082 UCPB General Insurance Co.

V Masagana
Telmart Inc.
GR No. 137172, April 4, 2001
Topic: Premium
Ponente: Davide

Author: Keith Meridores
Link:
http://sc.judiciary.gov.ph/jurisprudence/2001/apr2001/
137172.htm
FACTS:
1. Manila Yellow Taxicab was insured by Fieldmen's Insurance. The latter issued a Common Carrier Accident
Insurance Policy.
2. In 1962, one of the taxicabs of Manila Yellow met an accident in Pangasinan. It's driver Coquia (petitioner's
son) died.
3. The petitioner filed a complaint against Fieldmen's to collect in the CFI of Manila.
4. CFI of Manila: Fieldmen's must pay 4,000 plus costs.
5. An appeal was taken by Fieldmen's to the CA.
5.1. 1st defense: Coquia has no contractual relation with Fieldmen's
5.2. 2nd defense: Yellow Taxicab has not complied with the provisions of the policy concerning arbitration.
6. CA: matters are purely question of law. Certified it to the SC.
1. Respondent Masagana obtained from UCPB 5 fire insurance for its properties in pasay.
1.1 the 5 insurance policies had a validity of one year (specifically from 5/22/1991 4:00pm to 5/22/1992
4:00)
2. On June 13, 1992, some/ all of the properties in Pasay were razed by fire.
3. On July 13, 1992, Telamart tendered 5 EPCI MCs. These checks serve as renewal premium payments for
the 5 insurance policies.
4. UCPB accepted payment and even issued an Official Receipt Direct Premium
5. On July 14, 1992, Telamart made its official claim for indemnification of the burned properties.
6. On that same day UCPB returned the 5 checks.
7. Telamart filed a case with the Trial Court for consignment of the checks, renewal of the policies, and payout
of the indemnities.
8. TC: in favor of Telemart
9. UCPB appealed to CA
10. CA: affirmed the TC.
11. Hence this appeal to the SC
ISSUE:
Whether or not the payment of premiums by Telamart can be considered to renew its insurance policies?

HELD:
Yes. UCPB is estopped to invoke Sec. 77 of the Insurance Code which states that "no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof has been
paid
RATIO:
1. Sec. 77 cannot be applied in favor of the petitioner because it is habitually granting 60 to 90 days as credit
term for the payment of premiums.
2. Despite the amendment of the old Insurance Code, specifically, deleting the provision "unless there is clear
agreement to grant the insured credit extension of the premium due."
2.1 Sec. 72 of the old code provides: 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)
2.2 Sec. 77 of the new code provides: 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.
2.3 from this amendment it seems that the intent in deleting the underlined clause is clear, but the SC in this
case, considering the circumstances (see #1 of ratio) deemed it applies.
3. Lastly, this case gave 5 exceptions to the general rule laid out in Sec. 77
GR: no policy or contract of insurance issued by an insurance company is valid and binding unless and until
the premium thereof has been paid
EX:
1. In the case of a life or an industrial life policy whenever the grace period provision applies. (Sec. 77)
2. Any 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 premium is actually paid. (Sec. 78)
3. parties have agreed to the payment in installments of the premium and partial payment has been made at the
time of loss. (Makati Tuscany Condominium Corporation vs. CA)
4. the insurer may grant credit extension for the payment of the premium. (Makati Tuscany Condominium
Corporation vs. CA)
5. Estoppel

DOCTRINE
As a rule, 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 for the 5 exceptions.


SEPARATE OPINION:
Vitug:
By weight of authority, estoppel cannot create a contract of insurance, neither can it be successfully invoked to
create a primary liability, nor can it give validity to what the law so proscribes as a matter of public policy. So
essential is the premium payment to the creation of the vinculum juris between the insured and the insurer that
it would be doubtful to have that payment validly excused even for a fortuitous event.

Pardo:
Verily, it is elemental law that the payment of premium is a mandatory requisite to make the policy of
insurance effective. If the premium is not paid in the manner prescribed in the policy as intended by the
parties, the policy is void and ineffective.