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PREMIUMS full and duly acknowledged in an official receipt signed by an

authorized official/representative of the Company,”

Pedro Arce vs. The Capital Insurance & Surety Co., Inc.
It is obvious from both the Insurance Act, as amended, and the stipulation of the
G.R. No. L-28501, September 30, 1982
parties that time is of the essence in respect of the payment of the insurance
FACTS: premium so that if it is not paid the contract does not take effect unless there is
Pedro Arce (INSURED) was the owner of a residential house in Tondo, Manila, still another stipulation to the contrary. In the instant case, the INSURED was
which had been insured with the Capital Insurance and Surety Co., Inc. given a grace period to pay the premium but the period having expired with no
(COMPANY) since 1961 under Fire Policy No. 24204. On November 27, 1965, payment made, he cannot insist that the COMPANY is nonetheless obligated to
the COMPANY sent to the INSURED Renewal Certificate No. 47302 to cover him.
the period December 5, 1965 to December 5, 1966. The COMPANY also The Supreme Court reversed CFI’s decision.
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 January 4, 1966. The COMPANY accepted the PHIL. PHOENIX SURETY vs WOODWORKS
promise but the premium was not paid on January 4, 1966. On January 8, 1966,
the house of the INSURED was totally destroyed by fire. FACTS:

Upon WOODWORKS’s application, PHIL. PHOENIX issued in its favor a fire
On January 10, 1966, INSURED's wife presented a claim for indemnity to the insurance policy whereby PHIL. PHOENIX insured WOODWORKS’ building,
COMPANY. She was told that no indemnity was due because the premium on machinery and equipment for a term of one year from against loss by fire. The
the policy was not paid. Nonetheless the COMPANY tendered a check for premium and other charges amounted to P10,593.36.
P300.00 as financial aid which was received by the INSURED's daughter,
Evelina R. Arce. The COMPANY reiterated that the check was given "not as an
obligation, but as a concession" because the renewal premium had not been paid. It is undisputed that WOODWORKS did not pay the premium stipulated in the
The INSURED cashed the check but then sued the COMPANY on the policy. Policy when it was issued nor at any time thereafter.
The CFI ruled in favor of Arce and ordered the COMPANY to pay the proceeds
of the fire insurance policy. Before the expiration of the one-year term, PHIL. PHOENIX notified
ISSUE: WOODWORKS of the cancellation of the Policy allegedly upon request of
WOODWORKS. The latter has denied having made such a request. PHIL.
Whether Arce is entitled to the proceeds of the insurance policy despite non-
PHOENIX credited WOODWORKS with the amount of P3,110.25 for the
payment of the premium.
unexpired period of 94 days, and claimed the balance of P7,483.11 representing ,
RULING: earned premium. Thereafter, PHIL. PHOENIX demanded in writing for the
No. Sec. 72 of the Insurance Act, as amended by R.A. No. 3540, provides: payment of said amount. 

WOODWORKS disclaimed any liability contending, in essence, that it need not
SEC. 72. An insurer is entitled to payment of premium as soon as the pay premium “because the Insurer did not stand liable for any indemnity during
thing insured is exposed to the perils insured against, unless there is the period the premiums were not paid.”
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” For this reason, PHIL. PHOENIX commenced action in the CFI of Manila.
Judgment was rendered in PHIL. PHOENIX’s favor . From this adverse
Morever, the parties in this case had stipulated: Decision, WOODWORKS appealed to the Court of Appeals which certified the
IT IS HEREBY DECLARED AND AGREED that not. withstanding case to SC on a question of law.
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 ISSUE:

May the insurer collect the earned premiums?
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 again renewed and private respondent issued to petitioner another policy. The
NO. The Courts findings are buttressed by Section 77 of the Insurance Code petitioner paid 152,000 pesos then refused to furnish the balance.
(Presidential Decree No. 612, promulgated on December 18, 1974), which now The company filed an action to recover the unpaid balance of P314,103.05.
provides that “no contract of insurance issued by an insurance company is valid The condominium administration explained that it discontinued the payment of
and binding unless and until the premium thereof has been paid, notwithstanding premiums because the policy did not contain a credit clause in its favor and that
any agreement to the contrary.” the acceptance of premiums didn’t waive any of the company rights to deny
liability on any claim under the policy arising before such payments or after the
expiration of the credit clause of the policy and prior to premium payment, loss
Since the premium had not been paid, the policy must be deemed to have lapsed. wasn’t covered.
Petitioner sought for a refund. The trial court dismissed the complaint and
counterclaim owing to the argument that payment of the premiums of the
The non-payment of premiums does not merely suspend but put, an end to an
policies were made during the lifetime or term of said policies, so risk attached
insurance contract, since the time of the payment is peculiarly of the essence of
under the policies.
the contract.
The Court of Appeals ordered petitioner to pay the balance of the premiums
owing to the reason that it was part of an indivisible obligation.
In fact, if the peril insured against had occurred, PHIL. PHOENIX, as insurer, Petitioner now asserts that its payment by installment of the premiums for the
would have had a valid defense against recovery under the Policy it had issued. insurance policies invalidated them because of the provisions of Sec. 77 of the
Explicit in the Policy itself is PHIL. PHOENIX’s agreement to indemnify Insurance Code disclaiming liability for loss for occurring before payment of
WOODWORKS for loss by fire only “after payment of premium,” Compliance premiums.
by the insured with the terms of the contract is a condition precedent to the right
of recovery. Issue: 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

The burden is on an insured to keep a policy in force by the payment of Held: Judgment affirmed.
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. Ratio:
The continuance of the insurer’s obligation is conditional upon the payment of Sec. 77. An insurer is entitled to the payment of the premium as soon as the
premiums, so that no recovery can be had upon a lapsed policy, the contractual thing is exposed to the peril insured against. Notwithstanding any agreement to
relation between the parties having ceased. 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
Moreover, “an insurer cannot treat a contract as valid for the purpose of provision applies.
collecting premiums and invalid for the purpose of indemnity.” Petitioner concluded that 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
The judgment appealed from was reversed, and PHIL. PHOENIX’s complaint has been paid, notwithstanding any agreement to the contrary. As a consequence,
dismissed. petitioner seeks a refund of all premiumpayments made on the alleged invalid
insurance policies.
We hold that the subject policies are valid even if the premiums were paid on
Makati Tuscany v CA G.R. No. 95546 November 6, 1992 installments. The records clearly show that petitioner and private respondent
Facts: intended subject insurance policies to be binding and effective notwithstanding
American International Underwriters issued a policy in favor of Makati Tuscany the staggered payment of the premiums. The initial insurance contract entered
Condominium Corporation with a total premium of P466,103.05. The company into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the
issued a replacement policy. Premium was again paid. In 1984, the policy was insurer accepted all the installment payments. Such acceptance of payments

