Roque v.

Intermediate Appellate Court

G.R. No. L-66935 Nov. 11, 1985
Justice Gutierrez, Jr.
Facts: Isabela Roque (Roque of Isabela Roque Timber
Enterprises) hired the Manila Bay Lighterage Corp. (Manila
Bay) to load and carry its logs from Palawan to North Harbor,
Manila. The logs were insured with Pioneer Insurance and
Surety Corp. (Pioneer). The logs never reached Manila due to
certain circumstances (as alleged by Roque and found by the
appellate court), such as the fact that the barge was not
seaworthy that it developed a leak, that one of the hatches
were left open causing water to enter, and the absence of the
necessary cover of tarpaulin causing more water to enter the
barge. When Roque demanded payment from Pioneer, but the
latter refused on the ground that its liability depended upon the
Total Loss by Total Loss of Vessel Only. The trial court ruled
in favor of Roque in the civil complaint filed by the latter against
Pioneer, but the decision was reversed by the appellate court.
Issue:
WON in cases of marine insurance, there is a
warranty of seaworthiness by the cargo owner; WON the loss
of the cargo was due to perils of the sea, not perils of the ship.
Held:
Yes, there is. The liability of the insurance company is
governed by law. Section 113 of the Insurance Code provides
that In every marine insurance upon a ship or freight, or
freightage, or upon anything which is the subject of marine
insurance, a warranty is implied that the ship is seaworthy.
Hence, there can be no mistaking the fact that the term "cargo"
can be the subject of marine insurance and that once it is so
made, the implied warranty of seaworthiness immediately
attaches to whoever is insuring the cargo whether he be the
shipowner or not. Moreover, the fact that the unseaworthiness
of the ship was unknown to the insured is immaterial in
ordinary marine insurance and may not be used by him as a
defense in order to recover on the marine insurance policy.
As to the second issue, by applying Sec. 113 of the
Insurance Code, there is no doubt that the term 'perils of the
sea' extends only to losses caused by sea damage, or by the
violence of the elements, and does not embrace all losses
happening at sea; it is said to include only such losses as are
of extraordinary nature, or arise from some overwhelming
power, which cannot be guarded against by the ordinary
exertion of human skill and prudence. t is also the general rule
that everything which happens thru the inherent vice of the
thing, or by the act of the owners, master or shipper, shall not
be reputed a peril, if not otherwise borne in the policy. It must
be considered to be settled, furthermore, that a loss which, in
the ordinary course of events, results from the natural and
inevitable action of the sea, from the ordinary wear and tear of
the ship, or from the negligent failure of the ship's owner to
provide the vessel with proper equipment to convey the cargo
under ordinary conditions, is not a peril of the sea. Such a loss
is rather due to what has been aptly called the "peril of the
ship." The insurer undertakes to insure against perils of the sea
and similar perils, not against perils of the ship. Neither
barratry can be used as a ground by Roque. Barratry as
defined in American Insurance Law is "any willful misconduct
on the part of master or crew in pursuance of some unlawful or
fraudulent purpose without the consent of the owners, and to
the prejudice of the owner's interest." Barratry necessarily
requires a willful and intentional act in its commission. No
honest error of judgment or mere negligence, unless criminally
gross, can be barratry. In the case at bar, there is no finding
that the loss was occasioned by the willful or fraudulent acts of
the vessel's crew. There was only simple negligence or lack of
skill.

