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    PREMIUM: An Insurance Premium Is The Consideration Paid An Insurer For Undertaking To

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    Prudencio Ruiz Agacita
    1. An insurance premium must generally be paid in full for a policy to be valid. However, there are exceptions if the parties agreed to installment payments, a credit term was granted, or estoppel applies. 2. If only partial payment was made and the balance was paid after a loss, the policy is not valid unless an exemption applies. 3. A person cannot be held liable for unpaid premiums if the policy lapsed due to nonpayment, as the insurer's obligation ends when premiums are not paid.

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    PREMIUM: An Insurance Premium Is The Consideration Paid An Insurer For Undertaking To

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    Prudencio Ruiz Agacita
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    1. An insurance premium must generally be paid in full for a policy to be valid. However, there are exceptions if the parties agreed to installment payments, a credit term was granted, or estoppel applies. 2. If only partial payment was made and the balance was paid after a loss, the policy is not valid unless an exemption applies. 3. A person cannot be held liable for unpaid premiums if the policy lapsed due to nonpayment, as the insurer's obligation ends when premiums are not paid.

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    1. An insurance premium must generally be paid in full for a policy to be valid. However, there are exceptions if the parties agreed to installment payments, a credit term was granted, or estoppel applies. 2. If only partial payment was made and the balance was paid after a loss, the policy is not valid unless an exemption applies. 3. A person cannot be held liable for unpaid premiums if the policy lapsed due to nonpayment, as the insurer's obligation ends when premiums are not paid.

    Copyright:

    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
    Download as odt, pdf, or txt
    57 views3 pages

    PREMIUM: An Insurance Premium Is The Consideration Paid An Insurer For Undertaking To

    Uploaded by

    Prudencio Ruiz Agacita
    1. An insurance premium must generally be paid in full for a policy to be valid. However, there are exceptions if the parties agreed to installment payments, a credit term was granted, or estoppel applies. 2. If only partial payment was made and the balance was paid after a loss, the policy is not valid unless an exemption applies. 3. A person cannot be held liable for unpaid premiums if the policy lapsed due to nonpayment, as the insurer's obligation ends when premiums are not paid.

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    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
    Download as odt, pdf, or txt
    of 3

    PREMIUM: An insurance premium is the consideration paid an insurer for undertaking to

    indemnify the insured against the specified peril

    General Rule: Sec. 77. An insurer is entitled to payment of the premium as soon as the thing
    insured is exposed to the peril insured against.

    Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by


    an insurance company is valid and binding unless and until the premium thereof has been
    paid.

    Exemption:
    1. In the case of a life or an industrial life policy whenever the grace period provision applies.

    2. Sec. 79. An acknowledgment in a policy or contract of insurance or 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 the premium is actually paid.

    3. if the parties have agreed to the payment in installments of the premium and partial
    payment has been made at the time of loss, not only that. (Tuscany v CA)

    4. 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. (Tuscany v CA)

    Note: 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.

    5. Estoppel

    Return of Premium
    • when the thing is not exposed to the peril insured against
    • time policy: when the policy is returned before the expiration of the stipulated time
    • voidable contract which is subsequently annulled
    • annulment of contract on account of fraud or misrepresentation of the insurer or his  agent or on
    account of facts the existence of which the insured was ignorant of without his fault
    • when by any default of the insured other than actual fraud, the insurer never incurred liability
    under the policy
    • over-insurance by several insurers
    Cases:

    A. General Rule
    1. PHILIPPINE PHOENIX SURETY vs WOODWORK INC

    That “no contract of insurance issued by an insurance company is valid and binding unless
    and until the premium thereof has been paid, notwithstanding any agreement to the contrary.”
    Since the premium had not been paid, the policy must be deemed to have lapsed.

    Ruling:
    Under the insurance code, “no contract of insurance issued by an insurance company is valid
    and binding unless and until the premium thereof has been paid, notwithstanding any
    agreement to the contrary.”

    Since the premium had not been paid, the policy must be deemed to have lapsed. The non-
    payment of premiums does not merely suspend but put, an end to an insurance contract,
    since the time of the payment is peculiarly of the essence of the contract.

    2. TIBAY et al vs CA – May a fire insurance policy be valid, binding and enforceable upon
    mere partial payment of premium?

    Note: If the policy requires full payment = General Rule

    Where the premium has only been partially paid and the balance paid only after the peril
    insured against has occurred, the insurance contract did not take effect and the insured
    cannot collect at all on the policy.

    Ruling:
    Insurance is a contract whereby one undertakes for a consideration to indemnify another
    against loss, damage or liability arising from an unknown or contingent event. The
    consideration is the premium, which must be paid at the time and in the way and manner
    specified in the policy, and if not so paid, the policy will lapse and be forfeited by its own
    terms.

    Here, Since the Policy provides for payment of premium in full and no other indications
    relating to the exemptions of article 77 of the insurance code. Thus Accordingly, where the
    premium has only been partially paid and the balance paid only after the peril insured against
    has occurred, the insurance contract did not take effect and the insured cannot collect at all
    on the policy.
    3. Valenzuela vs CA – May a person be held liable for non payment of premium?

    Under Jurisprudence, the burden is on an insured to keep a policy in force by the payment of
    premiums, rather than on the insurer to exert every effort to prevent the insured from allowing
    a policy to elapse through a failure to make premium payments. The continuance of the
    insurer’s obligation is conditional upon the payment of premiums, so that no recovery can be
    had upon a lapsed policy, the contractual relation between the parties having ceased. "the
    non-payment of premiums does not merely suspend but puts an end to an insurance contract
    since the time of the payment is peculiarly of the essence of the contract."

    Here, Since admittedly the premiums have not been paid, the policies issued have lapsed.
    The insurance coverage did not go into effect or did not continue and the obligation of insurer
    ceased. Hence, the insurer which had no more liability under the lapsed and inexistent
    policies to demand, much less sue the insured for the unpaid premiums would be the height
    of injustice and unfair dealing.

    B. Exemption
    1. UCPB vs Masagana telemart

    Ruling: 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

    2. Tuscany v CA

    Ruling:
    While it may be true that under Section 77 of the Insurance Code, the parties may not agree
    to make the insurance contract valid and binding without payment of premiums, there is
    nothing in said section which suggests that the parties may not agree to allow payment of the
    premiums in installment, or to consider the contract as valid and binding upon payment of the
    first premium. Otherwise, we would allow the insurer to renege on its liability under the
    contract, had a loss incurred before completion of payment of the entire premium, despite its
    voluntary acceptance of partial payments, a result eschewed by a basic considerations of
    fairness and equity.

    C. Payment Using Check

    Ruling: In the instant case, the best evidence of such authority is the fact that petitioner
    accepted the check and issued the official receipt for the payment. It is, as well, bound by its
    agent’s acknowledgment of receipt of payment. And Under Art. 79 of the Insurance Code: An
    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 the premium is actually paid.

    Payment through agent: Authorized to receive in behalf of the insurance company which is
    due on such policy or contract of insurance

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