UCPB General Insurance v. Masagana Telamart (1999)

UCPB GENERAL INSURANCE [UCPB] v. MASAGANA TELAMART [Masagana]

1999 / Pardo

FACTS

In 1991, UCPB issued 5 fire insurance policies covering Masagana Telamart’s various properties for the period from 22 May 1991 to 22 May 1992.

On March 1992 [~2 months before policy expiration], UCPB evaluated the policies and decided not to renew them upon expiration of their terms on 22 May 1992.  UCPB advised Masagana’s broker of its intention not to renew the policies. On April 1992 [~1 month before policy expiration], UCPB gave written notice to Masagana of the non-renewal of the policies. On June 1992 [policy already expired], Masagana’s property covered by 3 UCPB-issued policies was razed by fire.

On 13 July 1992, Masagana presented to UCPB’s cashier 5 manager's checks, representing premium for the renewal of the policies for another year.

It was only on the following day, 14 July 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 5 manager's checks, and rejected Masagana’s claim since the policies had expired and were not renewed, and the fire occurred on 13 June 1992 (or before tender of premium payment).

            Masagana filed a civil complaint for recovery of the face value of the policies covering the insured property razed by fire. 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 [22 May 1992 – 22 May 1993].

            CA affirmed 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.

ISSUE & HOLDING

WON the fire insurance policies had expired on 22 May 1992, or had been extended or renewed by an implied credit arrangement though actual payment of premium was tendered on a later date after the occurrence of the risk insured against [fire]. FIRE INSURANCE POLICIES HAD EXPIRED

RATIO

An insurance policy, other than life is not valid and binding until actual payment of the premium.  Any agreement to the contrary is void. The parties may not agree expressly or impliedly on the extension of credit or time to pay the premium and consider the policy binding before actual payment.

The case of Malayan Insurance v. Cruz-Arnaldo cited by the CA is not applicable. In that case, payment of the premium was made on before the occurrence of the fire.  In the present case, the payment of the premium for renewal of the policies was tendered a month after the fire occurred.  Masagana did not even give UCPB a notice of loss within a reasonable time after occurrence of the fire.

CA DECISION REVERSED