MAKATI TUSCANY CONDOMINIUM CORP VS CA

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 on the latter's building and premises, for a period beginning 1 March 1982 and
ending 1 March 1983. The premium was paid on 4 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 renewed and petitioner made two installment 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 unpaid balance. Petitioner explained
that it discontinued the payment of premiums because the policy did not contain a credit
clause in its favor. Petitioner further claimed that the policy was never binding and valid,
and no risk attached to the policy. It then pleaded a counterclaim for P152,000.00 for
the premiums already paid for 1984-85, and in its answer, sought the refund of
representing the premium payments for 1982-85.
ISSUE: WON the policy is valid and binding even if the premium was not paid in full so
as to make the insured liable for the balance of the premium
HELD: Yes. The policy was binding and effective notwithstanding the staggered
payment of premiums. The initial insurance contract entered into in 1982 was renewed
in 1983, then in 1984. In 3 years, the insurer accepted all the installment payments.
Such acceptance speaks loudly of the insurer’s intention to honor the policies it issued
to the insured. While it may be true that Section 77 of the Insurance Code provides that
parties may not agree to make insurance contract valid and binding without the payment
of the premiums, there is nothing in the section which suggests that the parties may not
agree to allow payment in installments. Otherwise, it would allow the insurer to renege
on its liability under the contract had a loss occurred after the completion of payment of
the entire premium despite its voluntary acceptance of the partial payments.
UCPB GENERAL INSURANCE COMPANY vs MASAGANA TELEMART
FACTS: Masagana obtained from UCPB five (5) FIRE insurance policies on its Manila
properties.
The policies were effective from 4 pm of May 22, 1991 to 4 pm of May 22, 1992. On
June 13, 1992, Masagana’s properties were razed by fire.  On July 13, 1992, plaintiff
tendered five checks for P225,753.45 as renewal premium payments. A receipt was
issued.  On July 14, 1992, Masagana made its formal demand for indemnification for
the burned insured properties. UCPB then rejected Masagana’s claims under the
argument that the fire took place before the tender of payment.
Hence Masagana filed this case.
The Court of Appeals disagreed with UCPB’s argument that Masagana’s tender of
payment of the premiums on 13 July 1992 did not result in the renewal of the policies,
having been made beyond the effective date of renewal as provided under Policy
Condition No. 26, which states:
26. Renewal Clause. -- Unless the company at least forty five days in advance of the
end of the policy period mails or delivers to the assured at the address shown in the
policy notice of its intention not to renew the policy or to condition its renewal upon
reduction of limits or elimination of coverages, the assured shall be entitled to renew
the policy upon payment of the premium due on the effective date of renewal.
Both the Court of Appeals and the trial court found that sufficient proof exists that
Masagana, which had procured insurance coverage from UCPB for a number of years,
had been granted a 60 to 90-day credit term for the renewal of the policies.  Such
a practice had existed up to the time the claims were filed.  Most of the premiums have
been paid for more than 60 days after the issuance. Also, no timely notice of non-
renewal was made by UCPB.
ISSUE: WON insurer may be made liable
HELD: YES. Insurer should be made liable even if premiums were not paid as of the
time of the loss since said loss occurred before the expiration of the credit term that was
practiced by the parties. It would be unjust and inequitable if recovery on the policy
would not be permitted against the insurer which had consistently granted 60 to 90-day
credit term for payment of renewal premiums despite its full awareness of Section 77.
Estoppel bars it from taking refuge under said Section since the insured relied on good
faith on such practice.
J. Vitug dissenting;
A requirement imposed by way of State regulation upon insurers is the maintenance of
an adequate legal reserve in favor of those claiming under their policies. 4 The law
generally mandates that insurance companies should retain an amount sufficient to
guarantee the security of its policyholders in the remote future, as well as the present,
and to cover any contingencies that may arise or may be fairly anticipated.

