AMERICAN HOME ASSURANCE CO.

VS CHUA(309 SCRA 250,1999)

FACTS
On April 6, 1990, Moonlight Enterprises, respondents business establishment, was razed by
fire. Respondent then filed an insurance claim with petitioner and four other co-
insurers. Petitioner refused to honor the claim, thus prompting respondent to file an action. In its
defense, petitioner claimed that there was no existing insurance contract when the fire occurred
since respondent did not pay the premium. It alleged that even assuming there was a contract,
respondent violated several conditions of the policy. The trial court ruled in favor of
respondent. This was affirmed in toto by the Court of Appeals. Its motion for reconsideration
having been denied, petitioner filed this petition.

ISSUE
WON there was a valid payment of premium, considering that respondents check was cashed
after the occurrence of the fire.

RULING
YES.
The general rule in insurance laws is that unless the premium is paid the insurance policy is not
valid and binding. The only exceptions are life and industrial life insurance. Whether payment
was indeed made is a question of fact which is best determined by the trial court. Here, the trial
court found, as affirmed by the Court of Appeals, that there was a valid check payment by
respondent to petitioner. Well-settled is the rule that the factual findings and conclusions of the
trial court and the Court of Appeals are entitled to great weight and respect, and will not be
disturbed on appeal in the absence of any clear showing that the trial court overlooked certain facts
or circumstances which would substantially affect the disposition of the case.
Petitioner accepted the check and issued an official receipt for the payment. Its agent
acknowledged receipt of payment. An acknowledgement of the receipt of premium is conclusive
evidence of its payment, so far as to make the policy binding. Section 78 of the Insurance Code
explicitly provides:

An acknowledgment in a policy or contract of insurance of the receipt of premium is

conclusive evidence of its payment, so far as to make the policy binding, notwithstanding
any stipulation therein that it shall not be binding until the premium is actually paid.

This Section establishes a legal fiction of payment and should be interpreted as an exception to
Section 77.