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G.R. No. 95546 November 6, 1992 Bellosillo, J.

American Home Assurance Co. (AHAC) issued a policy on Tuscany's
building and premises from 3/1/82 to 3/1/83 with a total premium of
P466,103.05. The premium was paid on installments from March to
November 1982.
The policy was renewed in 1983 for which the premiums were also paid
on installment. It was again renewed in 1984 for which Tuscany made 2
installment payments but thereafter refused to pay the balance because:
o The policy did not contain a credit clause in its favor, and
o The receipts for the installment payments covering all 3 policies,
stated the following reservations:
! Acceptance of payment shall not waive AHAC's rights to
deny any claim under the policy arising before such
payments/ after the expiration of the credit clause
! Subject to no loss prior to premium payment. If there be any
loss, such is not covered.
AHAC filed an action to recover the unpaid balance of P314,103.05.
Tuscany filed counterclaim for refund of premiums already paid for 1984,
claiming the risk never attached. It argues that there is no perfected
contract of insurance upon mere partial payment of the premiums
according to Section 77 of the Insurance Code which states that "no
contract of insurance is valid and binding unless the premium
thereof has been paid, notwithstanding any agreement to the

ISSUE: W/N policies are valid even if premiums were paid on installments

HELD: Yes.
The records clearly show the parties intended subject insurance policies to
be binding and effective notwithstanding staggered payment. For 3 years, AHAC
accepted Tuscany's installment payments. This speaks loudly of insurer's
intention to honor the policies issued. Certainly, basic principles of equity and
fairness would not allow the insurer to continue collecting and accepting the
premiums, although paid on installments, and later deny liability on the lame
excuse that the premiums were not prepared in full. Tuscany may not be allowed
to renege on its obligation to pay the balance of the premium after the expiration
of the whole term of the third policy. Moreover, as correctly observed by the CA,
where the risk is entire and the contract is indivisible, the insured is not entitled to
a refund of the premiums paid if the insurer was exposed to the risk insured for
any period, however brief or momentary.

Bianca Danica Santiago Villarama