CASE #28:

GENERAL INSURANCE AND SURETY CORPORATION v. NG HUA

G.R. No. L-14373
January 30, 1960
Bengzon, J.

Note: The aforesaid Policy No. 471 contains this stipulation on the back thereof;.
3. The insured shall give notice to the company of any insurance or insurances already affected, or which
may subsequently be effected, covering any of the property hereby insured, and unless such notice be
given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on
behalf of the Company before the occurrence of any loss or damage, all benefits under the policy shall
be forfeited.

Facts: Defendant General Insurance and Surety Corporation issued its insurance Policy No. 471, insuring
against fire, for one year, the stock in trade of the Central Pomade Factory owned by Ng Hua. The face
of the policy bore the annotation: "Co-Insurance Declared — NIL". The next day, the Pomade factory
building burned. Ng Hua claimed indemnity from the insurer. However, the defendant insurer refused to
pay for various reasons, namely (a) action was not filed in time; (b) violation of warranty; (c) submission
of fraudulent claim; and (f) failure to pay the premium.

It is undenied that Ng Hua had obtained fire insurance on the same goods, for the same period of time,
in the amount of P20,000.00 from General Indemnity Co. However, the Court of Appeals referring to the
annotation and overruling the defense, held that there was no violation of the policy.

Issue: Whether the General Insurance can refuse to pay the proceeds?

Held: Yes, the annotation must be deemed to be a warranty that the property was not insured by any
other policy. Violation thereof entitles the insurer to rescind. (Sec. 69. Insurance Act) Such
misrepresentation is fatal. The defendant insurer is free from liability because there is no question that
the policy issued by General Indemnity had not been stated in nor endorsed on Policy No. 471 of
defendant. And as stipulated in the above-quoted provisions of such policy "all benefit under this policy
shall be forfeited.”
Case #36:

PHILIPPINE PHOENIX SURETY & INSURANCE COMPANY v. WOODWORKS

G.R. No. L-25317
August 6, 1979
Melencio-Herrera, J.

Facts: Plaintiff issued in its favor Fire Insurance Policy No. 9749 for P500,000.00 whereby plaintiff
insured defendant's building, machinery and equipment for a term of one year against loss by fire. It is
undisputed that defendant 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, plaintiff notified defendant, of the cancellation of the Policy
allegedly upon request of defendant. The latter has denied having made such a request. Defendant,
through counsel, disclaimed any liability in its reply- letter contending, that it need not pay premium
"because the Insurer did not stand liable for any indemnity during the period the premiums were not
paid."

Plaintiff commenced action in the Court of First Instance, to recover the amount of P7,483.11 as "earned
premium." Defendant controverted on the theory that its failure "to pay the premium after the issuance
of the policy put an end to the insurance contract and rendered the policy unenforceable."

Issue: Whether there was valid fire insurance even if the premium stated in the policy has not been
paid?

Held: No, 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". "The premium 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."

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.

... the rule is that under policy provisions that upon the 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 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.