Ragaza, John Edward Kenneth M.

PREMIUM

Section 81. If a peril insured against has existed, and the insurer has been liable for any period,
however short, the insured is not entitled to return of premiums, so far as that particular risk is
concerned.

Where short period rate has been stipulated.

If a policy on which premium have been paid for a year is cancelled by the insurer before
the expiration of the year, it retains only a proportion of the annual premium that the expired time
bears to the entire time.

If the policy is cancelled by the insured, the pro rata return of premium will not be followed
if the policy stipulates a short period rate, in which case, the insured is entitled to return of the
premium in the proportion stipulated .

A short period rate clause appears in most fire policies.

Section 82. A person insured is entitled to a return of the premium when the contract is voidable,
and subsequently annulled under the provisions of the Civil Code; or on account of the fraud
or misrepresentation of the insurer, or of his agent, or on account of facts, or the existence of
which the insured was ignorant of without his fault; or when by any default of the insured other
than actual fraud, the insurer never incurred any liability under the policy.

A person insured is not entitled to a return of premium if the policy is annulled, rescinded or if
a claim is denied by reason of fraud.

Where the contract is voidable.

(1) Fraud of the insurer or his agent. – if the policy is induced by the fraud or
misrepresentation of the insurer, or his agent, the insured may, by timely action, rescind
the contract and demand the return of the premiums paid by him. (Sec. 78)
(2) Other grounds.- the insured is also entitled to a return of the premiums when the contract
is voidable “on account of facts, the existence of which the insured was ignorant without
his fault; or when, by any default of the insured other than actual fraud, the insurer never
incurred liability under the policy.” (Section. 82)

Example:

Where the insured pays insurance premiums on his vessel not knowing that it has
already been lost, he can recover back premiums so paid in the absence of stipulation in
the policy that the insurer will remain liable even if the vessel is already lost.
 (3) Fraud of the insured. – the insured is not entitiled to a return of the premium paid if the
policy is annuled by reason of fraud or misrepresentation of the insured.

Where insurenace is illegal

When the insurance is void because it is illegal, the general rule is that the premiums cannot
be recovered.

But if, in fact, the parties are not in pari delicto, the law will allow an innocent insured to
take again his premiums as when the insured was ignorant of the fact which rendered the insurance
illegal.

Section 83. In case of an over insurance by several insurers other than life, the insured is entitled
to a ratable return of the premium, proportioned to the amount by which the aggregate sum
insured in all the policies exceeds the insurable value of the thing at risk.

Where there is over-insurance.

In case of over-insurance by double insurance, the insurer is not liable for the total amount
of insurance taken, his liability being limited to the amount of the insurable interest on the property
insured. Hence he is not entitled to that portion of the premium corresponding to the excess of the
insurance over the insurable interest of the insured.

Basis of right to recover premiums.

With regard to return of premium for short, interest, over-insurance, and double insurance,
the basis is this:

1. Insurer could have been called to pay the whole sum insured. – If the insurer could at any
time, and under any conceivable circumstances, have been called on to pay the whole
premium is earned and there shall be no return;
2. Insurer could have been called to pay only part of the whole sum insured. – If, on the other
hand, he could never in any event have thus been called on to pay the whole, but only a
part of the amount of his subscription.

Section 84. An insurer may contract and accept payments, in addition to regular premium, for
the purpose of paying future premiums on the policy or to increase the benefits thereof.

The Insured is duty bound to make promp payment of only the insurance premiums due
under the policy.