Malayan Insurance Co., Inc. vs. CA [G.R. No. L-36413, 26

September 1988]
Post under case digests, Commercial Law at Tuesday,
February 21, 2012 Posted by Schizophrenic Mind
Facts: Malayan Insurance Co. Inc. (MALAYAN) issued a
Private Car Comprehensive Policy covering a Willys jeep. The
insurance coverage was for "own damage" not to exceed
P600.00 and "third-party liability" in the amount of P20,000.00.
During the effectivity of the insurance policy, , the insured jeep,
while being driven by one Juan P. Campollo an employee of
the respondent San Leon Rice Mill, Inc., (SAN LEON) collided
with a passenger bus belonging to the respondent Pangasinan
Transportation Co., Inc. (PANTRANCO) at the national
highway in Barrio San Pedro, Rosales, Pangasinan, causing
damage to the insured vehicle and injuries to the driver, Juan
P. Campollo, and the respondent Martin C. Vallejos, who was
riding in the ill-fated jeep.
Martin C. Vallejos filed an action for damages against Sio
Choy, Malayan Insurance Co., Inc. and the PANTRANCO
before the Court of First Instance of Pangasinan. The trial court
rendered judgment holding Sio Choy, SAN LEON, and
MALAYAN jointly and severally liable. However, MALAYANs
liability will only be up to P20,000.
On appeal, CA affirmed the decision of the trial court. However,
it ruled that SAN LEON has no obligation to indemnify or
reimburse the petitioner insurance company for whatever
amount it has been ordered to pay on its policy, since the San
Leon Rice Mill, Inc. is not a privy to the contract of insurance
between Sio Choy and the insurance company.
MALAYAN appealed to the SC by way of review on certiorari.
Issues:
(1) Whether or not MALAYAN is solidarily liable to Vallejos,
along with Sio Choy and SAN LEON
(2) Whether or not MALAYAN is entitled to be reimbursed by
SAN LEON for whatever amount petitioner has been adjudged
to pay respondent Vallejos on its insurance policy.
Held:
(1) Only Sio Choy and SAN LEON are solidarily liable to
Vallejos for the award of damages. Sio Choy is liable as owner
of the jeep pursuant to Article 2184, while SAN LEON is liable
as the employer of the driver of the jeep at the time of the
accident pursuant to Art 2180.
MALAYANs liability, however, arose only out of the insurance
policy with Sio Choy. Petitioner as insurer of Sio Choy, is liable
to respondent Vallejos, but it cannot, as incorrectly held by the
trial court, be made "solidarily" liable with the two principal
tortfeasors namely respondents Sio Choy and SAN LEON.
(2) MALAYAN is entitled to be reimbursed. Upon payment of
the loss, the insurer is entitled to be subrogated pro tanto to
any right of action which the insured may have against the third
person whose negligence or wrongful act caused the loss.
When the insurance company pays for the loss, such payment
operates as an equitable assignment to the insurer of the
property and all remedies which the insured may have for the
recovery thereof. That right is not dependent upon , nor does it
grow out of any privity of contract or upon written assignment
of claim, and payment to the insured makes the insurer
assignee in equity.
http://coffeeafficionado.blogspot.com/2012/02/malayaninsurance-co-inc-vs-ca-gr-no-l.html

