UCPB General Insurance Co., Inc. vs. Masagana Telemart Inc. (Insurance)

UCPB General Insurance Co., Inc. vs. Masagana Telemart Inc.

(Insurance Law)

356 SCRA 307 (G.R. No. 137172)

April 4, 2001

Petitioners:	UCPB General Insurance Co., Inc.
Respondents:	Masagana Telemart Inc.

CJ. Davide, Jr.:

FACTS:

On April 15, 1991, petitioner issued five (5) insurance policies covering respondent’s various property described therein against fire, for the period from May 22, 1991 to May 22, 1992.

In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration of their terms on May 22, 1992. Petitioner advised respondent’s broker, Zuellig Insurance Broker’s, Inc. of its intention not to renew the policies.

On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies at the address stated in the policies.

On June 13, 1992, fire razed respondent’s property covered by three of the insurance policies petitioner issued.

On July 13, 1992, respondent presented to petitioner’s cashier at its head office five (5) manager’s checks in the total amount of ₱225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993. No notice of loss was filed by respondent under the policies prior to July 14, 1992.

On July 14, 1992, respondent filed with petitioner its formal claim for indemnification of the insured property razed by fire.

On the same day, July 14, 1992, petitioner returned to respondent the five (5) manager’s check that it tendered, and at the same time rejected respondent’s claim for the reasons (a) that the policies had expired and were not renewed and (b) that the fire occurred on June 13, 1992, before respondent’s tender of premium payment.

On July 21, 1992, respondent filed with the Regional Trial Court, Branch 58, Makati City, a civil complaint against petitioner for recovery of ₱18,645,000.00 representing the face value of the policies covering respondent’s insured property razed by fire and for attorney’s fees.

ISSUE:

Whether Sec. 77 of the Insurance Code of 1978 must strictly be applied to petitioner’s advantage despite its practice of granting a 60 to 90 day credit term for the payment of the premiums.

HELD:

No. It can be seen at once that Section 77 does not restate the portion of Section 72 expressly permitting an agreement to extend the period to pay the premium. But are there exceptions to Section 77? The answer is in the affirmative. The first exception is provided by Section 77 itself, and that is, in case of a life or industrial life policy whenever the grace period provision applies. The second is that covered by Section 78 of the Insurance Code, which provides: SEC. 78. 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. A third exception was laid down in Makati Tuscany Condominium Corporation vs. Court of Appeals, wherein we ruled that Section 77 may not apply if the parties have agreed to the payment in installments of the premium and partial payment has been made at the time of loss, x x x Not only that. In Tuscany, we also quoted with approval the following pronouncement of the Court of Appeals in its Resolution denying the motion for reconsideration of its decision: x x x By the approval of the aforequoted findings and conclusion of the Court of Appeals, Tuscany has provided a fourth exception to Section 77, namely, that the insurer may grant credit extension for the payment of the premium. This simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs before the expiration of the term, recovery on the policy should be allowed even though the premium is paid after the loss but within the credit term.

Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract to provide a credit term within which to pay the premiums. That agreement is not against the law, morals, good customs, public order or public policy. The agreement binds the parties.

Finally in the instant case, it would be unjust and inequitable if recovery on the policy would not be permitted against Petitioner, which had consistently panted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Section 77. Estoppel bars it from taking refuge under said Section, since Respondent relied in good faith on such practice. Estoppel then is the fifth exception to Section 77.

Malayan Insurance Co., Inc. vs. Cruz Arnaldo (Insurance Law)

Malayan Insurance Co., Inc. vs. Cruz Arnaldo

(Insurance Law)

154 SCRA 672 (G.R. No. L-67835)

October 12, 1987

Petitioners:	Malayan Insurance Co., Inc. (MICO)
Respondents:	Gregoria Cruz Arnaldo, in her capacity as the Insurance Commissioner and Coronacion Pinca

J. Cruz:

FACTS:

On June 7, 1981, the petitioner Malayan Insurance Co., (MICO) issued to respondent, Coronacion Pinca, a Fire Insurance Policy on her property for ₱100,000.00, effectively July 22, 1981, until July 22, 1982.

On October 15, 1981, MICO allegedly cancelled the policy for non-payment of the premium and sent the corresponding notice to Pinca.

On December 24, 1981, payment of the premium for Pinca was received by Domingo Adora agent of MICO.

On January 15, 1982, Adora remitted this payment to MICO, together with other payments.

On January 18, 1982, Pinca’s property was completely burned.

On February 5, 1982, Pinca’s payment was returned by MICO to Adora on the ground that her policy had been cancelled earlier. But Adora refused to accept it.

In due time, Pinca made the prerequisite demands for payment, which MICO rejected. She then went to the Insurance Commission. It is because she was ultimately sustained by the latter that MICO has come to us for relief.

