Makati Tuscany Condominium Corporation v CA (Insurance


G.R. No. 95546 November 6, 1992
by American International Underwriters (Phils.), Inc., respondent.

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. 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. 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. 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. Petitioner explained that it discontinued the
payment of premiums because the policy did not contain a credit clause in
its favor. Petitioner further claimed that the policy was never binding and
valid, and no risk attached to the policy. 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.

(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due

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

RULING: No. At the very least. however brief or momentary. Moreover. . the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period. except in the case of a life or an industrial life policy whenever the grace period provision applies. the contract remains valid even if the premiums were paid on installments. The obligation to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium. basic principles of equity and fairness would not allow the insurer to continue collecting and accepting the premiums.has been paid. although paid on installments. where the risk is entire and the contract is indivisible. Certainly. and later deny liability on the lame excuse that the premiums were not prepared in full. as correctly observed by the appellate court. both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.

95 as full payment of the premiums for the renewal of the five insurance policies on Respondent’s properties.000. April 4.UCPB v Masagana G. had been granted a 60 to 90-day credit term for the renewal of the policies. 137172.45 as renewal premium payments.00 as indemnity for the burned properties covered by the renewal-replacement policies. the assured shall be entitled to renew the policy upon payment of the premium due on the effective date of renewal. 1992.J.R. The modification consisted in the (1) deletion of the trial court’s declaration that three of the policies were in force from August 1991 to August 1992. which had procured insurance coverage from UCPB for a number of years. The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender of payment of the premiums on 13 July 1992 did not result in the renewal of the policies.753.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.645. Renewal Clause. plaintiff tendered five checks for P225. 26. Masagana obtained from UCPB five (5) insurance policies on its Manila properties. and (2) reduction of the award of the attorney’s fees from 25% to 10% of the total amount due the Respondent. On June 13. Such a practice had existed up to the time the claims were filed. Masagana’s properties were razed by fire. The policies were effective from May 22.753. 1992. -. 1991 to May 22. UCPB then rejected Masagana’s claims under the argument that the fire took place before the tender of payment. On July 13. Masagana made its formal demand for indemnification for the burned insured properties. Most of the premiums have been paid for more than 60 . having been made beyond the effective date of renewal as provided under Policy Condition No. 2001 C. we reversed and set aside the assailed decision[1] of the Court of Appeals. No. which affirmed with modification the judgment of the trial court (a) allowing Respondent to consign the sum of P225. (b) declaring the replacement-renewal policies effective and binding from 22 May 1992 until 22 May 1993. On July 14. 1992. Davide Facts: In our decision of 15 June 1999 in this case. 1992. A receipt was issued. and (c) ordering Petitioner to pay Respondent P18. which states: 26. Both the Court of Appeals and the trial court found that sufficient proof exists that Masagana. Hence Masagana filed this case.

The Tuscany case has provided another exception to Section 77 that the insurer may grant credit extension for the payment of the premium. notwithstanding any stipulation therein that it shall not be binding until premium is actually paid.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. 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. Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly applied to Petitioner’s advantage despite its practice of granting a 60. 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. The Supreme Court. 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. upon observing the facts. as there is no proof at all that the notice sent by ordinary mail was received by Masagana. both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted. the premiums were paid within the grace period. so far as to make the policy binding. Section 77 does not expressly prohibit an agreement granting credit extension. At the very least. Makati Tuscany v Court of Appeals. no timely notice of non-renewal was made by UCPB. 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. Also.days after the issuance. UCPB filed a motion for 90- day credit term for the payment of premiums. If the insurer has granted the insured a credit term for the payment of the . Held: No. Also. 1991 to May 22. affirmed that there was no valid notice of non-renewal of the policies in question. Petition denied.

premium and loss occurs before the expiration of the term. 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. Estoppel then is the fifth exception. public order or public policy. The agreement binds the parties. morals. recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term. good customs. Estoppel bars it from taking refuge since Masagana relied in good faith on such 90-day credit term for the payment of premiums. . That agreement is not against the law. which had consistently granted a 60. It would be unjust if recovery on the policy would not be permitted against Petitioner. Moreover.