsement.
10 ANG GIOK CHIP v. SPRINGFIELD FIRE
AND MARINE
FACTS:
1. Ang insured his warehouse for the total value
of Php 60,000. One of these, amounting to
10,000, was with Springfield Insurance
Company.
2. His warehouse burned down, then he
attempted to recover 8,000 from Springfield
for the indemnity. The insurance company
interposed its defense on a rider in the policy
in the form of Warranty F, fixing the amount
of hazardous good that can be stored in a
building to be covered by the insurance.
3. They claimed that Ang violated the 3 percent
limit by placing hazardous goods to as high
as 39 percent of all the goods stored in the
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
building. His suit to recover was granted by
the trial court. Hence, this appeal.
ISSUE: Whether a warranty referred to in the policy as
forming part of the contract of insurance and in the form
of a rider to the insurance policy, is null and void
because not complying with the Philippine Insurance
Act.
HELD: No. The warranty is valid. Petition dismissed.
RATIO:
The Insurance Act, Section 65, taken
from California law, states:
"Every express warranty, made at or before the
execution of a policy, must be contained in the policy
itself, or in another instrument signed by the insured
and referred to in the policy, as making a part of it."
Warranty F, indemnifying for a value of Php 20,000 and
pasted on the left margin of the policy stated:
It is hereby declared and agreed that during
the currency of this policy no hazardous goods be
stored in the Building to which this insurance applies or
in any building communicating therewith, provided,
always, however, that the Insured be permitted to
stored a small quantity of the hazardous goods
specified below, but not exceeding in all 3 per cent of
the total value of the whole of the goods or
merchandise contained in said warehouse,
viz; . . . .
Also, the court stated a book that said, "any express
warranty or condition is always a part of the policy, but,
like any other part of an express contract, may be
written in the margin, or contained in proposals or
documents expressly referred to in the policy, and so
made a part of it."
“It is well settled that a rider attached to a policy is a
part of the contract, to the same extent and with like
effect as it actually embodied therein. In the second
place, it is equally well settled that an express warranty
must appear upon the face of the policy, or be clearly
incorporated therein and made a part thereof by explicit
reference, or by words clearly evidencing such
intention.”
The court concluded that Warranty F is contained in
the policy itself, because by the contract of insurance
agreed to by the parties it was made to be a part. It
wasn’t a separate instrument agreed to by the parties.
The receipt of the policy by the insured without
objection binds him. It was his duty to read the policy
and know its terms. He also never chose to accept a
different policy by considering the earlier one as a
mistake. Hence, the rider is valid.
11 YOUNG v. MIDLAND TEXTILE
FACTS:
1. The purpose of the present action is to
recover the sum of P3,000 upon an insurance
policy. The lower court rendered a judgment
in favor of the plaintiff and against the
defendant for the sum of P2,708.78, and
costs. From that judgment the defendant
appealed to this court.
2. Young occupied a building at '321 Calle
Claveria, as a residence and bodega
(storehouse). On the 29th of May, 1912,
Midland Textile, in consideration of the
payment of a premium of P60, entered into a
contract of insurance with Young promising to
pay the sum of P3,000, in case said residence
and bodega and contents should be
destroyed by fire.
3. One of the conditions of said contract was that
no hazardous goods be stored or kept in the
building.
4. On the 4th or 5th of February, 1913, the
plaintiff placed in said residence and bodega
three boxes which belonged to him and which
were filled with fireworks for the celebration of
the Chinese new year.
5. On the 18th day of March, 1913, said
residence and bodega and the contents
thereof were partially destroyed.
6. Fireworks were found in a part of the building
not destroyed by the fire; that they in no way
contributed to the fire, or to the loss
occasioned thereby.
ISSUE:
Whether or not the placing of said fireworks in
the building insured, under the conditions above
enumerated, they being "hazardous goods," is a
violation of the terms of the contract of insurance.
HELD:
Yes.
The word "stored" has been defined to be a deposit in
a store or warehouse for preservation or safe keeping;
to put away for future use, especially for future
consumption; to place in a warehouse or other place of
deposit for safe keeping. Said definition does not
include a deposit in a store, in small quantities, for daily
use. "Daily use" precludes the idea of deposit for
preservation or safe keeping, as well as a deposit for
future consumption or safe keeping.
A violation of the terms of a contract of insurance, by
either party, will constitute the basis for a termination of
the contractual relations, at the election of the other.
The right to terminate the contractual relations exists
even though the violation was not the direct cause of
the loss. In the present case, the deposit of the
"hazardous goods," in the building insured, was a
violation of the terms of the contract. Although the
hazardous goods did not contribute to the loss, the
insurer, at his election, was relieved from liability Said
deposit created a new risk, not included in the terms of
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
the contract. The insurer had neither been paid, nor
had he entered into a contract, to cover the increased
risk.
Contracts of insurance are contracts of indemnity, upon
the terms and conditions specified therein. Parties
have a right to impose such reasonable conditions at
the time of the making of the contract as they deem
wise and necessary. The rate of premium is measured
by the character of the risk assumed. The insurer, for a
comparatively small consideration, undertakes to
guarantee the insured against loss or damage, upon
the terms and conditions agreed upon, and upon no
other. When the insurer is called upon to pay, in case
of loss, he may justly insist upon a fulfillment of the
terms of the contract. If the insured cannot bring
himself within the terms and conditions of the contract,
he is not entitled to recover for any loss suffered. The
terms of the contract constitute the measure of the
insurer's liability. If the contract has been terminated,
by a violation of its terms on the part of the insured,
there can be no recovery. Compliance with the terms
of the contract is a condition precedent to the right of
recovery. Courts cannot make contracts for the parties.
While contracts of insurance are construed most
favorably to the insured yet they must be construed
according to the sense and meaning of the terms which
the parties themselves have used. Astute and subtle
distinctions should not be permitted, when the
language of the contract is plain and unambiguous.
Such distinctions tend to bring the law itself into
disrepute.
The judgment of the lower court is revoked and the
defendant is relieved from any responsibility under said
complaint, and, without any finding as to costs.
