Lalican vs The Insular Life Assurance Company Limited such reinstatement by the mere filing of an application.
e mere filing of an application. The insurer has the
G.R. No. 183526  August 25, 2009
Facts: Violeta is the widow of the deceased Eulogio C. Lalican (Eulogio).
During his lifetime, Eulogio applied for an insurance policy with Insular Life.
On 24 April 1997, Insular Life, through Josephine Malaluan (Malaluan), its
agent in Gapan City, issued in favor of Eulogio Policy No. 9011992, which
contained a 20-Year Endowment Variable Income Package Flexi Plan worth
P500,000.00, with two riders valued at P 500,000.00 each. Thus, the value of
the policy amounted to P1,500,000.00. Violeta was named as the primary
beneficiary. P Under the terms of Policy No. 9011992, Eulogio was to pay the
premiums on a quarterly basis in the amount of 8,062.00, payable every 24
April, 24 July, 24 October and 24 January of each year, until the end of the
20-year period of the policy. According to the Policy Contract, there was a
grace period of 31 days for the payment of each premium subsequent to the
first. If any premium was not paid on or before the due date, the policy would
be in default, and if the premium remained unpaid until the end of the grace
period, the policy would automatically lapse and become void.  Eulogio paid
the premiums due on 24 July 1997 and 24 October 1997. However, he failed
to pay the premium due on 24 January 1998, even after the lapse of the grace
period of 31 days. Policy No. 9011992, therefore, lapsed and became
void. Eulogio submitted to the Cabanatuan District Office of Insular Life,
through Malaluan, on 26 May 1998, an Application for Reinstatement of
Policy No. 9011992, together with the amount of P 8,062.00 to pay for the
premium due on 24 January 1998. In a letter dated 17 July 1998, Insular Life
notified Eulogio that his Application for Reinstatement could not be fully
processed because, although he already deposited P8,062.00 as payment for
the 24 January 1998 premium, he left unpaid the overdue interest thereon
amounting to P322.48. Thus, Insular Life instructed Eulogio to pay the
amount of interest and to file another application for reinstatement. Eulogio
was likewise advised by Malaluan to pay the premiums that subsequently
became due on 24 April 1998 and 24 July 1998, plus interest. On 17
September 1998, Eulogio went to Malaluans house and submitted a second
Application for Reinstatement of Policy No. 9011992, including the amount
of P17,500.00, representing payments for the overdue interest on the premium
for 24 January 1998, and the premiums which became due on 24 April 1998
and 24 July 1998. As Malaluan was away on a business errand, her husband
received Eulogios second Application for Reinstatement and issued a receipt
for the amount Eulogio deposited.  A while later, on the same day, 17
September 1998, Eulogio died of cardio-respiratory arrest secondary to
electrocution.
Issue: Whether or not Eulogio had an existing insurable interest in his own
life until the day of his death in order to have the insurance policy validly
reinstated.
Held: No. An insurable interest is one of the most basic and essential
requirements in an insurance contract. In general, an insurable interest is that
interest which a person is deemed to have in the subject matter insured, where
he has a relation or connection with or concern in it, such that the person will
derive pecuniary benefit or advantage from the preservation of the subject
matter insured and will suffer pecuniary loss or damage from its destruction,
termination, or injury by the happening of the event insured against. The
existence of an insurable interest gives a person the legal right to insure the
subject matter of the policy of insurance. Section 10 of the Insurance Code
indeed provides that every person has an insurable interest in his own life.
Section 19 of the same code also states that an interest in the life or health of a
person insured must exist when the insurance takes effect, but need not exist
thereafter or when the loss occurs.
In the instant case, Eulogios death rendered impossible full compliance with
the conditions for reinstatement of Policy No. 9011992. True, Eulogio, before
his death, managed to file his Application for Reinstatement and deposit the
amount for payment of his overdue premiums and interests thereon with
Malaluan; but Policy No. 9011992 could only be considered reinstated after
the Application for Reinstatement had been processed and approved by
Insular Life during Eulogios lifetime and good health.
The stipulation in a life insurance policy giving the insured the privilege to
reinstate it upon written application does not give the insured absolute right to
right to deny the reinstatement if it is not satisfied as to the insurability of the
insured and if the latter does not pay all overdue premium and all other
indebtedness to the insurer. After the death of the insured the insurance
Company cannot be compelled to entertain an application for reinstatement of
the policy because the conditions precedent to reinstatement can no longer be
determined and satisfied.
Malaluan did not have the authority to approve Eulogios Application for
Reinstatement. Malaluan still had to turn over to Insular Life Eulogios
Application for Reinstatement and accompanying deposits, for processing and
approval by the latter.
Violeta did not adduce any evidence that Eulogio might have failed to fully
understand the import and meaning of the provisions of his Policy Contract
and/or Application for Reinstatement, both of which he voluntarily signed.
While it is a cardinal principle of insurance law that a policy or contract of
insurance is to be construed liberally in favor of the insured and strictly as
against the insurer company, yet, contracts of insurance, like other contracts,
are to be construed according to the sense and meaning of the terms, which the
parties themselves have used. If such terms are clear and unambiguous, they
must be taken and understood in their plain, ordinary and popular sense.
