CHAPTER 4 - PERFECTION OF CONTRACT OF INSURANCE
communicated to the applicant as the latter was already dead.
Offer and Acceptance. Consensuality
• When is a contract of insurance perfected?
• It is the would-be insured who makes the offer by filling up
the application form supplied by the broker/agent, and
submitting relevant kind of information called for by the
kind of insurance being applied for.
• The most positive evidence of acceptance is the delivery of
the policy.
• Where the insurance company inures unreasonable delay in
acting on application, there being negligence, recovery may
be had, not based on contract but on tort.
- Especially if what is being insured is life, had the application
been acted upon promptly, applicant would have been
covered and recovery made.
• Delivery of the policy
- Invariably, life, health, and accident insurance are condition
upon the delivery of the policy to the insured while in good
health. This is to protect the insurers from assuming a risk
that arises between the time of application and the final act
necessary to create the contract.
PEREZ v. CA
FACTS: Perez had been insured w/ BF Lifeman Insurance since
1980. In 1987, Lalog, an agent, visited Perez and convinced
him for additional insurance coverage. He accomplished an
application form and his wife paid Php2,075. A receipt was
then issued by Lalog indicating the amount received as
deposit. However, the latter lost the form and asked Perez to
fill up another form. The application was forwarded to the
office in Quezon, w/c was supposed to forward the paper to
Manila office. On Nov. 25, Perez died, but his papers was only
received in Manila on Nov.27. Without knowing that he
already died, the company approved his application and
issued the policy on Dec. 2. When the wife went to Manila to
claim benefits, company refused to pay the claim under the
additional coverage policy. They argued that the contract has
not been perfected at the time of Perez’s death.
HELD: When Primitivo filed an application for insurance, paid
P2,075.00 and submitted the results of his medical
examination, his application was subject to the acceptance of
private respondent BF Lifeman Insurance Corporation. The
perfection of the contract of insurance between the deceased
and respondent corporation was further conditioned upon
compliance with the following requisites stated in the
application form. Under the contract, it is only when the
applicant pays the premium and receives and accepts the
policy while he is in good health that the contract of insurance
is deemed to have been perfected. In this case, there is no
way that the acceptance of application could be
VDA DE SINDAYEN v. INSULAR
FACTS: Sindayen made a written application to Insular Life
Assurance thru its agent Mendoza and paid the first premium.
It was agreed that if and when issued, the policy should be
delivered to his aunt. On Jan. 11, the company accepted the
app and issued a policy. On Jan. 15, Sindayen died. On Jan.
18, the policy was delivered to Felicia. When asked if her
nephew was in good health, she replied in the affirmative not
knowing that Sindayen already died. When Mendoza found out
that Sindayen already died, he asked the aunt to return the
policy which she complied with. Later on, the company
obtained the signature of Sindayen’s widow and beneficiary
for a legal document releasing the company from all claims in
consideration of 40.06. The payment was returned and
Sindayen’s widow filed action to enforce payment of policy.
HELD: Personal delivery to the insured is not necessary. It
may be made by mail or to a duly constituted agent. The
delivery of the policy by the agent to the insured
consummates the contract even though the agent knew that
the insured was not in good health at the time, the theory
being that his knowledge is the company’s knowledge and his
delivery of the policy is the company’s delivery. In this case,
Mendoza was authorized by the company to make the delivery
of the policy when he received payment of the first premium
from aunt, and was satisfied that the insured was in good
health. Also, good health is required in the entering of the
insurance contract, not in the delivery of the policy.
ENRIQUEZ v. SUN LIFE
FACTS:
1. 2 days after Herrer made an application to Sun Life, she
paid the premium and was given provisional receipt. Her
app was forwarded to the head office at Montreal.
2. On Nov. 26, head office gave notice of acceptance. On
Dec. 4, policy was issued.
