Premium

General Rule: No policy is binding until the premium

thereof has been paid. Exceptions: (a) in case of life or industrial life policy, whenever the grace period applies

Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992. The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire. Makati Tuscany Condo Corp. vs. CA, American Home Assurance Co. (AHAC) G.R. No. 95546 November 6, 1992

(b)

in case of estoppel Insurer is entitled to payment of premiums as soon

Whether 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, as amended, which provides: Sec. 77. An insurer is entitled to the 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. Facts: Insurer, AHAC, issued an insurance policy on Tuscanys building and premises covering a one-year period. Payment was agreed by both parties to be staggered (5 installments). The 1982 and 1983 policies had been fully paid. For the 1984 policy, Insured paid only 2 installments and refused to pay the balance on the ground that the policy did not contain a credit clause in its favor, that it was not binding and risk never attached, thus, demanded for refund of the premiums paid. But insurer wants to recover the unpaid balances. Trial Court: Dismissed Insurers action to recover as well as Insureds counterclaim for refund. CA: The insurance contract became valid and binding upon payment of the first premium, and the Insurer could not have denied liability on the ground that payment was not made in full, for the reason that it agreed to accept installment payment. Tuscany appealed to SC on the ground: There cannot be a perfected contract of insurance upon mere partial payment of the premiums because under Sec. 77 of the Insurance Code, no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary. Issue: Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of the Insurance Code, as amended. Held: 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 insurers 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. 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 premiums are not paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is not contrary to morals, good

as the thing insured is exposed to the perils insured against. When insurer entitled to Return of Premiums a. when the contract is voidable on account of fraud or misrepresentation of the insurer; b. when on account of facts, the existence of which the insured was ignorant without his fault c. when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy d. when the insured has become a public enemy and the policy automatically canceled (on the ground of equity) e. in case of over-insurance by several insurers (ratable return of premiums, proportioned to the amount by which the aggregate sum insured in all policies exceed the insurable value of the thing at risk) UCPB Gen. Insurance Co. (Insurer) vs Masagana Telemart (Insured) G.R. No. 137172 June 15, 1999 Facts: Insurer issued 5 fire insurance policies covering various properties of the Insured (covering the period May 22, 1991-May 22, 1992). Before the expiration of the policy (March 1992), Insurer evaluated the policy and decided not to renew them. Thus, Insurer issued a notice of non-renewal to Insureds broker Zuellig (on April 1992). After the expiration of the policy (or on June 13, 2012), fire razed Insureds property covered by 3 policies. A month later, Insured presented 5 checks to the Insurers cashier as payment for the renewal of the policy (from May 1192-May 1993), however, no notice of loss was ever filed by Insured. Insurer refused to pay on the ground that the policies had already expired and were not renewed, and that the fire occurred before payment of the premium (for renewal). RTC: Insured fully complied with its duty to pay premium. CA: following previous practice, Insured was allowed a 60-90 day credit term for the renewal of its policy, and that the acceptance of the late premium payment suggested an understanding that payment could be made later, and that no timely notice of non-renewal was sent. Issue: Whether the fire insurance policies issued by Insurer to Insured had expired on May 1992 or had been extended or renewed by an implied credit arrangement (even though actual tender of payment was made after the occurrence of the fire). Held: No, the insurance policies had not been renewed. An insurance policy, other than life, issued originally or on renewal, is not valid and binding until actual payment of the premium. Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of creditor time to pay the premium and consider the policy binding before actual payment.

customs, public order or public policy. So is an understanding to allow insured to pay premiums in installments not so proscribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. Petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary.

3. The cardinal polestar in the construction of an insurance contract is the intention of the parties as expressed in the policy. Verily, it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. 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 year as the part payment bears to the whole payment.

Sps. Tibay vs. CA and Fortune Life and General Insurance Co. G.R. No. 119655 May 24, 1996

Facts: Insurer, Fortune, issued a fire insurance policy in favor of insured on their two-storey residential building (January 23, 1987 to January 23, 1988). Insured paid P600 out of the P2,983.50 premium. About 2 months later (or on March 8, 1987), the subject property was completely destroyed by fire. Two days later, Insured paid the balance. She also filed a claim to the proceeds. Insurer refused on the ground that Insured violated one of the terms, re: that the policy shall be valid and effective upon the Company only when the premiums have actually been paid in full. Hence, Insured sued Insurer for damages. TC: Favored Insured (Insurer liable). CA: Reversed TC ruling (Insurer not liable). Issue: WON the fire insurance policy is binding and enforceable despite the fact that the premium was merely partially paid. Held: The insurance policy is not binding and enforceable (Insurer not liable). Ratio: 1. 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.

4. The case of South Sea Surety and Insurance Company, Inc. v. Court Of Appeals, speaks only of two (2) statutory exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of the insurance contract. These exceptions are: (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies, and (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment. A maxim of recognized practicality is the rule that the expressed exception or exemption excludes others. Exceptio firmat regulim in casibus non exceptis. Thus, under Sec. 77, as well as Sec. 78, until the premium is paid, and the law has not expressly excepted partial payments, there is no valid and binding contract. Hence, in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy. In this case, the law is manifestly on the side of the insurer. For it cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, hence, the imperative need for its prompt payment and full satisfaction. 6. The term of these insurance policies constitute the measure of the insurers liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy. The validity of these limitations is by law passed upon by the Insurance Commissioner who is empowered to approve all forms of policies, certificates or contracts of insurance which insurers intend to issue or deliver. That the policy contract in the case at bench was approved and allowed issuance simply reaffirms the validity of such policy, particularly the provision in question

G.R. No. L-25317 August 6, 1979 PHILIPPINE PHOENIX SURETY COMPANY, plaintiff-appellee, vs. INC., defendant-appellant. & INSURANCE WOODWORKS,

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.

Specifically, this action is for recovery of unpaid premium on a fire insurance policy issued by plaintiff, Philippine Phoenix Surety & Insurance Company, in favor of defendant Woodworks, Inc. The following are the established facts: On July 21, 1960, upon defendant's application, plaintiff issued in its favor Fire Insurance Policy No. 9749 for P500,000.00 whereby plaintiff insured defendant's building, machinery and equipment for a term of one year from July 21, 1960 to July 21, 1961 against loss by fire. The premium and other charges including the margin fee surcharge of P590.76 and the documentary stamps in the amount of P156.60 affixed on the Policy, amounted to P10,593.36. It is undisputed that defendant did not pay the premium stipulated in the Policy when it was issued nor at any time thereafter. On April 19, 1961, or before the expiration of the one-year term, plaintiff notified defendant, through its Indorsement No. F-6963/61, of the cancellation of the Policy allegedly upon request of defendant. 1 The latter has denied having made such a request. In said Indorsement, plaintiff credited

2. The Phoenix and Tuscany Rulings are not persuasive because the factual scenarios are not the same. These two (2) cases adequately demonstrate the waiver, either express or implied, of prepayment in full by the insurer: impliedly, by suing for the balance of the premium as in Phoenix, and expressly, by agreeing to make premiums payable in installments as in Tuscany. But contrary to the stance taken by petitioners, there is no waiver express or implied in the case at bench.

defendant with the amount of P3,110.25 for the unexpired period of 94 days, and claimed the balance of P7,483.11 representing ,learned premium from July 21, 1960 to 18th April 1961 or, say 271 days." On July 6, 1961, plaintiff demanded in writing for the payment of said amount. 2 Defendant, through counsel, disclaimed any liability in its reply- letter of August 15, 1961, 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." 3 On January 30, 1962, plaintiff commenced action in the Court of First Instance of Manila, Branch IV (Civil Case No. 49468), 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." 4 We find the appeal meritorious. 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." 5 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." 6 The provisions on premium in the subject Policy read: THIS POLICY OF INSURANCE WITNESSETH, THAT in consideration of MESSRS. WOODWORKS, INC. hereinafter called the Insured, paying to the PHILIPPINE PHOENIX SURETY AND INSURANCE, INC., hereinafter called the Company, the sum of PESOS NINE THOUSAND EIGHT HUNDRED FORTY SIX ONLY the Premium for the first period hereinafter mentioned. ... xxx xxx xxx THE COMPANY HEREBY AGREES with the Insured ... that if the Property above described, or any part thereof, shall be destroyed or damaged by Fire or Lightning after payment of Premium, at any time between 4:00 o'clock in the afternoon of the TWENTY FIRST day of JULY One Thousand Nine Hundred and SIXTY and 4:00 o'clock in the afternoon of the TWENTY FIRST day of JULY One Thousand Nine Hundred and SIXTY ONE. ... (Emphasis supplied) Paragraph "2" of the Policy further contained the following condition: 2. No payment in respect of any premium shall be deemed to be payment to the Company unless a printed form of receipt for the same signed by an Official or duly-appointed Agent of the Company shall have been given to the Insured. Paragraph "10" of the Policy also provided: 10. This insurance may be terminated at any time at the request of the Insured, in which case the Company will retain the customary short period rate for the time the policy has been in force. This insurance may also at any time be terminated at the option of the Company, on notice to that effect being given to the Insured, in which case the Company shall be liable to repay on demand a ratable proportion of the premium for the unexpired term from the date of the cancelment. Clearly, 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." 7 To constitute an extension of credit there must be a clear and express agreement therefor." 8

From the Policy provisions, we fail 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. An acceptance of an offer to allow credit, if one was made, is as essential to make a valid agreement for credit, to change a conditional delivery of an insurance policy to an unconditional delivery, as it is to make any other contract. Such an acceptance could not be merely a mental act or state of mind, but would require a promise to pay made known in some manner to defendant. 9 In this respect, the instant case differs from that involving the same parties entitled Philippine Phoenix Surety & Insurance Inc. vs. Woodworks, Inc., 10 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 non-payment of premiums does not merely suspend but put, an end to an insurance contract, since the time of the payment is peculiarly of the essence of the contract. 11 ... 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. 12 In fact, if the peril insured against had occurred, plaintiff, as insurer, would have had a valid defense against recovery under the Policy it had issued. Explicit in the Policy itself is plaintiff's agreement to indemnify defendant for loss by fire only "after payment of premium," supra. Compliance by the insured with the terms of the contract is a condition precedent to the right of recovery. The burden is on an insured to keep a policy in force by the payment of premiums, rather than on the insurer to exert every effort to prevent the insured from allowing a policy to elapse through a failure to make premium payments. The continuance of the insurer's obligation is conditional upon the payment of premiums, so that no recovery can be had upon a lapsed policy, the contractual relation between the parties having ceased. 13 Moreover, "an insurer cannot treat a contract as valid for the purpose of collecting premiums and invalid for the purpose of indemnity." 14 The foregoing findings are buttressed by section 77 of the Insurance Code (Presidential Decree No. 612, promulgated on December 18, 1974), which now provides that no contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, notwithstanding any agreement to the contrary. WHEREFORE, the judgment appealed from is reversed, and plaintiff's complaint hereby dismissed.

