Insurance Case Digest: Areola v. CA (1994)

G.R. No. 95641   September 22, 1994

Lessons Applicable: Binding Effect of Payment (Insurance)

Laws Applicable: Art. 1910,Article 1191

FACTS:

• December 17, 1984: Prudential Guarantee And Assurance, Inc. issued collector's provisional receipt amounting to P1,609.65 
• June 29, 1985: 7 months after the issuance of petitioner Santos Areola's Personal Accident Insurance Policy, Prudential Guarantee And Assurance, Inc. unilaterally cancelled it for failing to pay his premiums through its manager Teofilo M. Malapit
• Shocked by the cancellation of the policy, Santos approached Carlito Ang, agent of Prudential and demanded the issuance of an official receipt.  Ang told Santos that it was a mistake and assured its rectification.
• July 15, 1985: Santos demanded the same terms and same rate increase as when he paid the provincial receipt but Malapit insisted that the partial payment he made was exhausted and that he should pay the balance or his policy will cease to operate
• July 25, 1985 : Assistant Vice-President Mariano M. Ampil III apologized 
• August 6, 1985 had filed a complaint for breach of contract with damages before the lower court
• August 13, 1985: Santos received through Carlito Ang the leeter of Assistant Vice-President Mariano M. Ampil III finding error on their part since premiums were not remitted Malapit, proposed to extend its lifetime to December 17, 1985
• RTC: favored Santos - Prudential in Bad Faith
• CA: Reversed - not motivated by negligence, malice or bad faith in cancelling subject policy

ISSUE: W/N the Areolas can file against damages despite the effort to rectify the cancellation

HELD: YES. RTC reinstated

• Malapit's fraudulent act of misappropriating the premiums paid is beyond doubt directly imputable to Prudential
• Art. 1910.  The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.

• Subsequent reinstatement could not possibly absolve Prudential there being an obvious breach of contract
• a contract of insurance creates reciprocal obligations for both insurer and insured
• Article 1191
• choice between fulfillment or rescission of the obligation in case one of the obligors fails to comply with what is incumbent upon him
• entitles the injured party to payment of damages, regardless of whether he demands fulfillment or rescission of the obligation
• Nominal damages are "recoverable where a legal right is technically violated and must be vindicated against an invasion that has produced no actual present loss of any kind, or where there has been a breach of contract and no substantial injury or actual damages whatsoever have been or can be shown.

Insurance Case Digest: South Sea Surety and Insurance Co., Inc. v. CA (1995)

G.R. No. 102253  June 2, 1995
Lessons Applicable: 

• Authority to Receive Payment/Effect of Payment (Insurance)
• Binding Effect of Payment (Insurance)

Laws Applicable: Section 77,Section 301, Section 306 of the Insurance Code

FACTS:

• Valenzuela Hardwood and Industrial Supply, Inc. shipped with Seven Brothers' vessel M/V Seven Ambassador lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila
• Valenzuela insured the logs against loss and/or, damage with South Sea Surety and Insurance Co., Inc. for P2,000,000 issuing a Marine Cargo Insurance Policy
• January 24 1984: Valenzuela gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua
• January 25 1984: M/V Seven Ambassador sank
• January 30 1984: The check was tendered to South Sea but it refused.  Instead it cancelled the insurance policy for non-payment of the premium
• RTC: favored Valenzuela against South Sea and Seven Brothers
• CA: Absolved Seven Brothers 
• stipulation in the charter party that the ship owner would be exempted from liability in case of loss 
• South Sea contends that it is cancelled and that Mr. Chua is not authorized

ISSUE: W/N  Mr. Chua is an authorized representative to receive the payment

HELD: YES. petition is DENIED

• payment of the premium is a condition precedent to, and essential for, the efficaciousness of the contract.
• The only two statutorily provided exceptions are 
• (a) in case the insurance coverage relates to life or industrial life (health) insurance when a grace period applies and 
• (b) when the insurer makes a written acknowledgment of the receipt of premium, this acknowledgment being declared by law to be then conclusive evidence of the premium payment
• South Sea Surety and Insurance Co., Inc. delivered to him the policy on 21 January 1984 at his office to be delivered to the Valenzuela - deemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium