Pacific Timber v CA
intended and policy is valid > Mondragon wrote on the bottom of the application
Lessons Applicable: Rules on cover notes (if premium
CANNOT yet be computed) (Insurance)
Laws Applicable: Section 84 of the Insurance Code
FACTS:
 March 19, l963: Pacific Timber secured
temporary insurance from Workmen's Insurance
Company, Inc. for its exportation of 1,250,000
board feet of Philippine Lauan and Apitong logs
to be shipped from the Diapitan Bay, Quezon
Province to Tokyo, Japan.
 Workmen's issued Cover Note insuring the
cargo "Subject to the Terms and Conditions of
the Workmen's Insurance Company, Inc."
 April 2, 1963: regular marine cargo policies were
issued for a total of 1,195.498 bd. ft. Due to the
bad weather some of the logs were lost during
loading operations. 45 pieces of logs were
salvaged, but 30 pieces were lost. Pacific
informed Workmen's who refused stating that the
logs covered in the 2 marine policies were
received in good order at the point of destination
and that the cover note was null and void upon
the issuance of the Marine Policies
 CFI: cover note is valid
 CA: reversed
ISSUE: W/N the cover note is valid despite the
absence of premium payment upon it
HELD: YES. CA set aside. CFI reinstated
 it was not necessary to ask for payment of the
premium on the Cover Note , for the loss insured
against having already occurred, the more
practical procedure is simply to deduct the
premium from the amount due on the Cover Note
 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
 cover note as a "binder"
 supported by the doctrine that where a policy is
delivered without requiring payment of the
premium, the presumption is that a credit was
 it sent its adjuster to investigate and assess the form his strong recommendation for the approval of
loss to determine if petitioner was guilty of delay
in communicating the loss but there was none the insurance application.
 Section 84
 Delay in the presentation to an insurer of notice > On Apr 30, 1957, Mondragon received a letter from
or proof of loss is waived if caused by any act of Grepalife Main office disapproving the insurance
his or if he omits to take objection promptly and
specifically upon that ground application of Ngo for the simple reason that the 20yr
endowment plan is not available for minors below 7
yrs old.
Grepalife v. CA
> Mondragon wrote back the main office again
89 SCRA 543
strongly recommending the approval of the
Facts: endowment plan on the life of Helen, adding that
Grepalife was the only insurance company NOT
> On March 14, 1957, respondent Ngo Hing filed an
selling endowment plans to children.
application with Grepalife for a 20-yr endowment
policy for 50T on the life of his one year old daughter > On may 1957, Helen died of influenza with
Helen Go. complication of broncho pneumonia. Ngo filed a claim
with Gepalife, but the latter denied liability on the
> All the essential data regarding Helen was supplied
ground that there was no contract between the insurer
by Ngo to Lapu-Lapu Mondragon, the branch
and the insured and a binding receipt is NOT
manager of Grepalife-Cebu. Mondragon then typed
evidence of such contract.
the data on the application form which was later
signed by Ngo.
> Ngo then paid the insurance premium and a Issue:
binding deposit receipt was issued to him. The
Whether or not the binding deposit receipt, constituted
binding receipt contained the following provision: “If
a temporary contract of life insurance.
the applicant shall not have been insurable xxx and
the Company declines to approve the application, the
insurance applied for shall not have been in force at Held:
any time and the sum paid shall be returned to the
NO.
applicant upon the surrender of this receipt.”

The binding receipt in question was merely an
acknowledgement on behalf of the company, that the
latter’s branch office had received from the applicant,
the insurance premium and had accepted the
application subject for processing by the insurance
company, and that the latter will either approve or
reject the same on the basis of whether or not the
applicant is insurable on standard rates.
Since Grepalife disapproved the insurance application
of Ngo, the binding deposit receipt had never became
on force at any time, pursuant to par. E of the said
receipt. A binding receipt is manifestly merely
conditional and does NOT insure outright. Where an
agreement is made between the applicant and the
agent, NO liability shall attach until the principal
approves the risk and a receipt is given by the agent.
The acceptance is merely conditional, and is
subordinated to the act of the company in approving
or rejecting the application. Thus in life insurance, a
binding slip or binding receipt does NOT insure by
itself.
 renewed and petitioner made two installment
PHILIPPINE AMERICAN LIFE AND GENERAL
INSURANCE COMPANY, petitioner,
vs.
