G.R. No. 95546 November 6, 1992
MAKATI TUSCANY CONDOMINIUM CORPORATION, petitioner, vs. THE COURT OF APPEALS, AMERICAN HOME ASSURANCE CO., represented by American International Underwriters (Phils.), Inc., respondent.

FACTS

Sometime in early 1982, respondent American Home Assurance Co. (AHAC) issued Insurance Policy No. AH-CPP-9210452 in favor of petitioner Makati Tuscany Condominium Corporation (TUSCANY) on the latter’s building and premises, for the period March 1, 1982 to March 1, 1983, with a total premium of P466,103.05. The premium was paid in installments on March 12, 1982, May 20, 1982, June 21, 1982, and November 16, 1982, all accepted by respondent. On February 10, 1983, respondent issued Policy No. AH-CPP-9210596, renewing the previous policy for March 1, 1983 to March 1, 1984, with the same premium paid in installments on April 13, July 13, August 3, September 9, and November 21, 1983, all accepted. On January 20, 1984, the policy was renewed as Policy No. AH-CPP-9210651 for March 1, 1984 to March 1, 1985. Petitioner made two installment payments for this policy, accepted by respondent: P52,000 on February 6, 1984 and P100,000 on June 6, 1984. Petitioner then refused to pay the balance of P314,103.05. Respondent filed an action to recover the unpaid balance. Petitioner admitted the policy issuance but explained it discontinued payment because the policy lacked a credit clause and the installment receipts contained reservations disclaiming liability for any loss prior to premium payment. Petitioner claimed the policy was never valid and no risk attached, and sought a refund of all premiums paid for 1982-1985. The trial court dismissed both the complaint and counterclaim. Both parties appealed. The Court of Appeals modified the trial court’s decision, ordering petitioner to pay the premium balance with interest and affirming the denial of the counterclaim.

ISSUE

Whether payment by installment of the premiums due on an insurance policy invalidates the contract of insurance under Section 77 of the Insurance Code (P.D. 612, as amended).

RULING

No. The subject insurance policies are valid even if the premiums were paid on installments. The records show both parties intended the policies to be binding and effective despite staggered premium payments. The initial 1982 contract was renewed in 1983 and 1984, with the insurer accepting all installment payments each year. This acceptance demonstrates the insurer’s intention to honor the policies. Basic principles of equity and fairness preclude the insurer from accepting installment payments and later denying liability on the ground that premiums were not paid in full. Section 77 of the Insurance Code, which requires prepayment of premiums as a condition for the validity of the contract, does not expressly prohibit an agreement granting credit extension or allowing installment payments. Such an agreement is not contrary to morals, good customs, public order, or public policy. At the very least, both parties are in estoppel to question the arrangement they voluntarily accepted. The contract became valid and binding upon payment of the first premium. Petitioner cannot renege on its obligation to pay the balance after the policy term expired. Furthermore, where the risk is entire and the contract indivisible, the insured is not entitled to a refund of premiums paid if the insurer was exposed to the risk insured for any period. The Court of Appeals decision is affirmed.