ARCE vs. THE CAPITAL INSURANCE & SURETY CO., INC., FACTS: In Civil Case No.

66466 of the Court of First Instance of Manila, the Capital Insurance and Surety Co., Inc., (COMPANY) was ordered to pay Pedro Arce (INSURED) the proceeds of a fire insurance policy. Not satisfied with the decision, the company appealed to this Court on questions of law. The INSURED (Pedro ARce) was the owner of a residential house in Tondo, Manila, which had been insured with the COMPANY (Capital insurance) since 1961 under Fire Policy No. 24204. On November 27, 1965, the COMPANY sent to the INSURED Renewal Certificate No. 47302 to cover the period December 5, 1965 to December 5, 1966. The COMPANY also requested payment of the corresponding premium in the amount of P 38.10. Anticipating that the premium could not be paid on time, the INSURED, thru his wife, promised to pay it on January 4, 1966. The COMPANY accepted the promise but the premium was not paid on January 4, 1966. On January 8, 1966, the house of the INSURED was totally destroyed by fire. On January 10, 1966, INSURED's wife presented a claim for indemnity to the COMPANY. She was told that no indemnity was due because the premium on the policy was not paid. Nonetheless the COMPANY tendered a check for P300.00 as financial aid which was received by the INSURED's daughter, Evelina R. Arce. The COMPANY reiterated that the check was given "not as an obligation, but as a concession" because the renewal premium had not been paid, The INSURED cashed the check but then sued the COMPANY on the policy. ISSUE: Whether the petitioners are entitled to claim from their policy despite non-payment of their premium. RULING: SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the perils insured against, unless there is clear agreement to grant credit extension for the premium due. No policy issued by an insurance company is valid and binding unless and until the premium thereof has been paid (Moreover, the parties in this case had stipulated: IT IS HEREBY DECLARED AND AGREED that notwithstanding anything to the contrary contained in the policy, this insurance will be deemed valid and binding upon the Company only when the premium and documentary stamps therefore have actually been paid in full and duly acknowledged in an official receipt signed by an authorized official/representative of the Company, " It is obvious from both the Insurance Act, as amended, and the stipulation of the parties that time is of the essence in respect of the payment of the insurance premium so that if it is not paid the contract does not take effect unless there is still another stipulation to the contrary. In the instant case, the INSURED was given a grace period to pay the premium but the period having expired with no payment made, he cannot insist that the COMPANY is nonetheless obligated to him. American Home Assurance vs. Chua [G.R. No. 130421. June 28, 1999] FACTS: Petitioner, American Home, is a domestic corporation engaged in the insurance business. Sometime in 1990, respondent Chua obtained from petitioner a fire insurance covering the stock-in-trade of his business, Moonlight Enterprises, located at Valencia, Bukidnon. The insurance was due to expire on 25 March 1990. On 5 April 1990 respondent issued PCIBank Check No. 352123 in the amount of P2, 983.50 to petitioners agent, James Uy, as payment for the renewal of the policy. In turn, the latter delivered Renewal Certificate No. 00099047 to respondent. The check was drawn against a Manila bank and deposited in petitioners bank account in Cagayan de Oro City. The corresponding official receipt was issued on 10 April. Subsequently, a new insurance policy, Policy No. 206-4234498-7, was issued, whereby petitioner undertook to indemnify respondent for any damage or loss arising from fire up toP200,000 for the period 25 March 1990 to 25 March 1991. On 6 April 1990 Moonlight Enterprises was completely razed by fire. Total loss was estimated between P4, 000,000 and P5, 000,000. Respondent filed an insurance claim with petitioner and four other co-insurers, namely, Pioneer Insurance and Surety Corporation, Prudential Guarantee and Assurance, Inc., Filipino Merchants Insurance Co. and Domestic Insurance Company of the Philippines. Petitioner refused to honor the claim notwithstanding several demands by respondent, thus, the latter filed an action against petitioner before the trial court. In its defense, petitioner claimed there was no existing insurance contract when the fire occurred since respondent did not pay the premium. It also alleged that even assuming there was a contract, respondent violated several conditions of the policy, particularly: (1) his submission of fraudulent income tax return and financial statements; (2) his failure to establish the actual loss, which petitioner assessed at P70,000; and (3) his failure to notify to petitioner of any insurance already effected to cover the insured goods. These violations, petitioner insisted, justified the denial of the claim. Petitioner emphasizes that when the fire occurred on 6 April 1990 the insurance contract was not yet subsisting pursuant to Article 1249[3] of the Civil Code, which recognizes that a check can only effect payment once it has been cashed. Although respondent testified that he gave the check on 5 April to a certain James Uy, the check, drawn against a Manila bank and deposited in a Cagayan de Oro City bank, could not have been cleared by 6 April, the date of the fire. In fact, the official receipt issued for respondents check payment was dated 10 April 1990, four days after the fire occurred. Citing jurisprudence, petitioner also contends that respondents non-disclosure of the other insurance contracts rendered the policy void. Respondent refutes the reason for petitioners denial of his claim. To bolster his argument, respondent cites Section 66 of the Insurance Code,[5] which requires the insurer to give a notice to the insured of its intention to terminate the policy forty-five days before the

Moreno, Jean Paul C.

