V.

Policy
 Forms of Insurance Policies Facts:
 Riders in an insurance policy 1) Petitioner Jaime T. Gaisano was the registered owner of a
 Concept of vauled vs. open vs. running policies 1992 Mitsubishi Montero with plate number GTJ-777

 Agreement limiting the period of action
VI. Premium
 Nature and necessity of premium in insurance
2) On September 27, 1996, Respondent Development
contracts
 Effect of non-payment of premiums
 Instances when insured has the right to
recover premiums
Jaime T. Gaisano vs. Development Insurance and Surety
Corp., G.R. No. 190702, Feb. 27, 2017
Petitioner: Jaime T. Gaisano (insured)
Respondent: Development Insurance and Surety Corporation
(insurer)
- while Respondent Development Insurance and
Surety Corporation is a domestic corporation engaged
in the insurance business.
Insurance and Surety Corporation issued a
Comprehensive Commercial Vehicle Policy to Petitioner
Gaisano
- in the amount of P1.5M over the vehicle for a period
of one year commencing on September 27, 1996.
- Respondent Development Insurance and Surety
Corporation also issued two other commercial
vehicle policies to Petitioner Gaisano covering two
other motor vehicles for the same period.

3) Respondent Development Insurance and Surety

“The general rule in insurance laws is that unless the premium is
paid, the insurance policy is not valid and binding.
Section 77 of the Insurance Code, applicable at the time of the
issuance of the policy, provides:
Sec. 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.”
Corporation
- collects the premiums and other charges on the
policies, through their agent Trans-Pacific
- Trans-Pacific issued a statement of account to
Petitioner Gaisano’s company, Noah's Ark.
o Noah's Ark immediately processed the
payments and issued a Far East Bank check
dated September 27, 1996 payable to Trans-
Pacific on the same day. 

1
 o The check bearing the amount of P140,893.50
that represents payment for the three insurance
policies, with P55,620.60 for the PREMIUM and
other charges over the vehicle.
o However, NOBODY from Trans-Pacific picked up
the check that day (September 27) because
Trans-Pacific president celebrating his
birthday.
o Trans-Pacific informed Noah's Ark Company that
its messenger would get the check the next
day, September 28.
4) In the evening of September 27, 1996, while under the
official custody of Noah's Ark marketing manager
Achilles Pacquing as a service company vehicle,
- the insured vehicle was stolen in the vicinity of SM.
- Achilles Pacquing reported the loss and despite search
and retrieval efforts, the vehicle was not recovered.
5) Unaware of the incident, Trans-Pacific picked up the check
the next day, September 28.
- Trans-Pacific issued an official receipt
acknowledging the receipt for the payment of
premium and other charges over the vehicle.
- The check issued to Trans-Pacific for P140,893.50 was
deposited with Metrobank for encashment on
October 1, 1996.
6) On October 1, 1996, Achilles Pacquing informed
Petitioner Gaisano of the vehicle's loss.
- Thereafter, Petitioner Gaisano reported the loss and
filed a claim with Respondent Development
Insurance and Surety Corporation for the insurance
proceeds of P1.5M. 
2
- After investigation, Respondent Development
Insurance and Surety Corporation DENIED the claim
on the ground that
o there was no insurance contract.
- The Respondent Development Insurance and Surety
Corporation asserted that the non-payment of the
premium rendered the policy ineffective.
- The premium was received by the Respondent
Development Insurance and Surety Corporation only
on October 2, 1996,
o Hence there was no known loss covered by the
policy to which the payment could be applied.
7) RTC ruled in favor of Petitioner Gaisano.
- Trial Court considered the premium paid as of
September 27, even if the check was received only on
September 28 because
(1) Respondent's agent, Trans-Pacific,
acknowledged payment of the premium on that
date, September 27, and
(2) the check that Gaisano issued was honored by
respondent in acknowledgment of the authority
of the agent to receive it.
- The RTC ruled that it would be unjust and
inequitable not to allow a recovery on the policy
while allowing respondent to retain the premium
paid.
8) CA: UPHELD Respondent Development Insurance and
Surety Corporation’s position that
- an insurance contract becomes valid and binding
only after the premium is paid pursuant to Section
77 of the Insurance Code.
 - It found that the premium was not yet paid at the
time of the loss on September 27,
o but only a day after or on September 28, 1996,
when the check was picked up by Trans-
Pacific. 
o CA also found that none of the exceptions to
Section 77 is applicable with this case.
o Nevertheless, the CA ordered Respondent
Insurance Company to return the premium it
received.
9) Hence Petitioner Jaime T. Gaisano filed this petition before
the Supreme Court. Gaisano argues that
- According to Gaisano, the principle of mutuality of
contracts is violated, at his expense, IF Respondent
Insurance Company is allowed to be excused from
performance on the insurance contract only for one
vehicle, but not as to the two others, just because no
loss is suffered as to the two.
- To allow this "would be to place exclusively in the hands
of one of the contracting parties the right to decide
whether the contract should stand or not x x x."
Issue: W/N there was an there a proper contract of insurance
between the petitioner and the respondent, despite the delays
incurred in the payment of the premiums?

- the prohibitive tenor of Section 77 does not apply Ruling: NO.

because the parties stipulated for the payment of Insurance is a contract whereby one undertakes for a
premiums. consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event.
- The parties intended the contract of insurance to be
immediately effective upon issuance, despite non-
payment of the premium, because respondent
trusted petitioner.
Just like any other contract, it requires a cause or
- He adds that Respondent Insurance Company waived
consideration.
its right to a pre-payment in full of the terms of the
policy, and is in estoppel. - The CONSIDERATION is the PREMIUM,
- which MUST BE PAID at the time and in the way and
10) Petitioner Jaime T. Gaisano also argues that assuming
manner specified in the policy.
he is not entitled to recover insurance proceeds, but only
- If not so paid, the policy will lapse and be forfeited
to the return of the premiums paid,
by its own terms.
- then Gaisano should be able to recover the full
GENERAL RULE in insurance laws is that UNLESS THE
amount of what he paid.
PREMIUM is paid, the insurance policy is not valid and
- The insurance policy covered three vehicles yet binding.
Respondent Insurance Company intention was
Section 77 of the Insurance Code, applicable at the time of the
merely to disregard the contract for only the lost
issuance of the policy, provides:
vehicle.

3
Sec. 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.
IN THE CASE AT BAR, There is no dispute that the check was
delivered to and was accepted by Respondent's agent,
Trans-Pacific, only on September 28, 1996.
No payment of premium had thus been made AT THE TIME
OF THE LOSS of the vehicle on September 27, 1996.
While Petitioner Gaisano claims that Trans-Pacific was
informed that the check was ready for pick-up on
September 27, 1996,
- the NOTICE of the availability of the check, by itself,
DOES NOT produce the effect of payment of the
premium.
Trans-Pacific could not be considered in delay in accepting the
check because when it informed Petitioner Gaisano that it
will only be able to pick-up the check the next day,
- Petitioner Gaisano did not protest to this, but
instead ALLOWED Trans-Pacific to do so.
- Thus, AT THE TIME OF LOSS, there was no payment
of premium yet to make the insurance policy
effective.
There are exceptions to the rule that no insurance contract
takes effect unless premium is paid.
4
1. Sec. 77: In case of a life or industrial life policy
whenever the grace period provision applies.
2. Sec. 78: where the insurer acknowledged in the policy
or contract of insurance itself the receipt of premium,
even if premium has not been actually paid
3. Makati Tuscany Condominium Corporation vs.
Court of Appeals: where the parties agreed that
premium payment shall be in installments and partial
payment has been made at the time of loss
4. The insurer may grant credit extension for the payment
of the premium. Where the insurer granted the insured
a credit term for the payment of the premium, and loss
occurs before the expiration of the term
5. Estoppel as when it has consistently granted a 60 to
90-day credit term for the payment of premiums.
Petitioner Gaisano FAILED TO ESTABLISH the fact of a grant
by Respondent Insurance Company of a credit term in his
favor, or that the grant has been consistent.
While there was mention of a credit agreement between Trans-
Pacific and Respondent Insurance Company,
- such arrangement was not proven and was internal
between agent and principal. 
- Under the principle of relativity of contracts, contracts
bind the parties who entered into it.
- It cannot favor or prejudice a third person, even if he
is aware of the contract and has acted with knowledge.
Thus the Petitioner Gaisano is not entitled to the insurance
proceed

Arce v. Capital Insurance & Surety Co., Inc., 117 SCRA 63
(1982)
Facts:
1) Pedro Arce owns a residential house,
- which has been insured with Capital Insurance and
Surety since 1961 under a Fire Policy.
2) In 1965, Capital Insurance
- sent Pedro Arce a Renewal Certificate to cover the
one-year period from December 5, 1965.
- Capital Insurance also REQUESTED payment of the
premium.
3) Pedro Arce anticipating that the premium could not be
paid on time,
- Arce promised to pay it but he was not able to fulfill
said promise.
- Arce’s house was totally destroyed by fire.
4) Two days later, Arce’s wife presented a claim for
indemnity,
- but she was told that no indemnity was due because
the premium was not paid.
5
5) Nonetheless, Capital Insurance tendered a check for
P300 as financial aid received by Arce's daughter
Evelina.
- The voucher which Arce’s wife signed stated that it
was in full settlement of the fire loss under the
policy.
- Capital Insurance reiterated that the check was given
NOT AS AN OBLIGATION but as a concession,
because the renewal premium had not been paid.
6) RTC: held that since the Capital Insurance
- could have demanded payment of the premium,
mutuality of obligation requires that it should also
be liable on its policy.
- The RTC also held that the INSURED Pedro Arce was
not bound by the signature of his wife on the check
voucher because he DID NOT AUTHORIZE her to
sign the waiver.
 
Issue: W/N Capital is obligated to satisfy the claim of Pedro
Arce despite the latter's failure to pay the premium? NO.
Held: Unless the premium is paid, there is no insurance; Capital is
NOT obligated to Pedro Arce.
1. Sec. 72 of the Insurance Act, as amended by R.A. No. 3540
reads:
SEC. 72. An insurer is entitled to payment of premium
as soon as the thing insured is exposed to the perils
insured against, unless there is clear agreement to grant
credit extension for the premium due. No policy issued
by an insurance company is valid and binding unless and
until the premium thereof has been paid.
2. The parties in this case had stipulated:
IT IS HEREBY DECLARED AND AGREED that not.
withstanding anything to the contrary contained in
the within policy, this insurance will be deemed
valid and binding upon the Company ONLY when
 the premium and documentary stamps therefor
have actually been paid in full and duly
acknowledged in an official receipt signed by an
authorized official/representative of the Company
1. It is obvious from both (1) the Insurance Act and (2)
the stipulation of the parties that time is of the essence
in respect of the payment of the insurance premium so
that if it is not paid the contract does not take effect
unless there is still another stipulation to the contrary.
- In the instant case, Pedro Arce was given a grace
period to pay the premium (promissory note) but the
period having expired with no payment made, he
cannot insist that Capital is nonetheless obligated to
him.
2. Prior to the amendment, an insurance contract was
effective even if the premium had not been paid so that
an insurer was obligated to pay indemnity in case of loss and
correlatively he had also the right to sue for payment of the
premium.
- But the amendment to Sec. 72 has radically changed
the legal regime in that unless the premium is paid
there is no insurance.
Sps. Antonio A. Tibay , et.al. vs. Court of Appeals ,et.al., G.R.
No. 119655.  May 24, 1996
Petitioner: Sps. Antonio A. Tibay and Violeta R. Tibay and Ofelia M.
Roraldo, Victorina M. Roraldo, Virgilio M. Roraldo, Myrna M. Roraldo
and rosabella m. Roraldo.
Respondent: Court Of Appeals and Fortune Life And General
Insurance Co., Inc..
Topic: Premiums
Doctrine:
SEC. 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
6
paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies
Facts:
1) Fortune Life and General Insurance Co., Inc. (Fortune)
- issued a Fire Insurance Policy in favor of Spouses
Violeta and/or Nicolas on their residential building
and all their personal belongings.
- The insurance was for P600K.
- On January 23, 1987, Violeta only paid P600 of the
P2983.50 premium.
2) The insured building of Spouses Tibay was destroyed by
fire.
- Two days after the fire Violeta PAID THE BALANCE
OF THE PREMIUM.
- On the same day, Violeta filed with Fortune a claim
on the Fire Insurance Policy.
3) Violeta’s claim was referred to Goodwill Adjustment
Services, Inc. (GASI).
- GASI requested the necessary documents for the
investigation and processing;
- Violeta complied.
- Violeta also signed a non-waiver agreement with
GASI.
4) Fortune DENIED the claim of Violeta
- for violation of Policy Condition No. 2 to which it
states: that policy provides for payment of premium
in full and
- Sec. 77: 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 of the Accordingly, where the premium has only been partially paid
Insurance Code. and the balance paid only after the peril insured against has
occurred,
- Efforts to settle the case before the Insurance
Commission proved futile. - the insurance contract did not take effect and the
5) Violeta and the other petitioners sued FORTUNE insured CANNOT collect at all on the policy. This is
INSURANCE fully supported by Sec. 77 of the Insurance Code which
provides
- for DAMAGES in the amount of P600K plus 12% interest
per annum, P100K moral damages, and 20% attorney’s SEC. 77. An insurer is entitled to payment of the premium as
fees. soon as the thing insured is exposed to the peril insured
against. Notwithstanding any agreement to the contrary, no
6) RTC: ruled for petitioners. policy or contract of insurance issued by an insurance company
7) CA: reversed the decision by declaring FORTUNE not to is valid and binding unless and until the premium thereof has
be liable but ordered them to return the premium. been paid, except in the case of a life or an industrial life policy
whenever the grace period provision applies
8) Hence this petition for review with petitioners
contending mainly Conformably with the aforesaid stipulations from the Policy
explicitly worded and taken in conjunction with Sec. 77 of
- that contrary to the conclusion of the appellate
the Insurance Code
court, FORTUNE remains liable under the subject
fire insurance policy in spite of the failure of - the payment of partial premium by the assured in
petitioners to pay their premium in full. this particular instance should not be considered
the payment required by the law and the stipulation
Issue
of the parties.
W/N partial payment of premium render the insurance policy - Rather, it must be taken in the concept of a deposit
ineffective? YES to be held in trust by the insurer until such time that the
Ruling: full amount has been tendered and duly receipted for.
- In other words, as expressly agreed upon in the
The Policy clearly provides for payment of premium in full stating contract, full payment must be made before the risk
that: occurs for the policy to be considered effective and
in force.
“This policy including any renewal thereof and/or any
endorsement thereon is not in force until the premium has - Thus, NO VINCULUM JURIS whereby the insurer
bound itself to indemnify the insured according to
been fully paid to and duly receipted by the Company in the
manner provided herein.” law ever arose from the fractional payment of
premium.