12 AMERICAN HOME ASSURANCE v.
TANTUCO
FACTS:
1. Tantuco Enterprises, Inc. is a coconut oil milling and
refining company. It owned two mills (the first oil mill
and a new one), both located at its factory compound
at Iyam, Lucena City.
2. The two oil mills are separately covered by fire
insurance policies issued by American Home
Assurance Co.
3. On Sept. 30, 1991, a fire broke out and gutted and
consumed the new oil mill. American Home rejected
the claim for the insurance proceeds on the ground that
no policy was issued by it covering the burned oil mill.
It stated that the new oil mill was under Building No. 15
while the insurance coverage extended only to the oil
mill under Building No. 5.
ISSUE:
Whether or not the new oil mill is covered by the
fire insurance policy
HELD:
In construing the words used descriptive of a building
insured, the greatest liberality is shown by the courts in
giving effect to the insurance. In view of the custom of
insurance agents to examine buildings before writing
policies upon them, and since a mistake as to the
identity and character of the building is extremely
unlikely, the courts are inclined to consider the policy
of insurance covers any building which the parties
manifestly intended to insure, however inaccurate the
description may be.
Notwithstanding, therefore, the misdescription in the
policy, it is beyond dispute, to our mind, that what the
parties manifestly intended to insure was the new oil
mill.
If the parties really intended to protect the first oil mill,
then there is no need to specify it as new. Indeed, it
would be absurd to assume that the respondent would
protect its first oil mill for different amounts and leave
uncovered its second one.
13 FIELDMAN’S INSURANCE v. SONGCO
FACTS:
1. Federico Songco of Floridablanca,
Pampanga, a man of scant education being
only a first grader, owned a private jeepney.
2. He was induced by Fieldmen's Insurance
Company Pampanga agent Benjamin
Sambat to apply for a Common Carrier's
Liability Insurance Policy covering his motor
vehicle.
3. Upon paying the annual premium, Fieldmen's
Insurance Company, Inc. issued a Common
Carriers Accident Insurance Policy covering
one year.
4. Federico said that his vehicle is an ‘owner’
private vehicle and not for passengers,
despite the latter being initially adamant, was
made to believe that his vehicle qualifies
under the common carrier liability insurance
policy.
5. Songco paid an annual premium and he was
issued a Common Carriers Accident
Insurance Policy.
6. After the lapse of one year, and upon payment
of the corresponding premium, the policy was
renewed extending the coverage for another
year.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
7. During the effectivity of the renewed policy,
the insured vehicle, while being driven by
Rodolfo Songco, duly licensed driver and
Federico’s son, collided with a car.
8. As a result, Federico and Rodolfo died, while
Carlos (another son) and his wife Angelita,
and a family friend sustained physical injuries.
9. The Court of Appeals rendered a decision in
favor of the claimants, holding that where
inequitable conduct is shown by an insurance
firm, it is estopped from enforcing forfeitures
in its favor, in order to forestall fraud or
imposition on the insured.
10. After Fieldmen's Insurance Co. had led the
insured Songco to believe that he could
qualify under the common carrier liability
insurance policy, it could not, thereafter, be
permitted to change its stand to the detriment
of the heirs of the insured.
11. The failure to apply the Doctrine of Estoppel
in this case would result in a gross travesty of
justice.
ISSUE:
Whether or not the insurance claim is proper?
RULING: YES.
The fact that the insured owned a private vehicle, not a
common carrier, was something which the company
knew all along. In fact, it exerted the utmost pressure
on the insured, a man of scant education, to enter into
the contract of insurance. The Court of Appeals also
held that since some of the conditions in the policy
were impossible to comply with under the existing
conditions at the time and inconsistent with the known
facts, the insurer is estopped from asserting breach of
such conditions. Except for the fact that the passengers
were not fare-paying, their status as beneficiaries
under the policy is recognized. Even if the be assumed
that there was an ambiguity, such must be strictly
interpreted against the party that caused them
As estoppel is primarily based on the doctrine of good
faith and the avoidance of harm that will befall the
innocent party due to its injurious reliance, the failure
to apply it in this case would result in a gross travesty
of justice.
Citing the case of Qua Chee Gan vs. Law Union & Rock
Insurance "The contract of insurance is one of perfect
good faith (uberrima fides) not for the insured alone,
but equally so for the insurer; in fact, it is more so for
the latter, since its dominant bargaining position carries
with it stricter responsibility."
14 PIONEER INSURANCE v. YAP
FACTS:
1. Respondent Oliva Yap was the owner of a
store in a two-storey building located at No.
856 Juan Luna Street, Manila, where in 1962
she sold shopping bags and footwear, such
as shoes, sandals and step-ins.
2. Chua Soon Poon Oliva Yap's son-in-law, was
in charge of the store. On April 19, 1962,
respondent Yap took out Fire Insurance
Policy No. 4216 from petitioner Pioneer
Insurance & Surety Corporation with a face
value of P25,000.00 covering her stocks,
office furniture, fixtures and fittings of every
kind and description.
3. Among the conditions in the policy executed
by the parties are the following:
The Insured shall give notice to the
Company of any insurance or insurances
already effected, or which may subsequently
be effected, covering any of the property
hereby insured, and unless such notice be
given and the particulars of such insurance or
insurances be stated in, or endorsed on this
Policy by or on behalf of the Company before
the occurrence of any loss or damage, all
benefits under this Policy shall be forfeited. It
is understood that, except as may be stated
on the face of this policy there is no other
insurance on the property hereby covered
and no other insurance is allowed except by
the consent of the Company endorsed
hereon. Any false declaration or breach or this
condition will render this policy null and void.
4. At the time of the insurance on April 19, 1962
of Policy No. 4219 in favor of respondent Yap,
an insurance policy for P20,000.00 issued by
the Great American Insurance Company
covering the same properties was noted on
said policy as co-insurance.
5. Still later, or on September 26, 1962,
respondent Oliva Yap took out another fire
insurance policy for P20,000.00 covering the
same properties, this time from the Federal
Insurance Company, Inc., which new policy
was, however, procured without notice to and
the written consent of petitioner Pioneer
Insurance & Surety Corporation and,
therefore, was not noted as a co-insurance in
Policy No. 4219.
