G.R. No. 44588 May 9, 1989
LAURA VELASCO and GRETA ACOSTA, petitioners, vs. HON. SERGIO A. F. APOSTOL and MAHARLIKA INSURANCE CO., INC., respondents.

FACTS

Petitioners Laura Velasco and Greta Acosta were plaintiffs in a civil case for damages arising from a vehicular accident on November 27, 1973. Their car was struck by a taxicab driven by Dominador Santos. The original defendants were the driver and the taxi owners. Petitioners later impleaded Maharlika Insurance Co., Inc., alleging the taxi was insured for third-party liability. The trial court found the taxi driver negligent and held the owners solidarily liable for damages. However, it exonerated Maharlika Insurance, finding the insurance policy was not in force at the time of the accident due to non-payment of the initial premium and concealment of a material fact by the insured.
The petitioners elevated the case, arguing the trial court erred in considering the defense of late premium payment, claiming it was waived during pre-trial. They contended the pre-trial order only stipulated the issue of whether Maharlika was liable under the policy, not the specific issue of premium payment. Additionally, petitioners asserted there was a credit extension agreement for the premium, making the policy effective despite the delayed payment.

ISSUE

The primary issue is whether the trial court correctly considered the defense of non-payment of the insurance premium and properly exonerated Maharlika Insurance from liability.

RULING

The Supreme Court affirmed the trial court’s decision, holding Maharlika Insurance not liable. On the procedural issue, the Court ruled that the defense of non-payment of premium was not waived at pre-trial. The pre-trial order framing the issue of Maharlika’s liability under the policy necessarily included the question of premium payment, as it is fundamental to the policy’s enforceability. The Court emphasized that a pre-trial order is not an exhaustive list and includes issues inferable by necessary implication. Moreover, evidence on late payment was introduced at trial without objection from petitioners, which constituted implied consent to try the issue.
On the substantive issue, the Court found no valid credit extension agreement that would make the policy binding despite non-payment. Under the then-governing Insurance Act (Act No. 2427), an insurer was not liable for any loss unless the premium was paid, except if there was a clear agreement to grant credit. Petitioners failed to prove such an agreement. The policy was delivered conditionally, subject to payment, and the premium was only paid after the accident occurred. The fact of the accident was concealed from the insurer at the time of payment, demonstrating bad faith and the absence of a prior binding contract. Consequently, no insurance contract existed at the time of the collision. The deletion of the credit extension clause in the subsequent Insurance Code of 1978 was noted but deemed inapplicable to this case governed by the old law.