7
 - The insurance contract itself expressly provided that
the policy would be effective only when the premium was
paid in full.
In the construction of an insurance contract is the intention
of the parties as expressed in the policy.
- Courts have no other function but to enforce the
same.
Verily, it is elemental law that the payment of premium is
requisite to keep the policy of insurance in force.
- If the premium is not paid in the manner prescribed
in the policy as intended by the parties the policy is
ineffective.
- Partial payment even when accepted as a partial
payment will not keep the policy alive even for such
fractional part of the year as the part payment
bears to the whole payment.
UCPB Gen. Insurance Co. Inc. vs. Masagana Telamart, Inc.
G.R. No. 137172. April 4, 2001
Doctrine: If the insurer has granted the insured a credit term for
the payment of the premium and loss occurs before the expiration
of the term, recovery on the policy should be allowed even though
the premium is paid after the loss but within the credit term.
FACTS:
1) Masagana Telemart Inc obtained from defendant UCPB
Insurance
- five (5) insurance policies on its properties located
at Taft Avenue, Pasay.
2) All five (5) policies reflect on their face the effectivity term:
8
"from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May
1992."
3) On June 13, 1992, Masagana Telemart’s properties were
razed by fire.
4) On July 13, 1992, Masagana tendered payment
- and UCPB Insurance accepted, five (5) Equitable
Bank Manager's Checks as renewal premium
payments
- for which Official Receipt Direct Premium was issued
by UCPB Insurance.
5) Masagana made its formal demand for indemnification
for the burned insured properties.
6) On the same day, UCPB Insurance returned the five (5)
manger's checks stating in its letter that it was rejecting
Masagana Telemart’s claim on the following grounds:
a) Said policies expired last May 22, 1992 and were not
renewed for another term;
b) UCPB Insurance had put Masagana and its alleged
broker on notice of non-renewal earlier; and
c) The properties covered by the said policies were burned
in a fire that took place last June 13, 1992, or before
tender of premium payment."
ISSUE:
Whether Section 77 of the Insurance Code of 1978 (P.D. No. 1460)
must be strictly applied to Petitioner's advantage despite its
practice of granting a 60- to 90-day credit term for the payment of
premiums?
RULING:
NO. MASAGANA WINS THIS TIME. 1999 DECISION SET ASIDE; CA
DECISION AFFIRMED
SEC. 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.
This was formerly Act 2427, Section 72:
SEC. 72. An insurer is entitled to payment of premium as soon as
the thing insured is exposed to the peril insured against, unless
there is clear agreement to grant the insured credit
extension of the premium due. No policy issued by an
insurance company is valid and binding unless and until the
premium thereof has been paid.
The New IC 77 does not restate the portion of IC 72
expressly permitting an agreement to extend the period to
pay the premium.
However, there are exceptions to IC 77.
1. In case of a life or industrial life policy whenever the
grace period provision applies [Sec. 77]
2. Any acknowledgment of the receipt of premiums
conclusive evidence of payment [Sec. 78]
3. If the parties have agreed to the payment in
installments of the premium and partial payment has
been made at the time of loss [Makati Tuscany
Condominium v. CA]
4. The insurer may grant credit extension for the
payment of the premium [Makati Tuscany Condominium]
5. Estoppel
The New IC 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
9
extension, and such an agreement is not contrary to morals, good
customs, public order or public policy. [Makati Tuscany
Condominium v. CA]
ON EXCEPTION #4. If the INSURER has granted the insured a
credit term for the payment of the premium and loss occurs
before the expiration of the term,
- recovery on the policy should be allowed even
though the premium is paid after the loss but
within the credit term.
It would be unjust and inequitable if recovery on the policy
would not be permitted against UCPB, which UCPB had
consistently granted a 60-90-day credit term for the
payment of premiums despite its full awareness of IC 77.
Estoppel bars it from taking refuge under said section 77, since
Masagana relied in good faith on such practice.
NOTE: There was no valid notice of non-renewal of the
policies in question, as there is no proof at all that the notice
sent by ordinary mail was received by Respondent, and the
copy thereof allegedly sent to Zuellig was never transmitted
to Respondent.
FACTS FROM THE 1999 CASE:
1) In 1991, UCPB issued 5 insurance policies covering Masagana
Telamart’s various properties for the period from May 22,
1991 to May 22, 1992.
2) On March 1992 (2 months before policy expiration), UCPB
evaluated the policies and decided not to renew them
upon expiration of their terms on May 22, 1992.
- UCPB advised MAsagana’s broker of its intention
not to renew the policies.
 3) On April 1992 (1 month before policy expiration), UCPB gave
written notice to Masagana of the non-renewal of the
policies.
- On June 1992 (the policy already expired), Masagana’s
property covered by 3 UCPB-issued policies was razed
by fire.
4) On July 13, 1992, Masagana presented to UCPB’s cashier five
manager’s checks, representing premium for the renewal of
the policies for another year.
5) It was only on the following day, July 14, 1992, when
Masagana filed with UCPB a formal claim for indemnification of
the insured property razed by fire. On the same day, UCPB
returned the five manager’s checks, and rejected Masagana’s
claim since the policies had expired and were not renewed,
and the fire occurred on on June 13, 1992.
6) Masagana filed a civil suit for recovery of the face value of the
policies covering the insured property razed by fire.
7) RTC ruled in favor of Masagana, as it found it to have
complied with the obligation to pay the premium; hence, the
replacement-renewal policy of these policies are effective and
binding for another year (which was May 22, 1992 – May 22,
1993).
8) CA affirmed the RTC, holding that following previous practice,
Masagana was allowed a 60-90 day credit term for the
renewal of its policies, and that the acceptance of the late
premium payment suggested that payment could be made
later.
American Home Ass. Co. vs. Antonio Chua, G.R. No. 130421.
June 28, 1999
G.R. No. 150751; September 20, 2004
Petitioner: American Home Assurance Company
Respondent: Antonio Chua
Doctrine:
10
To constitute a violation the other existing insurance contracts
must be upon the same subject matter and with the same interest
and risk. Nonetheless, a party will be estopped from invoking this
given previous knowledge of the co-insurers.
FACTS:
1) Petitioner American Home Assurance Company (AHAC) is
a domestic corporation engaged in the insurance
business.  
- Sometime in 1990, respondent Antonio Chua
obtained from American Home a fire insurance
covering the
o stock-in-trade of his business , Moonlight
Enterprises at Valencia, Bukidnon.  
- The insurance was due to expire on 25 March
1990.
2) On 5 April 1990, Respondent Antonio Chua
- issued a PCI Bank Check to American Home’s
agent, James Uy, as payment for the renewal of the
policy.  
- In turn, the James Uy delivered a renewal
certificate to Chua.  
- The check was drawn against a Manila bank and
deposited in American Home’s bank account in
Cagayan de Oro City. 
- Subsequently, a new insurance policy was issued,
whereby American Home undertook to indemnify Chua
for any damage or loss arising from fire up
to P200,000 for the period 25 March 1990 to 25
March 1991.
3) On 6 April 1990, Moonlight Enterprises was completely
razed by fire.  
- Total loss was estimated between P4,000,000
and P5,000,000.  
 - Respondent Chua filed an insurance claim with
American Home and four other co-insurers, namely,
o Pioneer Insurance and Surety Corporation,
o Prudential Guarantee and Assurance, Inc.,
o Filipino Merchants Insurance Co. and Domestic
Insurance Company of the Philippines.   income tax returns for the years 1987 to 1989.  All
- American Home refused to honor the claim despite
several demands by Chua
- Thus Chua filed an action against petitioner before
the trial court.
4) In its defense, American Home claimed there was no
existing insurance contract when the fire occurred since
Chua DID NOT PAY THE PREMIUM.  
- American Home also alleged that even assuming
6) CA: affirmed RTC found that Respondent Antonio Chua’s
there was a contract, Chua violated several
conditions of the policy, particularly:  
(1) his submission of fraudulent income tax return and
financial statements;
7) American Home filed the petition reiterating its stand that
(2) his failure to establish the actual loss, which
petitioner assessed at P70,000; and
(3) his failure to notify to American Home of any
insurance already effected to cover the insured
goods.  These violations, petitioner insisted, justified
the denial of the claim.
renewal certificate issued by petitioner’s agent
James Uy
- RTC declared that the alleged fraudulent
documents were limited to the disparity between
the official receipts issued by the BIR and the
the other documents were found to be genuine.
- As to Respondent Antonio Chua’s failure to notify
American Home of the other insurance contracts
covering the same goods, the trial court held that
o American Home failed to show that such
omission was intentional and fraudulent.
Petitioner AHAC was made to pay 750,000 in
damages.
claim was substantially proved and American Home’s
unjustified refusal to pay the claim entitled Chua’ to the
award of damages.
there was no existing insurance contract between the
parties. 
- It invoked Section 77 of the Insurance Code, which
provides that no policy or contract of insurance
issued by an insurance company is valid and
binding unless and until the premium thereof has
been paid and