6. At dawn on December 19, 1962, a fire broke
out in the building housing respondent Yap's
above-mentioned store, and the said store
was burned.
7. Respondent Yap filed an insurance claim, but
the same was denied in petitioner's letter of
May 17, 1963 on the ground of "breach and/or
violation of any and/or all terms and
conditions" of Policy No. 4219.
8. On July 17, 1963, Oliva Yap filed with the
Court of First Instance of Manila the present
complaint, asking, among others, for payment
of the face value of her fire insurance policy.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
9. In its answer, petitioner alleged that no
property belonging to plaintiff Yap and
covered by the insurance policy was
destroyed by the fire; that Yap's claim was
filed out of time; and that Yap took out an
insurance policy from another insurance
company without petitioner's knowledge
and/or endorsement, in violation of the
express stipulations in Policy No. 4219,
hence, all benefits accruing from the policy
were deemed forfeited. The trial court decided
for plaintiff Oliva Yap; and its judgment was
affirmed in full by the Court of Appeals.
Hence, this petition.
ISSUE:
Whether or not petitioner should be absolved from
liability on Fire Insurance Policy No. 4219 on account
of any violation by respondent Yap of the co-insurance
clause therein.
HELD:
Yes. There was a violation by respondent Oliva Yap of
the co-insurance clause contained in Policy No. 4219
that resulted in the avoidance of petitioner's liability. By
the plain terms of the policy, other insurance without
the consent of petitioner would ipso facto avoid the
contract. It required no affirmative act of election on the
part of the company to make operative the clause
avoiding the contract, wherever the specified
conditions should occur. Its obligations ceased, unless,
being informed of the fact, it consented to the additional
insurance. The validity of a clause in a fire insurance
policy to the effect that the procurement of additional
insurance without the consent of the insurer
renders ipso facto the policy void is well-settled. The
obvious purpose of the aforesaid requirement in the
policy is to prevent over-insurance and thus avert the
perpetration of fraud. The public, as well as the insurer,
is interested in preventing the situation in which a fire
would be profitable to the insured.
15 PRUDENTIAL GUARANTEE v. TRANS
ASIA
FACTS:
1. Trans Asia is the owner of the vessel M/V Asia
Korea. Prudential Guarantee and Assurance
Inc. insured said vessel for loss/damage of
the hull and machinery arising from perils of
fire and explosion beginning from the period
of July 1, 1993 until July 1, 1994.
2. While the policy was in force, a fire broke out.
Trans Asia file its notice of claim for damages
sustained by the vessel. It also reserved its
right to subsequently notify Prudential as to
the full amount of the claim upon final survey
and determination by the average adjuster
Richard Hogg International of the damage
sustained by the reason of fire.
3. Trans Asia executed a document
denominated "Loan and Trust Receipt"
amounting to Php 3,000,000. Prudential
Guarantee and Assurance Inc. denied the
former's claim and requested for the return of
the said amount.
4. The insurance company contends that there
was a breach in the policy conditions,
specifically, "Warranted Vessel Classed and
Class Maintained".
5. The trial court held that Trans Asia failed to
prove its compliance with the terms of the
warranty. It further explained that the
concealment made by Trans Asia is sufficient
to avoid the policy. Prudential, as the injured
party, is entitled to rescind to rescind the
contract. The trial court dismissed the
complaint and directed Trans Asia to return
the "loan" extended by Prudential.
6. The Court of Appeals reversed the decision of
the trial court. It contends that Prudential had
the burden to show that there was a breach in
the warranty and which it failed to do so. The
Court considered Prudential's admission that,
at the time the insurance contract was entered
into, the vessel was properly classed by the
Bureau Veritas, a classification recignized by
the industry. It further contends that then
subject warranty was in a form of a rider,
hence, such contract should be counstrued
against Prudential. Finally, it interpreted the
transaction between the parties as one of
subrogation, instead of a loan. Thus, the
amount given to Trans Asia was considered
to be a partial payment to its claim under the
policy.
ISSUES:
1.) WON there was a breach in the warranty of the
contract.
2.) WON such contract partakes the nature of a loan.
HELD:
The Supreme Court held that:
1.) Prudential failed to establish that Trans Asia had
violated and breached the policy condition provided in
the insurance contract. The latter was able to establish
proof of loss and coverage of the loss. Prudential also
made a categorical admission at the time of the
procurement of the insurance contract that the vessel
was properly classified by the Bureau Veritas.
Assuming that there was a breach in the policy, the
renewal of the insurance policy for two consecutive
years after the loss is deemed as a waiver on the part
of Prudential. Breach of a warranty or of a condition
renders the contract defeasible at the option of the
insurer; but if he so elects, he may waive his privilege
and power to rescind by the mere expression of an
intention so to do.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
2.) the amount granted by Prudential to Trans Asia,
evidenced by a document denominated as a "Loan and
Trust Receipt", constitued partial payment on the
policy. Under said agreement, Prudential is obligated
to hand over to Trans Asia "whatever recovery the
latter may make" and the latter to deliver to the former
"all document necessary to prove its interest in the said
property." Prudential was given the right of subrogation
to whatever net recovery Trans Asia may obtain from
third parties resulting from the fire.
16 GENERAL INSURANCE v. NG HUA
FACTS:
1. General Insurance and Surety Corporation
issued its Insurance Policy No. 471, insuring
against fire, for 1 year, the stock in trade of the
Central Pomade Factory owned by Ng Hua.
2. The policy covered damages up to
P10,000.00. The next day, Pomade factory
building burned. Ng Hua claimed indemnity
from the insurer.
3. After some negotiations and upon suggestion
of the Manila Adjustment Company, he
reduced the claim of P5,000.00.
4. Nevertheless, the insurer refused to pay for
various reasons, namely (a) action was not
filed in time; (b) violation of warranty; (c)
submission of fraudulent claim; and (f) failure
to pay the premium. The aforesaid Policy No.
471 contains this stipulation on the back
thereof:
3. The insured shall give notice to the
company of any insurance or insurances
already affected, or which may subsequently
be effected, covering any of the property
hereby insured, and unless such notice be
given and the particulars of such insurance or
insurances be stated in or endorsed on this
Policy by or on behalf of the Company before
the occurrence of any loss or damage, all
benefits under the policy shall be forfeited.
5. The face of the policy bore the annotation:
"Co-Insurance Declared — NIL"
6. TC and CA, referring to the annotation and
overruling the defense, held that there was no
violation of the above clause, inasmuch as
"co-insurance exists when a condition of the
policy requires the insured to bear ratable
proportion of the loss when the value of the
insured property exceeds the face value of the
policy," hence there is no co-insurance here.
ISSUE: WON there is breach of warranty of the above
stipulation
RULING: Yes. It is undenied that Ng Hua had obtained
fire insurance on the same goods, for the same period
of time, in the amount of P20,000.00 from General
Indemnity Co. Hence, there is co-insurance.
The statement in question must be deemed to be a
statement (warranty) binding on both insurer and
insured, that there were no other insurance on the
property. Remember it runs "Co-Insurance declared";
emphasis on the last word. If "Co-Insurance" means
that the Court of Appeals says, the annotation served
no purpose. The annotation then, must be deemed to
be a warranty that the property was not insured by any
other policy. Violation thereof entitles the insurer to
rescind. (Sec. 69. Insurance Act).
Ng Hua alleges "actual knowledge" on the part of
General insurance of the fact that he had taken out
additional insurance with General Indemnity. However,
CA found no evidence of such knowledge. Indeed, this
concealment and violation was expressly set up as a
special defense in the answer.
Petitioner successfully established its defense of
warranty breach or concealment of the other insurance
and/or violation of the provision of the policy above-
mentioned.
17 PHILIPPINE PHOENIX v. WOODWORKS
(1967)
DOCTRINE: Nonpayment of the premium due does not
produce the cancellation of insurance contract.
FACTS:
1. On April 1, 1960, plaintiff issued and delivered
to defendant a Fire Policy for the amount of
P300,000, for a term of one year.
2. The premiums of said policy amounted to
P6,051.95. September 22 of the same year,
the defendant paid P3,000. Failure of the
defendant to pay the amount of P3,522.09
representing the unpaid balance of the
premium, plaintiff commenced an action to
recover from defendant the said amount.
3. The Court a quo ordered the defendant to pay
the plaintiff. Hence, the present appeal.
ISSUE: WON the non-payment of the premium due
produced the cancellation of the insurance contract.
RULING: NO. Nonpayment of the premium due does
not produce the cancellation of insurance contract.
Where between the insurer and the insured, there was
not only a perfected contract of insurance but a partially
performed one as far as the payment of the agreed
premium was concerned. Thereafter the obligation of
the insurer to pay the insured the amount for which the
policy was issued in case the conditions therefor had
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
been complied with, arose and became binding upon
it, while the obligation of the insured to pay the
remainder of the total amount of the premium due
became demandable.
As the contract had become perfected, the parties
could demand from each other the performance of
whatever obligations they had assumed. In the case of
the insurer, it is obvious that it had the right to demand
from the insured the completion of the payment of the
premium due or sue for the rescission of the contract.
As it chose to demand specific performance of the
insured's obligation to pay the balance of the premium,
the latter's duty to pay is indeed indubitable.
18 PHILIPPINE PHOENIX v. WOODWORKS
(1979)
DOCTRINE: “The premium must be paid at the time
and in the way and manner specified in the policy and,
if not so paid, the policy will lapse and be forfeited by
its own terms.”
FACTS:
1. On July 21, 1960, upon defendant’s
application, plaintiff issued in its favor Fire
Insurance Policy whereby the plaintiff insured
defendant’s building, machinery and
equipment for a term of one year against loss
by fire. The premium and other charges
amounted to P10,593.36.
2. The defendant did not pay the premium
stipulated in the policy when it was issued nor
at any time thereafter.
3. On April 18, 1961, or before the expiration of
the one year term - plaintiff notified the
defendant of the cancellation of the policy
allegedly upon request of the defendant.
4. Defendant denied having such a request. On
the said notification, the plaintiff credited
defendant 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 from July 21, 1960 to 18th
April 1961 or, say 271 days.”
5. On July 6, 1961, plaintiff demanded in writing
for the payment of said amount. Defendant
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.”
6. Plaintiff commenced an action to recover the
amount of P7, 483.11 as “earned premium.”
Defendant controverted basically on the
theory that its failure “to pay the premium after
the issuance of the policy put an end to the
insurance contract and rendered the policy
unenforceable.”
CFI: ruled in favor of the plaintiff ordering the defendant
to pay plaintiff the said amount
ISSUE: May the plaintiff recover the unpaid premium
from the defendant?
RULING: NO. Insurance is “a contract whereby one
undertakes for a consideration to indemnify another
against loss, damage or liability arising from an
unknown or contingent event.” The consideration is the
“premium”. “The premium must be paid at the time and
in the way and manner specified in the policy and, if not
so paid, the policy will lapse and be forfeited by its own
terms.”
The Policy provides for pre-payment of premium.
Accordingly; “when the policy is tendered the insured
must pay the premium unless credit is given or there is
a waiver, or some agreement obviating the necessity
for prepayment.” To constitute an extension of credit
there must be a clear and express agreement therefor.”
From the Policy provisions, the Court failed to find any
clear agreement that a credit extension was accorded
defendant. And even if it were to be presumed that
plaintiff had extended credit from the circumstances of
the unconditional delivery of the Policy without
prepayment of the premium, yet it is obvious that
defendant had not accepted the insurer’s offer to
extend credit, which is essential for the validity of such
agreement.
The instant case differs from that involving the
same parties entitled Philippine Phoenix
Surety & Insurance Inc., vs. Woodworks, Inc.
(1967), where recovery of the balance of the
unpaid premium was allowed inasmuch as in
that case “there was not only a perfected,
contract of insurance but a partially performed
one as far as the payment of the agreed,
premium was concerned.” This is not the
situation obtaining here where no partial
payment of premiums has been made
whatsoever.
Since the premium had not been paid, the policy must
be deemed to have lapsed.
