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3.
FACTS:
July 21, 1960: Woodworks, Inc. was issued a fire policy for its
building machinery and equipment by Philippine Phoenix Surety & Insurance Co. for
P500K covering July 21, 1960 to July 21, 1961. Woodworks did not pay the
premium totalling to P10,593.36.
April 19, 1961: It was alleged that Woodworks notified Philippine Phoenix the
cancellation of the Policy so Philippine Phoenix credited P3,110.25 for the unexpired
period of 94 days and demanded in writing the payment of P7,483.11
Woodworks refused stating that it need not pay premium "because the Insurer
did not stand liable for any indemnity during the period the premiums were not
paid."
Philippine Phoenix filed with the CFI to recover its earned premium of P7,483.11
Woodworks: to pay the premium after the issuance of the policy put an
end to the insurance contract and rendered the policy unenforceable
FACTS:
Upon WOODWORKSs application, PHIL. PHOENIX issued in its favor a fire
insurance policy whereby PHIL. PHOENIX insured WOODWORKS building,
machinery and equipment for a term of one year from against loss by fire. The
premium and other charges amounted to P10,593.36.
It is undisputed that WOODWORKS did not pay the premium stipulated in the
Policy when it was issued nor at any time thereafter.
Before the expiration of the one-year term, PHIL. PHOENIX notified
WOODWORKS of the cancellation of the Policy allegedly upon request of
WOODWORKS. The latter has denied having made such a request. PHIL.
PHOENIX credited WOODWORKS with the amount of P3,110.25 for the
unexpired period of 94 days, and claimed the balance of P7,483.11
representing , earned premium. Thereafter, PHIL. PHOENIX demanded in
writing for the payment of said amount.
WOODWORKS disclaimed any liability contending, in essence, that it need
not pay premium because the Insurer did not stand liable for any indemnity
during the period the premiums were not paid.
For this reason, PHIL. PHOENIX commenced action in the CFI of Manila.
Judgment was rendered in PHIL. PHOENIXs favor . From this adverse
Decision, WOODWORKS appealed to the Court of Appeals which certified the
case to SC on a question of law.
ISSUE:
May the insurer collect the earned premiums?
HELD:
NO. The Courts findings are buttressed by Section 77 of the Insurance Code
(Presidential Decree No. 612, promulgated on December 18, 1974), which
now provides that no contract of insurance issued by an insurance company
is valid and binding unless and until the premium thereof has been paid,
notwithstanding any agreement to the contrary.
Since the premium had not been paid, the policy must be deemed to have
lapsed.
The non-payment of premiums does not merely suspend but put, an end to an
insurance contract, since the time of the payment is peculiarly of the essence
of the contract.
In fact, if the peril insured against had occurred, PHIL. PHOENIX, as insurer,
would have had a valid defense against recovery under the Policy it had
issued. Explicit in the Policy itself is PHIL. PHOENIXs agreement to indemnify
WOODWORKS for loss by fire only after payment of premium, Compliance
by the insured with the terms of the contract is a condition precedent to the
right of recovery.
The burden is on an insured to keep a policy in force by the payment of
premiums, rather than on the insurer to exert every effort to prevent the
insured from allowing a policy to elapse through a failure to make premium
payments. The continuance of the insurers obligation is conditional upon the
payment of premiums, so that no recovery can be had upon a lapsed policy,
the contractual relation between the parties having ceased.
Moreover, an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity.
DISPOSITION:
The judgment appealed from was reversed, and PHIL. PHOENIXs complaint
dismissed.