3. However, on Dec. 18, Atty. Torres wrote to the Manila
office that Herrer would withdraw his application, but was
told in a letter received on Dec. 21 that the policy was
already issued. Herrer then died on Dec. 20.
HELD: Given the silence of the Insurance Act as to the
perfection of insurance contract, Art. 1262 CC, which
provides that “an acceptance made by letter shall not bind the
person making the offer except from the time it came to his
knowledge,” shall apply. in this case, while it is established
that the letter of acceptance of application was made, there is
no showing that it was actually mailed and therefore not
received by the applicant. The insurance contract was not
then perfected.

• May an insurance contract be oral? No provision in
insurance code requiring a particular form for the validity of
the insurance contract.
Premium Payment
• The payment of the premium is the foundation of a life
insurance policy.
- Accumulated premium receivables affect the legal reserves
insurance companies are required to maintain, consistent
with the concept of insurance being one involving the
pooling sources from among those exposed tot he same or
similar risks.
• Sec. 233 (a): the policyholder is entitled to a grace period of
30 days or 1 month to pay premium after the first.
• Section 77. An insurer is entitled to payment of the
premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an
insurance company is valid and binding unless and until the
premium thereof has been paid, except in the case of a life
or an industrial life policy whenever the grace period
provision applies, or whenever under the broker and agency
agreements with duly licensed intermediaries, a ninety (90)-
day credit extension is given. No credit extension to a duly
licensed intermediary should exceed ninety (90) days from
date of issuance of the policy.
• Section 79. An acknowledgment in a policy or contract of
insurance or the receipt of premium is conclusive evidence
of its payment, so far as to make the policy binding,
notwithstanding any stipulation therein that it shall not be
binding until the premium is actually paid.
• Premium payment in Life Insurance:
- Perfection of life insurance depends on the payment of the
first premium.
- After the payment of first premium, a grace period of 30
days is given to pay subsequent periodic premium
payments.
- Upon expiration of grace period, policy lapses UNLESS the
nonforfeiture clause may be invoked.
- The insurer is not required to give notice to the insured of
the failure of the latter to pay such subsequent premiums
as a prerequisite for the cancellation of the policy (Sec. 64)
- If policy becomes a claim during the grace period, the
claim is valid but the overdue premium, with interest, will
be deducted from the proceeds.
- If insured fails to pay the premium due within the grace
period, policy lapses and all the premiums previously paid
are forfeited UNLESS entitled to any of the non-default
provisions of the policy, the insured having paid three
annual premiums by then.
• Premium payment in Property Insurance:
- Property insurance is only limited for one year.
- No grace period mandated by the Code in property
insurance. Taking into account the limited effectivity, lax
credit arrangements would result in accumulation of
premium receivables where policy is renewed yearly and
the risk insured against did not happen.
VELASCO v. APOSTOL
FACTS:
1. Velasco was riding her car when it was suddenly hit by the
taxi driven by Santos but registered in the name of Artuz.
Velasco then filed complaint against the latter and
imploded Maharlika Insurance, alleging that the taxi was
insured against third-party liability for 20k at the time of
the incident.
2. Maharlika Insurance claimed that the alleged insurance
policy was not in force due to the nonpayment of
premium.
3. Lower court granted the petition but exonerated the
insurance company.
HELD: Pursuant to Sec. 72 of Act No 2427, the law in force
when the accident happened, the insurance policy would be
valid and binding notwithstanding the non-payment of the
premium if there was a clear agreement to grant to the
insured a credit extension. Such agreement may be express or
implied. Pet. argued that the initial premium was paid on 11
Dec 1973 and this subsequent acceptance of premium estops
the insurance company from rendering the policy ineffective.
Had there really been a credit extension, the insured would
not have had any apprehension or hesitation to inform
Maharlika at the time of or before the payment of the
premium that an accident for which the insurer may be held
liable had already happened. Under such circumstances,
notice alone is necessary and the insured need not pay the
premium because whatever premium may have been due may
already be deducted upon the satisfaction of the loss under
the policy. Velasco and Acosta failed to point out any other
circumstances showing that prepayment of premium was not
intended to be insisted upon.