ISSUE:

Whether there is a valid insurance contract at the time of the loss.

HELD:

Yes. MICO claims it cancelled the policy in question on October 15, 1981, for non-payment of premium. To support this assertion, it presented one of its employees, who testified that "the original of the endorsement and credit memo"—presumably meaning the alleged cancellation—"were sent the assured by mail through our mailing section." However, there is no proof that the notice, assuming it complied with the other requisites mentioned above, was actually mailed to and received by Pinca. All MICO offers to show that the cancellation was communicated to the insured is its employee's testimony that the said cancellation was sent "by mail through our mailing section," without more. The petitioner then says that its "stand is enervated (sic) by the legal presumption of regularity and due performance of duty," (not realizing perhaps that "enervated" means "debilitated," not "strengthened").

Makati Tuscany Condominium Corp. vs. Court of Appeals (Insurance Law)

Makati Tuscany Condominium Corp. vs. Court of Appeals

(Insurance Law)

215 SCRA 462 (G.R. No. 95546)

November 6, 1992

Petitioners:	Makati Tuscany Condominium Corporation
Respondents:	Court of Appeals, American Home Assurance Co., represented by American Underwriters (Phils.) Inc.

J. Bellosillo:

FACTS:

This case involves a purely legal question whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance, in view of Sec. 77 of the Insurance Code.

In 1982, private respondent American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils), Inc., issued in favor of petitioner TUSCANY an insurance policy on the latter’s building and premises for the period March 1, 1982 and ending March 1, 1983, with a total premiums of ₱466,103.05. The premium was paid on five installments. In 1983 the policy was renewed, and the premium was again paid on installments. In 1984, the policy was again renewed, and the premium paid on installments. However, after two installments, TUSCANY refused to pay the balance of the premium.

Consequently, AHAC filed an action to recover the balance. In its answer, TUSCANY explained that it discontinued the payment of premium claiming, among others, that the policy was never binding and valid and no risk attached to the policy.

ISSUE:

Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance.

HELD:

No. The subject policies are valid even if the premiums were paid on installments. The records clearly show that petitioner and private respondent intended subject insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3) years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of the insurer’s intention to honor the policies it issued to petitioner. 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 prepaid in full.

It appearing from the peculiar circumstances that the parties actually intended to make the three (3) insurance contracts valid, effective and binding, petitioner 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 (No. AH-CPP-9210651) in March 1985. Moreover, as correctly observed by the appellate court, 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.

Vda. de Gabriel vs. Court of Appeals (Insurance Law)

Vda. de Gabriel vs. Court of Appeals

(Insurance Law)

264 SCRA 137 (G.R. No. 103883)

November 11, 1996

Petitioners:	Jacqueline Jimenez Vda. de Gabriel
Respondents:	Court of Appeals and Fortune Insurance and Surety Company, Inc.

J. Vitug:

FACTS:

The petitioner for review on certiorari seeks the reversal of the decision of the Court of Appeals setting aside the judgment of the Regional Trial Court which ordered private respondent Fortune Insurance and Surety Company, Inc., to pay petitioner Jacqueline Jimenez Vda. de Gabriel, the surviving spouse and beneficiary in an accident (group) insurance of her dead husband, the amount of ₱100,000.00, plus legal interest.

Marcelino Gabriel, the insured, was employed by Emerald Construction & Development Corporation (“ECDC”) at its construction project in Iraq. He was covered by a personal accident insurance in the amount of ₱100,000.00 under a group policy procured from private respondent by ECDC for its overseas workers.

On May 22, 1982, within the life of the policy, Gabriel died in Iraq. A year later, or on July 12, 1983, ECDC reported Gabriel’s death to private respondent by telephone. Ultimately private respondent denied the claim of ECDC on the ground of prescription. Petitioner went to court alleging that her husband died of electrocution while working.

ISSUE:

Whether or not the cause of action had prescribed.

HELD:

Yes. On the issue of “prescription”, private respondent correctly invoked Section 384 of the Insurance Code; viz: “Sec. 384. Any person having any claim upon the policy issued pursuant to this chapter shall without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases, with the Commissioner on the Courts within one year from the denial of the claim, otherwise, the claimant’s right of action shall prescribe.” The notice of death was given to private respondent, concededly, more than a year after the death of petitioner’s husband. Private respondent in invoking prescription, was not referring to the one-year period from the denial of the claim within which to file an action against an insurer but obviously to the written notice of claim that had to be submitted within six months from the time of the accident.

Yes. The petitioner’s claim that the insurance covered only the building and not the elevator is absured, to say the least. This Court has little patience with puerile arguments that affront common sense, let alone basic legal principles with which even law students are familiar. The circumstance that the building insured is seven stories high and so had to be provided with elevators a legal requirement known to the petitioner as an insurance company makes its contention all the more ridiculous.

