46. G.R. No. 137172. April 4, 2001 UCPB GENERAL INSURANCE CO. INC. vs. MASAGANA ELAMAR , INC.

, !AC S" In our decision of June1999 in this case, we reversed and set aside the assailed decision[1] of the Court of Appeals, which affirmed with modification the judgment of the trial court ordering petitioner to pay respondent as indemnity for the urned properties covered y the renewal!replacement policies" #n June 1$, 199%, plaintiff&s properties were ra'ed y fire" #n July 1$, 199%, plaintiff tendered, and defendant accepted, five ()* +,uita le -an. /anager&s Chec.s as renewal premium payments" #n July 10, 199%, /asagana made its formal demand for indemnification for the urned insured properties" #n the same day, defendant returned the five ()* manager&s chec.s stating in its letter that it was rejecting /asagana&s claim on the following grounds1 2a* 3aid policies e4pired last /ay %%, 199% and were not renewed for another term5 * 6efendant had put plaintiff and its alleged ro.er on notice of non!renewal earlier5 and c* 7he properties covered y the said policies were urned in a fire that too. place last June 1$, 199%, or efore tender of premium payment"2 -oth the Court of Appeals and the trial court found that sufficient proof e4ists that 8espondent, which had procured insurance coverage from 9etitioner for a num er of years, had een granted a :; to 9;!day credit term for the renewal of the policies" 3uch a practice had e4isted up to the time the claims were filed" 8espondent disagrees with our ruling that parties may neither agree e4pressly or impliedly on the e4tension of credit or time to pay the premium nor consider a policy inding efore actual payment" It urges the Court to ta.e judicial notice of the fact that despite the e4press provision of 3ection << of the Insurance Code, e4tension of credit terms in premium payment has een the prevalent practice in the insurance industry" /ost insurance companies, including 9etitioner, e4tend credit terms ecause 3ection << of the Insurance Code is not a prohi itive injunction ut is merely designed for the protection of the parties to an insurance contract" 7he Code itself, in 3ection <=, authori'es the validity of a policy notwithstanding non! payment of premiums" 8espondent also asserts that the principle of estoppel applies to 9etitioner" 6espite its awareness of 3ection << 9etitioner persuaded and induced 8espondent to elieve that payment of premium on the :;! to 9;!day credit term was perfectly alright5 in fact it accepted payments within :; to 9; days after the due dates" -y e4tending credit and ha itually accepting payments :; to 9; days from the effective dates of the policies, it has implicitly agreed to modify the tenor of the insurance policy and in effect waived the provision therein that it would pay only for the loss or damage in case the same occurred after payment of the premium"

ISSUE" >hether 3ection << of the Insurance Code of 19<= (9"6" ?o" 10:;* must e strictly applied to 9etitioner@s (AC9- Beneral Insurance* advantage despite its practice of granting a :;! to 9;!day credit term for the payment of premiums" #EL$" NO. 3ection << has its source in 3ection <% of Act ?o" %0%< otherwise .nown as the Insurance Act as amended y 8"A" ?o" $)0;, approved on %1 June 19:$, which read1 SEC. 72. An insurer is entitled to 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. !nderscoring supplied" It can e seen at once that 3ection << does not restate the portion of 3ection <% e4pressly permitting an agreement to e4tend the period to pay the premium" -ut are there e4ceptions to 3ection <<C 7he answer is in the affirmative" 7uscany has provided a fourth e4ception to 3ection <<, namely, that the insurer may grant credit e4tension for the payment of the premium" 7his simply means that if the insurer has granted the insured a credit term for the payment of the premium and loss occurs efore the e4piration of the term, recovery on the policy should e allowed even though the premium is paid after the loss ut within the credit term" /oreover, there is nothing in 3ection << which prohi its the parties in an insurance contract to provide a credit term within which to pay the premiums" 7hat agreement is not against the law, morals, good customs, pu lic order or pu lic policy" 7he agreement inds the parties (Article 1$;:, Civil Code*" Dinally in the instant case, it would e unjust and ine,uita le if recovery on the policy would not e permitted against 9etitioner, which had consistently granted a :;! to 9;!day credit term for the payment of premiums despite its full awareness of 3ection <<" +stoppel ars it from ta.ing refuge under said 3ection, since 8espondent relied in good faith on such practice" +stoppel then is the fifth e4ception to 3ection <<"