Insurance Case Digests Set 4

Enriquez v Sun Life Assurance, Ass urance, G.R. No. L-15895, November 29, 1920 Issue: Was there a perfected insurance contract that bars the petitioner from recovering the

premium he has paid? Ruling: The contract for a life annuity was not perfected because it has not been proved

satisf satisfact actori orily ly that that the accept acceptanc ancee of the applic applicati ation on ever ever came came to the knowle knowledg dgee of the applicant. Basis: The law applicable to the case is found to be the second paragraph of article 1262 of

the Civil Code providing that an acceptance made by letter shall not bind the person making the offer except from the time it came to his knowledge. The pertinent fact is, that according to the provisional receipt, three things had to be accomplished by the insurance company before there was a contract: (1) There had to be a medical examination of the applicant; (2) there had to be approval of the application by the head office of the company; and (3) this approval had in some way to be communicated by the company to the applicant. The further admitted facts are that the head office in Montreal did accept the application, did cable the Manila office to that effect, did actually issue the policy and did, through its agent in Manila, actually actually write the letter of notificatio notification n and place place it in the usual channels channels for transmissio transmission n to the addressee. The fact as to the letter of notification thus fails to concur with the essential elem elemen ents ts of the the gene genera rall rule rule pert pertai aini ning ng to the the mail mailing ing and and deli delive very ry of mail mail matte matterr as announce announced d by the American American courts, namely, when a letter letter or other other mail matter is addressed addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have been received by the addressee unless it is shown that it was deposited in the post-office, properly addressed and stamped.

Vda. de Sindayen v Insular Life, G.R. 41702, September 4, 1935 Issue: Was there a binding insurance contract that would allow the beneficiary to claim the

proceeds of the policy, when the insured was no longer in good health on the day the policy was delivered by the agent of the insurance company? Ruling: The defendant company assumed the risk covered by the policy on the life of Arturo

Sindayen on January 18, 1933, the date when the policy was delivered to the insured. Basis: It is the interest not only of the applicant but of all insurance companies as well that

there should be some act which gives the applicant the definite assurance that the contract has been consummated. This sense of security and of peace of mind that one's defendants are provided for without risk either of loss or of litigation is the bedrock of life insurance. A

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cloud will be thrown over the entire insurance business if the condition of health of the insured at the time of delivery of the policy may be required into years afterwards with the view to avoiding the policy on the ground that it never took effect because of an alleged lack of good health, at the time of delivery. Suppose in the present instance that Sindayen had recovered his health, but was killed in an automobile accident six months after the delivery of the policy; and that when called on to pay the loss, the company learns of Sindayen's grave illness on January 18, 1933, and alleges that the policy had never taken effect. It is difficult to imagine that the insurance company would take such a position in the face of the common belief of the insuring public that when the policy is delivered, in the absence of fraud or other grounds for rescission, the contract of insurance is consummated. The insured rests and acts on that faith. So does the insurance company, for that matter, for from the date of delivery of the policy it appropriates to its i ts own use the premium paid by the insured. When the policy is issued and delivered, in the absence of fraud or other grounds for rescission, it is plainly not within the intention of the parties that there should be any questions held in abeyance or reserved for future determination that leave the very existence of the contract in suspense and doubt. If this were not so, the entire business world which deals so voluminously in insurance would be affected by this uncertainly. Policies that have been delivered to the insured are constantly being assigned for credit and other purposes. Although such policies are not negotiable instruments and are subject to defenses for fraud, it would be a most serious handicap to business if the very existence of the contract remains in doubt even though the policy has been issued and delivered with all the formalities required by the law. It is therefore in the public interest, for the public is profoundly and generally interested in life insurance, as well as in the interest of the insurance companies themselves by giving certainly and security to their policies, that we are constrained to hold, as we, do, the deli delive very ry of the the polic policy y to the the insu insured red by an agent agent of the the compa company ny who who is that the auth author oriz ized ed to make make deliv delivery ery or with withou outt deliv delivery ery is the the fina finall act act which which bind bindss the the company (and the insured as well) in the absence of fraud or other legal ground for rescission. The fact that the agent to whom it has entrusted this duty (and corporation can

only act through agents) is derelict or negligent or even dishonest in the performance of the duty which has been entrusted to him would create a liability of the agent to the company but does not resolve the company's obligation based upon the authorized acts of the agent toward a third party who was not in collusion with the agent.

Perez v CA, et al., G.R. No. 112329, January 28, 2000 Issue: Was the additional policy coverage of P50,000 already binding between the parties







Ruling: There There was no perfected perfected insurance insurance contract on the day the insured died. The policy

issued issued by the insurance insurance company company after the death of the insured, insured, and it not knowing knowing that the latter had already died, is of no force and effect. Basis: When Primitivo filed an application for insurance, paid P2,075.00 and submitted the

results of his medical examination, his application was subject to the acceptance of private responden respondentt BF Lifeman Lifeman Insurance Insurance Corporation. Corporation. The perfection perfection of the contract of insurance insurance between the deceased and respondent corporation was further conditioned upon compliance with the following requisites stated in the application form: there shall be no contract of insurance unless and until a policy is issued on this application and that the said policy shall not take effect until the premium has been paid and the policy delivered to and accepted by me/us in person while I/We, am/are in good health. The assent of private respondent BF Lifeman Insurance Corporation therefore was not given when it merely received the application form and all the requisite supporting papers of the applicant. Its assent was given when it issues a corresponding policy to the applicant. Under the abovementioned provision, it is only when the applicant pays the premium and receives and accepts the policy while he is in good health that the contract of insurance is deemed to have been perfected. The condition imposed by the corporation that the policy must have been delivered to and accepted by the applicant while he is in good health can hardly be considered as a potestative or facultative condition. On the contrary, the health of the applicant at the time of the delivery of the policy is beyond the control or will of the insurance company. Rather, the condition is a suspensive one whereby the acquisition of rights depends upon the happening of an event which constitutes the condition. In this case, the suspensive condition was the policy must have been delivered and accepted by the applicant while he is in good health. There was nonfulfillment of the condition, however, inasmuch as the applicant was already dead at the time the policy policy was issue issued. d. Hence Hence,, the non-fu non-fulfil lfillme lment nt of the condit condition ion result resulted ed in the nonnonperfection of the contract. As stated above, a contract of insurance, like other contracts, must be assented to by both parties either in person or by their agents. So long as an application for insurance has not been either accepted or rejected, it is merely an offer or proposal to make a contract. The contract, to be binding from the date of application, must have been a completed contract, one that leaves nothing to be done, nothing to be completed, completed, nothing to be passed upon, or determined, before it shall take effect. There can be no contract of insurance unless the minds







Malayan Insurance v Arnaldo,

et al ., .,

G.R. No. L-67835, October 12, 1987

Issue: Did the payment of premium made six months after the policy was issued render such

policy effective as to allow the insured to recover from it? Ruling: The payment made by the insured to the agent of the insurance company rendered

the policy effective as of the time the t he policy was issued. Basis: The petitioner relies heavily on Section 77 of the Insurance Code providing that:

SEC. 77. An insurer is entitled to 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 i nsurance issued by an insurance company 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. The above provision is not applicable because payment of the premium was in fact eventually made in this case. Notably, the premium invoice issued to Pinca at the time of the delivery of the policy on June 7, 1981 was stamped "Payment Received" of the amoung of P930.60 on "12-24-81" "12-24-81" by Domingo Domingo Adora. Adora. This is important important because because it suggests suggests an understan understanding ding between MICO and the insured that such payment could be made later, as agent Adora had assured Pinca. In any event, it is not denied that this payment was actually made by Pinca to Adora, who remitted the same to MICO. There is the petitioner's argument, however, that Adora was not authorized to accept the premium payment because six months had elapsed since the issuance by the policy itself. It is argued that this prohibition was binding upon Pinca, who made the payment to Adora at her own risk as she was bound to first check his authority to receive it. MICO is taking an inconsistent stand. While contending that acceptance of the premium payment was prohibited by the policy, it at the same time insists that the policy never came into force because the premium had not been paid. One surely, cannot have his cake and eat it too. We do not share MICO's view that there was no existing insurance at the time of the loss sustained by Pinca because her policy never became effective for non-payment of premium. Payment was in fact made, rendering the policy operative as of June 22, 1981, and removing it from the provisions provisions of Article Article 77, Thereafter, Thereafter, the policy policy could be cancelled cancelled on any of the







Great Pacific Life v CA and Teodoro Cortez, G.R. No. L-57308, April 23, 1990 Issue: Whether the insured may claim the refund of the premium he has paid Ruling: The insured is entitled to the refund r efund of the premium paid including damages. Basis: When the petitioner advised private respondent on June 1, 1973, four months after he

had paid the first premium, that his policy had never been in force, and that he must pay another premium and undergo another medical examination to make the policy effective, the petitioner committed a serious breach of the contract of insurance. Petitioner should have informed Cortez of the deadline for paying the first premium before or at least upon delivery of the policy to him, so he could have complied with what was needful and would not have been misled into believing that his life and his family were protected by the the polic policy, y, when when actu actual ally ly they they were were not. not. And, And, if the the prem premiu ium m paid paid by Corte Cortezz was was unacceptable for being late, it was the company's duty to return it. By accepting his premiums without giving him the corresponding protection, the company acted in bad faith. Sections 79, 81 and 82 of P.D. 612 of the Insurance Code of 1978 provide when the insured is entitled to the return of premium paid. SECTION 79. A person insured is entitled to a return of premium, as follows: (a) To the whole premium, if no part of his interest in the thing insured be exposed to any of the perils insured against. (b) Where the insure is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued: Provided,That no holder of a life insurance policy may avail himself of the privil privilege egess of this paragr paragraph aph withou withoutt suffic sufficien ientt causes causes as otherw otherwise ise provided by law. SECTION 81. A person insured is entitled to a return of the premium when the contract is voidable on account of the fraud or misrepresentation of the insurer or of his agent or on account of facts the existence of which the







SECTION 82. In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk. Since the policy was in fact inoperative or ineffectual from the beginning, the company was never at risk, hence, it is i s not entitled to keep the premium. The award of moral damages to Cortez was proper for there can hardly be any doubt that he must have suffered moral shock, serious anxiety and wounded feelings upon being informed by the petitioner six (6) months after it issued the policy to him and four (4) months after receiving the full premium, that his policy was in fact worthless for it never took effect, hence, he and his family never received the protection that he paid for.

Lumibao v IAC, et al., G.R. No. 64677, September 13, 1990 Issues: 1) Whether petitioner induced the insured to take out the policy through a rebate

2) Whether the petitioner should be compelled to fulfill her promise of of giving back half of the premium paid by the insured Ruling: 1) Petitioner violated Sec. 361 of the Insurance Code when she promised the insured

a rebate of 50% of the first premium paid. 2) The appellate court should not have ordered petitioner to pay the promised amount to the insured as it is against the law and public policy. Basis: 1) A prepon preponder deranc ancee of evide evidence nce on record record suppo supports rts the findings findings of the trial and

appellate courts that petitioner had induced private respondent to take out a life insurance polic policy y from from Mani Manila la Bank Banker erss Life Life Insu Insura ranc ncee Corp Corpora oratio tion n by prom promis isin ing g him him a reba rebate te equivalent to 50% of the first annual premium payment. These factual findings are, therefore, final and binding upon the Court. Section 361 of Pres. Decree No. 612 states: No insurance company doing business business in the Philippine Philippiness or any agent thereof, no insurance insurance broker, and no employee or other representative of any such insurance company, agent, or









insured or to any employee of such insured, either as an inducement to the making of such insurance or after such insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract of insurance; nor

shall any such company, or any agent thereof, as to any policy or contract of insurance issued, make any discrimination against any Filipino in the sense that he is given less advantageous rates, rates, dividends dividends or other policy conditions conditions or privileges privileges than are accorded accorded to other nationals nationals because of his race [Emphasis supplied.]

Furthermore, Section 363 of Pres. Decree No. 612 provides that violation of the above section constitutes a ground for the immediate revocation of the license issued to the erring insurance company, agent or broker and the imposition of a fine not exceeding five hundred pesos. It is evident that petitioner's promise to pay private respondent an amount equivalent to 50% of the first premium payment, which would be taken out of her commission on the insurance policy, is covered squarely by the express provisions of Section 361. 2) By virtue of Article 1409 (7) of the New Civil Code, the rebate agreement between the petitioner and private respondent is deemed a contract void ab initio, and, consequently, does not give rise to enforceable rights and obligations as between the parties thereto. Public policy considerations serve to underscore further the Court's foregoing ruling that petitioner's promise of rebate, which is expressly prohibited by law, may not be enforced for compliance by the courts. Section 361 of Pres. Decree No. 612 is similar to the so-called "anti-discrimination" statutes found found in other other jurisdi jurisdicti ctions ons which which regula regulate te the activi activitie tiess in the insura insurance nce indus industry. try. The purpose of these statutes is the prevention of unfair discriminatory practices by insurance companies, agents and brokers in order to ensure that equal terms are fixed for policyholders of the same insurable class and equal expectation of life. In aid and furtherance of this desirab desirable le policy policy,, the statut statutes es prohib prohibit it such such practi practices ces involv involving ing rebate rebatess or prefer preferent ential ial







Makati Tuscany Condominium Corporation v CA, G.R. No. 95546, November 6, 1992 Issue: Did payment of the premiums due on the insurance policy by installment render such

policy void as to allow the insured not to pay the remaining unpaid balance? Ruling: The subject policies were valid even if the premium was paid in installments and

therefore petitioner may not be allowed to refuse payment of the balance. Basis: We hold that the subject policies are valid even if the premiums were paid on

installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. 1984. In those those three three (3) years, years, the insure insurerr accep accepted ted all the instal installme lment nt paymen payments. ts. Such Such acceptance of payments speaks loudly of the insurer's intention to honor the policies it issued to petitioner. 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. It appearing from the peculiar circumstances that the parties actually intended to make three (3) insurance contracts valid, effective and binding, petitioner may not be allowed to renege on its obligation to pay the balance of the premium after the expiration of the whole term of the third policy) in March 1985. Moreover, as correctly observed by the appellate court, where the risk is entire 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.







Basis: Appellant surety company insists that Mr. Chua is an administrative assistant for the

past ten years and an agent for less than ten years of the Columbia Columbia Insurance Insurance Brokers, Brokers, Ltd. He is paid a salary as a administrative assistant and a commission as agent based on the premiums he turns over to the broker. Appellant therefore argues that Mr. Chua, having received the insurance premiums as an agent of the Columbia Insurance Broker, acted as an agent of the insured under Section 301 of the Insurance Code which provides as follows: Sec. 301. Any person who for any compensation, commission or other thing of value, acts, or aids in soliciting, negotiating or procuring the making of any insurance contract or in placing risk or taking out insurance, on behalf of an insured other than himself, shall be an insurance broker within the intent of this

Code, and shall thereby become liable to all the duties requirements, liabilities and penalties to which an insurance broker is subject.

The appellees, upon the other hand, claim that the second paragraph of Section 306 of the Insurance Code provide as follows: Sec. 306. . . . Any insurance company which delivers to an insurance agent or insurance broker a policy or contract of insurance shall be deemed to have auth authori orize zed d such such agen agentt or brok broker er to rece receiv ivee on its its beha behalf lf paym paymen entt of any any premium which is due on such policy of contract of insurance at the time of its issuance or delivery or which becomes due thereon.

On crosscross-exa examin minati ation on in behalf behalf of South South Sea Surety Surety and Insuranc Insurancee Co., Co., Inc. Inc. Mr. Chua Chua testified that the marine cargo insurance policy for the plaintiff's logs was delivered to him on 21 January 1984 at his office to be delivered to the plaintiff. When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua the marine cargo insurance policy for the plaintiffs logs, he is deemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf. When therefore the insured logs were lost, the insured had already paid the premium to an







Basis: The pertinent provisions in the Policy on premium read — THIS POLICY OF INSURANCE WITNISSETH THAT only after payment to the Company in accordance with Policy Condition No. 2 of the total premiums by the insured as stipulated

above for the period aforementioned for insuring against Loss or Damage by Fire or Lightning as herein appears, the Property herein described . . . 2. This policy including any renewal thereof and/or any endorsement thereon is not in force until the premium has been fully paid to and duly receipted by the Company in the manner

provided herein. Any supplementary agreement seeking to amend this condition prepared by agent, broker or Company official, shall be deemed invalid and of no effect .

