UCPB General Insurance Co. v.

Masagana Telamart
June 15,1999 | J. Pardo
Premium Payment
MND

DOCTRINE:
CASE SUMMARY: Masagana is insured by UPCB Gen. Insurance until May 22, 1992. Petitioner informed Masagana that its
insurance policies will not be renewed. A fire broke out in respondent’s property 22 days after its insurance has supposedly
expired. A month after the fire, it subsequently paid premiums to UCPB and claimed for indemnification the day after.
Petitioner returned the payments and rejected the respondent’s claim for recovery on the ground that the insurance
policies had expired and that the fire occurred before the tender of premium payment. Court ruled in favor of UCPB.

FACTS:
 Petitioner issued 5 insurance policies covering respondent’s various properties against fire, for the period of May
1991 to May 1992. It evaluated the policies and decided not to renew the respondent’s insurance policies.
o Petitioner advised the respondent’s broker Zuellig Insurance Brokers Inc of its intention not to renew
the policies. Gave a written notice to respondent on April 6, 1992.
 Fire razed through the property of Masagana in June 13, 1992.
 On July 13,1992, respondent presented to petitioner’s cashier 5 manager checks, amounting to a total of ~Php
225,000 as premium payment for the renewal of policies. It did not file a notice of loss on this day.
o The day after, it filed a claim for indemnification. However, the petitioner returned the checks and
rejected its claim for the reasons that the policies had expired and were not renewed, and that the fire
occurred before the tender of premium payment.
 Respondent filed a complaint before RTC for the recovery of ~Php 18.6 M representing the face value of the
policies covering respondent’s insuring the property razed by fire and attorney’s fees.
 Respondent filed a motion to dismiss but was denied. Petitioner appealed to the CA, but to no avail. CA affirmed
the decision of RTC on the following grounds:
o Previous practice was that Masagana was allowed a 60 to 90 day credit term for the renewal of its policies
(like a grace period)
o And that the acceptance of late payment indicates an understanding that payment could be made later.
 Hence, this appeal before the SC.

ISSUE: Whether the fire insurance policies issued to Masagana had expired on May 22, 1992 or had been renewd by an
implied credit arrangement, despite the actual premium payment being tendered on a date after the fire? The SC ruled in
this case that the petitioner is correct in denying the claims of Masagana.

RULING:
 According to the Insurance Code, an insurance policy, other than life, issued originally or on renewal, is not valid
until actual payment of the premium. Any agreement to the contrary is void.1 The parties may not agree
expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding
before actual payment.
o In this case, the premium payment for renewal of the policies was tendered on July 13, 1992, a month
after the fire happened. “The assured did not even give the insurer a notice of loss within a reasonable
time after occurrence of the fire.”

DISPOSITION: The Court reversed and set aside the decision of the CA. Respondent’s complaint is dismissed and
petitioner’s counterclaims thereto filed with the RTC. Without costs.

1
Section 77. See next case for provision. There is a discussion regarding its amendments.
NOTES: