Tibay vs Court of Appeals Bellosillo May 24, 1996 Facts: Fortune Life and General Insurance Co., Inc.

issued a fire insurance policy in favour of Tibay and Ronaldo on their two-storey residential building. Of the total premium of P 2983.50, Tibay only paid 600.00 thus leaving a considerable balance unpaid. During the period of the policy, the insured building was completely destroyed by fire. Two days later, Tibay paid the balance of the premium and on the same day, filed with Fortune a claim on the fire insurance policy. Fortune denied the claim but upon action before the court, the trial court held that Fortune is liable for the total value of the insured building and personal properties. Upon appeal, the CA reversed the ruling of the trial court and declared Fortune as not liable. The Supreme Court affirmed the ruling of the CA, it having been stated in the policy that the policy shall be deemed effective, valid and binding upon the Insurance Company only when the premiums have actually been paid in full. In contending that Fortune was liable, Tibay cited the 1967 Phoenix case. However, the court said that Phoenix is not applicable in the instant case, as in Phoenix, a contract was perfected upon partial payment of the premium since the parties had not otherwise stipulated that prepayment of the premium was a condition precedent to the existence of the contract. In this case, by express agreement of the parties, no vinculum juris was to be established until full payment was effected prior to the occurrence of the risk insured against. Doctrine: The rule that contracts of insurance will be construed in favour of the insured and most strongly against the insurer should not be permitted to have the effect of making a plain agreement ambiguous and then construe it in favour of the insured. If the premium is not paid in the manner prescribed in the policy as intended by the parties the policy is ineffective. Partial payment even when accepted as a partial payment will not keep the policy alive even for such fractional part of the years as the part payment bears to the whole payment. For as long as the Insurance Code remains unchanged and partial payment of premiums is not mentioned at all as among the exceptions provided in Secs. 77 and 78, no policy of insurance can ever pretend to be efficacious or effective until premium has fully been paid.