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speaks loudly of the insurer's intention to honor the policies it issued to Fortune denied the claim for violation of the Insurance Code. Tibay sued for
petitioner. damages in the amount of P600,000.00 representing the total coverage of the
Quoting the CA decision: policy.
“While the import of Section 77 is that prepayment of premiums is strictly The trial court ruled for petitioners and made fortune liable for the total value of
required as a condition to the validity of the contract, we are not prepared to rule the insured building and personal properties. The Court of Appeals reversed the
that the request to make installment payments duly approved by the insurer, court by removing liability from Fortune after returning the premium.
would prevent the entire contract of insurance from going into effect despite Hence this petition for review.
payment and acceptance of the initial premium or first installment. Section 78 of The petitioner contended that Fortune remained liable under the subject fire
the Insurance Code in effect allows waiver by the insurer of the condition of insurance policy in spite of the failure of petitioners to pay their premium in full.
prepayment by making an acknowledgment in the insurance policy of
receipt of premium as conclusive evidence of payment so far as to make the Issue: May a fire insurance policy be valid, binding and enforceable upon mere
policy binding despite the fact that premium is actually unpaid. Section 77 partial payment of premium?
merely precludes the partiesfrom stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting Held: No. Petition dismissed.
credit extension. So is an understanding to allow insured to pay premiums in
installments not so proscribed. Ratio:
The reliance by petitioner on Arce vs. Capital Surety and Insurance Co. is The pertinent provisions read:
unavailing because the facts therein are substantially different from those in the 2. This policy including any renewal thereof and/or any endorsement thereon is
case at bar. In Arce, no payment was made by the insured at all despite the grace not in force until the premium has been fully paid to and duly receipted by the
period given. Here, petitioner paid the initial installment and thereafter made Company in the manner provided herein.
staggered payments resulting in full payment of the 1982 and 1983 insurance This policy shall be deemed effective, valid and binding upon the Company only
policies. For the 1984 policy, petitioner paid two (2) installments although it when the premiums therefor have actually been paid in full and duly
refused to pay the balance. acknowledged in a receipt signed by any authorized official of the company
It appearing from the peculiar circumstances that the parties actually intended to Where the premium has only been partially paid and the balance paid only after
make three (3) insurance contracts valid, effective and binding, petitioner may the peril insured against has occurred, the insurance contract did not take effect
not be allowed to renege on its obligation to pay the balance of and the insured cannot collect at all on the policy. The Insurance Code which
the premium after the expiration of the whole term. Moreover, as correctly says that no policy or contract of insurance issued by an insurance company is
observed by the appellate court, where the risk is entire and the contract is valid and binding unless and until the premium has been paid.
indivisible, the insured is not entitled to a refund of the premiums paid if the What does “unless and until the premium thereof has been paid” mean?
insurer was exposed to the risk insured for any period, however brief or Escosura v. San Miguel- the legislative practice was to interpret “with pay” in
momentary. accordance to the intention of distinguishbetween full and partial payment,
where the modifying term is used.
Tibay v CA G.R. No. 119655. May 24, 1996 Petitioners used Philippine Phoenix v. Woodworks, where partial payment of
the premium made the policy effective during the whole period of the policy.
Facts: The SC didn’t consider the 1967 Phoenix case as persuasive due to the different
Fortune Life issued a fire insurance Policy to Tibay on her two-storey residential factual scenario.
building at Zobel Street, Makati City. The insurance was for P600,000.00 In Makati Tuscany v CA, the parties mutually agreed that the premiums could be
covering the period from January 23, 1987 to January 23, 1988. On January 23 paid in installments, hence, this Court refused to invalidate the insurance policy.
1987, Tibay only paid P600.00 of 3,000 peso premium and left a balance. Nothing in Article 77 of the Code suggested that the parties may not agree
The insured building was completely destroyed by fire. Tibay then paid the to allow payment of the premiums in installment, or to consider the contract as
balance. On the same day, she filed a claim on the policy. Her claim was valid and binding upon payment of the first premium.
accordingly referred to the adjuster, Goodwill, which immediately wrote Violeta Phoenix and Tuscany demonstrated the waiver of prepayment in full by the
requesting her to furnish it with the necessary documents for the investigation insurer. In this case however, there was no waiver. There was a stipulation that
and processing of her claim. Petitioner complied, and she signed a non-waiver the policy wasn’t in force until the premium has been fully paid and receipted.

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There was no juridical tie of indemnification from the fractional payment In the meanwhile, the contract endures, and an occurrence of the risk insured
of premium. The insurance contract itself expressly provided that the policy riggers the insurer's liability. Also, legal compensation arises where insurer's
would be effective only when the premium was paid in full. liability to the insured would simply be reduced by the balance of the premium.
Verily, it is elemental law that the payment of premium is requisite to keep the It must here be noted that the insured had made, and the insurer had accepted
policy of insurance in force. If the premium is not paid in the manner prescribed partial premium payment on the policy weeks before the risk insured against
in the policy as intended by the parties the policy is ineffective. Partial payment took place. An insurance is an aleatory contract effective upon its perfection
even when accepted as a partial payment will not keep the policy alive. although the occurrence of a condition or event may later dictate the
South Sea v CA stipulated 2 exceptions to the requirement of payment of the demandability of certain obligations. Fortune’s stipulation that insurance shall
entire premium as a prerequisite to the validity of the insurance contract. These not "be . . . in force until the premium has been fully paid," and that it "shall be
are when in case the insurance coverage relates to life or insurance when a grace deemed effective, valid and binding upon the company only when the premiums
period applies, and when the insurer makes a written acknowledgment of the therefor have actually been paid in full and duly acknowledged," override the
receipt of premium to be conclusive evidence of payment. efficaciousness of the insurance contract despite the payment and acceptance.
Hence, in the absence of clear waiver of prepayment in full by the insurer, the Article 78 of the Insurance Code “An acknowledgment in a policy or contract of
insured cannot collect on the proceeds of the policy. insurance of the receipt of premium is conclusive evidence of its payment, so far
“The terms of the insurance policy constitute the measure of the insurer’s as to make the policy binding, notwithstanding any stipulation therein that it
liability. In the absence of statutory prohibition to the contrary, insurance shall not be binding until the premium is actually paid“
companies have the same rights as individuals to limit their liability and to Even if a portion was paid in the premium, the insurance coverage becomes
impose whatever conditions they deem best upon their obligations not effective and binding, any stipulation in the policy to the contrary
inconsistent with public policy.” notwithstanding.
J. Vitug Malayan Insurance Co, Inc. V Ca (1986)
“All the calculations of the company are based on the hypothesis of prompt
payments. They not only calculate on the receipt of the premiums when due, but Lessons Applicable: Motor Vehicle Liability Insurance - Authorized Driver
on the compounding interest upon them. It is on this basis that they are enabled Cause (Insurance)
to offer assurance at the favorable rates they do.”
The failure of appellants to fully pay their premium prevented the contract of FACTS:
insurance from becoming binding an Fortune. This series of acts is tainted with Aurelio Lacson ,owner of a Toyota NP Land Cruiser, Model