Section 77 of the Insurance Code provides:

"SECTION 77. An insurer is entitled to payment of the premium as soon as the

Commenting on this new provision, Dean Hernando B. Perez states:

"Under the former rule, whenever the insured was granted credit extension, such
policy was binding even though the premiums had not been paid. This rule was
changed when the present provision eliminated the portion concerning credit
agreement, and added the phrase 'notwithstanding any agreement to the
contrary' which precludes the parties from stipulating that the policy is valid even
if premiums are not paid. Therefore, under the present law, the policy is not valid
and binding unless and until the premium is paid. If the insurer wants to favor the
insured by making the policy binding despite non-payment, a mere credit
agreement would not be sufficient. The remedy would be for insurer to
acknowledge in the policy that premiums were paid although they were not, in
which case the policy becomes binding because such acknowledgment is a
conclusive evidence of payment of premium.”

By weight of authority, estoppel cannot create a contract of insurance, neither can it be

FACTS: Petitioner Jamie Gaisano was the registered owner of a 1992 Mitsubishi
Montero while respondent is a domestic corporation engaged in the insurance business.
Respondent issued a comprehensive commercial vehicle policy to petitioner in the
amount of P1,500,000.00 over the vehicle for a period of one year commencing on
September 27, 1996 up to September 27, 1997. To collect the premiums and other
charges on the policies, respondent's agent, Trans-Pacific Underwriters Agency (Trans-
Pacific), issued a statement of account to petitioner's company, Noah's Ark.

Noah's Ark immediately processed the payments and issued a check dated September
27, 1996 payable to Trans-Pacific on the same day. The check represents payment for
the insurance policies, with P55,620.60 for the premium and other charges over the
vehicle. However, nobody from Trans-Pacific picked up the check that day because its
president and general manager was celebrating his birthday. Trans-Pacific informed
Noah's Ark that its messenger would get the check the next day. In the evening of
September 27, while under the official custody of Noah's Ark marketing manager, the
vehicle was stolen in the vicinity of SM Megamall. The marketing manager reported the
loss to the police. Despite search and retrieval efforts, the vehicle was not recovered.
Oblivious of the incident, Trans-Pacific picked up the check the next day, September 28.
It issued an official receipt dated September 28, acknowledging the receipt of
P55,620.60 for the premium and other charges over the vehicle. The check issued to
Trans Pacific for P140,893.50 was deposited with Metrobank for encashment on
October 1, 1996. The respondent was thereafter informed of the loss of the vehicle and
petitioner demanded payment of the loss but the respondent refused on the ground that
there was no insurance contract due to the non-payment of the premium.

ISSUE: WON the respondent is liable for the loss

HELD: NO. Just like any other contract, insurance requires a cause or consideration.
The consideration is the premium which must be paid at the time, way, and manner
specified in the policy. If not paid, the policy will lapse and be forfeited by its own terms.
The policy in this case does not fall under the exceptions provide by law and
jurisprudence. They contemplate a situation where insurer have consistently granted the
insured a credit extension for payment of the premium. Here however, petitioner failed
to establish the fact of a grant by respondent of a credit term in his favor or that the
grant has been consistent. To rule otherwise would render nugatory the requirement of
Section 77.
PACIFIC TIMBER EXPORT CORP. vs CA

FACTS: The plaintiff secured temporary insurance from the defendant for its exportation
of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from
Quezon Province to Okinawa and Tokyo, Japan. Workmen’s Insurance issued a cover
note insuring the cargo of the plaintiff subject to its terms and conditions. Two marine
policies were the issued and the premiums thereon paid. After the issuance of the cover
note, but before the issuance of the two marine policies, some of the logs intended to be
exported were lost during loading operations in the Diapitan Bay due to bad weather. 30
pieces were verified to have been lost or washed away as a result of the accident.
Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during loading in
the vessel.
The plaintiff claimed for insurance to the value of P19,286.79. Woodmen’s wrote the
plaintiff denying the latter's claim on the ground that the cover note is null and void for
lack of valuable consideration.
ISSUE: WON the premium was needed to make the cover note binding
HELD: NO. the cover note was binding even if premium was not paid thereon because
no premium could be fixed on the cover note until all the particulars of the shipment
were known. No separate premium is required to be paid on the cover note.
Furthermore, if the cover note is to be treated as a separate policy, the purpose and
function of the cover note would be set at naught or rendered meaningless. Liability on
the cover note should arise even before payment of the premium.