No less preposterous is the petitioner’s claim that the elevators were insured after the occurrence of the fire, a case of shutting the barn door after the horse had escaped, so to speak. This pretense merits scant attention. Equally underserving of serious is its submission that the elevators were not damaged by the fire, against the report of arson investigators of the INP and indeed, its own expressed admission in its answer where it affirmed that the fire “damaged or destroyed a portion of the 7^th floor of the insured building and more particularly a Hitachi elevator control panel.”

The petitioner argues that since at the time of the fire the building insured was worth ₱5,800,000.00, the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity of only ₱67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides: xxx. However, there is no evidence on record that the building was worth ₱5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at ₱2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time the building was burned it was still under construction and not yet completed.

As defined in the aforestated provision, which is not Section 60 of the Insurance Code,” and open policy is one which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.” This means that the actual loss, as determined will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not be exceed the face value of the policy.

The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of ₱508,867.00.

Development Insurance Corporation vs. Intermediate Appellate Court (Insurance Law)

Development Insurance Corporation vs.

Intermediate Appellate Court

(Insurance Law)

143 SCRA 62 (G.R. No. L-71360)

June 16, 1986

Petitioners:	Development Insurance Corporation
Respondents:	Intermediate Appellate Court and Philippine Union Realty Development Corporation

J. Cruz:

FACTS:

This case will require an examination of Policy No. RY/F-082, as renewed by virtue of which the petitioner Development Insurance insured Philippine Union Realty Development Corporation’s building against fire for ₱2,500,000.00.

The petitioner claims that the insurance covered only the building but not the elevators. The petitioner also argues that since at the time of the fire the building insured was worth ₱5,800,000.00, the private respondent should be considered its own insurer for the difference between the amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the respondent is entitled to an indemnity of only ₱67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides:

“If the property hereby insured shall, at the breaking out of any fire, be collectively of greater value that the sum insured thereon then the insured shall be considered as being his own insurer for the difference, and shall bear a ratable proportion of the loss accordingly. Every item, if more than one, of the policy shall be separately subject to this condition”

ISSUE:

Whether the claim of the insurance company that insurance of building does not cover the elevator is incorrect.

HELD:

Yes. The petitioner’s claim that the insurance covered only the building and not the elevator is absured, to say the least. This Court has little patience with puerile arguments that affront common sense, let alone basic legal principles with which even law students are familiar. The circumstance that the building insured is seven stories high and so had to be provided with elevators a legal requirement known to the petitioner as an insurance company makes its contention all the more ridiculous.

No less preposterous is the petitioner’s claim that the elevators were insured after the occurrence of the fire, a case of shutting the barn door after the horse had escaped, so to speak. This pretense merits scant attention. Equally underserving of serious is its submission that the elevators were not damaged by the fire, against the report of arson investigators of the INP and indeed, its own expressed admission in its answer where it affirmed that the fire “damaged or destroyed a portion of the 7^th floor of the insured building and more particularly a Hitachi elevator control panel.”

The petitioner argues that since at the time of the fire the building insured was worth ₱5,800,000.00, the private respondent should be considered its own insurer for the difference between that amount and the face value of the policy and should share pro rata in the loss sustained. Accordingly, the private respondent is entitled to an indemnity of only ₱67,629.31, the rest of the loss to be shouldered by it alone. In support of this contention, the petitioner cites Condition 17 of the policy, which provides: xxx. However, there is no evidence on record that the building was worth ₱5,800,000.00 at the time of the loss; only the petitioner says so and it does not back up its self-serving estimate with any independent corroboration. On the contrary, the building was insured at ₱2,500,000.00, and this must be considered, by agreement of the insurer and the insured, the actual value of the property insured on the day the fire occurred. This valuation becomes even more believable if it is remembered that at the time the building was burned it was still under construction and not yet completed.

As defined in the aforestated provision, which is not Section 60 of the Insurance Code,” and open policy is one which the value of the thing insured is not agreed upon but is left to be ascertained in case of loss.” This means that the actual loss, as determined will represent the total indemnity due the insured from the insurer except only that the total indemnity shall not be exceed the face value of the policy.

The actual loss has been ascertained in this case and, to repeat, this Court will respect such factual determination in the absence of proof that it was arrived at arbitrarily. There is no such showing. Hence, applying the open policy clause as expressly agreed upon by the parties in their contract we hold that the private respondent is entitled to the payment of indemnity under the said contract in the total amount of ₱508,867.00.

