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Laura Velasco and Greta Acosta v. Hon. Sergio Apostol (CFI judge) and Maharlika Insurance Co. (1989) Regalado, J. A Mercury car and Taxi collided. Owner of Mercury car sued both the party of the Taxi and the Taxis Insurance. Insurance company did not want to pay because even though no first premium was paid before the accident, there was still an implied agreement to grant a credit extension to the Taxi client. SC says party to Mercury car was not able to prove the existence of this implied agreement. (Nov 27, 1973) At about 2:30 pm, Velasco and Acosta were riding in Velascos Mercury car along Quezon Blvd toward the direction of Manila. o Velasco owns car. o Driver was Restitute Guarra. Before reaching a corner, a taxi crossed the center island and collided with the Mercury car. Then the taxi tried to return t o its original position but was unable to climb the island and instead, hit the Mercury car again. The bumping caused the Mercury car then to hit a jeepney. o Taxi driver: Dominador Santos o Taxi registered in names of: Alice Artuz c/o Norberto Santos (Dec 11, 1973) First payment of premium by Velasco to Maharlika. Mercury car people sued taxi people. Taxi people in turn sued Maharlika Insurance Co. because the taxi was insured rd against 3 party liability with Maharlika. Maharlika claims that at the time of the accident, the insurance policy was not yet in force because of non-payment of premium. TC decision: Mercury people won in the sense that Taxi people lost but Maharlika was exonerated. Mercury people raise case to SC by certiorari. They argue: o That Maharlika agreed to grant the then prospective insured (the taxi people) a credit extension for the premium due.

Issue: Is Maharlika Insurance Company liable? Held: No. Ratio:

SC notes that this case arose under the old insurance law. The accident occurred Nov 27, 1973. Complaint was filed on July 20, 1974, both before effectivity of new insurance law (PD 612, enacted December 18, 1974) The former old law, which applies to this case says: An insurer is entitled to the 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.

In this case, the insurance policy would be valid even with the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied. The accident occurred on Nov 27, 1973. Initial premium was paid only on Dec 11, 1973. Mercury people argue that: in spite of late payment, the policy is still binding because there was an implied agreement to grant a credit extension so as to make the policy effective. o To them, the acceptance of the premium and delivery of the policy estops Maharlika insurance company from asserting that the policy is ineffective. SC says there is no proof of an implied agreement. o The delivery of the policy was March 28, 1974 and only because the premium had been paid, more than 3 months before delivery. As found by the TC, payment was accepted by the insurer without any knowledge that the risk insured against had already occurred. o So, delivery of the policy was far from being unconditional. o Had there really been a credit extension, the insured would not have hesitated to inform Maharlika insurance company, before the payment of the premium, that an accident for which the insurer may be held liable had already happened. In fact, under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Aside from the supposed unconditional delivery of the policy, which has been demonstrated to be baseless, Mercury people failed to point out "any other circumstances showing that prepayment of premium was not intended to be insisted upon." o They have failed to discharge the burden of proving their allegation of the existence of the alleged credit extension agreement. Their insurance claim must fail. SC adds: o In the present law, Sec. 77 of the Insurance Code has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was then involved in this case.

Judgment affirmed (Maharlika exonerated)