JUDGE LORE R. VALENCIA-BAGALACSA,
On June 20, 1995, private respondents, as legitimate
children and forced heirs of their late father, Faustino
Lumaniog, filed with the aforesaid RTC, a complaint
for recovery of sum of money against petitioner
alleging that: their father was insured by petitioner
under Life Insurance Policy No. 1305486 with a face
value of P50,000.00; their father died of "coronary
thrombosis" on November 25, 1980; on June 22,
1981, they claimed and continuously claimed for all
the proceeds and interests under the life insurance
policy in the amount of P641,000.00, despite repeated
demands for payment and/or settlement of the claim
due from petitioner, the last of which is on December
1, 1994, petitioner finally refused or disallowed said
claim on February 14, 1995;1 and so, they filed their
complaint on June 20, 1995.
So ang Philam sinasabi nag prescribe na daw. And
concealment when he answered no for treatment of
heart problems and hpn when he’s a known hpn.
RTC: evidentiary in nature. Hence trial on the merits is
necessary. not yet prescribed.
RULE 65 to CA:
The plaintiff’s cause of action did not accrue until his
claim was finally rejected by the insurance company.
This is because, before such final rejection, there was
no real necessity for bringing suit.
ISSUES
"A. Whether or not the complaint filed by private
respondents for payment of life insurance proceeds is
already barred by prescription of action.
"B. Whether or not an extrajudicial demand made
after an action has prescribed shall cause the revival
of the action."9
RULING:
It must be emphasized that petitioner had specifically
alleged in the Answer that it had denied private
respondents’ claim per its letter dated July 11,
1983.12 Hence, due process demands that it be given
the opportunity to prove that private respondents had
received said letter, dated July 11, 1983. Said letter is
crucial to petitioner’s defense that the filing of the
complaint for recovery of sum of money in June, 1995
is beyond the 10-year prescriptive period13 .
It based its finding on a mere explanation of the
private respondents’ counsel and not on evidence
presented by the parties as to the date when to
reckon the prescriptive period. The ruling of the RTC
that the cause of action of private respondents had
not prescribed, is arbitrary and patently erroneous for
not being founded on evidence on record, and
therefore, the same is void.
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
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 The obligation to pay premiums when due is ordinarily that the acceptance of the late premium payment
unpaid balance of P314,103.05 for Insurance Policy. as indivisible obligation to pay the entire premium. suggested that payment could be made later.
Petitioner explained that it discontinued the payment
of premiums because the policy did not contain a ISSUE & HOLDING
UCPB General Insurance v. Masagana Telamart
credit clause in its favor. Petitioner further claimed WON the fire insurance policies had expired on 22
(1999)
that the policy was never binding and valid, and no May 1992, or had been extended or renewed by an
risk attached to the policy. It then pleaded a implied credit arrangement though actual payment of
counterclaim for P152,000.00 for the premiums UCPB GENERAL INSURANCE [UCPB] v. premium was tendered on a later date after the
already paid for 1984-85, and in its answer with MASAGANA TELAMART [Masagana] occurrence of the risk insured against [fire]. FIRE
amended counterclaim, sought the refund of 1999 / Pardo INSURANCE POLICIES HAD EXPIRED
P924,206.10 representing the premium payments for FACTS
1982-85. In 1991, UCPB issued 5 fire insurance RATIO
policies covering Masagana Telamart’s various An insurance policy, other than life is not valid
properties for the period from 22 May 1991 to 22 May and binding until actual payment of the
DECISION OF LOWER COURTS:
1992. premium. Any agreement to the contrary is
(1) Trial Court: dismissed the complaint and
On March 1992[~2 months before policy void.The parties may not agree expressly or impliedly
counterclaim
expiration], UCPB evaluated the policies and on the extension of credit or time to pay the premium
(2) CA: ordering herein petitioner to pay the balance
decided not to renew them upon expiration of their and consider the policy binding before actual
of the premiums due
terms on 22 May 1992. UCPB advised Masagana’s payment.
broker of its intention not to renew the policies. The case of Malayan Insurance v. Cruz-Arnaldocited
ISSUE:
On April 1992 [~1 month before policy by the CA is not applicable. In that case, payment of
Whether payment by installment of the premiums due
expiration], UCPB gave written notice to Masagana the premium was made on before the occurrence of
on an insurance policy invalidates the contract of
of the non-renewal of the policies. On June the fire. In the present case, the payment of the
insurance, in view of Sec. 77 of P.D. 612, otherwise
1992 [policy already expired], Masagana’s premium for renewal of the policies was tendered a
known as the Insurance Code, as amended, which
propertycovered by 3 UCPB-issued policies month after the fire occurred. Masagana did not even
provides:
was razed by fire. give UCPB a notice of loss within a reasonable time
Sec. 77. An insurer is entitled to the payment of the
On 13 July 1992, Masagana presented to after occurrence of the fire.
