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Insurance Case Digest: Makati Tuscany v. CA (1992)

G.R. No. 95546 November 6, 1992
Lessons Applicable: 
  • Installments and partial payment (Insurance)
  • Grounds on Return of Premium: No exposed to peril insured against (Insurance)
  • Early 1982: American Home Assurance Co. (AHAC), represented by American International Underwriters (Phils.), Inc., issued in favor of Makati Tuscany Condominium Corporation (Tuscany) on the latter's building and premises, for a period beginning 1 March 1982 and ending 1 March 1983, with a total premium of P466,103.05.
    • Premium were paid on installments on:
      • March 12 1982
      • May 20 1982
      • June 21 1982
      • November 16 1982
  • February 10 1983: AHAC replaced and renewed the previous policy, for a term covering 1 March 1983 to 1 March 1984
    • premium of P466,103.05 was again paid on installments on:
      • April 13 1983
      • July 13 1983
      • August 3 1983
      • September 9 1983
      • November 21 1983
  • January 20 1984: policy was again renewed for the period March 1 1984 to  March 1 1985 
    • Tuscany only paid two installment payments
      • February 6 1984 for P52k
      • June 6 1984 for P100k
  • AHAC filed an action to recover the unpaid balance of P314,103.05
  • RTC: dismissed the complaint
    • While it is true that the receipts issued to the defendant contained the aforementioned reservations, it is equally true that payment of the premiums of the three aforementioned policies (being sought to be refunded) were made during the lifetime or term of said policies, hence, it could not be said, inspite of the reservations, that no risk attached under the policies
      • counterclaim for refund is not justified
  • CA: ordered Tuscany to pay premiums when due is ordinarily as indivisible obligation to pay the entire premium; insurance contract became valid and binding upon payment of the first premium
1. W/N payment by installment of the premiums due on an insurance policy invalidates the contract of insurance on the basis of: 
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, petitioner seeks a refund of all premium payments made on the alleged invalid insurance policies.
2. W/N there is risk attached to the insurance so it cannot be refunded


1. NO
  • 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, and such an agreement is not contrary to morals, good customs, public order or public policy 
    • At the very least, both parties should be deemed in estoppel to question the arrangement they have voluntarily accepted.
  • It paid the initial installment and thereafter made staggered payments resulting in full payment of the 1982 and 1983 insurance policies. For the 1984 policy, petitioner paid 2 installments although it refused to pay the balance. - appearing that they actually intended to make 3 insurance contracts valid 
2. NO.
  • where the risk is entire and the contract is indivisible, the insured is not entitled to a refund of the premiums paid if the insurer was exposed to the risk insured for any period, however brief or momentary