G.R. No. L-1669; August 31, 1950
PAZ LOPEZ DE CONSTANTINO, plaintiff-appellant, vs. ASIA LIFE INSURANCE COMPANY, defendant-appellee.

G.R. No. L-1670; August 31, 1950
AGUSTINA PERALTA, plaintiff-appellant, vs. ASIA LIFE INSURANCE COMPANY, defendant-appellee.

FACTS

Two consolidated cases involving life insurance policies issued by Asia Life Insurance Company. In the first case, the insured, Arcadio Constantino, paid the first annual premium for a policy effective September 27, 1941. No further premiums were paid, and he died on September 22, 1944. In the second case, the insured spouses paid premiums up to January 31, 1942. The husband died on February 16, 1945. In both instances, premium payments ceased due to the Japanese occupation of Manila, which forced the closure of the insurer’s branch office and made transactions impossible and illegal. The beneficiaries sued to recover the policy proceeds, minus unpaid premiums, arguing that non-payment was caused by war.

ISSUE

Whether the beneficiaries may recover the insurance proceeds despite the insureds’ failure to pay the stipulated premiums, when such failure was caused by the war.

RULING

No. The Supreme Court affirmed the lower court’s decision absolving the insurer from liability. The policies expressly stipulated that premium payments were due in advance and that any unpunctuality would cause the policy to lapse. Non-payment of premiums is a fundamental defense expressly preserved by the Insurance Act. The Court adopted the United States rule, following New York Life Ins. Co. vs. Statham, which holds that the war merely suspends the contract, and the insurer’s obligation revives only if the insured survives the war and resumes premium payments. Since the insureds died during the period of suspended premiums, the policies had lapsed. The equitable reserve values in the second case had already been returned via a loan and advance. The terms of the insurance contract are binding and must be enforced.

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