South Sea Surety and Insurance Co., Inc. vs. Court of Appeals; G.R. No. 102253. June 2, 1995

Effect – Payment Through an Agent

FACTS

An insurer which delivers to an insurance agent or insurance broker an insurance policy shall be deemed to have authorized such agent to receive on its behalf payment of any premium which is due on such policy.

On 16 January 1984, Valenzuela Hardwood entered into an agreement with Seven Brothers Shipping to load on board in its vessel M/V Seven Ambassador,  lauan round logs numbering 940 for shipment in Manila. On January 20, Hardwood insured the logs against loss and/or damage with defendant South Sea Surety for 2 Million. On January 24, Hardwood paid the premium for the insurance policy to Victorio Chua. On January 25, M/V Seven Ambassador sank resulting in the loss of the plaintiff’s insured logs. However, it was only in the morning of 30 January 1984 or 5 days after the vessel sank when his messenger tendered the check to defendant South Sea Surety and Insurance Co., Inc.

South Sea Surety cancelled the insurance policy it issued as of the date of inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code. 

Hardwood demanded for the payment of the proceeds of the policy but the South Sea denied liability under the policy. Seven Brothers Shipping also denied liability. 

The trial court rendered judgment in favor of plaintiff Hardwood. The Court of Appeals affirmed the judgment of the court a quo only against the insurance corporation; in absolving the shipping entity from liability. 

ISSUE

Whether or not Victorio Chua, in receiving the check for the insurance premium prior to the occurrence of the risk insured against has so acted as an agent of petitioner.

HELD

YES.  When the appellant South Sea Surety and Insurance Co., Inc. delivered to Mr. Chua the marine cargo insurance policy for the plaintiff’s logs, he is deemed to have been authorized by the South Sea Surety and Insurance Co., Inc. to receive the premium which is due on its behalf.

An insurer which delivers to an insurance agent or insurance broker an insurance policy shall be deemed to have authorized such agent to receive on its behalf payment of any premium which is due on such policy

NOTES

Undoubtedly, the 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 (Secs. 77-78, Insurance Code).

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