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1) American Home Assurance Co. (AHAC) issued insurance policies to Makati Tuscany Condominium Corporation for 3 years, with premiums paid by installments.
2) For the third year, Tuscany stopped paying installments, arguing the policies were not valid since premiums were not fully paid upfront.
3) The Court held that the policies were valid and binding, as the parties intended the policies to be effective despite staggered premium payments, given that AHAC had accepted installment payments for 3 years prior.
1) American Home Assurance Co. (AHAC) issued insurance policies to Makati Tuscany Condominium Corporation for 3 years, with premiums paid by installments.
2) For the third year, Tuscany stopped paying installments, arguing the policies were not valid since premiums were not fully paid upfront.
3) The Court held that the policies were valid and binding, as the parties intended the policies to be effective despite staggered premium payments, given that AHAC had accepted installment payments for 3 years prior.
1) American Home Assurance Co. (AHAC) issued insurance policies to Makati Tuscany Condominium Corporation for 3 years, with premiums paid by installments.
2) For the third year, Tuscany stopped paying installments, arguing the policies were not valid since premiums were not fully paid upfront.
3) The Court held that the policies were valid and binding, as the parties intended the policies to be effective despite staggered premium payments, given that AHAC had accepted installment payments for 3 years prior.
FACTS American Home Assurance Co. (AHAC) issued a policy on Tuscany's building and premises from 3/1/82 to 3/1/83 with a total premium of P466,103.05. The premium was paid on installments from March to November 1982. The policy was renewed in 1983 for which the premiums were also paid on installment. It was again renewed in 1984 for which Tuscany made 2 installment payments but thereafter refused to pay the balance because: o The policy did not contain a credit clause in its favor, and o The receipts for the installment payments covering all 3 policies, stated the following reservations: ! Acceptance of payment shall not waive AHAC's rights to deny any claim under the policy arising before such payments/ after the expiration of the credit clause ! Subject to no loss prior to premium payment. If there be any loss, such is not covered. AHAC filed an action to recover the unpaid balance of P314,103.05. Tuscany filed counterclaim for refund of premiums already paid for 1984, claiming the risk never attached. It argues that there is no perfected contract of insurance upon mere partial payment of the premiums according to Section 77 of the Insurance Code which states that "no contract of insurance is valid and binding unless the premium thereof has been paid, notwithstanding any agreement to the contrary".
ISSUE: W/N policies are valid even if premiums were paid on installments
HELD: Yes. The records clearly show the parties intended subject insurance policies to be binding and effective notwithstanding staggered payment. For 3 years, AHAC accepted Tuscany's installment payments. This speaks loudly of insurer's intention to honor the policies issued. 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. Tuscany 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. Moreover, as correctly observed by the CA, 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.