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UCPB GENERAL INSURANCE CO. INC. v. MASAGANA TELAMART

FACTS:

Plaintiff obtained five insurance policies from defendant for its properties in Pasay City and Manila. The policies were effective from 4:00 PM of May 22, 1991, to 4:00 PM of May 22, 1992. On June 13, 1992, the plaintiff's properties were destroyed by fire. On July 13, 1992, the plaintiff tendered payment of the renewal premiums to the defendant, who accepted the payment. However, on the same day, the defendant returned the payment and rejected the plaintiff's claim on the grounds that the policies had expired on May 22, 1992, and were not renewed for another term. The plaintiff filed this case seeking indemnification for the burned properties. The trial court allowed the plaintiff to consign the payment, declared the renewal policies effective, and ordered the defendant to pay indemnity. The Court of Appeals affirmed the judgment with modification. The Supreme Court reversed the decision, holding that the policies had not been renewed. The plaintiff filed a motion for reconsideration, claiming that the Supreme Court had made its own findings of fact inconsistent with those of the lower courts.

ISSUES:

  1. Main Issue

    • Whether the fire insurance policies issued covering the period from May 22, 1991, to May 22, 1992, were extended or renewed by an implied credit arrangement even though actual payment of the premium was tendered on a later date and after the occurrence of the fire risk insured against.

  2. Sub-Issue Raised by Respondent

    • Whether the principle of estoppel applies to Petitioner due to its habitual acceptance of late premium payments, thereby implicitly agreeing to a 60 to 90-day credit term for the premium payment.

RULING:

  1. Main Issue

    • The Supreme Court ruled that the fire insurance policies were renewed by operation of law because no valid notice of non-renewal was made within 45 days before May 22, 1992, and the premiums were paid within the customary 60 to 90-day credit term extended by the insurer. This practice was established as having been consistently observed by Petitioner with Respondent.

  2. Sub-Issue

    • The Supreme Court acknowledged the application of estoppel against Petitioner. The consistent extension of credit and acceptance of premium payments within 60 to 90 days from the effective dates of the policies resulted in an implied agreement modifying the insurance contract terms. Consequently, Petitioner could not invoke Section 77 of the Insurance Code to deny liability.

PRINCIPLES:

  1. Section 77 of the Insurance Code

    • An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. No policy or contract of insurance issued by an insurance company is valid and binding until the premium has been paid.

  2. Exceptions to Section 77 of the Insurance Code

    • Life or industrial life policies with a grace period.

    • Section 78, which provides that acknowledgment of premium payment in a policy is conclusive evidence of its payment.

    • Agreement on installment payments, as established in the Makati Tuscany Condominium Corporation v. Court of Appeals case.

    • Credit extension agreed upon by the parties for the payment of premiums.

    • The doctrine of estoppel, preventing an insurer from denying liability if it has consistently granted a credit term for premium payments.

  3. Article 1306 of the Civil Code

    • Contracting parties may establish any stipulations, clauses, terms, and conditions they deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.