VALENZUELA v. CA
FACTS:
1. Valenzuela was the general agent of PhilAmGen, and as
such, he was authorized to solicit and sell nonlife
insurance. In consideration of which, he was entitled to
receive a full agent’s commission.
2. In 1973, he solicited marine insurance from Delta Motors,
Inc. However, he didn’t receive his full payment of
commission.
3. In 1977, PhilAmGen proposed to Valenzuela that they
share commission on 50-50 basis. However, the latter
refused.
4. Due to his refusal, the company didn’t credit in his
account the commission earned from Delta Motor’s
insurance. The general agency agreement was then
terminated, prompting Valenzuela to file action for
damages.
5. It was ruled by the CA that wile Valenzuela was entitled
for damages due to termination of agreement in bad
faith, he shall pay the insurance company for the unpaid
and uncollected premiums.
HELD: The Court held that holding Valenzuela liable for
unpaid premiums has no bases. Under Sec. 77 of the
insurance code, the remedy for the non- payment of
premiums is to put an end to and render the insurance policy
not binding. Since admittedly the premiums have not been
paid, the policies issued have lapsed. The insurance coverage
did not go into effect or did not continue and the obligation
of Philamgen as insurer ceased.
TIBAY v. CA
FACTS:
1. FORTUNE issued fire insurance policy in favor of Tibay on
their two-story residential building. However, out of the
premium Php2983, only Php600 was paid.
2. In 1987, the insured building was completely destroyed
by fire. 2 days later, Tibay paid the balance of the
premiums and consequently filed a claim on the fire
insurance policy.
3. This however was denied for violation of policy condition
no. 2 and of sec. 77 of insurance code. Tibay then filed a
complaint against FORTUNE for damages. This was
granted by lower court, but reversed by CA
HELD: Insurance is a contract whereby one undertakes for a
consideration to indemnify another against loss, damage or
liability arising from an unknown or contingent event. The
consideration is the premium, which must be paid at the time
and in the way and manner specified in the policy, and if not
so paid, the policy will lapse and be forfeited by its own
terms. Policy Condition No. 2 explicitly provides that the that
policy is not in force until premium has been FULL PAID.
MAKATI TUSCANY v. CA
FACTS:
1. American Home Assurance Co. (AHAC) issued in favor of
Makati Tuscany Condominium an insurance policy on the
latter’s building and premises. The premium was paid on
installments, all of which were accepted by AHAC.
2. AHAC issued to the petitioner an insurance policy, which
replaced and renewed the previous policy. The premium
was paid on installments again, all of which were also 

accepted by AHAC.
3. For the second time, the policy was renewed. Petitioner
made two installment payments, both accepted by AHAC.
Thereafter, petitioner refused to pay the balance of
payment. AHAC then filed an action to recover the unpaid
balance.
4. In its counterclaim, petitioner explained that it
discontinued the payment of premiums because the policy
did not contain a credit clause in its favor and that the
acceptance of premiums didn’t waive any of the company
rights to deny liability on any claim under the policy
arising before such payments. It further argued its
payment of premiums in installment invalidated the
policies pursuant to Sec. 77 of the Insurance Code and
eventually sought a refund of the premiums it has paid.
HELD: While prepayment of premiums strictly required as a
condition to the validity of the contract under Sec. 77,
installment payments duly approved by the insurer would not
invalidate the policy. It was clarified that Sec. 77 merely
precludes the parties from stipulating that the policy is valid
even if premiums are not paid, but does not expressly
prohibit an agreement granting credit extension, but it does
not expressly preclude payment in installments. Moreover,
sec.. 78 of the Insurance Code in effect allows waiver by the
insurer of the condition of prepayment by making an
acknowledgment in the insurance policy of receipt of
premium as conclusive evidence of payment so far as to make
the policy binding despite the fact that premium is actually
unpaid.
