"TITLE 8

"PREMIUM
 
"Section 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed
to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of
insurance issued by an insurance company is valid and binding unless and until the premium thereof
has been paid, except in the case of a life or an industrial life policy whenever the grace period
provision applies, or whenever under the broker and agency agreements with duly licensed
intermediaries, a ninety (90)-day credit extension is given. No credit extension to a duly licensed
intermediary should exceed ninety (90) days from date of issuance of the policy
 
"Section 78. Employees of the Republic of the Philippines, including its political subdivisions and
instrumentalities, and government-owned or -controlled corporations, may pay their insurance
premiums and loan obligations through salary deduction: Provided, That the treasurer, cashier,
paymaster or official of the entity employing the government employee is authorized,
notwithstanding the provisions of any existing law, rules and regulations to the contrary, to make
deductions from the salary, wage or income of the latter pursuant to the agreement between the
insurer and the government employee and to remit such deductions to the insurer concerned, and
collect such reasonable fee for its services
 
o Premium is the agreed price for assuming and carrying risk, the consideration paid for
undertaking to indemnify insured against specified perils
 Where only one premium is paid for several things not separately valued or separately
insured, making for only one cause or consideration, the insurance contract is
indivisible (It is immaterial that they are transported separately)
o Assessment, is a sum specifically levied by mutual insurance companies upon a fixed and
definite plan to pay loses and expenses
 A policy issued on the assessment plan has been defined as one where the payment of
the benefit is in any manner dependent upon the collection of an assessment upon
persons holding similar policies
 Premiums and assessments are but contribution from all members of the insuring
organization to make good the losses of individual members, the distinction is that
premiums are collected and paid to meet anticipated losses while assessments are
collected to meet actual losses
 Assessments are legally enforceable once levied (unless otherwise agreed) while
premiums are not a debt (unless otherwise agreed as well)
o Payment of premium ordinarily not a debt or obligation
 In fire, casualty, and marine insurance, premium payable becomes a debt as soon as the
risk attaches, and in suretyship as soon as the contract is perfected ad delivered to
obligor
 Non-payment of the balance of the premium due does not produce the cancellation of
the contract in the sense that it can no longer be enforced
 When part was paid and the risk attached, insurer can demand the remaining like
specific performance of an obligation
 Where no premium was actually paid there was no policy and no demand of premiums
can be made
  Payment of the remaining balance after the loss does not make the insurance
enforceable because insurer did not acknowledge the contract's existence with only
the partial payment (even a stipulation to the contrary)
 Dissenting opinion, the law merely says payment of premium create an
obligation, it did not specify that it be in full
 Non-payment of the balance does NOT result in an automatic cancellation of the
insurance, it would place exclusively in one of the parties the right to decide whether
a contract should stand (violates mutuality)
 Payment so long as it is accepted becomes binding
 There is usually no duty assumed by the insurer to pay any premiums subsequent to the
first (Risks coverage though)
o Effect of non-payment of premiums
 Non-payment of the FIRST premium, unless waived, prevents the contract from
becoming binding
 Non-payment of the balance of the premium due does not produce cancellation
of the contract
 Non-payment of subsequent premiums does not affect the validity of the contract
unless by express stipulation it provides that the policy shall be suspended or lapses
 Life insurance allotted 30 days/a month within which to pay the premium
 Section 78 allows payment of government employees through salary deduction
o Excuses for non-payment of premiums
 Fortuitous events, will not prevent forfeiture of the policy when premium remains
unpaid
 Does not merely suspend but puts an end to the contract
 Condition, conduct or default of insurer, no excuse will avail to prevent forfeiture
EXCEPT only when the non-payment has been in some way been induced by the
condition or conduct of insurer
 Insurer has become insolvent
 When insurer falsely represent the contract as void
 Mere inaction or silence of insurer, not deemed to have waived his privilege of
forfeiture by mere inaction
 Insured has the privilege of continuing the policy by making premium payments,
insurer cannot ordinarily force insured to make these payments
o Validity of policy where credit extension is granted to insured
 The intention of the law is to put a contract of insurance (except life or industrial life
policies, or whenever the grace period applies) on a cash and carry basis so that the
premium be paid in cash for a nonlife insurance policy to be binding
 Section 77 merely precludes the parties from stipulating that the policy is valid even if
premiums are not paid, but does not expressly prohibit an agreement granting credit
extension
 There is no actual payment but is still valid because there is merely a waiver to
prepayment and there is a right to recover the premium due and unpaid
 Insurance other than life is not valid and binding until actual payment of the premium
 Credit extension by express agreement is void but if done by acknowledgment of receipt
of premiums the policy is valid
o When policy valid and binding notwithstanding non-payment of the premium (Exceptions to
77)
 Life or industrial policy where grace period applies
  Broker and agency agreements with duly licensed intermediaries (90 day extension is
given)
 Acknowledgment in a policy of receipt of a premium even if there is a stipulation that it
shall not be binding until premium actually paid
 An agreement allowing the insured to pay in installments and partial payment has been
made at the time of loss
 When there is an agreement to grant insured credit extension for the payment of the
period
 When estoppel bars the insurer from invoking section 77 to avoid recovery on a policy
providing a credit term for the payment
o If the credit extension exceeds 90 day from issuance then it should be deemed only for 90
days
 Receipt by insurer after expiration but before los renders insurance valid
 Where policy is issued there is a presumption that premiums have been paid
o Intention to keep valid the policy despite partial payment is important
o Receipt of premium is conclusive evidence of payment so as to make the policy binding
despite the fact it was not actually paid
 Meaning policy is active even if paid after the loss but within the credit period
o Dissenting opinion
 Credit arrangements have adverse effects on the integrity of legal reserve requirements
 Estoppel should not allow what public policy prohibits (that a policy is not active if no
premium)
o When insurance claim is fraudulent in character, then there should be no recovery (later
report so he can pay for the renewal first)
 Failure to give notice is material misrepresentation
o Purported credit by mere verbal understanding cannot amend the insurance policy
o Under estoppel, admission or representation is conclusive upon the person making it and
cannot be disproved as against the person relying on it, the only valid estoppel in premium
pre-payment is the conclusiveness of the acknowledgement in the policy of the receipt of
premiums
o There must be a clear and definite agreement to grant credit for it to count as an exception
to section 77
o Premium mut be paid in the manner prescribed in the policy as intended by the parties
 
