Tibay vs. vs. CA GR No. 119655 May 24 1996 To allow the possibility of paying the premium even after the peril has ensued will surely undermine the foundation of the insurance business. Facts: In January 22 19!" t#$ %$tition$r &io'$ta Tibay (an) Nico'as Rora'so* obtain$) a +r$ insuranc$ ,o'icy -or t#$ir 2stor$y -ro/ t#$ %rivat$ R$s,on)$nt Fortun$ 0i-$ Insuranc$ Co. T#$ sai) ,o'icy cov$rs t#$ ,$rio) -ro/ January 2" 19! unti' January 2" 19 or on$ y$ar -or %6" an) at t#$ a3r$$) ,r$/iu/ o- %2" 9.5. n January 2 or t#$ n$t )ay" ,$tition$r /a)$ a ,artia' ,ay/$nt o- t#$ ,r$/iu/ it# %6. 7n-ortunat$'y" on Marc# 19!" t#$ sai) bui')in3 as burn$) to t#$ 3roun). It as on'y to )ays a-t$r t#$ +r$ t#at %$tition$r &io'$ta &io'$ta a)vanc$) t#$ -u'' ,ay/$nt o- t#$ ,o'icy ,r$/iu/ #ic# as acc$,t$) by t#$ insur$r. n t#is sa/$ )ay" ,$tition$r 'i8$is$ +'$) t#$ c'ai/ t#at as t#$n r$-$rr$) to t#$ insur$rs a)ust$r. Inv$sti3ation o- t#$ caus$ o- +r$ co//$nc$) an) t#$ ,$tition$r sub/itt$) t#$ r$;uir$) ,roo- o- 'oss. <$s,it$ t#at" t#$ ,rivat$ r$s,on)$nt Fortun$ r$-us$) to ,ay t#$ insuranc$ c'ai/ sayin3 it as not 'iab'$ )u$ to t#$ non,ay/$nt by ,$tition$r o- t#$ -u'' a/ount o- t#$ ,r$/iu/ as stat$) in t#$ ,o'icy. T#$ ,$tition$r t#$n brou3#t brou3#t t#$ /att$r to to t#$ Insuranc$ Insuranc$ Co//ission but not#in3 3oo) ca/$ out. =$nc$ t#is cas$ +'$). T#$ tria' court court ru'$ in -avor -avor o- t#$ ,$tition$r ,$tition$r.. 7,on a,,$a'" t#$ Court oA,,$a's r$v$rs$) t#$ 'o$r courts )$cision an) #$') t#at Fortun$ is not 'iab'$ but or)$r$) it to r$turn t#$ ,r$/iu/ ,ai) it# int$r$st to t#$ ,$tition$r. =$nc$" t#is ,$tition -or r$vi$.
Issu$: >#$t#$r or not t#$ ,artia' ,ay/$nt o- t#$ ,r$/iu/ r$n)$r$) t#$ insuranc$ ,o'icy in$?$ctiv$@ Ru'in3: $s. Insuranc$ is a contract #$r$by on$ un)$rta8$s -or a consi)$ration consi)$rati on to in)$/ni-y anot#$r a3ainst 'oss" )a/a3$ or 'iabi'ity arisin3 -ro/ an un8non or contin3$nt $v$nt. T#$ consi)$ration consi)$ration is t#$ ,r$/iu/" #ic# /ust b$ ,ai) at t#$ ti/$" ay an) /ann$r as stat$) in t#$ ,o'icy" an) i- not so ,ai) as in t#is cas$" t#$
,o'icy is t#$r$-or$ -or-$it$) by its on t$r/s. In t#is cas$" t#$ ,o'icy ta8$n out by t#$ ,$tition$r ,rovi)$s -or ,ay/$nt o- ,r$/iu/ in -u''. Binc$ t#$ ,$tition$r on'y /a)$ ,artia' ,ay/$nt it# t#$ r$/ainin3 ba'anc$ ,ai) on'y a-t$r t#$ +r$ or ,$ri' insur$) a3ainst #as occurr$)" t#$ insuranc$ contract t#$r$-or$ )i) not ta8$ $?$ct barrin3 t#$ insur$) -ro/ c'ai/in3 or co''$ctin3 -ro/ t#$ 'oss o- #$r bui')in3. 7n)$r B$ction !! o- t#$ Insuranc$ Co)$ (%#i'i,,in$*" it ,rovi)$s t#$r$in t#at An insur$r is $ntit'$) to ,ay/$nt o- t#$ ,r$/iu/ as soon as t#$ t#in3 insur$) is $,os$) to t#$ ,$ri' insur$) a3ainst. Notit#stan)in3 any a3r$$/$nt to t#$ contrary" no ,o'icy or contract o- insuranc$ issu$) by an insuranc$ co/,any is va'i) an) bin)in3 un'$ss an) unti' t#$ ,r$/iu/ t#$r$o- #as b$$n ,ai)" $c$,t in t#$ cas$ o- a 'i-$ or an in)ustria' 'i-$ ,o'icy #$n$v$r t#$ 3rac$ ,$rio) ,rovision a,,'i$s. =$r$in cas$" t#$ controv$rsy is on t#$ ,ay/$nt o- t#$ ,r$/iu/. It cannot b$ )is,ut$) t#at ,r$/iu/ is t#$ $'iir vita$ o- t#$ insuranc$ busin$ss b$caus$ t#$ insur$r is r$;uir$) by 'a to /aintain a r$s$rv$ -un) to /$$t its contin3$nt ob'i3ations to t#$ ,ub'ic.