misrepresentation and violates the uberrimae fidae principle of insurance 1972, bearing Plate No. NY-362 and with engine Number
contracts. F-374325 insured with Malayan Insurance Co
Tibay had entered into a "Non-Waiver Agreement" with the adjuster which Dec. 1, 1975: Aurelio brought it to the shop of Carlos Jamelo

permitted Fortune to claim non-payment of premium as a defense. for repair
The law neither requires, nor measures the strength of the vinculum juris by any Dec. 2, 1975: Rogelio Mahinay, together with Johnny

specific amount of premium payment. Payment on the premium, partly or in full, Mahinay, Rogelio Macapagong and Rogelio Francisco took and drove
is made by the insured which the insurer accepts. In fine, it is either that a the Toyota Land Cruiser and it met an accident with Bo
juridical tie exists (by such payment) or that it is not extant at all (by Carlos reported the incident to the police and instituted a

an absence thereof). Once the juridical relation comes into being, the full criminal case for Qualified Theft against his employees
efficacy follows. This is a partially performed contract. Rogelio Mahinay pleaded guilty and was convicted of

The non-payment of the balance shouldn’t result in an automatic cancellation of theft
the contract; otherwise, the right to decide the effectivity of the contract would Aurelio was not allowed to claim on the ground that the claim

become potestative. is not covered by the policy inasmuch as the driver of the insured
Instead, the parties should be able to demand from each other the performance of vehicle at the time of the accident was not a duly licensed driver
whatever obligations they had assumed or, if desired, sue timely for the Trial Court: favored Aurelio

rescission of the contract. CA: Affirmed

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ISSUE: W/N the taking of the vehicle by another person without permission or 26. Renewal Clause. -- Unless the company at least forty five days in advance of
authority from the owner or person-in-charge thereof is sufficient to place it the end of the policy period mails or delivers to the assured at the address shown
within the ambit of the word theft in the policy 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
HELD: YES. the premium due on the effective date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists
• The damages therefore were sustained in the course of the that Masagana, which had procured insurance coverage from UCPB for a
unlawful taking number of years, had been granted a 60 to 90-day credit term for the renewal of
• Bacolod IFCs interest in the insured vehicle was in the amount the policies. Such a practice had existed up to the time the claims were filed.
of P2,000.00 only compared to plaintiff's P26,000.00 it is well to Most of the premiums have been paid for more than 60 days after the issuance.
presume that Bacolod IFC did not deem it wise to be impleaded as Also, no timely notice of non-renewal was made by UCPB.
party-plaintiff in this case. This inaction on the part of BIFC will only The Supreme Court ruled against UCPB in the first case on the issue of whether
show that it was not really interested to intervene. 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
UCPB v Masagana G.R. No. 137172. April 4, 2001 implied credit arrangement though actual payment of premium was tendered on
a later date and after the occurrence of the risk insured against.
Facts: UCPB filed a motion for reconsideration.
In our decision of 15 June 1999 in this case, we reversed and set aside the The Supreme Court, upon observing the facts, affirmed that there was no valid
assailed decision[1] of the Court of Appeals, which affirmed with modification notice of non-renewal of the policies in question, as there is no proof at all that
the judgment of the trial court (a) allowing Respondent to consign the sum of the notice sent by ordinary mail was received by Masagana. Also, the premiums
P225,753.95 as full payment of the premiums for the renewal of the five were paid within the grace period.
insurance policies on Respondent’s properties; (b) declaring the replacement-
renewal policies effective and binding from 22 May 1992 until 22 May 1993; Issue: Whether Section 77 of the Insurance Code of 1978 must be strictly
and (c) ordering Petitioner to pay Respondent P18,645,000.00 as indemnity for applied to Petitioner’s advantage despite its practice of granting a 60- to 90-day
the burned properties covered by the renewal-replacement policies. The credit term for the payment of premiums.
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; and (2) Held: No. Petition denied.
reduction of the award of the attorney’s fees from 25% to 10% of the total
amount due the Respondent. Ratio:
Masagana obtained from UCPB five (5) insurance policies on its Manila Section 77 of the Insurance Code provides: No policy or contract of insurance
properties. issued by an insurance company is valid and binding unless and until
The policies were effective from May 22, 1991 to May 22, 1992. On June 13, the premium thereof has been paid…
1992, Masagana’s properties were razed by fire. On July 13, 1992, plaintiff An exception to this section is Section 78 which provides: Any
tendered five checks for P225,753.45 as renewal premium payments. A receipt acknowledgment in a policy or contract of insurance of the receipt of premium is
was issued. On July 14, 1992, Masagana made its formal demand for conclusive evidence of its payment, so far as to make the policy binding,
indemnification for the burned insured properties. UCPB then rejected notwithstanding any stipulation therein that it shall not be binding
Masagana’s claims under the argument that the fire took place before the tender until premium is actually paid.
of payment. Makati Tuscany v Court of Appeals- Section 77 may not apply if the parties have
Hence Masagana filed this case. agreed to the payment in installments of the premium and partial payment has
The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender been made at the time of loss.
of payment of the premiums on 13 July 1992 did not result in the renewal of the Section 78 allows waiver by the insurer of the condition of prepayment and
policies, having been made beyond the effective date of renewal as provided makes the policy binding despite the fact that premium is actually unpaid.
under Policy Condition No. 26, which states: Section 77 does not expressly prohibit an agreement granting credit extension.

