Makati Tuscany Condominium v.

CA

Sometime in 1982, private respondents American Home Assurance issued an

insurance policy in favor of Makati Tuscany Condominium. The policy was
renewable and was valid for period of one year while the premiums were
payable on installments. On 1984, petitioner failed to pay two consecutive
installments and because of this, American Home instituted an action to
recover the unpaid installments. On the other hand, petitioner averred that
the payments were discontinued as the 1984 policy did not contain a credit
clause and the policy provision that American Home cannot deny liability
because of prior non-payment of premiums by petitioner.

RTC: Denied and the complaint.

CA: Ordered petitioner to pay the premium balance.

On appeal, petitioner alleged that the insurance policies issued in its favor
was invalid because it runs contrary to the Insurance Code that requires the
payment of premiums in full.

Issue: Whether payment by installment of the premiums due on an insurance

policy invalidates the contract of insurance.

Ruling:

The payment by installment arrangement did not cause the nullity of the
insurance policy.

While the prepayment of premiums is strictly required as a condition to the

validity of the contract, Section 78 allows a waiver by the insurer of the
condition of prepayment by making an acknowledgment in the insurance
policy of receipt of premium as conclusive evidence of payment so far as to
make the policy binding despite the fact that the premium is actually unpaid.
Because of the insurer’s reissuance of the policy for three years, the payment
to the insurer and his acceptance speaks loudly of the intention to honor the
policies it issued to petitioner. Reliance on Arce v. Capital Surety was improper
as the factual circumstances are different from the present case.

Moreover, where the risk is entire and the contract is indivisible, the insured
is not entitled to refund of the premiums paid if the insurer was exposed to
the risk insured for any period.

Thus, petitioner is obliged to pay as the insurance policy was valid.