- cites the case of Arce v. Capital Insurance wherein the

court ruled that until the premium is paid there is no
insurance.
5) RTC: ruled in favor of respondent Chua.  It found that
ISSUES:
- Chua paid by way of check a day before the fire
1. W/N there was a valid payment of premium, considering that
occurred.  
respondent’s check was cashed after the occurrence of the fire
- The check, which was deposited in American Home’s
RULING:
bank account, was even acknowledged in the

11
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
1. life and
2. industrial life insurance.
Whether payment was indeed made is a question of fact which is
best determined by the trial court.   -
The trial court found, as affirmed by the Court of Appeals,
that there was a valid check payment by Antonio Chua to
American Home.   -
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.
According to the RTC the renewal certificate issued to Antonio
Chua
- contained the acknowledgment that premium had
been paid.  
In the instant case, the best evidence of such authority is the
fact that American Home accepted the check and issued the
official receipt for the payment.  American Home is bound by
its agent’s acknowledgment of receipt of payment.
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.
Makati Tuscany Condo. Corp. v. Court of Appeals, GR. No.
95546, 6 Nov. 1992
12
G.R. No. 95546; Nov. 06, 1992
Petitioner: Makati Tuscany Condo. Corp
Respondent: Court of Appeals and American Home Ass. Co.
Facts:
1) American Home Assurance Co represented by American
International Underwriters issued a policy in favor of
Makati Tuscany Condominium Corporation
with a total premium of P466,103.05.
- The company issued a replacement policy.
Premium was again paid.
In 1984, the policy was again renewed and
American International issued to Makati Tuscany
another policy.
- The petitioner paid 152,000 pesos then refused to
furnish the balance.
2) The American International Underwriters filed an action
to recover the unpaid balance of P314,103.05.
3) The Makati Tuscany’s administration explained that
- it discontinued the payment of premiums because
the policy did not contain a credit clause in its
favor and
- as well as the two (2) previous policies, stated the
following reservations:
o acceptance of premiums didn’t waive any of
the company rights to deny liability on any
claim under the policy arising before such
payments or after the expiration of the
credit clause of the policy
o Subject to no loss prior to premium
payment.
o If there be any loss such is not covered.
4) Makati Tuscany sought for a refund. 
5) RTC: dismissed the complaint and counterclaim owing to
the argument that
- PAYMENT OF THE PREMIUMS of the policies were
made during the lifetime or term of said policies,
so risk attached under the policies.
6) CA: ordered Makati Tuscany to pay the balance of the
premiums owing to the reason that it was part of an
indivisible obligation.
7) Makati Tuscany now asserts that its payment by
installment of the premiums for the insurance policies
invalidated them because of the provisions of Sec. 77 of
the Insurance Code disclaiming liability for loss for
occurring before payment of premiums
Issue:
Whether payment by installment of the premiums due on an
insurance policy invalidates the contract of insurance, in view of
Sec. 77 of P.D. 612?
Ruling: NO.
Sec. 77. An insurer is entitled to the payment of the premium as
soon as the thing 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.
Makati Tuscany concluded that there cannot be a perfected
contract of insurance upon mere partial payment of the
premiums because under Sec. 77 of the Insurance Code,
- no contract of insurance is valid and binding
unless the premium thereof has been paid,
notwithstanding any agreement to the contrary.
- As a consequence, Makati Tuscany’s seeks a refund
of all premium payments made on the alleged
invalid insurance policies.
We hold that the subject policies ARE VALID even if the
13
premiums were paid on installments.
The records clearly show that Makati Tuscany and American
Home Assurance Co intended subject insurance policies
- to be binding and effective notwithstanding the
staggered payment of the premiums.
- The initial insurance contract entered into in 1982
was renewed in 1983, then in 1984.
- In those three (3) years, the American Home
Assurance Co accepted all the installment
payments.
- Such acceptance of payments speaks loudly of the
insurer's intention to honor the policies it issued to
Makati Tuscany.
Quoting the CA decision:
“While the import of Section 77 is that prepayment of premiums is
strictly required as a condition to the validity of the contract, we
are not prepared to rule that the request to make
installment payments duly approved by the insurer, would
prevent the entire contract of insurance from going into
effect despite payment and acceptance of the initial
premium or first installment.
Section 78 of the Insurance Code in effect allows waiver by
the insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of
premium as conclusive evidence of payment so far as to
make the policy binding despite the fact that premium is
actually unpaid.
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.
- So is an understanding to allow insured to pay premiums
in installments not so proscribed.
The reliance by Makati Tuscany on Arce vs. Capital Surety and
Insurance Co. is unavailing
- because the facts therein are substantially different
 from those in the case at bar.  Concept of Loss
- In Arce vs. Capital Surety, no payment was made
 Liability of insurer in case of loss
by the insured at all despite the grace period
given.  Loss in case of negligence of the insured
- Here, Makati Tuscany paid the initial installment
VIII. Notice of Loss
and thereafter made staggered payments resulting
in full payment of the 1982 and 1983 insurance  Meaning of notice of loss
policies. For the 1984 policy, petitioner paid two (2)
 Insured’s obligation to serve notice and proof
installments although it refused to pay the balance.
of loss
It appearing from the peculiar circumstances that the
 Period need in giving notice of loss
parties actually intended to make three (3) insurance
contracts valid, effective and binding,  Burden of proof of loss
- Makati Tuscany may not be allowed to renege on  Effect of non-compliance with notice
its obligation to pay the balance of the premium requirement
after the expiration of the whole term.
- Moreover, as correctly observed by the appellate
court, where the risk is entire and the contract is Philippine American General Insurance Co., Inc. v. Sweet
indivisible, Lines, Inc., 212 SCRA 194, August 5, 1992
o the insured is not entitled to a refund of the
G.R. No. 87434 August 5, 1992
premiums paid if the insurer was exposed to
the risk insured for any period, however Petitioner: Phil. American Gen. Insurance
brief or momentary.
Respondent: Sweet Lines Inc.
Topic: Notice of Loss
Doctrine:

