Insurance
University
of San Agustin
Atty.
Nelita Jesusa A. Bacaling
“TITLE 8
“PREMIUM
“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,
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.
1.
What is the
concept of premium in insurance contracts? The premium is the consideration to
be paid by the insured to the insurer who charges him for undertaking to assume
the risk of indemnifying the insured against a specified peril.
2.
In fire,
casualty, and marine insurance – The premium payable becomes a debt as soon as
the risk attaches (Gulf Resort, citing
De Leon, Hector, Insurance Code of the Philippines).
a. What if the insured does not pay the premium,
is the contract cancelled? It does not totally cancel the contract. It is
cancelled as far as the obligation of the insurer to indemnify the insured is
concerned but as a source of obligation of the insured, the contract remains
enforceable. To Adopt a contrary ruling would be to place in the hands of one
party the right to decide whether a contract remains effective or not.
-
The
insured will still be liable for the balance of his premium under the contract.
Phil Phoenix Surety& Ins. Co v. Woodworks, Inc. 92 SCRA 419
-
Unless:
no premium was ever paid which means the contract never became effective.
b. Non-Payment
of Premium- policy does not become effective
“Sec. 77 says notwithstanding any agreement
to the contrary”
EXCEPT:
1.
Life
or Industrial life policy provision on grace periods;
2.
Policy
is under broker and agency agreements with duly licensed intermediaries
3.
Acknowledgment
in the policy itself that premium was already paid, even if there is a
stipulation that effectivity of policy shall only be upon actual payment of
premium; Se. 79.
4.
When
there is an agreement allowing payment of premium by installment and partial
payment has already been made;
5.
When
there is an agreement to grant the insured credit extension for the payment of
premium an loss occurs upon the expiration of the credit term;
6.
Estoppel
– receipt of payment by the insurer despite the lapse of the credit term will
render the policy valid and binding.
Ø UCPB General Insurance Co. INc. versus
Masagana Telemart, Inc. 356 SCRA 307
Ø Tibay versus Court of Appeals 257SCRA 126
Ø Makati Tuscany Condominium Corp. Versus Court
of Appeals 215 SCRA 462
3.
In life
insurance – Unpaid premiums are not considered debt by the insured to the
insurer, unlike in the case of non-life insurance.
A. Effect of non-payment –
a.1 the non-payment of the 1st
premium prevents the contract from becoming binding.
a.2 non payment of the first premium shall
render the policy lapsed subject to a grace period of thirty (30) days, (Sec
233 (a) and 234 (a); In case of industrial life the grace period or 4 weeks.
“SEC. 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.
“SEC. 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.
1.
An acknowledgment of receipt of premium is conclusive evidence
of its payment. Consequence the policy becomes binding.
-American Home Assurance Company versus Chua.
309 SCRA 250.
The
insurer accepted the mode of payment 30 days after issuance of policy. Not only
was the payment made thru check, the check also bounced. SC ruled in favor of
the insured. “Insurer implicitly agreed to waive the provision that it would
only pay for the loss if there is payment of the premium.”
-SC gave effect to Sec. 79, instead of
imposing the strict requirements of Sec 77.
“SEC. 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.
1.
When no
part of the thing insured become exposed to any of the perils insured against.
2.
When the
insurance is for a definite period and the insured surrenders his policy before
the termination thereof
3.
When the
contract is voidable and consequently annulled because of the fraud or misrep
of the insurer or his rep. Sec 82
4.
When the
contract is voidable because of the existence of facts of which the insured was
ignorant without his fault. Sec 82
5.
When the
insurer never incurred any liability under the policy because of the default of
the insured other than fraud. – (a brand new motor vehicle that was never used
and the purchase thereof was cancelled. No fraud but default is on the part of
the insured.)
6.
When
there is over-insurance. (Sec. 83)
“SEC. 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.
“SEC. 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.
“SEC. 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.
>>>> This is common when regular insurance contracts have "riders" which are expanded services or risks covered upon payment of additional premiums.
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