Case Summary (G.R. No. 119655)
Factual Background
Fortune issued Fire Insurance Policy No. 136171 covering the Tibays’ Makati residence for ₱600,000 (January 23, 1987–January 23, 1988). Violeta paid only ₱600 of the ₱2,983.50 premium on January 23, 1987. After complete destruction by fire on March 8, she paid the balance on March 10 and filed her claim the same day. The insurer’s adjuster requested documentation, which petitioners promptly furnished, but Fortune ultimately denied liability.
Procedural History
The trial court (July 19, 1990) held Fortune liable for ₱600,000 plus 6% interest and attorney’s fees. On appeal, the Court of Appeals (March 24, 1995) reversed, ordering only return of the full premium with 12% interest from March 10, 1987. Petitioners sought Supreme Court review.
Legal Provisions on Premium Payment
Under Section 77, no insurance contract is valid or binding “unless and until the premium thereof has been paid,” except life policies under grace period rules. Premium is the insurer’s consideration; its prompt and full payment maintains the policy in force.
Supreme Court’s Interpretation
The Court affirmed that full payment is a condition precedent. The explicit policy clause and Section 77 mandate that partial payment—even if accepted—does not bind the insurer. No “vinculum juris” arises until the entire premium is fully paid and receipted before the peril’s occurrence.
Analysis of Policy Provisions
Policy Condition No. 2 stipulates the contract “is not in force until the premium has been fully paid and duly receipted.” The “full payment” requirement cannot be waived by implication where the contract expressly so provides and was approved by the Insurance Commissioner.
Rejection of Countervailing Precedents
Prior decisions permitting partial-payment efficacy (Philippine Phoenix v. Woodworks; Makati Tuscany Condominium v. CA) involved either implied waiver by suing for the unpaid premium or express agreement to pay in installments. Here, no such waiver or installment arrangement exists;
...continue readingCase Syllabus (G.R. No. 119655)
Facts
- On January 22, 1987, Fortune Life and General Insurance Co., Inc. issued Fire Insurance Policy No. 136171 for ₱600,000 covering a two-storey residential building and contents at 5855 Zobel Street, Makati City (January 23, 1987–January 23, 1988).
- Insured paid only ₱600.00 of the ₱2,983.50 total premium on January 23, 1987, leaving a balance unpaid.
- On March 8, 1987, the building was completely destroyed by fire.
- Two days later (March 10, 1987), the insured paid the outstanding premium balance and filed a claim.
- Fortune’s adjuster, Goodwill Adjustment Services, Inc., requested documents; the insured signed a non-waiver agreement on March 28, 1987.
- On June 11, 1987, Fortune formally denied liability, citing Policy Condition No. 2 and Section 77 of the Insurance Code.
- Petitioners sued on March 3, 1988 for ₱600,000 indemnity plus interest, moral damages, and attorney’s fees.
Issue
- Whether a fire insurance policy becomes valid and enforceable when only part of the premium is paid before loss and the balance is tendered after the peril has occurred.
Policy Provisions
- Coverage: ₱600,000 for loss or damage by fire or lightning.
- Condition No. 2: “This policy … is not in force until the premium has been fully paid to and duly receipted by the Company …”
- No supplementary agreement to amend this prepayment requirement is effective.
- Partial payments accepted without full receipt are deemed deposits held in trust until full payment.
Applicable Insurance Code
- Section 77: “No policy … is valid and binding unless and unti