premium as soon as the thing is exposed to the peril
UCPB’s cashier 5 manager’s checks, CA DECISION REVERSED
insured against. Notwithstanding any agreement to
the contrary, no policy or contract of insurance issued representing premium for the renewal of the
policies for another year. UCPB GENERAL INSURANCE [UCPB] v.
by an insurance company is valid and binding unless
It was only on the following day, 14 July MASAGANA TELAMART [Masagana]
and until the premium thereof has been paid, except
1992, when Masagana filed with UCPB a formal 2001 / Davide, Jr.
in the case of a life or an industrial life policy
claim for indemnification of the insured property FACTS [SEE 1999 CASE DIGEST FOR THE OTHER
whenever the grace period provision applies.
razed by fire. On the same day, UCPB returned the 5 FACTS]
manager’s checks, and rejected Masagana’s CA disagreed with UCPB’s stand that Masagana’s
RULING:
claim since the policies had expired and were not tender of payment of the premiums on 13 July 1992
No, the contract remains valid even if the premiums
renewed, and the fire occurred on 13 June 1992 did not result in the renewal of the policies, having
were paid on installments. Certainly, basic principles
(or before tender of premium payment). been made beyond the effective date of renewal as
of equity and fairness would not allow the insurer to
Masagana filed a civil provided under Policy Condition No. 26:
continue collecting and accepting the premiums,
complaint for recovery of the face value of Renewal Clause. — Unless the company at least 45
although paid on installments, and later deny liability
the policies covering the insured property razed days in advance of the end of the policy period
on the lame excuse that the premiums were not
by fire. RTC ruled in favor of Masagana, as it found it mails or delivers to the assured at the address shown
prepared in full.
to have complied with the obligation to pay the in the policy notice of its intention not to renew the
At the very least, both parties should be deemed in
premium; hence, the replacement-renewal policy of policy or to condition its renewal upon reduction of
estoppel to question the arrangement they have
these policies are effective and binding for another limits or elimination of coverages, the assured shall be
voluntarily accepted.
year [22 May 1992 – 22 May 1993]. entitled to renew the policy upon payment of the
Moreover, as correctly observed by the appellate
CA affirmed RTC, holding that following premium due on the effective date of renewal.
court, where the risk is entire and the contract is
previous practice, Masagana was allowed a 60-90 The following facts have been established:
indivisible, the insured is not entitled to a refund of the
premiums paid if the insurer was exposed to the risk day credit term for the renewal of its policies, and
insured for any period, however brief or momentary.
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]
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.
AMERICAN HOME V CHUA
Lessons Applicable: Acknowledgement receipt
(Insurance)
Laws Applicable: Section 29, Section 66,Section
75, Section 77,Section 78, Section 306 of the
Insurance Code
FACTS:
 April 5, 1990: Antonio Chua renewed the fire
insurance for its stock-in-trade of his business,
Moonlight Enterprises with American Home
Assurance Companyby issuing a check
of P2,983.50 to its agent James Uy who delivered
the Renewal Certificate to him.
 April 6, 1990: Moonlight Enterprises was
completely razed by fire with an est. loss
of P4,000,000 to P5,000,000
 April 10, 1990: An official receipt was issued and
subsequently, a policy was issued
covering March 25 1990 to March 25 1991
 Antonio Chua filed an insurance claim with
American Home and 4 other co-insurers (Pioneer
Insurance and Surety Corporation, Prudential
Guarantee and Assurance, Inc. and Filipino
Merchants Insurance Co)
 American Home refused alleging the no premium
was paid
 RTC: favored Antonio Chua for paying by way of
check a day before the fire occurred
 CA: Affirmed
ISSUE:
1. W/N there was a valid payment of premium
considering that the check was cashed after the
occurrence of the fire since the renewal certificate
issued containing the acknowledgement receipt
2. W/N Chua violated the policy by his submission of
fraudulent documents and non-disclosure of the other
existing insurance contracts or “other insurance
clause"