“The non­payment of premiums does not
merely suspend but puts an end to an insurance
contract, since the time of the payment is peculiarly of
the essence of the contract.”
“x x x the rule is that under policy provisions
that upon the 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.”
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
19 ARCE v. CAPITAL INSURANCE
DOCTRINE: An insurer is entitled to payment of
premium as soon as the thing insured is exposed to the
perils insured against, unless there is clear agreement
to grant credit extension for the premium due. No policy
issued by an insurance company is valid and binding
unless and until the premium thereof has been paid.
FACTS:
1. The INSURED was the owner of a residential
house in Tondo which had been insured with
the COMPANY since 1961 under a Fire
Policy. On Nov 27, 1965, the COMPANY sent
to the INSURED a renewal certificate to cover
the period Dec 5, 1965 to Dec 5, 1966.
2. The COMPANY also requested payment of
the corresponding premium in the amount of
P 38.10. Anticipating that the premium could
not be paid on time, the INSURED, thru his
wife, promised to pay it on Jan 4, 1966. The
COMPANY accepted the promise but the
premium was not paid on Jan 4, 1966.
3. On Jan 8, 1966, the house of the INSURED
was totally destroyed by fire. The insured’s
wife made a claim to the COMPANY. She was
told that no indemnity was due because the
premium on the policy was not paid.
4. Nonetheless the COMPANY tendered a
check for P300.00 as financial aid which was
received by the INSURED's daughter,
Evelina.
5. The voucher for the check which Evelina
signed stated that it was "in full settlement (ex
gratia) of the fire loss under Claim No. F-554
Policy No. F-24202."
6. Thereafter, the INSURED and his wife went to
the office of the COMPANY to have his
signature on the check Identified preparatory
to encashment.
7. The COMPANY reiterated that the check was
given "not as an obligation, but as a
concession" because the renewal premium
had not been paid; the INSURED cashed the
check but then sued the COMPANY on the
policy.
8. The court a quo held that since the
COMPANY could have demanded payment
of the premium, mutuality of obligation
requires that it should also be liable on its
policy. The court a quo also held that the
INSURED was not bound by the signature of
Evelina on the check voucher because he did
not authorize her to sign the waiver.
ISSUE: Whether the petition of the Insured has merits.
RULING: No. The appeal is impressed with merit. The
trial court cited Capital Insurance and Surety Co., Inc.
v. Delgado wherein, “the preponderance of the
evidence shows that appellee issued fire insurance
policy No. C-1137 in favor of appellants covering a
certain property belonging to the latter located in Cebu
City; that appellants failed to pay a balance of P583.95
on the premium charges due, notwithstanding
demands made upon them. As with the issuance of the
policy to appellants the same became effective and
binding upon the contracting parties, the latter cannot
avoid the obligation of paying the premiums agreed
upon. In fact, appellant Mario Delgado expressly
admitted his unpaid account for premiums and asked
for an extension of time to pay the same. It is clear from
the foregoing that appellants are under obligation to
pay the amount sued upon.
On the other hand, Sec. 72 of the IC states, “An insurer
is entitled to payment of premium as soon as the thing
insured is exposed to the perils insured against, unless
there is clear agreement to grant credit extension for
the premium due. No policy issued by an insurance
company is valid and binding unless and until the
premium thereof has been paid.” Moreover, had
stipulated, “IT IS HEREBY DECLARED AND AGREED
that not. withstanding anything to the contrary
contained in the within policy, this insurance will be
deemed valid and binding upon the Company only
when the premium and documentary stamps therefor
have actually been paid in full and duly acknowledged
in an official receipt signed by an authorized
official/representative of the Company.”
20 MAKATI TUSCANY v. CA
DOCTRINE: The import of Section 77 is that
prepayment of premiums is strictly required as a
condition to the validity of the contract, We, would
prevent the entire contract of insurance from going into
effect despite payment and acceptance are not
prepared to rule that the request to make installment
payments duly approved by the insurer 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 an agreement is not contrary to morals,
good customs, public order or public policy (premiums
are not paid, but does not expressly prohibit an
agreement granting credit extension, and such De
Leon, the Insurance Code, at p. 175). 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.
FACTS:
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
1. Sometime in early 1982, private respondent
American Home Assurance Co. (AHAC),
represented by American International
Underwriters (Phils.), Inc., issued in favor of
petitioner Makati Tuscany Condominium
Corporation (TUSCANY) Insurance Policy
No. 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.
2. 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 private respondent.
Successive renewals of the policies were
made in the same manner.
3. On 1984, the policy was again renewed and
petitioner made two installment payments,
both accepted by private respondent, the first
on 6 February 1984 for P52,000.00 and the
second, on 6 June 1984 for P100,000.00.
4. Thereafter, petitioner refused to pay the
balance of the premium.
Private respondent filed an action to recover
the unpaid balance of P314,103.05 for
Insurance Policy.
5. Petitioner explained that it discontinued the
payment of premiums because the policy did
not contain a credit clause in its favor.
6. Petitioner further claimed that the policy was
never binding and valid, and no risk attached
to the policy.
7. 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.
ISSUE: Whether or not payment by installment of the
premiums due on an insurance policy invalidates the
contract of insurance, in view of Sec. 77 of P.D. 612,
otherwise known as the Insurance Code.
RULING: NO. The Supreme Court hold that the subject
policies are valid even if the premiums were paid on
installments. The records clearly show that petitioner
and private respondent 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 three (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 petitioner.
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 prepared in full.
The Court, therefore, sustain the Court of Appeals. The
court then quote with approval the well-reasoned
findings and conclusion of the appellate court
contained in its Resolution denying the motion to
reconsider its Decision —
While the import of Section 77 is that prepayment of
premiums is strictly required as a condition to the
validity of the contract, We are 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 an agreement
is not contrary to morals, good customs, public order or
public policy (premiums are not paid, but does not
expressly prohibit an agreement granting credit
extension, and such De Leon, the Insurance Code, at
p. 175). 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.
More so, The reliance by petitioner on Arce vs. Capital
Surety and Insurance
Co. is unavailing because the facts therein are
substantially different from those in the case at bar.
In Arce, no payment was made by the insured at all
despite the grace period given. In the case before at
bar, petitioner paid the initial installment and thereafter
made staggered payments resulting in full payment of
the 1982 and 1983 insurance policies. For the 1984
policy, petitioner paid two (2) installments although it
refused to pay the balance.
21 TIBAY v. CA
DOCTRINE: Clearly the Policy provides for
payment of premium in full. Accordingly, where the
premium has only been partially paid and the
balance paid only after the peril insured against
has occurred, the insurance contract did not take
effect and the insured cannot collect at all on the
policy.
FACTS:
1. Fortune Life issued a fire insurance Policy to
Tibay on her two-storey residential building at
Zobel Street, Makati City.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
2. The insurance was for P600,000.00 covering
the period from January 23, 1987 to January
23, 1988. On January 23 1987, Tibay only
paid P600.00 of 3,000 peso premium and left
a balance.
3. The insured building was completely
destroyed by fire. Tibay then paid the balance.
On the same day, she filed a claim on the
policy. Her claim was accordingly referred to
the adjuster, Goodwill, which immediately
wrote Violeta requesting her to furnish it with
the necessary documents for the investigation
and processing of her claim. Petitioner
complied, and she signed a non-waiver
agreement.
4. Fortune denied the claim for violation of the
Insurance Code. Tibay sued for damages in
the amount of P600,000.00 representing the
total coverage of the policy.
5. The trial court ruled for petitioners and made
fortune liable for the total value of the insured
building and personal properties.
6. The Court of Appeals reversed the court by
removing liability from Fortune after returning
the premium.
7. The petitioner contended that Fortune
remained liable under the subject fire
insurance policy in spite of the failure of
petitioners to pay their premium in full.
Issue: Whether or not a fire insurance policy is valid,
binding, and enforceable upon mere partial payment of
the premium?
Held: No. The pertinent provisions in the Policy on
premium read —
THIS POLICY OF INSURANCE
WITNISSETH THAT only after payment
to the Company in accordance with
Policy Condition No. 2 of the total
premiums by the insured as stipulated
above for the period aforementioned for
insuring against Loss or Damage by Fire
or Lightning as herein appears, the
Property herein described . . .
2. This policy including any renewal
thereof and/or any endorsement
thereon is not in force until the
premium has been fully paid to and
duly receipted by the Company in the
manner provided herein.
Any supplementary agreement seeking
to amend this condition prepared by
agent, broker or Company official, shall
be deemed invalid and of no effect.
xxx xxx xxx
Except only in those specific cases
where corresponding rules and
regulations which are or may hereafter
be in force provide for the payment of
the stipulated premiums in periodic
installments at fixed percentage, it is
hereby declared, agreed and
warranted that this policy shall be
deemed effective, valid and binding
upon the Company only when the
premiums therefor have actually
been paid in full and duly
acknowledged in a receipt signed by
any authorized official or
representative/agent of the Company in
such manner as provided herein.
Clearly the Policy provides for payment of premium
in full. Accordingly, where the premium has only
been partially paid and the balance paid only after
the peril insured against has occurred, the
insurance contract did not take effect and the
insured cannot collect at all on the policy. This is
fully supported by Sec. 77 of the Insurance Code which
provides —
Sec. 77. 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.
22 UCPB GENERAL v. MASAGANA
TELEMART
FACTS:
1. In 1991, UCPB issued 5 fire insurance
policies covering Masagana Telamart’s
various properties for the period from 22 May
1991 to 22 May 1992.
On March 1992 [~2 months before policy
expiration], UCPB evaluated the policies
and decided not to renew them upon
expiration of their terms on 22 May
1992. UCPB advised Masagana’s
broker of its intention not to renew the
policies.
2. On April 1992 [~1 month before policy
expiration], UCPB gave written notice to
Masagana of the non-renewal of the
policies. On June 1992 [policy already
expired], Masagana’s property covered by 3
UCPB-issued policies was razed by fire.
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
3. On 13 July 1992, Masagana presented to
UCPB’s cashier 5 manager's checks,
representing premium for the renewal of
the policies for another year.
4. It was only on the following day, 14 July 1992,
when Masagana filed with UCPB a formal
claim for indemnification of the insured
property razed by fire.
5. On the same day, UCPB returned the 5
manager's checks, and rejected
Masagana’s claim since the policies had
expired and were not renewed, and the fire
occurred on 13 June 1992 (or before tender
of premium payment).
6. Masagana filed a civil
complaint for recovery of the face value of
the policies covering the insured property
razed by fire. RTC ruled in favor
of Masagana, as it found it to have complied
with the obligation to pay the premium; hence,
the replacement-renewal policy of these
policies are effective and binding for another
year [22 May 1992 – 22 May 1993].
7. CA affirmed RTC, holding that following
previous practice, Masagana was allowed a
60-90 day credit term for the renewal of its
policies, and that the acceptance of the late
premium payment suggested that
payment could be made later.
ISSUE & HOLDING
WON the fire insurance policies had expired on 22 May
1992, or had been extended or renewed by an implied
credit arrangement though actual payment of premium
was tendered on a later date after the occurrence of the
risk insured against [fire]. FIRE INSURANCE
POLICIES HAD EXPIRED
RATIO
An insurance policy, other than life 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 v. Cruz-Arnaldo cited
by the CA is not applicable. In that case, payment of
the premium was made on before the occurrence of the
fire. In the present case, the payment of the premium
for renewal of the policies was tendered a month after
the fire occurred. Masagana did not even give UCPB
a notice of loss within a reasonable time after
occurrence of the fire.
23 AMERICAN HOME INSURANCE v. CHUA
FACTS:
1. American Home Assurance Company
(AHAC) is a domestic corporation engaged in
the insurance business. Sometime in 1990,
respondent Chua obtained from petitioner a
fire insurance covering the stock-in-trade of
his business, Moonlight Enterprises at
Valencia, Bukidnon. The insurance was due
to expire on 25 March 1990.
2. On 5 April 1990, Chua issued a PCI Bank
Check to petitioner’s agent, James Uy, as
payment for the renewal of the policy.