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At the very least, both parties should be deemed in estoppel to question the covers any building which the parties manifestly intended to insure, however
arrangement they have voluntarily accepted. inaccurate the description may be.
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 Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute,
granted the insured a credit term for the payment of the premium and loss occurs to our mind, that what the parties manifestly intended to insure was the new oil
before the expiration of the term, recovery on the policy should be allowed even mill.
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 If the parties really intended to protect the first oil mill, then there is no need to
insurance contract to provide a credit term within which to pay the premiums. specify it as new. Indeed, it would be absurd to assume that the respondent
That agreement is not against the law, morals, good customs, public order or would protect its first oil mill for different amounts and leave uncovered its
public policy. The agreement binds the parties. second one.
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 Great Pacific v CA G.R. No. L-31845 April 30, 1979
payment of premiums. Estoppel bars it from taking refuge since Masagana
relied in good faith on such practice. Estoppel then is the fifth exception. Facts:
Ngo Hing filed an application with the Great Pacific for a twenty-year
AMERICAN HOME INSURANCE vs TANTUCO endowment policy in the amount of P50,000.00 on the life of his one-year old
daughter Helen. He supplied the essential data which petitioner Mondragon,
◦ INSURANCE LAW: Liberality is the rule of construction in insurance the Branch Manager, wrote on the form. The latter paid the annual premium the
contracts. sum of P1,077.75 going over to the Company, but he retained the amount of
P1,317.00 as his commission for being a duly authorized agent of Pacific Life.
FACTS: Upon the payment of the insurance premium, the binding deposit receipt was
issued Ngo Hing. Likewise, petitioner Mondragon handwrote at the bottom of
Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned the back page of the application form his strong recommendation for the
two mills (the first oil mill and a new one), both located at its factory compound approval of the insurance application. Then Mondragon received a letter from
at Iyam, Lucena City. The two oil mills are separately covered by fire insurance Pacific Life disapproving the insurance application. The letter stated that the said
policies issued by American Home Assurance Co. life insurance application for 20-year endowment plan is not available for minors
below seven years old, but Pacific Life can consider the same under the Juvenile
On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. Triple Action Plan, and advised that if the offer is acceptable, the Juvenile Non-
American Home rejected the claim for the insurance proceeds on the ground that Medical Declaration be sent to the company.
no policy was issued by it covering the burned oil mill. It stated that the new oil The non-acceptance of the insurance plan by Pacific Life was allegedly not
mill was under Building No. 15 while the insurance coverage extended only to communicated by petitioner Mondragon to private respondent Ngo Hing.
the oil mill under Building No. 5. Instead, on May 6, 1957, Mondragon wrote back Pacific Life again strongly
recommending the approval of the 20-year endowment insurance plan to
ISSUE: children, pointing out that since the customers were asking for such coverage.
◦ Whether or not the new oil mill is covered by the fire insurance Helen Go died of influenza. Ngo Hing sought the payment of the proceeds of the
policy insurance, but having failed in his effort, he filed the action for the recovery
before the Court of First Instance of Cebu, which ruled against him.
In construing the words used descriptive of a building insured, the greatest 1. Whether the binding deposit receipt constituted a temporary contract of the
liberality is shown by the courts in giving effect to the insurance. In view of the life insurance in question
custom of insurance agents to examine buildings before writing policies upon 2. Whether Ngo Hing concealed the state of health and physical condition of
them, and since a mistake as to the identity and character of the building is Helen Go, which rendered void the policy
extremely unlikely, the courts are inclined to consider the policy of insurance

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Held: No. Yes. Petition dismissed. ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson

Ratio: HELD:
The receipt was intended to be merely a provisional insurance contract. Its
perfection was subject to compliance of the following conditions: (1) that the NO. A contract of insurance is a contract of indemnity upon the terms and
company shall be satisfied that the applicant was insurable on standard rates; (2) conditions specified therein. When the insurer is called upon to pay in case of
that if the company does not accept the application and offers to issue a policy loss or damage, he has the right to insist upon compliance with the terms of the
for a different plan, the insurance contract shall not be binding until the applicant contract. If the insured cannot bring himself within the terms and conditions of
accepts the policy offered; otherwise, the deposit shall be refunded; and (3) that the contract, he is not entitled as a rule to recover for the loss or damage
if the company disapproves the application, the insurance applied for shall not be suffered. For the terms of the contract constitute the measure of the insurer’s
in force at any time, and the premium paid shall be returned to the applicant. liability, and compliance therewith is a condition precedent to the right of
The receipt is merely an acknowledgment that the latter's branch office had recovery. At the time of the accident, Stokes had been in the Philippines for more
received from the applicant the insurance premium and had accepted than 90 days. Hence, under the law, he could not drive a motor vehicle without a
the application subject for processing by the insurance company. There was still Philippine driver’s license. He was therefore not an “authorized driver” under
approval or rejection the same on the basis of whether or not the applicant is the terms of the insurance policy in question, and Malayan was right in denying
"insurable on standard rates." Since Pacific Life disapproved the the claim of the insured. Acceptance of premium within the stipulated period for
insurance application of respondent Ngo Hing, the binding deposit receipt in payment thereof, including the agreed period of grace, merely assures continued
question had never become in force at any time. The binding deposit receipt effectivity of the insurance policy in accordance with its terms. Such acceptance
is conditional and does not insure outright. This was held in Lim v Sun. does not estop the insurer from interposing any valid defense under the terms of
The deposit paid by private respondent shall have to be refunded by Pacific Life. the insurance policy. The principle of estoppel is an equitable principle rooted
2. Ngo Hing had deliberately concealed the state of health of his daughter Helen upon natural justice which prevents a person from going back on his own acts
Go. When he supplied data, he was fully aware that his one-year old daughter is and representations to the prejudice of another whom he has led to rely upon
typically a mongoloid child. He withheld the fact material to the risk insured. them. The principle does not apply to the instant case. In accepting the premium
“The contract of insurance is one of perfect good faith uberrima fides meaning payment of the insured, Malayan was not guilty of any inequitable act or
good faith, absolute and perfect candor or openness and honesty; the absence of representation. There is nothing inconsistent between acceptance of premium
any concealment or demotion, however slight.” due under an insurance policy and the enforcement of its terms. WHEREFORE,
The concealment entitles the insurer to rescind the contract of insurance. the appealed judgment is reversed. The complaint is dismissed. Costs against