SOUTH SEA SURETY v. CA
FACTS:
1. Valenzuela Hardwood and Industrial entered into an
agreement with Seven Brothers where the latter loaded on
board its vessel the former’s lauan round logs. The logs
were then insured with South Sea Surety. The plaintiff then
gave the check in payment of the premium to Mr. Chua.
2. Later on, the vessel sank. 5 days later, a check to cover
payment was tendered but was not accepted. Instead, the
company cancelled the insurance policy for nonpayment of
premium due.
3. Valenzuela Hardwood and Industrial Supply filed a
complaint for recover of value of lost logs from seven
brothers shipping or to the extent of its alleged insurance
cover. Granted and affirmed.
HELD: Art. 306 of Insurance Code provides that “any
insurance company which delivers to an insurance agent or
insurance broker a policy or contract of insurance shall be
deemed to have authorized such agent or broker to receive on
its behalf payment of any premium which is due on such
policy of contract of insurance at the time of its issuance or
delivery or which becomes due. 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.
AREOLA v. CA
FACTS:
1. Areola bought a personal accident insurance policy where
the insured was supposed to pay Php1609. The insurance
company then issued a provisional receipt
2. 7 mos. after the issuance of insurance policy, Prudential
Guarantee unilaterally cancelled the policy for the alleged
failure to pay premiums.
3. The company offered to reinstate the policy and even
offered to extend its lifetime upon finding that the
cancellation was erroneous and that the premiums were
paid in full by petitioner-insured but were not remitted by
Malapit, insurance company's branch manager.
4. Areola the filed action for damages due to breach of
contract. Granted, but reversed by CA on the ground that
the cancellation was based on absence of official receipt
and not bad faith.
HELD: Malapit's fraudulent act of misappropriating the
premiums paid by petitioner-insured is beyond doubt directly
imputable to respondent insurance company. A corporation,
such as respondent insurance company, acts solely thru its
employees. Being the branch manager, he represented its
interests and acted on its behalf. Thus, Malapit’s receipt of
said premiums is receipt by the company. Under Article 1191,
the injured party is given a choice between fulfillment or
rescission of the obligation in case one of the obligors fails to
comply with what is incumbent upon him. However, said
article entitles the injured party to payment of damages,
regardless of whether he demands fulfillment or rescission of
the obligation.The damages would be nominal because the
insurance company took steps to rectify the contract . There
was also no actual or substantial damage inflicted.
UCPB GEN INS. v. MASAGANA
FACTS:
1. Pet. issued five insurance policies covering Masagana
Telemart’s properties. Upon expiration, pet. advised
respondent’s broker, Zuellig Insurance Brokers, of its
intention to not renew.
2. Pet. then gave resp. written notice of the nonrenewal of
the policies at the address stated in the policies. In June
1992, the fire razed respondent’s property.
3. A month after, when resp. presented checks for the
payment of premium of renewal policies for which official
receipt was issued. They consequently filed formal claim
for indemnification. However, pet. returned the checks and
rejected the resp.’s claim.
4. Resp. then filed a civil complaint for recovery of face value
of policies. Granted. This was reversed by CA on the
ground that the respondent was allowed a sixty (60) to
ninety (90) day credit term for the renewal of its policies,
and that the acceptance of the late premium payment
suggested an understanding that payment could be made
later.
HELD: Not renewed. An insurance policy, other than life is not
valid and binding until actual payment of the premium. Any
agreement to the contrary is void. The parties may not agree
expressly or impliedly on the extension of credit or time to
pay the premium and consider the policy binding before
actual payment.
UCPB GEN INS. v. MASAGANA (MR)
HELD: Sec. 77 has exceptions. First is in case of a life or
industrial life policy whenever the grace period provision
applies. Second is Sec. 78 which allows for the
acknowledgment of the receipt of premium regardless of the
stipulation that it’s not binding until premium is actually paid.