G.R. No. L-26827 June 29, 1984

AGAPITO GUTIERREZ, plaintiff-appellee,
vs. CAPITAL INSURANCE & SURETY CO., INC., defendantappellant.
Facts:
Capital Insurance & Surety Co., Inc. insured on December 7,
1961 for one year the jeepney of Agapito Gutierrez against
passenger and third-party liability. The passenger liability would
not exceed P5,000 for any one person.The policy provides in
item 13 that the authorized driver must be the holder of a valid
and subsisting professional driver's license. "A driver with an
expired Traffic Violation Receipt or expired Temporary
Operator's Permit is not considered an authorized driver." On
May 29, 1962, the insured jeepney had an accident at Buendia
Avenue, Makati, Rizal. As a result of said accident, a
passenger named Agatonico Ballega fell off the vehicle and
died. Teofilo Ventura, the jeepney driver, was duly licensed for
the years 1962 and 1963. However, at the time of the accident
he did not have the license. Instead, he had a carbon copy of a
traffic violation report (summons) issued by a policeman on
February 22, 1962, with the notation that he had committed the
violation: "Inattentive to driving (Inv. in accident) at 9:30
a.m., 2-22-62". The same traffic violation report, which served
as a receipt for his license, required him to report to Branch 8
of the traffic court at the corner of Arroceros and Concepcion
Streets, Manila at nine o'clock in the morning of March 2, 1962.
The TVR would "serve as a temporary operator's permit for 15
days from receipt hereof". It is indisputable that at the time of
the accident (May 29, 1962), Ventura was holding an "expired
Temporary Operator's Permit." Capital Insurance refused to
make any reimbursement with regard to Guttierez's payment to
the widow, hence he filed on October 14, 1963 in the city court
of Manila an action for specific performance and damages.
Insurance Company contended that paragraph 13 of the policy,
already cited, is decisive and controlling in this case. It plainly
provides, and we repeat, that "a driver with an expired Traffic
Violation Receipt or expired Temporary Operator's permit is not
considered an authorized driver within the meaning" of the
policy. Obviously, Ventura was not an authorized driver. His
temporary operator's permit had expired. The expiration bars
recovery under the policy. In liability insurance, "the parties are
bound by the terms of the policy and the right of insured to
recover is governed thereby" (44 C.J.S. 934)
Issue:
Whether an insurance covers a jeepney whose driver's traffic
violation report or temporary operator's permit had already
expired?
Rulling of the Court:
It was held that the following ruling has persuasive authority
with regards to Insurance:
Insurance; Automobile; When insurer exempt from liability;
Case at bar. The automobile insurance policy sued upon in
the instant case exempts the insurer company from liability for
any accident loss, damage or liability caused, sustained or
incurred while the vehicle is being driven by any person other
than an authorized driver.
The policy defines the term 'authorized driver' to be the insured
himself or any person driving on the insured's order or with his
permission provided he is permitted to drive under the
licensing laws.
In the given case, plaintiff's brother, who was at the wheel at
the time of the collision, did not have a valid license because
the one he had obtained had already expired and had not been

renewed as required by Section 31 of the Motor Vehicle Law.

That since he had renewed his license one week after the
accident, it did not cure the delinquency or revalidate the
license which had already expired (Syllabus, Tanco, Jr. vs. Phil.
Guaranty Co., 122 Phil. 709). Wherefore the case is against
Gutierrez.
VILLACORTA V. INSURANCE COMMISSION, PETITIONER AND
EMPIRE INSURANCE COMPANY, RESPONDENTS
G.R. NO. L-54171 OCTOBER 28, 1980
Case no. 44
FACTS: PETITIONER VILLACORTA HAD HER COLT LANCER CAR
INSURED WITH EMPIRE INSURANCE COMPANY AGAINST OWN
DAMAGE, THEFT AND 3RD PARTY LIABILITY. WHILE THE CAR WAS IN
THE REPAIR SHOP, ONE OF THE EMPLOYEES OF THE SAID REPAIR
SHOP TOOK IT OUT FOR A JOYRIDE AFTER WHICH IT FIGURED IN A
VEHICULAR ACCIDENT. THIS RESULTED TO THE DEATH OF THE
DRIVER AND SOME OF THE PASSENGERS AS WELL AS TO EXTENSIVE
DAMAGE TO THE CAR. VILLACORTA FILED A CLAIM FOR TOTAL LOSS
WITH THE SAID INSURANCE COMPANY. HOWEVER, IT DENIED THE
CLAIM ON THE GROUND THAT THE ACCIDENT DID NOT FALL WITHIN
THE PROVISIONS OF THE POLICY EITHER FOR THE OWN DAMAGE
OR THEFT COVERAGE, INVOKING THE POLICY PROVISION ON
AUTHORIZED DRIVER CLAUSE WHICH STATES THAT THE POLICY
LIMITS THE USE OF THE INSURED VEHICLE TO TWO (2) PERSONS
ONLY, NAMELY: THE INSURED HIMSELF OR ANY PERSON ON HIS
(INSURED'S) PERMISSION. THIS WAS UPHELD BY THE INSURANCE
COMMISSION FURTHER STATING THAT THE CAR WAS NOT STOLEN
AND THEREFORE NOT COVERED BY THE THEFT CLAUSE BECAUSE
IT IS NOT EVIDENT THAT THE PERSON WHO TOOK THE CAR FOR A
JOYRIDE INTENDS TO PERMANENTLY DEPRIVE THE INSURED OF HIS/
HER CAR.

ISSUE: WHETHER OR NOT THE INSURER COMPANY SHOULD PAY

THE SAID CLAIM.
RULING: YES. WHERE THE INSUREDS CAR IS WRONGFULLY TAKEN
WITHOUT THE INSUREDS CONSENT FROM THE CAR SERVICE AND
REPAIR SHOP TO WHOM IT HAD BEEN ENTRUSTED FOR CHECK-UP
AND REPAIRS (ASSUMING THAT SUCH TAKING WAS FOR A JOY RIDE,
IN THE COURSE OF WHICH IT WAS TOTALLY SMASHED IN AN
ACCIDENT), RESPONDENT INSURER IS LIABLE AND MUST PAY
INSURED FOR THE TOTAL LOSS OF THE INSURED VEHICLE UNDER
THE THEFT CLAUSE OF THE POLICY. ASSUMING, DESPITE THE
TOTALLY INADEQUATE EVIDENCE, THAT THE TAKING WAS
TEMPORARY AND FOR A JOY RIDE, THE COURT SUSTAINS AS THE
BETTER VIEW THAT WHICH HOLDS THAT WHEN A PERSON, EITHER
WITH THE OBJECT OF GOING TO A CERTAIN PLACE, OR LEARNING
HOW TO DRIVE, OR ENJOYING A FREE RIDE, TAKES POSSESSION OF
A VEHICLE BELONGING TO ANOTHER, WITHOUT THE CONSENT OF
ITS OWNER, HE IS GUILTY OF THEFT BECAUSE BY TAKING
POSSESSION OF THE PERSONAL PROPERTY BELONGING TO
ANOTHER AND USING IT, HIS INTENT TO GAIN IS EVIDENT SINCE HE
DERIVES THERE FROM UTILITY, SATISFACTION, ENJOYMENT AND
PLEASURE. ACCORDINGLY, THE APPEALED DECISION IS SET
ASIDE AND JUDGMENT IS HEREBY RENDERED SENTENCING PRIVATE
RESPONDENT TO PAY PETITIONER THE SUM OF P35,000.00 WITH
LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULL
PAYMENT IS MADE AND TO PAY THE COSTS OF SUIT.

Ng Gan Zee vs Asian Crusader Life Insurance

GR No. L-30685, may 30, 1983
Facts:
On May 12, 1962, Kwong Nam applied for a 20-year
endowment insurance on his life for the sum of P20,000.00,
with his wife, appellee Ng Gan Zee, as beneficiary. On the
same date, appellant, upon receipt of the required premium
from the insured, approved the application and issued the
corresponding policy.

