Saturday, February 25, 2012

UCPB General Insurance Co. Inc. vs. Masagana Telemart Inc. [G.R. No. 137172, April 4, 2001]

Facts: Plaintiff obtained from defendant fire insurance policies on its property effective from May 1991 - 1992. On June 1992, plaintiff's properties were raged by fire. On the same date plaintiff tendered, and defendant accepted five checks as renewal premium payments for which a receipt was issued. Masagana made a claim which was denied. the checks were then returned to plaintiff. According to defendant, the claim cannot be entertained for properties were burned before the tender of premium. 

Issue: Whether or not section 77 of the insurance code must be strictly applied to petitioner’s advantage despite its practice of granting 60 to 70 day credit term for the payment of its premium 

Held: 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: 

SECTION 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. 

Tuscany case 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. Article 1306 of the Civil Code provides: 

ARTICLE 1306. The contracting parties may establish such stipulations clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. 

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 granted 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.

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