Third is when the parties agreed to pay the premium in
installments (Makati Tuscany v. CA). Fourth, when the insurer
is granted a credit extension for the premium and premium is
paid after loss but within the credit term (Makati Tuscany v.
CA). In this case, UCPB had consistently granted a 60 to 90-
day credit term for the payment of premiums despite its full
awareness of Section 77. Estoppel bars it from taking refuge
under said Section, since Respondent relied in good faith on
such practice. Estoppel then is the fifth exception to Section
77.
DISSENT:
J. Pardo: There is no dispute that like in any other contract,
the parties to a contract of insurance enjoy the freedom to
stipulate on the terms and conditions that will govern their
agreement so long as they are not contrary to law, morals,
good customs, public order or public policy. However, the
agreement containing such terms and conditions must be
clear and definite. In the case at bar, there was no clear and
definite agreement between petitioner and respondent on the
grant of a credit extension. Masagana merely deduced that a
credit agreement existed based on previous years practice
that they had of delayed payments accepted by the insurer as
reflected on the face of the receipts issued by UCPB
evidencing the payment of premiums.
AMERICAN HOME ASSURANCE v. CHUA
FACTS:
1. Chua obtained from AHAC a fire insurance covering its
stock-in-trade business, Moonlight Enterprises. When the
policy expired, he issued a check to AHAC’s agent, James
Uy, as payment for renewal. An official receipt as well as
the new policy, was issued.
2. The following day, Moonlight Enterprises was burnt.
However, when Chua filed an insurance claim, AHAC
refused hence the action. Granted by TC and affirmed.
3. AHAC argued that pursuant to Art 1249, check can only
effect payment when cashed. The check was given on April
5 but it could not have been cleared by the following day
when the building was burnt. Furthermore, receipt issued
was dated 4 days after occurrence of fire.
HELD: The renewal certificate issued to respondent contained
the acknowledgment that premium had been paid. It is not
disputed that the check drawn by respondent in favor of
petitioner and delivered to its agent was honored when
presented and petitioner forthwith issued its official receipt to
respondent on 10 April 1990. Sec. 78 provides that “an
acknowledgment in a policy or contract of insurance of the
receipt of premium is conclusive evidence of its payment, so
far as to make the policy binding, notwithstanding any
stipulation therein that it shall not be binding until the
premium is actually paid.”
Nondefault options in life insurance
• Nondefault options also known as the “guaranteed values”
or “policy surrender options”
• At the time of application, applicant is required to indicate
the option he wants in case of defaults after having paid
three annual premiums.
1. Cash surrender value: portion of the reserve on a life
policy; accumulated premiums minus outstanding
accounts.
2. Extended insurance: the value will be applied as a single
premium to pay for the period it can purchase
- In effect, policy is converted into a term insurance.
- If death occurs during this period of extension,
beneficiary can recover the unchanged face value of
policy
- If the insured survives the period, the beneficiary gets
nothing
- The insured may reinstate original policy by complying
with the requirements provided by law
3. Paid up insurance: amount of insurance the value may
purchase
- Terms and conditions are the same the original policy
but less than the original face value
4. Automatic loan premium: If no option is elected, this will
automatically apply. Upon default, the insurer lends to the
insured without any need of application such amount as
may be necessary to pay his overdue premium, but not to
exceed the cash surrender value.
MANUFACTURER’S LIFE INSURANCE v. MEER
FACTS:
1. Manufacturers Life Insurance Company, a duly organized
corporation which has its head office at Toronto, engaged
in the distribution of life insurance business in the
Philippines. It was noted that the life insurance policies
contained nonforfeiture clauses.
2. Due to the war and failure of policyholders to pay the
premium, MLI applied the provisions of the automatic
premium loan clauses and the premium collected totaled
to Php1.069M.