L-34768, 24 February 1984 127 SCRA 766 CAPITAL INSURANCE vs PLASTIC ERA
• December 17, 1960: Capital Insurance & Surety Co.,
Daniel Adolfson had a subsisting Malayan car insurance policy with coverage Inc. delivered to the respondent Plastic Era Manufacturing Co., Inc. its
against own damage as well as 3rd party liability when his car figured in a open Fire Policy insuring its building, equipments, raw materials,
vehicular accident with another car, resulting to damage to both vehicles. At the products and accessories located at Sheridan Street, Mandaluyong,
time of the accident, Adolfson’s car was being driven by James Stokes, who was Rizal between December 15, 1960 1 pm - December 15, 1961 1 pm up
authorized to do so by Adolfson. Stokes, an Irish tourist who had been in the to P100,000 but Plastic Era did not pay the premium
Philippines for only 90 days, had a valid and subsisting Irish driver’s license but • January 8, 1961: Plastic Era delivered to Capital Insurance its
without a Philippine driver’s license. Adolfson filed a claim with Malayan but partial payment through check P1,000 postdated January 16, 1961
the latter refused to pay contending that Stokes was not an authorized driver • February 20, 1961: Capital Insurance tried to deposit the check
under the “Authorized Driver” clause of the insurance policy in relation to but it was dishonored due to lack of funds. According to the records,
Section 21 of the Land Transportation Office. on January 19, 1961 Plastic Era has had a bank balance of P1,193.41

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• January 18, 1961: Plastic Era's properties were destroyed by • June 25 1961: Carlos' driver Domingo Reyes met a vehicular
fire amounting to a loss of P283,875. The property was also insured collision along Rizal Avenue Extension, Potrero, Malabon, Rizal
to Philamgen Insurance Company for P200K.
 • Ccc Insurance Corporation denied his claim reasoning that the
driver was not an "authorized driver"
• Capital Insurance refused Plastic Era's claim for failing to pay • Reyes, who cannot read and write, who has never
the insurance premium passed any examination for drivers, and has not applied for a
• CFI: favored Capital Insurance license from the duly constituted government agency entrusted
• CA: affirmed with the duty of licensing drivers, cannot be considered an
ISSUE: W/N there was a valid insurance contract because there was an extention authorized driver
of credit despite failing to encash the check payment • AUTHORIZED DRIVER:

Any of the following: 

HELD: YES. Affirmed (a) The insured;

(b) Any person driving on the Insured's order or with his
• Article 1249 of the New Civil Code permission, provided that the person driving is permitted in
• The delivery of promissory notes payable to order, or accordance with licensing laws or regulations to drive the
bills of exchange or other mercantile documents shall produce motor vehicle covered by this Policy, or has been so permitted
the effect of payment only when they have been cashed, or and is not disqualified by order of a court of law or by reason
when through the fault of the creditor they have been impaired of any enactment or regulation from driving such Motor
• Capital Insurance accepted the promise of Plastic Era to pay Vehicle.
the insurance premium within 30 days from the effective date of • RTC: favored Robes and CCC was order to pay
policy. Considering that the insurance policy is silent as to the mode of ISSUE: W/N Domingo Reyes was an authorized driver
payment, Capital Insurance is deemed to have accepted the promissory
note in payment of the premium. This rendered the policy immediately
operative on the date it was delivered. HELD: YES. CA affirmed
• By accepting its promise to pay the insurance premium within
thirty (30) days from the effectivity date of the policy — December 17, • Court of Appeals found that the driver's license No. 271703
1960 Capital Insurance had in effect extended credit to Plastic Era. DP was genuine
• Where credit is given by an insurance company for the • Domingo Reyes is in possession of a driver's license
payment of the premium it has no right to cancel the policy for issued by the Motor Vehicles Office which on its face appears
nonpayment except by putting the insured in default and giving him to have been regularly issued
personal notice • Neither Gloria Presa nor the officer-in-charge
• Having held the check for such an unreasonable period of Marciano A. Monzon was placed on the witness stand to be
time, Capital Insurance was estopped from claiming a forfeiture of its examined in order to determine whether said license is indeed
policy for non-payment even if the check had been dishonored later. void
• Section 24 of the Revised Motor Vehicles Law, Act 3992 of the
LOSS Philippine Legislature, as amended by Republic Acts Nos. 587, 1204
and 2863,1


An examination or demonstration to show any applicant's ability to
• Carlos F. Robes insured with the CCC Insurance Corporation operate motor vehicles may also be required in the discretion of the
his Dodge Kingsway car against loss or damage through accident for an Chief, Motor Vehicles Office or his deputies.
amount not exceeding P8,000 • Section 26 of the Act prescribes further:

Page 8 of 14
SEC. 26. Issuance of chauffeur's license; professional badge: If, after
examination, or without the same, the Chief, Motor Vehicles Office or Paris-Manila Perfume – engaged in the manufacture of perfumery and toilet
his deputies, believe the applicant to possess the necessary articles
qualifications and knowledge, they shall issue to such applicant a Phoenix Assurance – corp organized under the laws of Great Britain, engaged in
license to operate as chauffeur ... the fire insurance business in the PH
• There is no proof that the owner of the automobile knew that
the circumstance surrounding such issuance showed that it was Phoenix issued a fire policy to Paris-Manila
irregular • Amount: P13K
• the weight of authority is in favor of a liberal interpretation of • With the knowledge of Phoenix, the property was also insured in two
the insurance policy for the benefit of the party insured, and strictly other companies
against the insurer
The insured property was totally destroyed by fire.
COMMUNITY MULTI-PURPOSE COOPERATIVE, INC. Phoenix refused to pay Paris-Manila upon presentment of the claim. It also
G.R. No.136914, January 25, 2002 refused to appoint an arbitrator under the provisions of section 17 of the policy.