3. In turn, the latter delivered a renewal
certificate to Chua.
4. The check was drawn against a Manila bank
and deposited in petitioner’s bank account in
Cagayan de Oro City.
5. Subsequently, a new insurance policy was
issued, whereby AHAC undertook to
indemnify respondent for any damage or loss
arising from fire up to P200,000 for the period
25 March 1990 to 25 March 1991.
6. On 6 April 1990, Moonlight Enterprises was
completely razed by fire. Total loss was
estimated between P4,000,000
and P5,000,000.
7. Respondent Chua filed an insurance claim
with petitioner and four other co-insurers,
namely, Pioneer Insurance and Surety
Corporation, Prudential Guarantee and
Assurance, Inc., Filipino Merchants Insurance
Co. and Domestic Insurance Company of the
Philippines.
8. Petitioner AHAC refused to honor the claim
notwithstanding several demands by Chua,
thus, the latter filed an action against
petitioner before the trial court.
9. In its defense, petitioner claimed there was no
existing insurance contract when the fire
occurred since Chua did not pay the
premium.
10. It also alleged that even assuming there was
a contract, he violated several conditions of
the policy, particularly: (1) his submission of
fraudulent income tax return and financial
statements; (2) his failure to establish the
actual loss, which petitioner assessed
at P70,000; and (3) his failure to notify to
petitioner of any insurance already effected to
cover the insured goods. These violations,
petitioner insisted, justified the denial of the
claim.
ISSUES:
1. WON there was a valid payment of premium,
considering that respondent’s check was cashed after
the occurrence of the fire
2. WON respondent Chua is guilty of violating the
policy by his submission of fraudulent documents and
non-disclosure of the other existing insurance
contracts
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
RULING:
1. YES. The general rule in insurance laws is that
unless the premium is paid the insurance policy is
not valid and binding. The only exceptions are life
and industrial life insurance. Whether payment
was indeed made is a question of fact which is
best determined by the trial court. The trial court
found, as affirmed by the Court of Appeals, that
there was a valid check payment by respondent to
petitioner. Well-settled is the rule that the factual
findings and conclusions of the trial court and the
Court of Appeals are entitled to great weight and
respect, and will not be disturbed on appeal in the
absence of any clear showing that the trial court
overlooked certain facts or circumstances which
would substantially affect the disposition of the
case. According to the trial court the renewal
certificate issued to respondent contained the
acknowledgment that premium had been paid. In
the instant case, the best evidence of such
authority is the fact that petitioner accepted the
check and issued the official receipt for the
payment. It is, as well, bound by its agent’s
acknowledgment of receipt of payment.
Section 78 of the Insurance Code explicitly
provides:
An acknowledgment in a policy or contract of
insurance of the receipt of premium is
conclusive evidence of its payment, so far as
to make the policy binding, notwithstanding
any stipulation therein that it shall not be
binding until the premium is actually paid.
2. NO. The submission of the alleged fraudulent
documents pertained to respondent’s income tax
returns for 1987 to 1989. Respondent, however,
presented a BIR certification that he had paid the
proper taxes for the said years. The trial court and
the Court of Appeals gave credence to the
certification and it being a question of fact, we hold
that said finding is conclusive.
Ordinarily, where the insurance policy specifies as
a condition the disclosure of existing co-insurers,
non-disclosure thereof is a violation that entitles the
insurer to avoid the policy. This condition is
common in fire insurance policies and is known as
the “other insurance clause.” The purpose for the
inclusion of this clause is to prevent an increase in
the moral hazard. The relevant provision is
Section 75, which provides that:
A policy may declare that a violation of
specified provisions thereof shall avoid it,
otherwise the breach of an immaterial
provision does not avoid the policy.
Respondent acquired several co-insurers and he
failed to disclose this information to
petitioner. Nonetheless, petitioner is estopped
from invoking this argument due to petitioner’s loss
adjuster who admitted previous knowledge of the
co-insurers.
It cannot be said that petitioner was deceived by
respondent by the latter’s non-disclosure of the
other insurance contracts when petitioner actually
had prior knowledge thereof. The loss adjuster,
being an employee of petitioner, is deemed a
representative of the latter whose awareness of the
other insurance contracts binds petitioner.
24 GREAT PACIFIC LIFE v. CA (1990)
DOCTRINE: Sections 79, 81 and 82 of the Insurance
Code of 1978 provide when the insured is entitled to
the return of premium paid.
FACTS:
1. Teodoro Cortez, upon the solicitation of
Margarita Siega an underwriter for the
petitioner Great Pacific Insurance
Corporation, applied for a 20-year
endowment policy for P30,000.
2. His application, with the requisite medical
examination, was accepted and approved by
the company and in due course, Endowment
Policy No. 221944 was issued in his name.
3. It was delivered to him by the underwriter,
Mrs. Siega on January 25, 1973.
4. The effective date indicated on the face of
the policy in question was December 25,
1972. The annual premium was P1,416.60.
Mrs. Siega assured him that the first
premium may be paid within the grace
period of thirty (30) days from date of
delivery of the policy. The first premium of
P1,416.60 was paid by him in three (3)
installments.
5. In a letter, defendant advised plaintiff that
Policy No. 221944 was not in force. To make
it enforceable and operative, plaintiff was
asked to remit the balance of P1,015.60 to
complete his initial annual premium due
December 15, 1972, and to see Dr. Felipe V.
Remollo for another full medical examination
at his own expense.
6. Cortez' reaction to the company's act was to
immediately inform it that he was cancelling
the policy and he demanded the return of his
premium plus damages.
7. When the company ignored his demand,
Cortez filed a complaint for damages in the
CFI. He prayed for the refund of the insurance
premium of P1,416.60 which he paid plus
damages.
ISSUE: WON the insured is entitled to a refund of the
premiums paid.
