Jaime T

Jaime T. Gaisano v. Development Insurance and Surety Corp.
G.R. No. 190702, [February 27, 2017], 806 PHIL 450-465

Doctrine:
The general rule in insurance laws is that unless the premium is paid, the
insurance policy is not valid and binding.
Facts:
Gaisano was the registered owner of a 1992 Mitsubishi Montero with plate
number GTJ-777, while respondent, Development Insurance and Surety
Corporation, is a domestic corporation engaged in the insurance business.
On September 27, 1996, respondent issued a comprehensive commercial
vehicle policy to petitioner in the amount of Php 1,500,000.00 over the said
vehicle for a period of one year commencing on September 27, 1996 up to
September 27, 1997.
Respondent also issued two other commercial vehicle policies to petitioner
covering two other motor vehicles for the same period.
To collect the premiums and other charges on the policies, respondent's
agent, Trans-Pacific Underwriters Agency, issued a statement of account to
petitioner's company, Noah's Ark Merchandising.
Noah's Ark immediately processed the payments and issued a Far East Bank
check dated September 27, 1996 payable to Trans-Pacific on the same day. The
check bearing the amount of P140,893.50 represents payment for the three
insurance policies, with P55,620.60 for the premium and other charges over the
vehicle. However, nobody from Trans-Pacific picked up the check that day,
September 27, because their president and general manager, Rolando Herradura,
was celebrating his birthday. Trans-Pacific informed Noah's Ark that its messenger
would get the check the next day, September 28.
In the evening of September 27, 1996, while under the official custody of
Noah's Ark marketing manager Achilles Pacquing as a service company vehicle,
the vehicle was stolen in the vicinity of SM Megamall at Ortigas, Mandaluyong
City. Pacquing reported the loss to the Philippine National Police Traffic
Management Command at Camp Crame in Quezon City. Despite search and
retrieval efforts, the vehicle was not recovered.
Without knowledge of the incident, Trans-Pacific picked up the check the
next day, September 28. It issued an official receipt numbered 124713 dated
September 28, 1996, acknowledging the receipt of Php 55,620.60 for the
premium and other charges over the vehicle. The check issued to Trans Pacific for
Pl40,893.50 was deposited with Metrobank for encashment on October 1, 1996.
After the incident, Pacquing informed Gaisano about the vehicle’s loss. The
petitioner reported the incident and filed for a claim with the respondent for the
insurance proceeds of Php 1,500,000.00. After investigation, respondent denied
petitioner’s claim on the ground that there was no insurance contract on the day
of the loss or incident.
Issue:
Whether there is a binding insurance contract between the petitioner and
respondent.
Ruling:
The court denied the petition.
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. Just like any other contract, it requires a cause or consideration.
The consideration is the premium, which must be paid at the time and in the way
and manner specified in the policy. If not so paid, the policy will lapse and be
forfeited by its own terms. The law, however, limits the parties' autonomy as to
when payment of premium may be made for the contract to take effect.
The general rule in insurance laws is that unless the premium is paid, the
insurance policy is not valid and binding.
Section 77 of the Insurance Code, applicable at the time of the issuance of
the policy, provides:
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, except in
the case of a life or an industrial life policy whenever the grace period provision
applies.

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Jaime T. Gaisano v. Development Insurance and Surety Corp.

G.R. No. 190702, [February 27, 2017], 806 PHIL 450-465

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