Facts: Country Banker’s Insurance Corp. (CBIC) insured the building of Phoenix’s defense:
respondent Lianga Bay and Community Multi-Purpose Corp., Inc. against fire, • The policy in question was issued "to one Peter Johnson, as proprietor
loss, damage, or liability during the period starting June 20, 1990 for the sum of of Paris-Manila Perfumery Co.,"
Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred. o the company was not the insured named in the policy, and that
The respondent filed the insurance claim but the petition denied the same on the the insurance was of no legal force and effect with the
ground that the building was set on fire by two NPA rebels and that such loss company
was an excepted risk under par.6 of the conditions of the insurance policy that • The policy of insurance did not cover any loss or damage occasioned by
the insurance does not cover any loss or damage occasioned by among others, explosion,"
mutiny, riot, military or any uprising. Respondent filed an action for recovery of o the loss was occasioned by an explosion, and was not covered
loss, damage or liability against petitioner and the Trial Court ordered the by the policy
petition to pay the full value of the insurance. • The policy provides that, if the claim is fraudulent, and that any false
declaration was made or used to obtain it, all benefits are thereby
Issue: Whether or not the insurance corporation is exempted to pay based on the forfeited
exception clause in the insurance policy. o the claim of the plaintiff is fraudulent as to the quantity and
value of the insured property at the time of the fire
Held: The Supreme Court held that the insurance corporation has the burden of • The policy becomes forfeited if a loss is occasioned by the willful act or
proof to show that the loss comes within the purview of the exception or connivance of the insured
limitation set-up. But the insurance corporation cannot use a witness to prove o the loss in question was caused by the willful act of Peter
that the fire was caused by the NPA rebels on the basis that the witness learned Johnson, and it prays that plaintiff's complaint be dismissed,
this from others. Such testimony is considered hearsay and may not be received with costs.
as proof of the truth of what he has learned. The petitioner, failing to prove the
exception, cannot rely upon on exemption or exception clause in the fire Lower Court: In favor of Paris-Manila
insurance policy. The petition was granted.
ISSUE; W/N Paris-Manila may claim on the policy
Topic: Loss & Notice of Loss

Page 9 of 14
Where a fire insurance company issued a policy insuring certain property against (1) Whether an action based on quasi-delict will prosper against a rent-a-car
loss by fire, and the insured property was destroyed by fire during the life of the company and, consequently, its insurer for fault or negligence of the car lessee in
policy, and the company contended that the fire was the result of an explosion, driving the rented vehicle
which was the primary cause of the fire, the burden of proof of that fact is on (2) Whether the ruling in MYC-Agro-Industrial Corporation v. Vda. de Caldo is
the company, and for want of such proof, the company is liable. applicable in the case at bar
• The cause of the explosion was and is unknown and wholly a matter of (1) We find no reversible error committed by respondent court in upholding the
conjecture. Neither Peter Johnson nor Francisco Banta (the only dismissal of petitioner's complaint. The pertinent provision is Art. 2176 of the
persons in the building at the time) claimed that either of them saw Civil Code which states: "Whoever by act or omission causes damage to another,
anything explode. there being fault or negligence, is obliged to pay for the damage done. Such fault
• Both Johnson and Banta testified that they heard an explosion, and or negligence, if there is no pre-existing contractual relation between the parties,
when they looked around, they saw fire and felt heat. There is no is called a quasi-delict . . . . ". To sustain a claim based thereon, the following
evidence as to whether the fire was started before or after the explosion. requisites must concur: (a) damage suffered by the plaintiff; (b) fault or
Neither is there any competent testimony as to the cause of the negligence of the defendant; and, (c) connection of cause and effect between the
explosion. fault or negligence of the defendant and the damage incurred by the plaintiff. We
• The factory where the fire occurred was filled with numerous kinds of agree with respondent court that petitioner failed to prove the existence of the
essences and oils used in the manufacture of perfumery and with a second requisite, i.e., fault or negligence of defendant FILCAR, because only the
quantity of alcohol and manufactured perfumes, all of which were of a fault or negligence of Dahl-Jensen was sufficiently established, not that of
highly inflammable nature, and the fire may have started from any one FILCAR. It should be noted that the damage caused on the vehicle of Soriano
of a number of reasons. was brought about by the circumstance that Dahl-Jensen swerved to the right
while the vehicle that he was driving was at the center lane. It is plain that the
Section 6 excludes only the damages which are the direct result of the explosion negligence was solely attributable to Dahl-Jensen thus making the damage
itself, and that it does not except damages which occurred from the fire suffered by the other vehicle his personal liability. Respondent FILCAR did not
occurring after the explosion, even though the explosion may have been the have any participation therein. Respondent FILCAR being engaged in a rent-a-
primary cause of the fire. But assuming, without deciding, that if it be a fact car business was only the owner of the car leased to Dahl-Jensen. As such, there
that the fire resulted from an explosion that that fact, if proven, would be a was no vinculum juris between them as employer and employee. Respondent
complete defense, the burden of the proof of that fact is upon the defendant, FILCAR cannot in any way be responsible for the negligent act of Dahl-Jensen,
and upon that point, there is a failure of proof. There is no competent the former not being an employer of the latter.
evidence as to whether the explosion caused the fire or the fire caused the (2) Petitioner's insistence on MYC-Agro-Industrial Corporation is rooted in a
explosion. misapprehension of our ruling therein. In that case, the negligent and reckless
operation of the truck owned by petitioner corporation caused injuries to several
FGU Insurance Corp. v. CA persons and damage to property. Intending to exculpate itself from liability, the
corporation raised the defense that at the time of the collision it had no more
Facts: control over the vehicle as it was leased to another; and, that the driver was not
On April 21, 1987, a car owned by private respondent FILCAR Transport Inc., its employee but of the lessee. The trial court was not persuaded as it found that
rented to and driven by Dahl-Jensen, a Danish tourist, swerved into the right and the true nature of the alleged lease contract was nothing more than a disguise
hit the car owned by Lydia Soriano and driven by Benjamin Jacildone. Dahl- effected by the corporation to relieve itself of the burdens and responsibilities of
Jensen did not possess a Philippine driver’s license. Petitioner, as the insurer of an employer. We upheld this finding and affirmed the declaration of joint and
Soriano’s car, paid the latter P25,382.20 and, by way of subrogation, sued several liability of the corporation with its driver.
FILCAR, Dahl-Jensen, and Fortune Insurance Corporation, FILCAR’s insurer,
for quasi-delict. The trial court dismissed the petition for failure to substantiate NOTICE AND PROOF OF LOSS
the claim for subrogation. The Court of Appeals affirmed the decision, but on the
ground that only Dahl-Jensen’s negligence was proven, not that of FILCAR. MALAYAN INSURANCE CO., INC. (MICO), petitioner, vs. GREGORIA
Hence, this instant petition. CRUZ ARNALDO, in her capacity as