The parties to a contract of carriage may fix by agreement a

shorter time for the bringing of suit on a claim for the loss of
or damage to the shipment, than that provided by the
statute of limitations.

Such limitation is not contrary to public policy for it does not in

any way defeat the complete vestiture of the right to recover,
but merely requires the assertion of that right by action at
an earlier period than would be necessary to defeat it through
the operation of the ordinary statute of limitations.

VII. Loss
14
FACTS:
1) Petitioners Philippine American General Insurance Co.
(PHILAMGEN) and Tagum Plastics (TAGUM) were the
insurers and importers, respectively, of an order of
POLYETHYLENE (the basic material for your common
plastics).
2) The POLYETHYLENE are
- to be shipped from the United States (through the
Indian Ship, SS Vishva Yash) and are to be received at
Manila.
- After which, from Manila the POLYETHYLENE are to be
shipped to Davao, Tagum Plastics’ place of business.
3) When the Indian Ship arrived at Manila
- it sought the services of Respondent Sweet Lines, Inc.
for the inter-island shipment to Davao.
4) However, when the M/V Sweet Love, owned and operated
by Sweet Lines, arrived at Davao,
- Petitioners found that the some of the imported
polyethylene were UNDELIVERED or DAMAGED.
5) For this reason, Petitioners filed suit against Respondent
Sweet Lines and the Davao Veterans Arrastre which
handled the cargoes at the Davao port.
 The basis for such suit are the BILLS OF LADING,
which serves as the contract between parties that
the goods indicated therein are to be delivered
complete in number and in the condition specified.
 Militating against the petitioners, however, is the
prescriptive period included in the bills of lading. It
states that any action arising from shortage or damages
must be brought within sixty (60) days from accrual of
right of action.
15
 Also, Notice of Claims For Loss or Damages IS
REQUIRED to be given to the carrier before the
institution of judicial claims.
6) The BILLS OF LADING were not formally offered as
evidence
- hence THERE WAS NO SHOWING that a contractual
prescriptive period was indicated therein.
7) RTC: ruled in favor of petitioners PHILAMGEN and TAGUM
8) CA: reversed on the basis of prescription.
9) Hence, this petition for review on certiorari.
Issue: W/N Tagum Plastics has timely notified the Respondent
Sweet Lines of its claim? NO.
Ruling:
 In the present case and under the aforestated assumption that
the time limit involved is a prescriptive period,
Respondent Sweet Lines carrier duly raised prescription
as an affirmative defense in its answer setting forth
paragraph 5 of the pertinent bills of lading which comprised the
stipulation thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery
to consignee or agent, if container shows exterior signs of damage or
shortage.
Claims for non-delivery, misdelivery, loss or damage must be filed
within 30 days from accrual.
Suits arising from shortage, damage or loss, non-delivery or
misdelivery shall be instituted within 60 days from date of accrual
of right of action.
Failure to file claims or institute judicial proceedings as herein provided
constitutes waiver of claim or right of action. In no case shall carrier
be liable for any delay, non-delivery, misdelivery, loss of damage to
cargo while cargo is not in actual custody of carrier. 
 On the issue of the validity of the controverted paragraph 5 of
the BILLS OF LADING above quoted which unequivocally
prescribes a time frame of
- THIRTY (30) DAYS for filing a claim with the carrier in
case of loss of or damage to the cargo and
- SIXTY (60) DAYS from accrual of the right of action
for instituting an action in court, which periods must
concur,
 Petitioners posit that the alleged shorter prescriptive
period which is in the nature of a limitation on
Petitioners right of recovery is unreasonable and that
Respondent Sweet Lines has the burden of proving
otherwise
 It has long been held that Article 366 of the Code of
Commerce applies not only to overland and river
transportation but also to maritime transportation.   -
 Moreover, we agree that in this jurisdiction, as viewed from
another angle, it is more accurate to state
- that the FILING OF A CLAIM WITH THE CARRIER
within the time limitation therefor under Article 366
actually constitutes a condition precedent to the
accrual of a right of action against a carrier for
damages caused to the merchandise.
- The shipper or the consignee MUST ALLEGE and
PROVE the fulfillment of the condition and IF HE
OMITS such allegations and proof, no right of action
against the carrier can accrue in his favor.
16
• As the requirements in Article 366, restated with a slight
modification in the assailed paragraph 5 of the BILLS OF
LADING, are reasonable conditions precedent, they are
not limitations of action.  
- Being conditions precedent, their performance must
precede a suit for enforcement and the vesting of the
right to file spit does not take place until the
happening of these conditions. 
 Where the contract of shipment contains a reasonable
requirement of giving notice of loss of or injury to the
goods
- the GIVING OF SUCH NOTICE is a condition precedent
to the action for loss or injury or the right to enforce
the carrier's liability.
The NOTICE requirement is not an empty formalism.
- The fundamental reason or purpose of such a
stipulation is not to relieve the carrier from just liability,
but reasonably to inform it that the shipment has
been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the
nature and extent of the injury.
- This protects the carrier by affording it an opportunity
to make an investigation of a claim while the matter is
fresh and easily investigated so as to safeguard itself
from false and fraudulent claims. 
 Stipulations in bills of lading or other contracts of shipment
which require notice of claim for loss of or damage to goods
shipped in order to impose liability on the carrier operate to
 prevent the enforcement of the contract when not complied
with, that is, notice is a condition precedent and the carrier is
not liable if notice is not given in accordance with the
stipulation,  as the failure to comply with such a stipulation in a
contract of carriage with respect to notice of loss or claim for
damage bars recovery for the loss or damage suffered.  IX.
 On the other hand, the VALIDITY OF A CONTRACTUAL
LIMITATION of time for filing the suit itself against a
carrier shorter than the statutory period therefor has
generally been upheld as such stipulation merely affects
the shipper's remedy and does not affect the liability of
the carrier.
 In the absence of any statutory limitation and subject only to
the requirement on the reasonableness of the stipulated
limitation period:
The parties to a contract of carriage may fix by agreement a
shorter time for the bringing of suit on a claim for the loss of
or damage to the shipment, than that provided by the
statute of limitations.
Such limitation is not contrary to public policy for it does not in
any way defeat the complete vestiture of the right to recover,
but merely requires the assertion of that right by action at
an earlier period than would be necessary to defeat it through
the operation of the ordinary statute of limitations.
 In the case at bar, there is neither any showing of
compliance by PETITIONERS
- with the requirement for the filing of a NOTICE OF
CLAIM within the prescribed period nor any allegation
to that effect.
- It may then be said that while PETITIONERS may
possibly have a cause of action, for failure to comply
with the above condition precedent they lost
17
whatever right of action they may have in their favor
or, token in another sense, that remedial right or
right to relief had prescribed.
 SWEET LINES WINS.
Double Insurance
 Meaning of Double Insurance
 Requisites
 Double Insurance vs. Over-Insurance
 Prohibition against Double Insurance
 Rules governing claims for over-insurance by
double-insurance
Geagonia v. Court of Appeals 241 SCRA 152, 160 (1995)
Petitioner: Armando Geagonia
Respondent: CA
Private Respondent: Country Bankers Insurance Corporation
Topic: Double Insurance
Doctrine:
“A double insurance exists where the same person is insured
by several insurers separately in respect of the same subject
and interest.
However, as to a mortgaged property, the mortgagor and the
mortgagee have each an independent insurable interest
therein and
(1) both interests may be covered by one policy, or
(2) each may take out a separate policy covering his
interest, either at the same or at separate times.”
Facts:
1) Petitioner Armando Geagonia is the owner of Norman’s
Mart.
 - He obtained from Private Respondent Country
Bankers Insurance Corporation a fire insurance policy
for P100,000
- covering the Stock-in-trade consisting principally of dry
goods.
- The period of the policy was from 22 December 1989 –
22 December 1990.
2) Petitioner Geagonia DECLARED in the policy that
Mercantile Insurance Co., Inc. was the co-insurer for
P50,000.00.
3) The policy contained a condition which states that the
INSURED shall give notice to the Company of any
insurance or insurances already effected, or which may
subsequently be effected, covering any of the property
insured, and unless such notice be given before the
occurrence of any loss or damage, all benefits under the
policy shall be deemed forfeited.
- However, this condition will not apply when the total
insurance/s in force at the time of the loss or damage
is not more than P200,000.
4) On 27 May 1990, a fire broke out and Petitioner
Geagonia’s insured stocks-in-trade were completely
DESTROYED
- prompting Geagonia to file a claim with Respondent
Country Bankers Insurance Corporation.
5) The CLAIM WAS DENIED by Country Bankers Insurance
Corporation on the ground that
- there was a violation of Condition 3 of the policy
- because at the time of the loss, Petitioner Geagonia’s
stocks-in-trade were likewise covered by 2 other fire
insurance policies issued by Philippines First
Insurance Co., Inc. (PFIC).
18
6) The FIRE INSURANCE POLICIES issued by PFIC indicate
that the insured was "Messrs. Discount Mart (Mr.
Armando Geagonia, Prop.)"
- with a mortgage clause stating that the LOSS SHALL BE
PAYABLE TO Messrs. Cebu Tesing Textiles, Cebu City
as mortgagee.
7) Petitioner Geagonia then filed a complaint against the
Respondent Country Bankers Insurance Corporation with
the Insurance Commission for the recovery of
P100,000.00 under its fire insurance policy.
8) Insurance Commission: In favor of Petitioner Geagonia,
- ordered Respondent Country Bankers Insurance to pay.
- It was Cebu Tesing Textiles which procured the PFIC
policies without informing him or securing Geagonia’s
consent; and that
- Cebu Tesing Textiles, as his creditor, had insurable
interest on the stocks.
9) Court of Appeals: reversed the decision of the Insurance
Commission.
- The PFIC policies indicate that the
 assured was Geagonia and
 Cebu Tesing Textiles was only the mortgagee
of the goods.
- The premiums on both policies were paid for by
Petitioner Geagonia as shown in the premium
invoices which indicated that it was issued to
Geagonia.
- It was Petitioner Geagonia who took out the policies
on the same property subject of the insurance and
IN FAILING TO DISCLOSE THE EXISTENCE OF
THESE insurances Geagonia violated Condition
number 3.
Issue:
W/N there was double insurance?
Ruling: NO.
 Condition 3 of the Country Bankers Insurance
Corporation’s Policy is a provision which invariably
appears in fire insurance policies and is intended to
prevent an increase in the moral hazard.
- It is commonly known as the additional or "other
insurance" clause and has been upheld as valid
and as a warranty that no other insurance exists.
- The rationale behind the incorporation of "other
insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud.
Its violation would thus avoid the policy.
 However, in order to constitute a violation, the "other
insurance" and incurring DOUBLE INSURANCE there must
be concurrence of these elements it must be
- same subject matter, the
- same interest therein, and the
- same risk.
• as to a mortgaged property, the mortgagor and the
mortgagee have each an independent insurable interest
therein and
o both interests may be covered by one policy, or
o each may take out a separate policy covering his
interest, either at the same or at separate times.”
Mortgagor's insurable interest - covers the full value of the
mortgaged property, even though the mortgage debt is
equivalent to the full value of the property.
19
Mortgagee's insurable interest - to the extent of the debt,
since the property is relied upon as security thereof, and in insuring
he is not insuring the property but his interest or lien thereon. It is
the value mortgaged which extends only to the amount of the
debt, not exceeding the value of the mortgaged property.
 Thus, SEPARATE INSURANCES covering different
insurable interests may be obtained by the
o mortgagor (Petitioner Geagonia) and
o the mortgagee (Cebu Tesing Textiles).
 A mortgagor may take out insurance for the benefit of
the mortgagee, which is the usual practice. The mortgagee
may be made the beneficial payee in several ways.
 As earlier stated, the insurable interests of a mortgagor and
a mortgagee on the mortgaged property are distinct and
separate.
 Hence in the case, since the two policies of the PFIC do not
cover the same interest as that covered by the policy of
the Country Bankers Insurance Corporation
- NO DOUBLE INSURANCE EXISTS.
- The non-disclosure then of the former policies was
not fatal to the Petitioner Geagonia right to recover
on the Country Bankers Insurance’s policy.