 
"Section 79. An acknowledgment in a policy or contract of insurance or 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
 
o Effect of acknowledgement of receipt of premium in policy
 Insurer cannot deny truth of the receipt of the premium in an action against him even if
it is actually unpaid
 Conclusive presumption extends only to the question of the binding effect of the policy.
Insurer may still dispute acknowledgement but only for the purpose of recovering the
premium due and unpaid (277)
o Cases
  By accepting the promise of insured to pay the policy, the insurer implicitly agreed to
modify the tenor of the insurance policy and in effect waived the provision that it
would only pay loss or damage after the payment of the premium
 Even if the check later gets dishonored
o Effect of acceptance of premium
 Acceptance of premium including the agreed period of grace merely assures continued
effectivity of the policy in accordance with its terms
 Insurer can still set up a valid defense under the terms of the insurance policy
 
 
"Section 80. A person insured is entitled to a return of premium, as follows:
 
"(a) To the whole premium if no part of his interest in the thing insured be exposed to any of the
perils insured against;
 
"(b) Where the insurance is made for a definite period of time and the insured surrenders his policy,
to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a
short period rate has been agreed upon and appears on the face of the policy, after deducting from
the whole premium any claim for loss or damage under the policy which has previously accrued:
Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph
without sufficient cause as otherwise provided by law
 
"Section 81. If a peril insured against has existed, and the insurer has been liable for any period,
however short, the insured is not entitled to return of premiums, so far as that particular risk is
concerned.
 
"Section 82. A person insured is entitled to a return of the premium when the contract is voidable,
and subsequently annulled under the provisions of the Civil Code; or on account of the fraud or
misrepresentation of the insurer, or of his agent, or on account of facts, or the existence of which the
insured was ignorant of without his fault; or when by any default of the insured other than actual
fraud, the insurer never incurred any liability under the policy.
 