Insurance Case Digest: Gulf Resorts Inc. V. Philippine Charter Insurance
Corp. (2005) G.R. No. 156167  May 16, 2005
Lessons Applicable: Stipulations Cannot Be Segregated (Insurance)
FACTS:
 Gulf Resorts, Inc at Agoo, La Union was insured with American
Home Assurance Company which includes loss or damage to
shock to any of the property insured by this Policy occasioned by
or through or in consequence of earthquake 
 July 16, 1990: an earthquake struck Central Luzon and Northern
Luzon so the properties and 2 swimming pools in its Agoo Playa
Resort were damaged
 August 23, 1990: Gulf's claim was denied on the ground that its
insurance policy only afforded earthquake shock coverage to the
two swimming pools of the resort
 Petitioner contends that pursuant to this rider, no
qualifications were placed on the scope of the
earthquake shock coverage.  Thus, the policy extended
earthquake shock coverage to all of the insured
properties.
 RTC: Favored American Home - endorsement rider means that
only the two swimming pools were insured against earthquake
shock 
 CA: affirmed RTC
ISSUE: W/N Gulf can claim for its properties aside from the 2 swimming
pools
HELD: YES. Affirmed.
 It is basic that all the provisions of the insurance policy should be
examined and interpreted in consonance with each other.
 All its parts are reflective of the true intent of the
parties.
Insurance Code
Section 2(1)
contract of insurance as an agreement whereby one undertakes for a
consideration to indemnify another against loss, damage or liability arising
from an unknown or contingent event
 An insurance premium is the consideration paid an insurer for
undertaking to indemnify the insured against a specified peril.
  In the subject policy, no premium payments were made
with regard to earthquake shock coverage, except on the
two swimming pools.   Makati Tuscany Condominium Corporation v CA (Insurance)
UCPB General Insurance v. Masagana Telamart (2001)
UCPB GENERAL INSURANCE [UCPB] v. MASAGANA
TELAMART [Masagana]
2001 / Davide, Jr.
FACTS [SEE 1999 CASE DIGEST FOR THE OTHER FACTS]
CA disagreed with UCPB’s stand that Masagana’s tender of payment of 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:
Renewal Clause. — Unless the company at least 45 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.
The following facts have been established:
1.  For years, UCPB had been issuing fire policies to th Masagana, and these
policies were annually renewed.
2.  UCPB had been granting Masagana a 60-90-day credit term within which to
pay the premiums on the renewed policies.
3.  There was no valid notice of non-renewal of the policies, as there is no proof
that the notice sent by ordinary mail was received by Masagana, and the copy
allegedly sent to Zuellig was ever transmitted to Masagana.
4.  The premiums for the policies were paid by Masagana within the 60- 90-day
credit term and were duly accepted and received by UCPB’s cashier.
ISSUE & HOLDING
WON IC 77 must be strictly applied to UCPB’s advantage despite its practice
of granting a 60- to 90-day credit term for the payment of premiums.  NO.
MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE; CA
DECISION AFFIRMED
RATIO
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.
This was formerly Act 2427, Section 72:
SEC. 72.  An insurer is entitled to payment of premium as soon as the thing
insured is exposed to the peril insured against, unless there is clear
agreement to grant the insured credit extension of the premium due.  No
policy issued by an insurance company is valid and binding unless and until
the premium thereof has been paid. (Underscoring supplied)
IC 77 does not restate the portion of IC 72 expressly permitting an agreement
to extend the periodto pay the premium.  However, there are exceptions to
IC 77.
1. In case of a life or industrial life policywhenever the grace period
provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premiumis conclusive
evidence of payment [Sec. 78]
3. If the parties have agreed to the payment ininstallments of the
premium and partial payment has been made at the time of
loss [Makati Tuscany Condominium v. CA]
4. The insurer may grant credit extensionfor the payment of the
premium [Makati Tuscany Condominium]  Moreover, as correctly observed by the appellate court, where the risk is entire
5. Estoppel
IC 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 customs, public order or public policy. [Makati Tuscany Condominium
v. CA]
ON EXCEPTION #4. 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.
It would be unjust and inequitable if recovery on the policy would
not be permitted against UCPB, which had consistently granted a 60-90-day
credit term for the payment of premiums despite its full awareness of IC 77. 
Estoppel bars it from taking refuge under said section, since Masagana relied
in good faith on such practice.
G.R. No. 95546 November 6, 1992 
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner,
vs. THE COURT OF APPEALS, AMERICAN HOME ASSURANCE
CO., represented by American International Underwriters (Phils.),
Inc., respondent. 
FACTS: 
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. 
DECISION OF LOWER COURTS: 
(1) Trial Court: dismissed the complaint and counterclaim
(2) CA: ordering herein petitioner to pay the balance of the premiums due 
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, 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. 
RULING: 
No, the contract remains valid even if the premiums were paid on
installments. 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. 
At the very least, both parties should be deemed in estoppel to question the
arrangement they have voluntarily accepted. 
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. The obligation to pay premiums when due is
ordinarily as indivisible obligation to pay the entire premium.