Page 10 of 14
the INSURANCE COMMISSIONER, and CORONACION We also look askance at the alleged cancellation, of which the insured and
PINCA, respondents. MICO's agent himself had no knowledge, and the curious fact that although
Pinca's payment was remitted to MICO's by its agent on January 15, 1982,
FACTS: MICO sought to return it to Adora only on February 5, 1982, after it presumably
On June 7, 1981, the petitioner (hereinafter called (MICO) issued to the private had learned of the occurrence of the loss insured against on January 18, 1982.
respondent, Coronacion Pinca, Fire Insurance Policy No. F-001-17212 on her These circumstances make the motives of the petitioner highly suspect, to say
property for the amount of P14,000.00 effective July 22, 1981, until July 22, the least, and cast serious doubts upon its candor and bona fides.
On October 15,1981, MICO allegedly cancelled the policy for non-payment, of Yu Ban Chuan v Fieldmen’s Insurance Co (1965)
the premium and sent the corresponding notice to Pinca.
On December 24, 1981, payment of the premium for Pinca was received by
Domingo Adora, agent of MICO. On January 15, 1982, Adora remitted this FACTS

payment to MICO, together with other payments. On January 18, 1982, Pinca's Yu Ban Chuan is a chinese man doing business of wholsesale deaing in gereneral
property was completely burned. merhcandise and school supplies under the name of CMC Trading. His business
was first situated in Nueva Street, Manila. While at this place, plainitff insured
DECISION OF LOWER COURTS: against first his stock merchandise with open policies from 2 insurance
(1) Insurance Commission: granted claim for compensation for burned property. companies. When he transferred his business to Muelle de Binondo. Manila, his
2 insurers agreed to have the coverage of his policy transferred to the new
premises and acknowledged the existence of co insurance.
Whether there was a valid insurance contract at the time of the loss. Less than a month after his transfer, Yu Buan’s business establishment in
Binondo was totally destroyed by fire.
A valid cancellation must, therefore, require concurrence of the following Because of Yu Ban’s non-compliance or failure to submit the required
conditions: documents and the adjusters’ demand in subsequent letters that he submit
(1) There must be prior notice of cancellation to the insured; additional papers, the adjusters and Yu Ban engaged in an exchange of
(2) The notice must be based on the occurrence, after the effective date of the communications, until finally Fieldman’s Insurance rejected Yu Ban’s claims,
policy, of one or more of the grounds mentioned; and denied liability under their respective policies, evidently upon their
(3) The notice must be respective adjusters’ recommendations.
(a) in writing,
(b) mailed, or delivered to the named insured,
(c) at the address shown in the policy; The plaintiff commenced suit in the Court of First Instance of Manila, and the
(4) It must state defendants answered the complaint with identical special defenses; to wit:

(a) which of the grounds mentioned in Section 64 is relied upon and Insured’s failure to prove the loss claimed;

(b) that upon written request of the insured, the insurer will furnish the facts on false and fraudulent claim; and

which the cancellation is based. arson or causes not independent of the will of the insured; and counterclaims for
MICO's claims it cancelled the policy in question on October 15, 1981, for non- the annulment of the policies.
payment of premium. To support this assertion, it presented one of its
employees, who testified that "the original of the endorsement and credit memo"
—presumably meaning the alleged cancellation — "were sent the assured by In proving the value of his loss, the plaintiff relied upon a merchandise inventory
mail through our mailing section" However, there is no proof that the notice, as of 31 December 1959, which he had allegedly submitted on 15 January 1960
assuming it complied with the other requisites mentioned above, was actually to the Bureau of Internal Revenue.
mailed to and received by Pinca.

Page 11 of 14
 It is well to note that plaintiff had every reason to show that the value of his
Whether Yu Ban is bound to provide the insurance company a proof of loss. stock of goods exceeded the amount of insurance that he carried. And the
inventory, having been made prior to the fire, was no proof of the existence of
these goods at the store when the fire occurred.

Shielding himself under Section 82 of the Insurance Act, the plaintiff asserts that
in submitting his proof of loss he was “not bound to give such proof as would be True, there were merchandise that were actually destroyed by fire. But when
necessary in a court of justice”. The assertion is correct, but does not give him fraud is conceived, what is true is subtly hidden by the schemer beneath proper
any justification for submitting false proofs. Their falsity is the best evidence of and legal appearances, including the preparation of the inventory.
the fraudulent character and the unmeritoriousness of plaintiff’s claim.
The filing of collection suits for unpaid purchases against Yu Ban Chuan,
The fact of the filing of the inventory as of 15 January 1960 should be however valid these may be, do not legitimize his fraudulent claim against the
considered as true, since there is no evidence to the contrary. However, it was an insurers in the present case, nor show that the goods allegedly delivered were at
error of the trial court of accepting as true the actual existence at the burned the store when the fire
premises of the stocks mentioned in the inventory.
Go Lu v. Yorkshire Insurance Company G.R. No. 18090 July 25, 1922
Six (6) of the many copies of the invoices submitted by the plaintiff to the
adjusters uncover a clear case of fraud and misrepresentation Insurer: Yorkshire Insurance Company
Insured: Go Lu
Type/Kind of Insurance: Fire
Manager of one of the suppliers denied signing the purchase invoice in favor of Fire Insurance Policy:
 1. Northern Assurance Company. Policy against loss from fire for the
There were dubious invoices issued by fictitious companies.
 period of one year to and in favor of the plaintiff for P10,000 on his
There were invoices indicating that merchandise were delivered to the new place stock of piece goods in the bodega.
of business even way before it transferred on 15 January 1960. 2. Yorkshire Insurance Company issued its policy on the same goods
for another P10,000 for the same period.
3. Scottish Union and National Insurance Company also issued its
The plaintiff, Yu Ban Chuan, adopted a uniform, too uniform, in fact, to be
policy to him on the same goods for P10,000 for the period of one
believed, explanation for all the invoices: that he did not buy the merchandise at
the companies’ addresses but bought from the agents who brought the goods to
him; that the originals of the invoices were burned and that he requested for true
Loss: A fire occurred in that portion of the building occupied by the Eastern Asia
copies from the agents whom he met casually in the streets after the fire and
Commercial Company, resulting in a loss and damage to the plaintiff's goods,
these agents delivered the exhibits to him; but he did not remember, or know the
which were insured. At the time of the fire, he claims that he was the owner of
names of these agents, nor did he know their whereabouts.
66 cases of bolt goods in the bodega, and that there was a total loss of 50 cases,
and that the remaining 16 were seriously damage.
In other words, he wants the court to believe also that these agents performed a
vanishing act after each one of them had turned in the copy of each invoice to The insurance companies disagreed with Lu’s proof of claims and amount of
the plaintiff. loss.