"A person insured is not entitled to a return of premium if the policy is annulled, rescinded or if a
claim is denied by reason of fraud.
 
"Section 83. In case of an over insurance by several insurers other than life, the insured is entitled to a
ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all
the policies exceeds the insurable value of the thing at risk
 
o When insured is entitled to recover premiums
 When no part of the thing has been exposed to any of the perils insured against
 When insurance is for a definite period and the insured surrender his policy before the
termination thereof
 When the contract is voidable and subsequently annulled because of fraud or
misrepresentation of insurer or his agent
 When contract is voidable because of the existence of facts of which the insured was
ignorant without his fault
  When insured never incurred any liability under the policy because of default of insured
(other than fraud)
 When there is over-insurance
 When rescission is granted due to breach of contract by insurer
 1,3,4, and 5 entitles to the entire premium
 Cannot recover premiums you have not paid for
 Neither can insured claim from annulled or rescinded policy by reason of his
fraud
o Where risk has never attached
 No premium is due unless the risk attaches
 Can recover in the absence of fraud by insured
o Where approval of application or acceptance of policy absent
 No premium can be recovered because the insured cannot be held liable because no risk
attached
o Where loss occurs before the effective date
 Here the insurance never took effect and there is no property insured
 Hence the entire premium should be returned
o Insured and insurer become public enemies
 Justice requires that premium be paid after the declaration of war
 War abrogates the insurance contract with a public enemy
o When insured surrenders policy before termination
 Section 80b does not apply when
 Insurance is not for a definite period
 Where a short period rate is agreed upon
 Where it is a life insurance policy
 If insurance is for a definite period and insured cancels by surrendering his policy
(provided it is allowed by policy), the insured is entitled to recover premiums already
paid equivalent to the unexpired term
 There shall be a deduction from the WHOLE premium any claim for loss or damage
under the policy which has previously accrued
 Would have been able to recover 3/4 but deducted amount already paid for but
the total grew smaller after recovery before cancellation (not sure if limited to
destruction only)
o Where short period rate stipulated
 It is not pro rata for the remaining period but as agreed upon in a short period rate
clause which might not be pro rata
o Where risk has attached
 The whole premium must be considered earned and therefore cannot be apportioned in
case the risk terminates before the end of the term
 If a peril insured against has exited and the insurer has been liable for any period,
however short, the insured is not entitled to return of premiums so far as that
particular risk is concerned
 If insurer cancels after 2 days out of the 5 covered by insurance during voyage
cannot recover because it has already been exposed to the perils
 Where insurance is divisible, the premium paid for any particular risk is not earned until
it attaches
 Ship voyage divisibly insured in stages, can cancel the remaining if it did not
reach that stage yet because no risk attached
 o Where contract is voidable
 Fraud or misrepresentation by insurer or agent, the insured may by timely action rescind
the contract and demand the premiums paid
 Other grounds, still entitled to premiums when
 Voidable on account of facts the existence of which insured was ignorant
without his fault (vessel already lost)
 By any default of insured other than actual fraud that the insurer never incurred
liability under the policy
 Fraud of insured, not entitled to premium if annulled by reason of fraud or
misrepresentation of insured
o Where there is over-insurance
 Insurer is not liable for the total insurance taken, liability is limited to the amount of the
insurable interest
 Hence he is not entitled to that portion of premium corresponding the excess (pro
rata?)
o Where insurance is illegal
 If void because it is illegal the general rules is that premiums cannot be recovered
 But if parties are NOT in pari delicto the law will allow an innocent insured to take again
his premiums
 Must be ignorant in its illegality and belief induced by fraudulent statement of
insurer
o Basis of right to recover premiums
 If insurer COULD at any time been called on to pay the whole sum on which he has
received premium, in such case the hole premium is earned and there shall be no
return
 If insurer COULD have been called to pay only part of the whole sum he ought not retain
the proportion of the premium and must return the residue
o Right to recover as to life insurance
 Recovery of premiums paid in life insurance is not allowed if the insured surrenders his
policy because it is not a divisible contract
 There is no proper relation between the annual premium and the risk of assurance for
the year it was paid, each installment is in consideration of the entire life insurance
 Insured entitled to cash surrender value of his policy after three full annual premiums
have been paid (Sec. 233 and Sec. 236)
 