HELD:petition is partly GRANTED modified
by deleting the awards of P200,000 for loss of profit,
P200,000 as moral damages and P100,000 as
exemplary damages, and reducing the award of
attorney’s fees from P50,000 to P10,000
1. YES.
 Section 77 of the Insurance Code
 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 life
or an industrial life policy whenever the grace
period provision applies
 Section 66 of the Insurance Code - not applicable
since not termination but renewal
 renewal certificate issued contained the
acknowledgment that premium had been paid
 Section 306 of the Insurance Code provides that
any insurance company which delivers a policy or
contract of insurance to an insurance agent or
insurance broker shall be deemed to have
authorized such agent or broker to receive on its
behalf payment of any premium which is due on
such policy or contract of insurance at the time of
its issuance or delivery or which becomes due
thereon
 best evidence of such authority is the fact that
petitioner accepted the check and issued the
official receipt for the payment. It is, as well,
bound by its agent’s acknowledgment of receipt
of payment
 Section 78 of the Insurance Code
 An acknowledgment in a policy or contract of
insurance of the receipt of premium is conclusive
evidence of its payment, so far as to make the
policy binding, notwithstanding any stipulation
therein that it shall not be binding until the
premium is actually paid.
 This Section establishes a legal fiction of
payment and should be interpreted as an
exception to Section 77
2. NO.
 purpose for the “other insurance clause” is to
prevent an increase in the moral hazard
 failure to disclose was not intentional and
fraudulent
 Section 75
 A policy may declare that a violation of specified
provisions thereof shall avoid it, otherwise the
breach of an immaterial provision does not avoid
the policy.
 American Home is estopped because its loss
adjusters had previous knowledge of the co-
insurers
 The loss adjuster, being an employee of
petitioner, is deemed a representative of the latter
whose awareness of the other insurance
contracts binds petitioner
 no legal and factual basis for the award of
P200,000 for loss of profit
 no such fraud or bad faith = no moral damages
 grant of attorney’s fees as part of damages is the
exception rather than the rule
 award attorney’s fees where it deems just and contingent event. The consideration is the premium,
equitable that it be so granted which must be paid at the time, way and manner as
 reduced to P10,000 stated in the policy, and if not so paid as in this case,
the policy is therefore forfeited by its own terms. In
Tibay, et. al v Court of Appeals this case, the policy taken out by the petitioner
GR No. 119655, 24 May 1996 provides for payment of premium in full. Since the
Bellosillo, [J.] petitioner only made partial payment with the
remaining balance paid only after the fire or peril
Facts: insured against has occurred, the insurance contract
therefore did not take effect barring the insured from
1. In January 22 1987, the Petitioner Violeta Tibay (and claiming or collecting from the loss of her building.
Nicolas Roralso) obtained a fire insurance policy for
2. Under Section 77 of the Insurance Code (Philippine),
their 2-storey from the Private Respondent Fortune
Life Insurance Co. The said policy covers the period it provides therein that "An insurer is entitled to
payment of the premium as soon as the thing insured
from January 23, 1987 until January 23, 1988 or one
year for P600, 000 and at the agreed premium of P2, is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no
983.50. On January 23 or the next day, petitioner
policy or contract of insurance issued by an insurance
made a partial payment of the premium with P600.
company is valid and binding unless and until the
premium thereof has been paid, except in the case of
2. Unfortunately, on March 8 1987, the said building
a life or an industrial life policy whenever the grace
was burned to the ground. It was only two days after
period provision applies." Herein case, the
the fire that Petitioner Violeta advanced the full
controversy is on the payment of the premium. It
payment of the policy premium which was accepted
cannot be disputed that premium is the elixir vitae of
by the insurer. On this same day, petitioner likewise
filed the claim that was then referred to the insurer's the insurance business because the insurer is
adjuster. Investigation of the cause of fire commenced required by law to maintain a reserve fund to meet its
and the petitioner submitted the required proof of loss. contingent obligations to the public. Due to this, it is
imperative that the premium is paid fully and promptly.
3. Despite that, the private respondent Fortune refused To allow the possibility of paying the premium even
to pay the insurance claim saying it as not liable due after the peril has ensued will surely undermine the
to the non-payment by petitioner of the full amount of foundation of the insurance business.
the premium as stated in the policy.
4. The petitioner then brought the matter to the
Insurance Commission but nothing good came out.
Hence this case filed.
5. The trial court rule in favor of the petitioner. Upon
appeal, the Court of Appeals reversed the lower
court's decision and held that Fortune is not liable but
ordered it to return the premium paid with interest to
the petitioner. Hence, this petition for review.
Issue: W/N the partial payment of the premium
rendered the insurance policy ineffective?
YES.
1. Insurance is a contract whereby one undertakes for
a consideration to indemnify another against loss,
damage or liability arising from an unknown or