3. Meer, the Collector of the National Internal Revenue
assessed the net amount of premium at P17,917.12
pursuant to SEC.255, National Internal Revenue Code. The
company however alleged that it did not collect premiums
within the meaning of the aforementioned provision, and
therefore it is not amenable to the tax.
HELD: In applying automatic premium loan, insurer in effect
loaned person the amount due and paid his premium with it.
The cash surrender value is an amount w/c the insurance
company holds in trust for the insured to be delivered to him
upon demand. It is therefore a liability of the company to the
insured. When the company’s credit for advances is paid out
of the CSV, that value and the company’s liability is
diminished pro tanto. Net assets of insurer increased since
decrease in liability means corresponding increase in net
assets. The premium was therefore paid by means of a "note"
or "credit" or "other substitute for money" and the tax is due
because section 255 above quoted levies taxes according to
the total premiums collected by the insurer "whether such
premiums are paid in money, notes, credits or any substitute
for money.
Reinstatement of a lapsed policy of life insurance
• Requirements pursuant to Art. 233 (j):
- it be exercised within 3 years from the default of
premium payment
- evidence of insurability satisfactory be produced
- payment of all overdue premiums and any indebtedness
• This cannot be applied when cash surrender value has been
duly paid or the extension period has expired.
ANDRES v. CROWN LIFE INSURANCE
FACTS: Spouses Andres’ endowment life insurance policy
lapsed for non-payment of the balance of the premium at
P165.15. They applied for reinstatement with the tender of
P100.00 and Crown Life approved, subject to the payment of
the P65.15, and the semi-annual premiums for the new year
of effectivity of the policy. Mrs. Andres’ died, and two days
after, Mr. Andres sent the P65.00 balance. He then presented
the death claim. Crown Life’s agent informed him of the
company’s refusal to pay and sent refund of P165.
HELD: The conditions set forth in the policy for reinstatement
are the following: (a) application shall be made within three
years from the date of lapse; (b) there should be a production
of evidence of the good health of the insured: (c) if the rate of
premium depends upon the age of the Beneficiary, there
should likewise be a production of evidence of his or her good
health; (d) there should be presented such other evidence of
insurability at the date of application for reinstatement; (e)
there should be no change which has taken place in such
good health and insurability subsequent to the date of such
application and before the policy is reinstated; and (f) all
overdue premiums and other indebtedness in respect of the
policy, together with interest at six per cent, compounded
annually, should first be paid. In this case, he was not able to
pay all past due premiums Failure to pay full premium due will
result in non- reinstatement of policy unless there is a clear
and positive waiver on the part of the insurer.
Refund of premiums
• When can there be refund of premiums?
- no part of the interest of the insured has been exposed to
the risk insured against
- insurance is made for a definite period of time and the
insured surrenders his policy before the expiration of that
period
- In this case, insured is entitled to a return of such
portion of the premiums corresponding with the
unexpired
- contract is voidable by reason of fraud or misrepresentation
of the insurer
- In case of overinsurance by several insurers, the insured is
entitled to ratable return.
Delivery of Policy
• Life insurance is conditioned on the delivery of the policy to
the insured while in good health.
- This is to protect the insurers from assuming risk that arises
bet. the time of application and the final act creating the
contract of insurance.
CHAPTER 5 - THE POLICY
• POLICY OF INSURANCE:a written instrument in which the
contract is set forth. This specifies the parties, premium,
property or life insured, interest of the insured in the
property if he is not the absolute owner, risks insured
against and the period of insurance.
• While there is no provision on the particular form for
validity, the policy should be in writing and printed in a form
approved by the Insurance commissioner.
- Failure to do so does not invalidate the contract, but
the insurer would be sanctioned for nonobservance.
• With respect to riders and endorsements:
- RIDER: a printed or typed stipulation contained in a slip of
paper attached to the policy.