 
"Section 84. An insurer may contract and accept payments, in addition to regular premium, for the
purpose of paying future premiums on the policy or to increase the benefits thereof
 
o Payments in addition to regular premiums
 Insured is duty bound to make prompt payment of only the insurance premiums due
under the policy
 Insure MAY contract with insure where insured may make insurer accept payments in
addition to regular premiums for the purpose of pay future premiums on the policy
OR to increase the benefit thereof
 
 
"TITLE 9
 "LOSS
 
"Section 85. An agreement not to transfer the claim of the insured against the insurer after the loss has
happened, is void if made before the loss except as otherwise provided in the case of life insurance.
 
"Section 86. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril
insured against was the proximate cause, although a peril not contemplated by the contract may have
been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only
a remote cause.
 
"Section 87. An insurer is liable where the thing insured is rescued from a peril insured against that
would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not
insured against, which permanently deprives the insured of its possession, in whole or in part; or where
a loss is caused by efforts to rescue the thing insured from a peril insured against.
 
"Section 88. Where a peril is especially excepted in a contract of insurance, a loss, which would not have
occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril
which was not excepted.
 
"Section 89. An insurer is not liable for a loss caused by the willful act or through the connivance of the
insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.
 
"TITLE 10
"NOTICE OF LOSS
 
"Section 90. In case of loss upon an insurance against fire, an insurer is exonerated, if written notice
thereof be not given to him by an insured, or some person entitled to the benefit of the insurance,
without unnecessary delay. For other non-life insurance, the Commissioner may specify the period for
the submission of the notice of loss.
 
"Section 91. When a preliminary proof of loss is required by a policy, the insured is not bound to give
such proof as would be necessary in a court of justice; but it is sufficient for him to give the best
evidence which he has in his power at the time.
 
"Section 92. All defects in a notice of loss, or in preliminary proof thereof, which the insured might
remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of
objection, are waived.
 
"Section 93. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any
act of him, or if he omits to take objection promptly and specifically upon that ground.
 
"Section 94. If the policy requires, by way of preliminary proof of loss, the certificate or testimony of a
person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it,
and in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer
that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified or
testified.
 
"TITLE 11
"DOUBLE INSURANCE
 
"Section 95. A double insurance exists where the same person is insured by several insurers separately
in respect to the same subject and interest.
 
"Section 96. Where the insured in a policy other than life is over insured by double insurance:
 
"(a) The insured, unless the policy otherwise provides, may claim payment from the insurers in such
order as he may select, up to the amount for which the insurers are severally liable under their
respective contracts;
 
"(b) Where the policy under which the insured claims is a valued policy, any sum received by him under
any other policy shall be deducted from the value of the policy without regard to the actual value of the
subject matter insured;
 
"(c) Where the policy under which the insured claims is an unvalued policy, any sum received by him
under any policy shall be deducted against the full insurable value, for any sum received by him under
any policy;
 
"(d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of
the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers,
according to their right of contribution among themselves;
 
"(e) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in
proportion to the amount for which he is liable under his contract.
 
"TITLE 12
"REINSURANCE
 
"Section 97. A contract of reinsurance is one by which an insurer procures a third person to insure him
against loss or liability by reason of such original insurance.
 
"Section 98. Where an insurer obtains reinsurance, except under automatic reinsurance treaties, he
must communicate all the representations of the original insured, and also all the knowledge and
information he possesses, whether previously or subsequently acquired, which are material to the risk.
 
"Section 99. A reinsurance is presumed to be a contract of indemnity against liability, and not merely
against damage.
 
"Section 100. The original insured has no interest in a contract of reinsurance.