Upon Kwong Nams death due to cancer of the liver with

metastasis, appellant denied the claim on the ground that the
answers given by the insured to the questions appearing in his
application for life insurance were untrue. Appellant further
maintains that when the insured was examined in connection
with his application for life insurance, he gave the appellants
medical examiner false and misleading information as to his
aliment and previous operation. Appellant argues that the
insureds statement in his application that a tumor hard and of
a hens egg size was removed during said operation,
constituted material concealment.
Issue:
Whether the insurance company, because of the insureds
representation, was mislead or deceived into entering the
contract.
Ruling:
No. It bears emphasis that Kwong Nam had informed the
appellants medical examiner that the tumor for which he was
operated on was associated with ulcer of the stomach and in
the absence of evidence that the insured had sufficient medical
knowledge as to enable him to distinguish between peptic ulcer
and a tumor, his statement should be construed as an
expression made in good faith of his belief as to the nature of
his ailment and operation. Thus, concealment exists where
the assured had knowledge of a fact material to the risk, and
honesty, good faith and fair dealing requires that he should
communicate it to the assurer, but he designedly and
intentionally withholds the same. Indeed kwong Nams
statement must be presumed to have been made by him
without knowledge of its incorrectness and without any
deliberate intent on his part to mislead the appellant.
Also, it has been held that where, upon the face of the
application, a question appears to be not answered at all or to
be imperfectly answered, and the insurer issued a policy
without any further inquiry, they waive the imperfection of the
answer and render the omission to answer more fully
immaterial.
Insular v Ebrado G.R. No. L-44059 October 28, 1977
Facts:
J. Martin:
Cristor Ebrado was issued by The Life Assurance Co., Ltd., a
policy for P5,882.00 with a rider for Accidental Death. He
designated Carponia T. Ebrado as the revocable beneficiary in
his policy. He referred to her as his wife.
Cristor was killed when he was hit by a failing branch of a tree.
Insular Life was made liable to pay the coverage in the total
amount of P11,745.73, representing the face value of the
policy in the amount of P5,882.00 plus the additional benefits
for accidental death.
Carponia T. Ebrado filed with the insurer a claim for the
proceeds as the designated beneficiary therein, although she
admited that she and the insured were merely living as
husband and wife without the benefit of marriage.
Pascuala Vda. de Ebrado also filed her claim as the widow of
the deceased insured. She asserts that she is the one entitled
to the insurance proceeds.
Insular commenced an action for Interpleader before the trial
court as to who should be given the proceeds. The court
declared Carponia as disqualified.
Issue: WON a common-law wife named as beneficiary in the
life insurance policy of a legally married man can claim the
proceeds in case of death of the latter?

Held: No. Petition

Ratio:
Section 50 of the Insurance Act which provides that "the
insurance shall be applied exclusively to the proper interest of
the person in whose name it is made"
The word "interest" highly suggests that the provision refers
only to the "insured" and not to the beneficiary, since a contract
of insurance is personal in character. Otherwise, the prohibitory
laws against illicit relationships especially on property and
descent will be rendered nugatory, as the same could easily be
circumvented by modes of insurance.
When not otherwise specifically provided for by the Insurance
Law, the contract of life insurance is governed by the general
rules of the civil law regulating contracts. And under Article
2012 of the same Code, any person who is forbidden from
receiving any donation under Article 739 cannot be named
beneficiary of a fife insurance policy by the person who cannot
make a donation to him. Common-law spouses are barred
from receiving donations from each other.
Article 739 provides that void donations are those made
between persons who were guilty of adultery or concubinage at
the time of donation.
There is every reason to hold that the bar in donations
between legitimate spouses and those between illegitimate
ones should be enforced in life insurance policies since the
same are based on similar consideration. So long as marriage
remains the threshold of family laws, reason and morality
dictate that the impediments imposed upon married couple
should likewise be imposed upon extra-marital relationship.
A conviction for adultery or concubinage isnt required exacted
before the disabilities mentioned in Article 739 may effectuate.
The article says that in the case referred to in No. 1, the action
for declaration of nullity may be brought by the spouse of the
donor or donee; and the guilty of the donee may be proved by
preponderance of evidence in the same action.
The underscored clause neatly conveys that no criminal
conviction for the offense is a condition precedent. The law
plainly states that the guilt of the party may be proved in the
same acting for declaration of nullity of donation. And, it would
be sufficient if evidence preponderates.
The insured was married to Pascuala Ebrado with whom she
has six legitimate children. He was also living in with his
common-law wife with whom he has two children.
Insular Life vs. Ebrado
80 SCRA 181
Facts:
> Buenaventura Ebrado was issued al life plan by Insular
Company. He designated Capriona as his beneficiary,
referring to her as his wife.
> The insured then died and Carponia tried to claim the
proceeds of the said plan.
> She admitted to being only the common law wife of the
insured.
> Pascuala, the legal wife, also filed a claim asserting her right
as the legal wife. The company then filed an action for
interpleader.
Issue:
Whether or not the common law wife named as beneficiary can
collect the proceeds.
Held:
NO.
The civil code prohibitions on donations made between
persons guilty of adulterous concubinage applies to insurance