Tibay v CA G.R. No. 119655. May 24, 1996 J. Bellosillo: Facts: Fortune Life issued a fire insurance Policy to Tibay on her twostorey residential building at Zobel Street, Makati City. 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. 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. 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. The trial court ruled for petitioners and made fortune liable for the total value of the insured building and personal properties. The Court of Appeals reversed the court by removing liability from Fortune after returning the premium. Hence this petition for review. 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.

or to consider the contract upon paymentof the first premium.

as

valid

and

binding

Phoenix and Tuscany demonstrated the waiver of prepayment in full by the insurer. In this case however, there was no waiver. There was a stipulation that the policy wasnt in force until the premium has been fully paid and receipted. There was no juridical tie of indemnification from the fractional payment of premium. The insurance contract itself expressly provided that the policy would be effective only when the premium was paid in full. Verily, it is elemental law that the payment of premium is requisite to keep the policy of insurance in force. 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. South Sea v CA stipulated 2 exceptions to the requirement of payment of the entire premium as a prerequisite to the validity of the insurance contract. These are when in case the insurance coverage relates to life or insurance when a grace period applies, and when the insurer makes a written acknowledgment of the receipt of premium to be conclusive evidence of payment. Hence, in the absence of clear waiver of prepayment in full by the insurer, the insured cannot collect on the proceeds of the policy. The terms of the insurance policy constitute the measure of the insurers liability. In the absence of statutory prohibition to the contrary, insurance companies have the same rights as individuals to limit their liability and to impose whatever conditions they deem best upon their obligations not inconsistent with public policy.

Issue: May a fire insurance policy be valid, binding and enforceable upon mere partial payment of premium? Held: No. Petition dismissed. Ratio: The pertinent provisions read: 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. 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 of the company 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. The Insurance Code which says that no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium has been paid. What does unless and until the premium thereof has been paid mean? Escosura v. San Miguel- the legislative practice was to interpret with pay in accordance to the intention of distinguish between full and partial payment, where the modifying term is used. Petitioners used Philippine Phoenix v. Woodworks, where partial payment of the premium made the policy effective during the whole period of the policy. The SC didnt consider the 1967 Phoenix case as persuasive due to the different factual scenario. In Makati Tuscany v CA, the parties mutually agreed that the premiums could be paid in installments, hence, this Court refused to invalidate the insurance policy. Nothing in Article 77 of the Code suggested that the parties may not agree to allow paymentof the premiums in installment,

MASAGANA f the five insurance policies on Respondents properties; (b) declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22 May 1993; and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies. The modification consisted in the (1) deletion of the trial courts declaration that three of the policies were in force from August 1991 to August 1992; and (2) reduction of the award of the attorneys fees from 25% to 10% of the total amount due the Respondent. Masagana obtained from UCPB five (5) insurance policies on its Manila properties. The policies were effective from May 22, 1991 to May 22, 1992. On June 13, 1992, Masaganas properties were razed by fire. On July 13, 1992, plaintiff tendered five checks for P225,753.45 as renewal premium payments. A receipt was issued. On July 14, 1992, Masagana made its formal demand for indemnification for the burned insured properties. UCPB then rejected Masaganas claims under the argument that the fire took place before the tender of payment. Hence Masagana filed this case. The Court of Appeals disagreed with UCPBs argument that Masaganas tender of paymentof the premiums on 13 July 1992 did not result in the renewal of the policies, having been made beyond the effective date of renewal as provided under Policy Condition No. 26, which states: 26. Renewal Clause. -- Unless the company at least forty five days in advance of the end of the policy period mails or delivers to the assured at the address shown in the policy notice of its intention not to renew the policy or to condition its

renewal upon reduction of limits or elimination of coverages, the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal. Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana, which had procured insurance coverage from UCPB for a number of years, had been granted a 60 to 90-day credit term for the renewal of the policies. Such a practice had existed up to the time the claims were filed. Most of the premiums have been paid for more than 60 days after the issuance. Also, no timely notice of nonrenewal was made by UCPB. The Supreme Court ruled against UCPB in the first case on the issue of whether the fire insurance policies issued by petitioner to the respondent covering the period from May 22, 1991 to May 22, 1992 had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date and after the occurrence of the risk insured against. UCPB filed a motion for reconsideration. The Supreme Court, upon observing the facts, affirmed that there was no valid notice of non-renewal of the policies in question, as there is no proof at all that the notice sent by ordinary mail was received by Masagana. Also, the premiums were paid within the grace period. Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioners advantage despite its practice of granting a 60- to 90-day credit term for thepayment of premiums. Held: No. Petition denied. Ratio: Section 77 of the Insurance Code provides: No policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid An exception to this section is Section 78 which provides: Any 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 premium is actually paid. Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss. Section 78 allows waiver by the insurer of the condition of prepayment and makes the policy binding despite the fact that premium is actually unpaid. Section 77 does not expressly prohibit an agreement granting credit extension. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for the payment of the premium. If the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy

should be allowed even though the premium is paid after the loss but within the credit term. Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties. It would be unjust if recovery on the policy would not be permitted against Petitioner, which had consistently granted a 60- to 90-day credit term for the payment of premiums. Estoppel bars it from taking refuge since Masagana relied in good faith on such practice. Estoppel then is the fifth exception. American Home v Chua G.R. No. 130421. June 28, 1999

Facts: Chua obtained from American Home a fire insurance covering the stock-in-trade of his business. The insurance was due to expire on March 25, 1990. On April 5, 1990, Chua issued a check for P2,983.50 to American Homes agent, James Uy, as payment for the renewal of the policy. The official receipt was issued on April 10. In turn, the latter a renewal certificate. A new insurance policy was issued where petitioner undertook to indemnify respondent for any damage or loss arising from fire up to P200,000 March 20, 1990 to March 25, 1991. On April 6, 1990, the business was completely razed by fire. Total loss was estimated between P4,000,000 and P5,000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, namely, Pioneer Insurance, Prudential Guarantee, Filipino Merchants and Domestic Insurance. Petitioner refused to honor the claim hence, the respondent filed an action in the trial court. American Home claimed there was no existing contract because respondent did not pay the premium. Even with a contract, they contended that he was ineligible bacue of his fraudulent tax returns, his failure to establish the actual loss and his failure to notify to petitioner of any insurance already effected. The trial court ruled in favor of respondent because the respondent paid by way of check a day before the fire occurred and that the other insurance companies promptly paid the claims. American homes was made to pay 750,000 in damages. The Court of Appeals found that respondents claim was substantially proved and petitioners unjustified refusal to pay the claim entitled respondent to the award of damages. American Home filed the petition reiterating its stand that there was no existing insurance contract between the parties. It invoked Section 77 of the Insurance Code, which provides that no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid and the case of Arce v. Capital Insurance that until the premium is paid there is no insurance.

Issues: 1. Whether there was a valid payment of premium, considering that respondents check was cashed after the occurrence of the fire 2. Whether respondent violated the policy by his submission of fraudulent documents and non-disclosure of the other existing insurance contracts 3. Whether respondent is entitled to the award of damages.

award for loss of profit. This cannot be shouldered by petitioner whose obligation is limited to the object of insurance. There was no fraud to justify moral damages. Exemplary damages cant be awarded because the defendant never acted in a reckless manner to claim insurance. Attorneys fees cant be recovered as part of damages because no premium should be placed on the right to litigate.

Held:Yes. No. Yes, but not all damages valid. Petition granted. Damages modified.

Ratio: 1. The trial court found, as affirmed by the Court of Appeals, that there was a valid check payment by respondent to petitioner. The court respected this. 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 agents 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. Submission of the alleged fraudulent documents pertained to respondents income tax returns for 1987 to 1989. Respondent, however, presented a BIR certification that he had paid the proper taxes for the said years. Since this is a question of fact, the finding is conclusive. Ordinarily, where the insurance policy specifies as a condition the disclosure of existing co-insurers, nondisclosure is a violation that entitles the insurer to avoid the policy. 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 the loss adjusters admission of previous knowledge of the co-insurers. It cannot be said that petitioner was deceived by respondent by the latters 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. 3. Petitioner is liable to pay the loss. But there is merit in petitioners grievance against the damages and attorneys fees awarded. There was no basis for an