RULING: Yes, record shows that the premium was
paid fully on February 21, 1973 or within the grace
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS
period. This being so, the policy was already
enforceable. The company had sufficient time to
examine the result of their medical examination on the
person of the appellee. They would not have delivered
the policy on January 24, 1973 if the appellee was
unacceptable. Moreover, if premiums were to be paid
within 90 days then the reckoning period should be the
date the policy was delivered and not the date the
appellee was physically examined. The 90-day period
from the date of physical examination as provided for
in the receipts of payment is of' no moment, since said
receipts are an integral part of the insurance policy
(contract). The official receipts issued by the
company's agent can only mean that the company
ratified the act of Mrs. Margarita Siega in giving the
appellee a grace period of 30 days from January 25,
1973 within which to pay the annual premium.
When the petitioner advised private respondent on
June 1, 1973, four months after he had paid the first
premium, that his policy had never been in force, and
that he must pay another premium and undergo
another medical examination to make the policy
effective, the petitioner committed a serious breach of
the contract of insurance.
Petitioner should have informed Cortez of the deadline
for paying the first premium before or at least upon
delivery of the policy to him, so he could have complied
with what was needful and would not have been misled
into believing that his life and his family were protected
by the policy, when actually they were not. And, if the
premium paid by Cortez was unacceptable for being
late, it was the company's duty to return it. By accepting
his premiums without giving him the corresponding
protection, the company acted in bad faith.
Sections 79, 81 and 82 of P.D. 612 of the Insurance
Code of 1978 provide when the insured is entitled to
the return of premium paid.
SECTION 79. A person insured is entitled to
a return of premium, as follows:
(a) To the whole premium, if no part
of his interest in the thing
insured be exposed to any of
the perils insured against.
(b) Where the insure is made for a
definite period of time and the
insured surrenders his policy, to
such portion of the premium as
corresponds with the unexpired
time, at a pro rata rate, unless a
short period rate has been agreed
upon and appears on the face of the
policy, after deducting from the
whole premium any claim for loss or
damage under the policy which has
previously accrued: Provided, That
no holder of a life insurance policy
may avail himself of the privileges of
this paragraph without sufficient
causes as otherwise provided by
law.
SECTION 81. A person insured is entitled to
a return of the premium when the contract is
voidable on account of the fraud or
misrepresentation of the insurer or of his
agent or on account of facts the existence of
which the insured was ignorant without his
fault; or when, by any default of the insured
other than actual fraud, the insurer never
incurred any liability under the policy.
SECTION 82. In case of an over-insurance by
several insurers, the insured is entitled to a
ratable return of the premium, proportioned to
the amount by which the aggregate sum
insured in all the policies exceeds the
insurable value of the thing at risk.
Since his policy was in fact inoperative or ineffectual
from the beginning, the company was never at risk,
hence, it is not entitled to keep the premium. The award
of moral damages to Cortez was proper for there can
hardly be any doubt that he must have suffered moral
shock, serious anxiety and wounded feelings upon
being informed by the petitioner six (6) months after it
issued the policy to him and four (4) months after
receiving the full premium, that his policy was in fact
worthless for it never took effect, hence, he and his
family never received the protection that he paid for.
25 JAIME T. GAISANO v. DEVELOPMENT
INSURANCE
FACTS:
1. Petitioner was the registered owner of a 1992
Mitsubishi Montero with plate number GTJ-
777 (vehicle), while respondent is a domestic
corporation engaged in the insurance
business.
2. On September 27, 1996, respondent issued a
comprehensive commercial vehicle policy to
petitioner in the amount of Pl,500,000.00 over
the vehicle for a period of one year
commencing on September 27, 1996 up to
September 27, 1997.
3. Respondent also issued two other
commercial vehicle policies to petitioner
covering two other motor vehicles for the
same period.
4. To collect the premiums and other charges on
the policies, respondent's agent, Trans-
Pacific Underwriters Agency (Trans-Pacific),
issued a statement of account to petitioner's
company, Noah's Ark
5. Merchandising (Noah's Ark). Noah's Ark
immediately processed the payments and
 FINALS | INSURANCE LAW | EMERGENCY DIGESTS

issued a Far East Bank check dated as the thing insured is exposed to the peril insured
September 27, 1996 payable to Trans-Pacific against. Notwithstanding any agreement to the
on the same day. contrary, no policy or contract of insurance issued by
6. The check bearing the amount of Pl40,893.50 an insurance company is valid and binding unless and
represents payment for the three insurance until the premium thereof has been paid, except in the
policies, with P55,620.60 for the premium and case of a life or an industrial life policy whenever the
other charges over the vehicle. grace period provision applies.
7. However, nobody from Trans-Pacific picked
up the check that day (September 27)
because its president and general manager,
Rolando Herradura, was celebrating his
birthday.
8. Trans-Pacific informed Noah's Ark that its
messenger would get the check the next day,
September 28. In the evening of September
27, 1996, while under the official custody of
Noah's Ark marketing manager Achilles
Pacquing (Pacquing) as a service company
vehicle, the vehicle was stolen in the vicinity
of SM Megamall at Ortigas, Mandaluyong
City.
9. Pacquing reported the loss to the Philippine
National Police Traffic Management
Command at Camp Crame in Quezon City.
10. Despite search and retrieval efforts, the
vehicle was not recovered. Oblivious of the
incident, Trans-Pacific picked up the check
the next day, September 28. It issued an
official receipt numbered 124713 dated
September 28, 1996, acknowledging the
receipt of P55,620.60 for the premium and
other charges over the vehicle.
11. The check issued to Trans Pacific for
Pl40,893.50 was deposited with Metrobank
for encashment on October 1, 1996.

ISSUE:

Whether there is a binding insurance contract between

petitioner and respondent.

HELD:

The court denied the petition. Insurance is a contract

whereby one undertakes for a consideration to
indemnify another against loss, damage or liability
arising from an unknown or contingent event. Just like
any other contract, it requires a cause or consideration.
The consideration is the premium, which must be paid
at the time and in the way and manner specified in the
policy. If not so paid, the policy will lapse and be
forfeited by its own terms. The law, however, limits the
parties' autonomy as to when payment of premium may
be made for the contract to take effect. The general rule
in insurance laws is that unless the premium is paid,
the insurance policy is not valid and binding.

Section 77 of the Insurance Code, applicable at the

time of the issuance of the policy, provides: Sec. 77. An
insurer is entitled to payment of the premium as soon