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:
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.