Velasco v. Apostol

LAURA VELASCO and GRETA ACOSTA v. JUDGE SERGIO APOSTOL and MAHARLIKA INSURANCE

1989 / Regalado

FACTS

On 27 Nov 1973, around 230 PM, Laura Velasco and Greta Acosta were riding in Velasco’s Mercury car when an N/S taxicab driven by Dominador Santos [registered in the name of Alice Artuz, c/o Norberto Santos] crossed the center island towards their direction, and collided with their car at the left front part. The taxicab tried to return to its original lane, but was unable to climb the island. It backtracked, hitting again Velasco’s car in the left near portion, causing the latter's back portion to turn toward the center hitting a jeepney on its right, which was travelling along their side.

                Velasco and Acosta sued the taxicab driver and its registered owners, claiming actual, moral and exemplary damages plus attorney's fees. Maharlika Insurance was impleaded as a defendant in an amended complaint, with an allegation that the N/S taxicab was insured against third party liability for 20k with Maharlika at the time of the accident.

Maharlika claimed that there was no cause of action against it because at the time of the accident, the alleged insurance policy was not in force due to non-payment of the premium. It further averred that even if the taxicab had been insured, the complaint would still be premature since the policy provides that the insurer would be liable only when the insured becomes legally liable.

RTC ruled in favor of Velasco and Acosta, finding that the proximate cause of the accident was the taxicab driver’s negligence. However, Maharlika was exonerated on the ground that the policy was not in force for failure to pay the initial premium and for their concealment of a material fact. The payment was accepted by Maharlika without any knowledge that the risk insured against had already occurred since such fact was concealed by the insured and was not revealed to Maharlika.

The accident occurred on 27 Nov 1973 while the initial premium was paid only on 11 Dec 1973. Velasco and Acosta maintain that in spite of this late payment, the policy is binding because there was an implied agreement to grant a credit extension so as to make the policy effective. To them, the subsequent acceptance of the premium and delivery of the policy estops Maharlika from asserting that the policy is ineffective.

ISSUE & HOLDING

WON Maharlika Insurance is liable. NOT LIABLE. RTC JUDGMENT AFFIRMED.

RATIO

It should be noted that this controversy arose under the aegis of the old insurance law, Act No. 2427, as amended. The former insurance law, which applies to this case, provided that:

An insurer is entitled to the 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 insurance policy in question would be valid and binding notwithstanding the non-payment of the premium if there was a clear agreement to grant to the insured credit extension. Such agreement may be express or implied.

SC finds no cogent proof of any such implied agreement. Had there really been a credit extension, the insured would not have had any apprehension or hesitation to inform Maharlika at the time of or before the payment of the premium that an accident for which the insurer may be held liable had already happened. Under such circumstances, notice alone is necessary and the insured need not pay the premium because whatever premium may have been due may already be deducted upon the satisfaction of the loss under the policy. Velasco and Acosta failed to point out any other circumstances showing that prepayment of premium was not intended to be insisted upon. They have thus failed to discharge the burden of proving their allegation of the existence of the purported credit extension agreement.

                SC noted that in the present law, Section 77 of the Insurance Code of 1978 has deleted the clause "unless there is clear agreement to grant the insured credit extension of the premium due" which was involved in this controversy.

The fact withheld could not have influenced Maharlika in entering into the supposed contract or in estimating the character of the risk or in fixing the rate premium, because no such contract existed at the time of the accident. There was nothing to rescind at that point in time. What should be apparent from such actuations of the taxicab owner/s is the presence of bad faith on their part, a reprehensible disregard of the principle that insurance contracts are uberrimae fidae and demand the most abundant good faith.