contracts. On matters not specifically provided for by the

Insurance Law, the general rules on Civil law shall apply. A life
insurance policy is no different from a civil donation as far as
the beneficiary is concerned, since both are founded on
liberality.
Why was the common law wife not ed to collect the
proceeds despite the fact that she was the beneficiary?
Isnt this against Sec. 53?
It is true that SC went against Sec. 53. However, Sec. 53 is
NOT the only provision that the SC had to consider. Art. 739
and 2012 of CC prohibit persons who are guilty of adultery or
concubinage from being beneficiaries of the life insurance
policies of the persons with whom they committed adultery or
concubinage. If the SC used only Sec. 53, it would have gone
against Art. 739 and 2012.
Grepalife v. CA
89 SCRA 543
Facts:
> On March 14, 1957, respondent Ngo Hing filed an
application with Grepalife for a 20-yr endowment policy for 50T
on the life of his one year old daughter Helen Go.
> All the essential data regarding Helen was supplied by Ngo
to Lapu-Lapu Mondragon, the branch manager of GrepalifeCebu. Mondragon then typed the data on the application form
which was later signed by Ngo.
> Ngo then paid the insurance premium and a binding deposit
receipt was issued to him. The binding receipt contained the
following provision: If the applicant shall not have been
insurable xxx and the Company declines to approve the
application, the insurance applied for shall not have been in
force at any time and the sum paid shall be returned to the
applicant upon the surrender of this receipt.
> Mondragon wrote on the bottom of the application form his
strong recommendation for the approval of the insurance
application.
> On Apr 30, 1957, Mondragon received a letter from
Grepalife Main office disapproving the insurance application of
Ngo for the simple reason that the 20yr endowment plan is not
available for minors below 7 yrs old.
> Mondragon wrote back the main office again strongly
recommending the approval of the endowment plan on the life
of Helen, adding that Grepalife was the only insurance
company NOT selling endowment plans to children.
> On may 1957, Helen died of influenza with complication of
broncho pneumonia. Ngo filed a claim with Gepalife, but the
latter denied liability on the ground that there was no contract
between the insurer and the insured and a binding receipt is
NOT evidence of such contract.
Issue:
Whether or not the binding deposit receipt, constituted a
temporary contract of life insurance.
Held:
NO.
The binding receipt in question was merely an
acknowledgement on behalf of the company, that the latters
branch office had received from the applicant, 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 Grepalife disapproved the insurance application of Ngo,
the binding deposit receipt had never became on force at any
time, pursuant to par. E of the said receipt. A binding receipt is
manifestly merely conditional and does NOT insure outright.
Where an agreement is made between the applicant and the