Except only in those specific cases where corresponding rules and regulations which are or may hereafter be in force provide for the payment of the stipulated premiums in periodic installment installmentss at fixed percentage percentage,, it is hereby hereby declared, declared, agreed and warranted warranted that this policy shall be deemed effective, valid and binding upon the Company only when the premiums therefor have actually been paid in full and duly acknowledged in a receipt signed by any

authorized official or representative/agent of the Company in such manner as provided herein. (emphasis supplied).

Clearly the Policy provides for payment of premium in full. Accordingly, where the premium has only been partially paid and the balance paid only after the peril insured against has occurred, the insurance contract did not take effect and the insured cannot collect at all on the policy. The case of Phoenix and Tuscany, adequ adequate ately ly demons demonstra trate te the waiver waiver,, either either expres expresss or implied, of prepayment in full by the insurer: impliedly, by suing for the balance of the prem premiu ium m as in Phoe Phoeni nix, x, and and expr expres essl sly, y, by agre agreei eing ng to make make prem premiu iums ms paya payabl blee in installments as in Tuscany. But contrary to the stance taken by petitioners, there is no waiver express or implied in the case at bench. Precisely, the insurer and the insured expressly stipulated that (t)his policy including any renewal thereof and/or any indorsement thereon is not not in forc forcee unti untill the the prem premiu ium m has has been been full fullyy paid paid to and and duly duly rece receip ipte ted d by the the







It cannot be disputed that premium is the elixir vitae of the insurance business because by law the insurer must maintain a legal reserve fund to meet its contingent obligations to the public, henc hence, e, the the impe impera rati tive ve need need for for its prom prompt pt paym paymen entt and and full full satis satisfa fact ctio ion. n. It must must be emphasized here that all actuarial calculations and various tabulations of probabilities of losses under the risks insured against are based on the sound hypothesis of prompt payment of premiu premiums. ms. Upon Upon this this bedro bedrock ck insura insurance nce firms firms are enable enabled d to offer offer the assuran assurance ce of security to the public at favorable rates. But once payment of premium is left to the whim and caprice of the insured, as when the courts tolerate the payment of a mere P600.00 as partial undertaking out of the stipulated total premium of P2,983.50 and the balance to be paid even after the risk insured against has occurred, as petitioners have done in this case, on the principle that the strength of the vinculum juris is not measured by any specific amount of premium payment, we will surely wreak havoc on the business and set to naught what has taken actuarians centuries to devise to arrive at a fair and equitable distribution of risks and benefits between the insurer and the insured.

UCPB UCPB Genera Generall Insu Insuran rance ce v Masa Masaga gana na Te Telem lemar art, t, G.R. G.R. 1371 137172 72,, June June 15, 15, 1999 1999;; reconsidered in UCPB General Insurance v Masagana Telemart, G.R. 137172, April 4, 2001 Issue: Whether there was a valid renewal of the insurance policy upon payment of the

premium 60 days from the date that it is due Ruling: The insurance company is estopped from claiming that the insurance policy was not

renewed as it has been the practice of the company to grant the insured a 60-to-90 day credit term within which to pay the premiums on the renewed policies. Basis: It can be seen at once that Section 77 does not restate the portion of Section 72

expressly permitting an agreement to extend the period to pay the premium. But are there









Co urt of A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the

payment in installments of the premium and partial payment has been made at the time of loss. Not only that. In Tuscany, we also quoted with approval the following pronouncement of the Court of Appeals in its Resolution denying the motion for reconsideration of its decision: While the import of Section 77 is that prepayment of premiums is strictly required as a condition to the validity of the contract, We are not prepared to rule that the request to make installment payments duly approved by the insurer would prevent the entire contract of insurance from going into effect despite payment and acceptance of the initial premium or first installment. Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of payment so far as to make the policy binding despite the fact that premium is actually unpaid. Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid, but does not expressly prohibit an agreem agreement ent granti granting ng credit credit extens extension ion,, and such such an agreem agreement ent is not contrary contrary to morals morals,, good good customs, public order or public policy (De Leon, The Insurance Code, p. 175). So is an understanding to allow insured to pay premiums in installments not so prescribed. At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.

By the the appr appro oval val of the the afore foreq quote uoted d fin findin dings and conc onclusi lusio on of the the Cour Courtt of Appeals, Tuscany has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before







INSURANCE CASES: SET 4, August 17, 2011

ANN MARIE M. ENAD August 31, 2011

Insurance Case Digests Set 4

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