policy period ends. In the instant case, petitioner opted not to terminate the policy. Instead, it renewed the policy by sending its agent to respondent, who was issued a renewal certificate upon delivery of his check payment for the renewal of premium. At this precise moment the contract of insurance was executed and already in effect. Respondent also claims that it is standard operating procedure in the provinces to pay insurance premiums by check when collected by insurance agents. ISSUES: 1. Whether there was a valid payment of premium, considering that respondents check was cashed after the occurrence of the fire; 2. Whether respondent violated the policy by his submission of fraudulent documents and nondisclosure of the other existing insurance contracts; RULING: On the payment of premium through check The general rule in insurance laws is that unless the premium is paid the insurance policy is not valid and binding. The only exceptions are life and industrial life insurance. Whether payment was indeed made is a question of fact which is best determined by the trial court. The trial court found, as affirmed by the Court of Appeals, that there was a valid check payment by respondent to petitioner. Well-settled is the rule that the factual findings and conclusions of the trial court and the Court of Appeals are entitled to great weight and respect, and will not be disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts or circumstances which would substantially affect the disposition of the case. We see no reason to depart from this ruling. According to the trial court the renewal certificate issued to respondent contained the acknowledgment that premium had been paid. It is not disputed that the check drawn by respondent in favor of petitioner and delivered to its agent was honored when presented and petitioner forthwith issued its official receipt to respondent on 10 April 1990. 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.[8] In the instant case, the 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 agents acknowledgment of receipt of payment. Section 78 of the Insurance Code explicitly provides: 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. On whether there were violations of the policy conditions stipulated Is respondent guilty of the policy violations imputed against him? We are not convinced by petitioners arguments. Ordinarily, where the insurance policy specifies as a condition the disclosure of existing coinsurers, non-disclosure thereof is a violation that entitles the insurer to avoid the policy. This condition

is common in fire insurance policies and is known as the other insurance clause. The purpose for the inclusion of this clause is to prevent an increase in the moral hazard. We have ruled on its validity and the case of Geagonia v. Court of Appeal clearly illustrates such principle. However, we see an exception in the instant case. Citing Section 29 of the Insurance Code, the trial court reasoned that respondents failure to disclose was not intentional and fraudulent. The application of Section 29 is misplaced. Section 29 concerns concealment which is intentional. The relevant provision is Section 75, which provides that: 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. To constitute a violation the other existing insurance contracts must be upon the same subject matter and with the same interest and risk. Indeed, respondent acquired several co-insurers and he failed to disclose this information to petitioner. Nonetheless, petitioner is estopped from invoking this argument. The trial court cited the testimony of petitioners loss adjuster who admitted previous knowledge of the co-insurers. Indubitably, it cannot be said that petitioner was deceived by respondent by the latters non-disclosure of the other insurance contracts when petitioner actually had prior knowledge thereof. Petitioners loss adjuster had known all along of the other existing insurance contracts, yet, he did not use that as basis for his recommendation of denial. The loss adjuster, being an employee of petitioner, is deemed a representative of the latter whose awareness of the other insurance contracts binds petitioner. We, therefore, hold that there was no violation of the other insurance clause by respondent.

JAMES STOKES vs. MALAYAN INSURANCE CO., INC. G.R. No. L-34768, 24 February 1984 127 SCRA 766 FACTS: Daniel Adolfson had a subsisting Malayan car insurance policy with coverage against own damage as well as 3rd party liability when his car figured in a vehicular accident with another car, resulting to damage to both vehicles. At the time of the accident, Adolfsons car was being driven by James Stokes, who was authorized to do so by Adolfson. Stokes, an Irish tourist who had been in the Philippines for only 90 days, had a valid and subsisting Irish drivers license but without a Philippine drivers license. Adolfson filed a claim with Malayan but the latter refused to pay contending that Stokes was not an authorized driver under the Authorized Driver clause of the insurance policy in relation to Section 21 of the Land Transportation Office. ISSUE: Whether or not Malayan is liable to pay the insurance claim of Adolfson HELD: NO. A contract of insurance is a contract of indemnity upon the terms and conditions specified therein. When the insurer is called upon to pay in case of loss or damage, he has the right to insist upon compliance with the terms of the contract. If the insured cannot bring himself within the terms and

Moreno, Jean Paul C.

conditions of the contract, he is not entitled as a rule to recover for the loss or damage suffered. For the terms of the contract constitute the measure of the insurers liability, and compliance therewith is a condition precedent to the right of recovery. At the time of the accident, Stokes had been in the Philippines for more than 90 days. Hence, under the law, he could not drive a motor vehicle without a Philippine drivers license. He was therefore not an authorized driver under the terms of the insurance policy in question, and Malayan was right in denying the claim of the insured. Acceptance of premium within the stipulated period for payment thereof, including the agreed period of grace, merely assures continued effectivity of the insurance policy in accordance with its terms. Such acceptance does not estop the insurer from interposing any valid defense under the terms of the insurance policy. The principle of estoppel is an equitable principle rooted upon natural justice which prevents a person from going back on his own acts and representations to the prejudice of another whom he has led to rely upon them. The principle does not apply to the instant case. In accepting the premium payment of the insured, Malayan was not guilty of any inequitable act or representation. There is nothing inconsistent between acceptance of premium due under an insurance policy and the enforcement of its terms.

Moreno, Jean Paul C.