Issue: Amount and value of the goods which plaintiff had in the building at the
The plaintiff adheres to the inventory as the immaculate basis for the actual time of the fire and that Go Lu submitted fraudulent proof of the amount of his
worth of stocks that were burned, on the ground that it was made from actual loss, and that, for such reason, he is not entitled to recover anything.
count, and in compliance with law. But this inventory is not binding on the
defendants, since it was prepared without their intervention.
Page 12 of 14
Held: Under all of the surrounding facts and circumstances, it is the opinion of delay in payment of the claim is created by the failure of the insurer to pay the
the writer that…the plaintiff should have judgment for the amount of his actual claim within the time fixed in both Secs. 243 and 244. Further, Sec. 29 of the
loss. Be that as it may, the majority of the court are of the opinion that the… policy itself provides that the claim shall be paid within 30 days after proof of
analysis of the facts not only establishes the amount of plaintiff's actual loss, but loss is received by the company.
that it also is conclusive that plaintiff's claim was fraudulent, and that he knew it
was fraudulent when he made it. His proof of claim was for 66 cases of piece Pacific Timber v CA G.R. No. L-38613 February 25, 1982
goods of the actual loss to be P7,594.67.
Here, the facts existing at and after the fire are conclusive evidence that there The plaintiff secured temporary insurance from the defendant for its exportation
were only 16 cases of goods in the bodega at the time of the fire, and the of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from
majority of this court are of the opinion that plaintiff's claim is not only Quezon Province to Okinawa and Tokyo, Japan.
fraudulent, but that he knew it was fraudulent at the time it was made, and that, Workmen’s Insurance issued a cover note insuring the cargo of the plaintiff
for such reason, he is not entitled to recover anything. subject to its terms and conditions.
The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy
No. 53 H0 1033 was for 542 pieces of logs equivalent to 499,950 board feet.
Finman General Assurance Corp. v. Court of Appeals Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548 board
G.R. No. 138737 July 12, 2001 feet. The total cargo insured under the two marine policies consisted of 1,395
Justice Kapunan logs, or the equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before the issuance of the two marine
Facts: policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be
exported were lost during loading operations in the Diapitan Bay.
Usiphil, Inc. obtained a fire insurance policy from Finman General While the logs were alongside the vessel, bad weather developed resulting in 75
Assurance Corp. then doing business in the name of Summa Insurance Corp.). pieces of logs which were rafted together co break loose from each other. 45
Sometime in 1982, Usiphil filed with Finman an insurance claim for the loss of pieces of logs were salvaged, but 30 pieces were verified to have been lost or
the insured properties due to fire. Despite several demands by Usiphil, Finman washed away as a result of the accident.
refused to pay the insurance claim on the grund that the same could not be Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during
allowed because Usiphil failed to comply with a condition in the policy loading of SS woodlock.
regarding the submission of certain documents to prove the loss. Thus, Usiphil Although dated April 4, 1963, the letter was received in the office of the
was constraint to file a complaint against Finman for the unpaid insurance claim. defendant only on April 15, 1963. The plaintiff claimed for insurance to the
After trial, the trial court rendered a decision in favor of Usiphil, and ordered value of P19,286.79.
Finman to pay Usiphil the amount of the insurance proceeds plus a 24% interest Woodmen’s requested an adjustment company to assess the damage. It submitted
rate per annum until the judgment proceeds is fully paid. Finman appealed the its report, where it found that the loss of 30 pieces of logs is not covered by
decision, arguing, among others, that since there was no express finding that it Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft. covered by
unreasonably withheld or denied the payment of the subject insurance claim, Cover Note 1010 insured for $70,000.00.
then the award of 24% per annum is not proper. The Court of Appeals affirmed The adjustment company submitted a computation of the defendant's probable
the decision of the trial court. liability on the loss sustained by the shipment, in the total amount of P11,042.04.
Woodmen’s wrote the plaintiff denying the latter's claim on the ground they
Issue: defendant's investigation revealed that the entire shipment of logs covered by the
two marine policies were received in good order at their point of destination. It
WON the 24% interest rate per annum awarded by the lower courts is was further stated that the said loss may be considered as covered under Cover
legal. Note No. 1010 because the said Note had become null and void by virtue of the
issuance of Marine Policy Nos. 53 HO 1032 and 1033.
Held: The denial of the claim by the defendant was brought by the plaintiff to the
attention of the Insurance Commissioner. The Insurance Commissioner ruled in
Yes, it is, for the same is authorized by Secs. 243 and 244 of the favor of indemnifying Pacific Timber. The company added that the cover note is
Insurance Code. Notably, under Sec. 244, aprima facie evidence of unreasonable
Page 13 of 14
null and void for lack of valuable consideration. The trial court ruled in
petitioner’s favor while the CA dismissed the case. Hence this appeal.

WON the cover note was null and void for lack of valuable consideration
WON the Insurance company was absolved from responsibility due to
unreasonable delay in giving notice of loss.

Held: No. No. Judgment reversed.

1. The fact that no separate premium was paid on the Cover Note before the loss
occurred does not militate against the validity of the contention even if no
such premium was paid. All Cover Notes do not contain particulars of the
shipment that would serve as basis for the computation of the premiums. Also,
no separate premiums are required to be paid on a Cover Note.
The petitioner paid in full all the premiums, hence there was no account unpaid
on the insurance coverage and the cover note. If the note is to be treated as a
separate policy instead of integrating it to the regular policies, the purpose of the
note would be meaningless. It is a contract, not a mere application for insurance.
It may be true that the marine insurance policies issued were for logs no longer
including those which had been lost during loading operations. This had to be so
because the risk insured against is for loss during transit, because the logs were
safely placed aboard.
The non-payment of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of premium, for
non-payment by it was not chargeable against its fault. Had all the logs been lost
during the loading operations, but after the issuance of the Cover Note, liability
on the note would have already arisen even before payment of premium.
Otherwise, the note would serve no practical purpose in the realm of commerce,
and is supported by the doctrine that where a policy is delivered without
requiring payment of the premium, the presumption is that a credit was intended
and policy is valid.
2. The defense of delay can’t be sustained. The facts show that instead of
invoking the ground of delay in objecting to petitioner's claim of recovery on the
cover note, the insurer never had this in its mind. It has a duty to inquire when
the loss took place, so that it could determine whether delay would be a valid
ground of objection.
There was enough time for insurer to determine if petitioner was guilty of delay
in communicating the loss to respondent company. It never did in the Insurance
Commission. Waiver can be raised against it under Section 84 of the Insurance

Page 14 of 14