Malayan Ins. Co., Inc. vs. Phils. First Ins. Co., Inc. and
Reputable Forwarder Services, Inc.,
Petitioner: Malayan Insurance Co., Inc.,
Respondent: Philippines First Insurance Co., Inc. and Reputable
Forwarder Services, Inc.
Topic: Double Insurance
Doctrine:
Sec. 93 of the Insurance Code A double insurance exists
where the same person is insured by several insurers
separately in respect of the same subject and interest. and
risk
The requisites in order for double insurance to arise are as follows:
a. The person insured is the same;
b. Two or more insurer insuring separately;
c. There is identity of subject matter;
d. There is identity of interest insured; and
e. There is identity of the risk or peril insured against.
Facts:
20
1) Wyeth Philippines, Inc. and Reputable Forwarders
Services (respondent)
- had been annually executing a contract of carriage,
- whereby the Reputable Forwarders Services
undertook to transport and deliver the Wyeth’s
products to its costumers, dealers or salesmen.
2) Nov. 18 1993: Wyeth procured a marine policy from
Philippines First Insurance Co., Inc. (respondent) to
secure its interest over its own products.
o Philippines First insured Wyeth’s nutritional,
pharmaceutical and other products usual or
incidental to the insured’s business while the
same were being transported or shipped in the
Philippines.
o The marine policy covers all risk of direct physical
loss or damage from any external cause, if by
land, and provides a limit of 6M per any one land
vehicle.
3) Dec. 1 1993: Wyeth executed its annual contract of
carriage with Reputable Forwarders Services.
- It turned out that the contract was not signed by
Wyeth’s representative/s.
o Nevertheless, it was admittedly signed by
Reputable’s representatives, the terms thereof
faithfully observed by the parties and, is previously
stated, the same contract of carriage had been
annually executed by the parties every year since
1989.
- Under the contract, Reputable undertook to answer
for
 “all risks with respect to the goods and shall be liable
to Wyeth, for the loss, destruction, or damage of the
goods/products due to any force majeure while the
goods/products are in transit and until actual delivery to
the costumers, salesmen, and dealers of the company.”
- The contract further required Reputable to secure an
insurance policy on Wyeth’s goods.
- Thus, on Feb. 11 1994, Reputable signed a Special Risk
Insurance Policy (SR Policy) with Petitioner
MALAYAN for the amount of 1M.
4) Oct. 6 1994: The truck carrying Wyeth’s products (1K boxes of
Promil infant formula worth around 2.35M), to be delivered
by Reputable to Mercury Drug Corp. in Libis,
- WAS HIJACKED by about 10 armed men.
- The hijacked truck was recovered 2 weeks later
without its cargo.
5) March 8 1995: Philippines First, after due investigation and
adjustment, and pursuant to the Marine Policy,
- paid Wyeth around 2.1M as indemnity.
6) Philippines First then demanded reimbursement from
Reputable Forwarders Services
- having been subrogated to the rights of Wyeth by
virtue of the payment.
- Reputable ignored the demand.
7) Aug. 12 1996: Philippines First instituted an action for
sum of money against Reputable claiming that
- Philippines First cannot be made liable under the
contract of carriage with Wyeth
- since the contract was not signed by Wyeth’s
representative/s.
21
- and that the cause of loss was force majeure, i.e.,
the hijacking incident.
8) RTC:
- Reputable is liable to Philippines First for the amount
of indemnity it paid to Wyeth, among others.
- Malayan liable to indemnify Reputable
9) ARGUMENT OF MALAYAN: Malayan argued that inasmuch
as there was already a marine policy issued by Philippines
First securing the same subject matter against loss and that
since the monetary coverage/value of the marine policy is
more than enough to indemnify the hijacked cargo,
Philippines First alone must bear the loss. Malayan sought the
dismissal of the third-party complaint against it.
Malayan invoked the following provisions of the Special Risk
Insurance Policy
SR POLICY Section 5. INSURANCE WITH OTHER COMPANIES. The
insurance does not cover any loss or damage to property which at the time
of the happening of such loss or damage is insured by or would but for the
existence of this policy, be insured by any Fire or Marine policy or policies
except in respect of any excess beyond the amount which would have
been payable under the Fire or Marine policy or policies had this insurance
not been effected.
SR POLICY SECTION 12. OTHER INSURANCE CLAUSE. If at the time
of any loss or damage happening to any property hereby insured, there be
any other subsisting insurance or insurances, whether effected by the
insured or by any other person or persons, covering the same property,
the company shall not be liable to pay or contribute more than its ratable
proportion of such loss or damage.
10) CA: sustained the RTC ruling.
 (1) Reputable is estopped from assailing the validity of
their contract of carriage with Wyeth on the ground
of lack of signature of Wyeth’s representative/s.;
(2) Reputable is liable under the contract for the value of
the goods even if the same was lost due to fortuitous
event; and
(3) Sec. 12 "modified other insurance clause". of the
Special Risk Insurance Policy prevails over Sec. 5
“other insurance clause”, it being the latter provision
of the same SR Policy;
- however, since the ratable proportion provision of Sec. 12
APPLIED ONLY IN CASE OF DOUBLE INSURANCE,
which is not present, then it should not be applied
and Malayan should be held liable for the full
amount of the policy coverage, that is, 1M.
Issue:
(1) W/N Reputable is a private carrier. YES
(2) W/N Reputable is strictly bound by the stipulation in its
contract of carriage with Wyeth, such that is should be liable
for any risk of loss or damage, for any cause whatsoever,
including that due to theft or robbery and other force
majeure. YES
(3) W/N Sec. 5 and Sec. 12 of the SR Policy is
“nugatory”? NO (issue in related to the topic)
(4) W/N Reputable should be held solidarily liable with Malayan
for the amount due to Philippines First. NO
Ruling:
(1) Reputable is a private carrier.
 Under Art. 1732 of the CC, common carriers are persons,
corporations, firms or association engaged in the business
of carrying or transporting passenger or goods, or both by
land, water or air for compensation, offering their services
to the public.
22
 On the other hand, a private carriers is one wherein the
carriage is generally undertaken by special agreement and it
does not hold itself out to carry goods for the general
public. A common carrier becomes a private carrier when it
undertakes to carry a special cargo or chartered to a special
person only.
 Therefore, for all intents and purposes, Reputable operated
as a private/special carrier with regard to its contract of
carriage with Wyeth.
(2) Reputable is bound by the terms of the contract of carriage.
 The extent of a private carrier’s obligations is dictated by
the stipulations of a contract it entered into, provided its
stipulations, clause, terms and conditions are not contrary
to law, morals, good customs, public order, or public policy.
 Being a private carrier, the extent of Reputable’s liability is
fully governed by the stipulations of the contract of
carriage, one of which is that it shall be liable to Wyeth for
the loss of the goods/products due to any and all causes
whatsoever, including theft, robbery and other force