agent, NO liability shall attach until the principal approves the

risk and a 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.
PHILIPPINE PHOENIX SURETY & INSURANCE
COMPANY, vs. WOODWORKS, INC. G.R. No. L-25317
August 6, 1979
PHILIPPINE PHOENIX SURETY & INSURANCE
COMPANY, vs.
WOODWORKS, INC.
G.R. No. L-25317 August 6, 1979
FIRST DIVISION
MELENCIO-HERRERA, J.:
FACTS:
Upon WOODWORKSs application, PHIL. PHOENIX issued in
its favor a fire insurance policy whereby PHIL. PHOENIX
insured WOODWORKS building, machinery and equipment for
a term of one year from against loss by fire. The premium and
other charges amounted to P10,593.36.
It is undisputed that WOODWORKS did not pay the premium
stipulated in the Policy when it was issued nor at any time
thereafter.
Before the expiration of the one-year term, PHIL. PHOENIX
notified WOODWORKS of the cancellation of the Policy
allegedly upon request of WOODWORKS. The latter has
denied having made such a request. PHIL. PHOENIX credited
WOODWORKS with the amount of P3,110.25 for the unexpired
period of 94 days, and claimed the balance of P7,483.11
representing , earned premium. Thereafter, PHIL. PHOENIX
demanded in writing for the payment of said amount.
WOODWORKS disclaimed any liability contending, in essence,
that it need not pay premium because the Insurer did not
stand liable for any indemnity during the period the premiums
were not paid.
For this reason, PHIL. PHOENIX commenced action in the CFI
of Manila. Judgment was rendered in PHIL. PHOENIXs favor .
From this adverse Decision, WOODWORKS appealed to the
Court of Appeals which certified the case to SC on a question
of law.
ISSUE:
May the insurer collect the earned premiums?
HELD:
NO. The Courts findings are buttressed by Section 77 of the
Insurance Code (Presidential Decree No. 612, promulgated on
December 18, 1974), which now provides 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.
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.
In fact, if the peril insured against had occurred, PHIL.
PHOENIX, as insurer, would have had a valid defense against
recovery under the Policy it had issued. Explicit in the Policy
itself is PHIL. PHOENIXs agreement to indemnify
WOODWORKS for loss by fire only after payment of
premium, Compliance by the insured with the terms of the
contract is a condition precedent to the right of recovery.
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 insurers 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.
Moreover, an insurer cannot treat a contract as valid for the
purpose of collecting premiums and invalid for the purpose of
indemnity.
DISPOSITION:
The judgment appealed from was reversed, and PHIL.
PHOENIXs complaint dismissed.
Insurance Case Digest: Philippine Phoenix Surety &
Insurance Co. v. Woodworks Inc (1979)
G.R. No. L-25317 August 6, 1979
Lessons Applicable: Estoppel and credit extension (Insurance)
Laws Applicable: Section 77 of the Insurance Code
FACTS:

July 21, 1960: Woodworks, Inc. was issued a fire

policy for its building machinery and
equipment by Philippine Phoenix Surety & Insurance
Co. for P500K covering July 21, 1960 to July 21,
1961. Woodworks did not pay the premium totalling
to P10,593.36.

April 19, 1961: It was alleged that Woodworks notified

Philippine Phoenix the cancellation of the Policy
so Philippine Phoenix credited P3,110.25 for the
unexpired period of 94 days and demanded in writing
the payment of P7,483.11

Woodworks refused stating that it need not pay

premium "because the Insurer did not stand liable for
any indemnity during the period the premiums were
not paid."

Philippine Phoenix filed with the CFI to recover its

earned premium of P7,483.11

Woodworks: to pay the premium after the

issuance of the policy put an end to the
insurance contract and rendered the policy
unenforceable

CFI: favored Philippine Phoenix

ISSUE: W/N there was a valid insurance contract despite no
premium payment was paid
HELD: NO. Reversed

Policy provides for pre-payment of premium. To

constitute an extension of credit there must be a clear
and express agreement therefor and there nust be
acceptance of the extension - none here

Since the premium had not been paid, the policy must
be deemed to have lapsed.

failure to make a payment of a premium or

assessment at the time provided for, the policy shall
become void or forfeited, or the obligation of the
insurer shall cease, or words to like effect, because
the contract so prescribes and because such a
stipulation is a material and essential part of the
contract. This is true, for instance, in the case of life,
health and accident, fire and hail insurance policies

Explicit in the Policy itself is plaintiff's agreement to

indemnify defendant for loss by fire only "after
payment of premium" Compliance by the insured with
the terms of the contract is a condition precedent to
the right of recovery.

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.
o