Saturday, March 2, 2019

[CASE DIGEST] UCPB GENERAL INSURANCE v. MASAGANA TELEMART, INC. (G.R. No. 137172)

April 4, 2001 

Ponente: Davide, Jr., C.J.

FACTS: 

Masagana Telemart filed a Motion for Reconsideration before the SC following the dismissal of its complaint against UCPB General Insurance in 1999 (see separate digest for the 1999 ruling). In its earlier ruling, the SC dismissed Masagana's complaint based on Sec. 77 of the Insurance Code. The SC held that Masagana's fire insurance policies were void because premiums were not paid upon renewal. Masagana, however, avers that:
  • the SC disregarded the findings of the trial court and the CA that the company has always had fire insurance policies with UCPB for many years, and that the insurance company regularly provided a 60- to 90-day credit term for renewal upon the expiration of said policies;
  • UCPB failed to send the notices of non-renewal within 45 days from the expiry dates of the policies; UCPB unconditionally accepted, and issued an official receipt for, the premium payment on July 13, 1992, which indicated UCPB's willingness to assume the risk despite only a 67.5% reinsurance coverage; and
  • UCPB did in fact appoint investigators to verify Masagana's claim as shown by the letter dated July 17, 1992.
RULING:  

SC granted Masagana's Motion for Reconsideration. As such, UCPB is ordered to (a) accept P225,753.95 as full payment of the premiums for the renewal of the five insurance policies on Masagana's properties; (2) pay Masagana P18,645,000.00 as indemnity for the burned properties covered by the renewal-replacement policies; and (c) pay 25% of the amount due as attorneys fees, P25,000.00 as litigation expenses, and costs of suit.




The Court held that the general rule as articulated in Sec. 77 of the Insurance Code is that prepayment of premiums is strictly required as a condition to the validity of the contract of insurance. But this is not absolute. The exceptions to the general rule are:

a)       in case of a life or industrial life policy (source: Art. 77, IC);
b)      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 (source: Art. 78, IC);
c)       Sec. 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 (source: Makati Tuscany Condominium Corporation vs. Court of Appeals);
d)      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 (source: Makati Tuscany Condominium Corporation vs. Court of Appeals); and
e)      estoppel, e.g., it would be unjust and inequitable if recovery on the policy would not be permitted against the insurance company which had consistently granted a 60- to 90-day credit term for the payment of premiums despite its full awareness of Sec. 77 (source: this is a new exception created by the SC by virtue of its ruling in this particular case).


DISSENTING OPINIONS


Vitug, J. (joined by J. Melo)

a)       Sec. 77 of the Insurance Code is an amendment of the old Sec. 72. The difference between the two is that the former does away with the phrase "unless there is a clear agreement to grant the insured credit extension of the premium due." As such, under the present law, the policy is not valid and binding unless and until the premium is paid.

b)      If the insurer wants to favor the insured by making the policy binding notwithstanding the non-payment of premium, a mere credit agreement would not be sufficient. The remedy would be for the insurer to acknowledge in the policy that premiums were paid although they were not, in which case the policy becomes binding because such acknowledgment is a conclusive evidence of payment of premium (Sec. 78). In the present case, there was no such acknowledgment from UCPB, which means Masagana's policies are considered expired and not renewed.

c)       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. A part payment of the premium, if accepted by the insurer, can thus perfect the contract and bring the parties into an obligatory relation. In the present case, no such payment was made.

d)      The fifth exception carved by the SC re: Sec. 77 of the Insurance Code disregards the synallagmatic nature of an insurance contract.





Pardo, J. (joined by J. Puno, J. Quisumbing, J. Melo)

a)       Masagana acted in bad faith when it surreptitiously tried to pay the overdue premiums before giving written notice to UCPB of the occurrence of the fire that razed the subject property. This failure to given notice of the fire immediately upon its occurrence blatantly showed the fraudulent character of its claim. Such act revealed a reprehensible disregard of the principle that insurance is a contract uberrima fides, the most abundant good faith.

b)      Another badge of fraud is that Masagana deviated from its previous practice of coursing its premium payments through its brokers. This time, Masagana went directly to UCPB and paid through its cashier with managers checks. Naturally, the cashier routinely accepted the premium payment because he had no written notice of the occurrence of the fire. Such fact was concealed by Masagana and not revealed to UCPB at the time of payment.

c)       The alleged practice of giving 60- to 90-day credit extension for payment of premiums was a disputed fact based on Masagana's own admission that nowhere in their policies was there a stipulation for such a credit arrangement. It must be stressed that a mere verbal understanding of Masagana that it has such a credit arrangement cannot amend an insurance policy. In insurance practice, amendments or even corrections to a policy are done by written endorsements or tickets appended to the policy.

d)      Masagana claims that the 60- to 90-day credit arrangements can be seen from the fact that the dates on the receipts issued by UCPB were beyond the expiration dates of the policies. However, it was established that such dates merely indicated the dates when UCPB issued said receipts and not the dates when Masagana actually forwarded the checks to its broker, Anson Insurance Agency, for payment to UCPB. Hence, what has been established was the grant of credit to the insurance brokers, not to the assured.
e)       
f)        Assuming arguendo that the 60- to 90 day-credit-term has been agreed between the parties, Masagana could not still invoke estoppel to back up its claim. Estoppel can not give validity to an act that is prohibited by law or against public policy. The actual payment of premiums is a condition precedent to the validity of an insurance contract other than life insurance policy. Any agreement to the contrary is void as against the law and public policy.

g)       In the insurance policy itself, it is indicated that the policy would not be binding on the insurer unless the premiums thereon had been paid in full. Pertinent provision: "It is hereby declared, agreed and warranted that this policy shall be deemed effective valid and binding upon the Company when the premiums thereof have actually been paid in full and duly acknowledged in a receipt signed by any authorized official or representative/agent of the Company in such manner as provided herein." In the present case, there was no clear and definite agreement between petitioner and respondent on the grant of a credit extension; neither was there partial payment of premiums.

h)      The use of the exceptional doctrine in Makati Tuscany Condominium Corp. vs. Court of Appeals in the present case is not warranted. In Tuscany, the Court held that the insurance policies were valid and binding because there was partial payment of the premiums and a clear understanding between the parties that they had intended the insurance policies to be binding and effective notwithstanding the staggered payment of the premiums. On the basis of equity and fairness, the Court ruled that there was a perfected contract of insurance upon the partial payment of the premiums, notwithstanding the provisions of Sec. 77 to the contrary. The Court 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. In the present case, the fact that no payment was made at all makes Tuscany completely inapplicable.