majeure while the goods/products are in transit and until
actual delivery to Wyeth’s customers, salesmen and dealers.
(3) Other insurance visàvis over insurance.
 Sec. 5 is actually the other insurance clause (also called
“additional insurance” and “double insurance”).
o Sec. 5 does not provide for the nullity of the SR
Policy but simply limits the liability of Malayan
only up to the excess of the amount that was
not covered by the other insurance policy.
 The SC cited the case of Geogonia v. CA wherein it was
held that the prohibition of the other insurance clause is
applied only in case of double insurance.
o The SC ruled that in order to constitute a
violation of the clause, the other insurance
 must be upon the same subject matter, the
same interest therein, and the same risk.
 Thus, even though the multiple insurance policies
involved were all issued in the name of the same
assured, over the same subject matter and covering the
same risk,
o it was ruled that there was no violation of the
“other insurance clause” since THERE WAS NO
DOUBLE INSURANCE.
 Sec. 12 of the SR policy, on the other hand, is the over
insurance clause. More particularly,
o it covers the situation where there is over
insurance due to double insurance.
o In such case, Sec. 15 of the SR policy provides
that Malayan shall
“not be liable to pay or contribute more than its ratable
proportion of such loss or damage.”
o This is in accord with the PRINCIPLE OF
CONTRIBUTION provided under Sec. 94 (e) of
the Insurance Code, which states that
“where the insured is over insured by double
insurance, 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.
 Clearly, both Sections 5 and 12 presupposes the
existence of a double insurance.
The pivotal question that now arises is whether there is
double insurance in this case such that either Sec. 5 or Sec.
12 of the SR Policy may be applied.
23
Sec. 93 of the Insurance Code A double insurance exists
where the same person is insured by several insurers
separately in respect of the same subject and interest. and
risk
The requisites in order for double insurance to arise are as follows:
 The person insured is the same;
 Two or more insurer insuring separately;
 There is identity of subject matter;
 There is identity of interest insured; and
 There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the
SR Policy were both issued over the same subject matter,
i.e. goods belonging to Wyeth, and both covered the same peril
insured against, it is,
- however, beyond cavil that the said policies were
issued to two different persons or entities.
- It is undisputed that Wyeth is the recognized insured of
o Philippines First under its Marine Policy, while
o Reputable is the recognized insured of Malayan
under the SR Policy.
- The fact that Reputable procured Malayan’s SR Policy
over the goods of Wyeth pursuant merely to the
stipulated requirement under its contract of
carriage with the Malayan does not make Reputable a
mere agent of Wyeth in obtaining Malayan’s SR
Policy.
 In addition, the interest of Wyeth over the property
subject matter of both insurance contracts is also
different and distinct from that of Reputable.
- The policy issued by Philippines First was in
 CONSIDERATION OF the legal and/or equitable
interest of Wyeth over its own goods.
- On the other hand, what was issued by Malayan to
Reputable was over the Reputable’s insurable
interest over the safety of the goods, which may
become the basis of the latter’s liability in case of loss or
damage to the property and falls within the contemplation
of Sec. 15 of the Insurance Code.
(4) Reputable is not solidarily liable with Malayan.
 There is solidary liability only when the obligation expressly
so states, when the law so provides or when the nature of
the obligation so requires.
 In this case, no solidary liability arises because Malayan’s
and Reputable’s respective liabilities arose from different
obligations – Malayan’s is based on the SR Policy while
Reputable’s is based on the contract of carriage.
X. Reinsurance
 Concept of Reinsurance
 Reinsurance vs. Double Insurance
 Reinsurance Treaty
Lalican vs. The Insular Life Assurance Co. Ltd, G.R. No.
183526 August 25, 2009
Petitioner: Violeta Lalican
Respondent: The Insular Life Assurance Co. Ltd.
Topic: Reinstatement
Doctrine:
“The stipulation in a life insurance policy giving the insured the
privilege to reinstate it upon written application does not give the
INSURED absolute right to such reinstatement by the mere filing of
an application.
The INSURER has the right to deny the reinstatement if
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a) it is not satisfied as to the insurability of the insured and
b) if the INSURED does not pay all overdue premium and
c) all other indebtedness to the INSURER. 
After the death of the INSURED the insurance Company cannot be
compelled to entertain an application for reinstatement of the policy
because the conditions precedent to reinstatement can no longer
be determined and satisfied." - Court in Andres v. The Crown Life
Insurance Company, citing  McGuire v. The Manufacturer's Life Insurance
Co.
Facts:
1) Eulogio Lalican applied for an insurance policy with the Insular
Life amounting to Php 1,500,000.
- Under the terms of the policy, Eulogio was to pay the
premiums on a quarterly basis, having a grace period of
31 days, for the payment of each premium subsequent to the
first.
- If any premium was not paid on or before the due date,
the policy would be in default and
- If the premium remained unpaid until the end of the grace
period, the policy would automatically lapse and become
void.
2) Eulogio paid the premiums due on the first two succeeding
payment dates
- but failed to pay subsequent premiums even after the lapse
of the grace period thereby rendering the policy void.
- Eulogio submitted an application for reinstatement of policy
through Josephine Malaluan, an agent of Insular Life,
together with the payment of the unpaid premiums.
- However, the Insular Life notified Eulogio that his
application could not be processed because he failed to
pay the overdue interest of the unpaid premiums.
3) Eulogio submitted to Josephine Malaluan’s house
- a second application for reinstatement including the
payment for the overdue interest as well as for the
premiums due for April and July of that year,
 - Such was received by Malaluan’s husband on her behalf and
was thereby issued a receipt for the amount Eulogio
deposited.
- However, on that same day, Eulogio died of cardio-
respiratory arrest secondary to electrocution.
4) Violeta, Eulogio’s widow filed with the Insular Life a claim for
payment of the full proceeds of the policy
- but the Insular Life informed Violeta that the claim could not
be granted
- since at the time of Eulogio’s death, his policy has already
lapsed and he failed to reinstate the same.
Eulogio’s death rendered impossible full compliance with the
conditions for reinstatement of policy
- even though, before Eulogio’s death, he managed to file his
application for reinstatement and deposit the amount for
payment of his overdue premiums and interest thereon with
Malaluan.
As expressly provided on the policy contract, agents of Insular Life
have no authority to approve any application for reinstatement.
- Agents still had to turn over to Insular Life the application
for reinstatement and accompanying deposit, for
processing and approval of the Insular Life.

5) Violeta requested a reconsideration of her claim but the same Eulogio’s Policy remained lapsed and void, not having been
was also rejected. Therefore, Violeta filed a complaint for death reinstated in accordance with the Policy Contract and Application for
claim benefits with the RTC a Reinstatement before Eulogio's death.

- alleging the (1) unfair claim settlement practice Insular Violeta, therefore, CANNOT CLAIM ANY DEATH BENEFITS from
Life and its (2) deliberate failure to act with reasonable Insular Life on the basis of Eulogio’s Policy;
promptness on her insurance claim. - but Violeta is entitled to receive the full refund of the
6) RTC rendered a decision in favor of Insular Life payments made by Eulogio thereon.

7) Violeta elevated her case to the Supreme Court via the petition
for review on Certiorari.
Issue:
Whether or not Eulogio’s policy was reinstated before his death?
Ruling:
No. To reinstate a policy means to restore the same to premium-
paying status after it has been permitted to lapse.
Both the policy contract and application for reinstatement provide
for specific conditions for the reinstatement of a lapsed policy.
According to the Application for Reinstatement,
- the policy would only be considered reinstated upon the
approval of the application by Insular Life
o during the applicant’s “lifetime and good health” and
whatever amount the application paid in connection was
considered to be a deposit only until approval of said
application.

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