Tan vs. Court of Appeals (Insurance Law)

Tan vs. Court of Appeals

174 SCRA 403 (G.R. No. 48049)

June 29, 1989

Petitioners:       Emilio Tan, Juanito Tan, Alberto Tan and Arturo Tan

Respondent:     Court of Appeals and the Philippine American Life Insurance Company

J. Gutierrez Jr.:

FACTS:

On September 23, 1973, Tan Lee Siong, father of herein petitioner, applied for life insurance in the amount of ₱80,000.00 with respondent Philippine American Life Insurance Company. Said application was approved and Policy No. 1082467 was issued effective November 6, 1973, with petitioners the beneficiaries thereof.

On April 26, 1975, Tan Lee Siong died of Hepatoma. Petitioner then filed with respondent company their claim for the proceeds of the life insurance policy. However, in a letter dated September 11, 1975, respondent company denied petitioner’s claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Sion in his application for insurance the premium paid on the policy were thereupon refunded.

Petitioners filed on November 27, 1975, a complaint against the former with the Office of the Insurance Commissioner.

The Petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

ISSUE:

Whether the respondent company had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action.

HELD:

Yes. The [Petitioner’s] contention is without merit. The so-called “incontestability clause” precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insurer’s lifetime. The phrase “during the lifetime” found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is “for a period of two years.”

As noted by the Court of Appeals, to wit: “The policy was issued on November 6, 1973 and the insured died on April 26, 1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured’s fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27, 1975.”

The insurer has two years from the date of insurance contract or of its last reinstatement within which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The petitioners interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts.

Great Pacific Life Assurance Company vs. Court of Appeals 89 SCRA 543 (Insurance Law)

Great Pacific Life Assurance Company vs. Court of Appeals

89 SCRA 543 (G.R. No. L-31845 and L-31878)

April 30, 1979

Petitioners:       Great Pacific Life Assurance Company (G.R. No. L-31845), Lapulapu Mondragon (G.R. No. L-31878)

Respondent:     Court of Appeals (both in G.R. No. L-31845 and L-31878), Ngo Hing (G.R. No. L-31878)

J. De Castro:

FACTS:

On March 4, 1957 respondent Ngo Hing filed an application with the Great Pacific Life Assurance Company for twenty-year endowment policy for ₱50,000.00 on the life of his one-year old Helen Go.

Upon payment of the insurance premium, a binding deposit receipt was issued to Hing by the branch manager of the insurer in Cebu.

On May 28, 1957, the child died of influenza with complication of broncho pneumonia.

ISSUE:

Whether the binding deposit receipt constituted a temporary contract of the life insurance in question.

HELD:

No. The provisions printed on the Binding Receipt show that the binding deposit receipt is intended to be merely a provisional or temporary insurance contract and only upon compliance of the following conditions:

1.  That the company shall be satisfied that the applicant was insurable on standard rates;

2.  That if the company does not accept the application and offers to issue a policy for different plan, the insurance contract shall not be binding until the applicant accepts the policy offered; otherwise the deposit shall be refunded; and

3.  That if the applicant is not insurable according to the standard rates, and the company disapproves the application, the insurance applied for shall not be in force at any time, and the premium paid shall be returned to the applicant;

Clearly implied from the aforesaid conditions is that the binding deposit receipt in question is merely acknowledgment on behalf of the company, that the latter’s branch office had received from the applicant the insurance premium and had accepted the application subject for processing by the insurance premium and had accepted the application subject for processing by the insurance company; and that the latter will either approve or reject the same on the basis of whether or not the applicant is “insurable on standard rates.”

Since Pacific Life disapproved the insurance application of Hing, the binding deposit receipt in question had never become in force at any time.

Upon this premise, the binding deposit receipt is, manifestly, merely conditional and does not insure outright. As held by this court, where an agreement is made between the applicant and the agent no liability shall attach until the principal approves the risk and receipt is given by the agent. The acceptance is merely conditional and is subordinated to the act of the company in approving or rejecting the application. Thus, in life insurance, “a binding slip” or “binding receipt” does not insure by itself. (De Lim vs. Sun Life Assurance Company of Canada, 41 Phil. 264)

It bears repeating that through the intra-company communication of April 30, 1957, Pacific Life disapproved the insurance application in question on the ground that it is not offering the twenty-year endowment insurance policy to children less than seven years of age. What it offered instead is another plan known as the Juvenile Triple Action, which private respondent failed to accept.

In the absence of a meeting of the minds between Pacific Life and Hing over the 20 year endowment life insurance in the amount of ₱50,000.00 in favor of the latter’s one year old daughter, and with non-compliance of the above-quoted conditions stated in the disputed binding deposit receipt, there could have been no insurance contract duly perfected between them. Accordingly, the deposit paid by private respondent shall have to be refunded by Pacific Life.