- To be binding, the descriptive title or name of title must be
mentioned and written on the blank spaces.
- If issued after the original policy, it must be countersigned
by the insured.
• With respect to cover notes/binding slip/ binding receipt:
- A policy shall be issued 60 days after issuance of cover
note.
- This may be extended with the written approval of the
commission if he determines that extensions not contrary
to or violative of the law.
Lim v. Sun Life Assurance (1920)

Facts: On July 6, 1917, Luis Lim applied for life insurance to
Sun Life with Pilar Lim as beneficiary. Upon payment of the
first premium, Sun Life issued a provisional policy, to the
effect that the terms and conditions of the life insurance
policy is subject to the condition that Sun Life Montreal shall
issue a policy on Lim’s application. Should Sun Life not issue
such a policy, then the agreement shall be null and void ab
initio. Luis died before the approval of the application for the
life insurance. Pilar files action to recover from policy.

Held: The provisional policy is nothing but an
acknowledgement of receipt of payment of premium. The
policy will only be issued upon acceptance, which has not
happened when Luis died. Only thing to do is return the
premium paid to Lim. Joyce on Insurance: Where an
agreement is made between the applicant and the agent
whether by signing an application containing such condition,
or otherwise, that no liability shall attach until the principal
approves the risk and a receipt is given buy the agent, such
acceptance is merely conditional, and it subordinated to the
act of the company in approving or rejecting; so in life
insurance a "binding slip" or "binding receipt" does not insure
of itself.
Great Pacific Life v. CA (1979)

Facts: Ngo Hing applied for a 20-year endowment policy for
the life of his one- year old daughter Helen with Grepalife. He
paid annual premium of P1,077.75, but retained for himself
retained amount of P1,317.00 as commission for being a
Grepalife agent. A binding deposit receipt was given by
Branch Manager Mondragon, who forwarded application to
Grepalife with recommendation for approval. Grepalife
rejected the application, saying the 20-year endowment
policy is not available to minors, and offered another plan, the
Juvenile Triple Action Plan. However, the non-acceptance of
Grepalife was allegedly not communicated to Ngo Hing,
because Mondragon instead re-sent the application to
Grepalife, pointing out that Chinese customers asked for such
coverage. While in this state of the application process, Helen
died of influenza. Ngo Hing then tried to collect from
insurance, but then filed a case against Mondragon and
Grepalife.
HELD: Binding deposit receipt stated that it was intended to
be a provisional or temporary insurance contract and only
upon compliance of the ff. conditions: that the company shall
be satisfied that applicant was insurable on standard rates;
that if the company does not accept the application and offers
to issue a policy for a different plan, the insurance contract
shall not be binding until the applicant accepts the policy
offered; and that if the applicant is not insurable according to
the standard rates, and the company disapproves the
application, the insurance applied for shall not be in force at
any time, and the premium paid shall be returned to the
applicant. Clearly, from the conditions, the binding deposit
receipt in question is merely an acknowledgement on behalf
of the company, that the latter’s branch office has received a
premium and accepted the application for processing. Since
petitioner disapproved application, the binding deposit
receipts had never become in force at any time. 


• Types of non life insurance policies:

1. Open: the value of the thing insured is not agreed upon to
be ascertained at the time of loss. There is however a face
value in an open policy to indicate the limit of the insurer’s
liability.
2. Valued: expressed on its face an agreement that the thing
insured shall be valued at a specific sum
3. Running: this contemplates successive insurances as the
object of the policy may be defined from time to time. This
is for properties which frequently changes in location and
quality.

• Parties:
1. Insurer: persons or entities, except mutual benefit
associations, engaged as principals in the insurance
business.
- This granted with certificate of authority by the Insurance
Commission upon compliance with the conditions
imposed by law or the code.
2. Insured: anyone except the public enemy who has capacity
to contract
- PUBLIC ENEMY: person who possesses the nationality of the
state with which another is at war