UCPB v Masagana first case G.R. No. 137172. June 15, 1999

J. Pardo

 Facts:

On April 15, 1991, UCPB issued five insurance policies for Masagana’s properties for the period from May 22, 1991 to May 22, 1992.

In March 1992, petitioner evaluated the policies and decided not to renew them upon expiration on May 22, 1992.  On April 6, 1992, petitioner gave written notice to respondent of the non-renewal of the policies. On June 13, 1992, fire razed respondent's property covered by three of the insurance policies petitioner issued.

On July 13, 1992, respondent presented to petitioner's cashier at its head office five (5) manager's checks in the total amount of P225,753.95, representing premium for the renewal of the policies from May 22, 1992 to May 22, 1993.  No notice of loss was filed by respondent under the policies prior to July 14, 1992. The next day, Masagana filed its formal claim for indemnification.

Petitioner returned to respondent the five checks that it tendered, and at the same time rejected respondent's claim for the reasons (a) that the policies had expired and were not renewed, and (b) that the fire occurred on June 13, 1992, before the tender of premium payment.

Masagana filed a complaint against petitioner for recovery of P18,645,000.00 as value of the property.

UCPB claimed that the complaint didn’t have a cause of action, and that petitioner was not liable to respondent for insurance proceeds under the policies because at the time of the loss of respondent's property due to fire, the policies had long expired and were not renewed.

The trial court ruled in favor of Masagana and authorized the latter consign the premium payments and thereby declaring it to have fully complied with the obligation. UCPB was authorized to pay the indemnity. UCPB then appealed to the CA. It affirmed the trial court decision.

The Court of Appeals held that the grace period of 60 to 90 days meant that payment can be made after the loss. UCPB then appealed.

Respondent averred that the CA correctly ruled notice of non-renewal wasn’t sent on time. They also submitted that that the Court of Appeals did not err in finding that there existed a 60-90 day grace period. They also affirmed that the Supreme Court could not review factual findings of the lower court.

Issue: Whether the fire insurance policies issued by petitioner to the respondent covering the period May 22, 1991 to May 22, 1992, had expired on the latter date 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.

Held: The policies had already expired. Petition granted

Ratio:

“An insurance policy, other than life, issued originally or on renewal, 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.”

Malayan v Cruz-Arnaldo- Not applicable because payment of the premium was in fact actually made on December 24, 1981, and the fire occurred on January 18, 1982.  Here, the payment of the premium for renewal of the policies was tendered on July 13, 1992, a month after the fire occurred on June 13, 1992.  The assured did not even give the insurer a notice of loss within a reasonable time after occurrence of the fire.