Chartis Philippines Insurance v. Cyber City Teleservices
REITERATIONFacts
The Antecedents: Chartis Philippines Insurance, Inc. (Chartis) issued two insurance policies to Cyber City Teleservices, Ltd. (CCTL): a professional indemnity insurance and a fidelity insurance. The policies were effective January 20, 2005, with a 90-day premium payment term. CCTL, through its broker Jardine Lloyd Thompson Insurance Brokers (JLT), requested and was granted several extensions for the premium payment, ultimately until June 15, 2005. No payment was made by CCTL. Procedural History: Chartis filed a collection suit against CCTL for the unpaid premiums. CCTL moved for summary judgment, arguing that under Section 77 of the Insurance Code, the policies were not valid and binding due to non-payment of premiums. The Regional Trial Court (RTC) ruled in favor of Chartis, finding that the credit extension constituted an exception to Section 77 and that a valid contract existed. The Court of Appeals (CA) reversed the RTC, holding that non-payment of premiums rendered the policies void and that no exceptions to Section 77 applied. Chartis appealed to the Supreme Court. The Petition: Chartis assailed the CA's decision, arguing that the policies were valid and binding due to the credit extended, and that it was entitled to the earned premiums and the Documentary Stamp Tax (DST) paid. Chartis also argued that the 'time on risk' provisions were valid.
Issue(s)
Whether petitioner Chartis is entitled to payment of the premiums. Whether the "time on risk" provisions are contrary to law, morals, and/or public policy. Whether CCTL is obligated to reimburse petitioner for the documentary stamps tax paid by Chartis.
Ruling
The petition is meritorious. The Supreme Court REVERSED and SET ASIDE the Decision and Resolution of the Court of Appeals and REINSTATED with MODIFICATION the Order of the Regional Trial Court. Respondent Cyber City Teleservices, Ltd. is ORDERED to pay petitioner Chartis Philippines Insurance, Inc. the following: (1) US$47,304.00 or its peso equivalent, representing the premiums due and documentary stamps tax paid, plus twelve percent (12%) interest per annum from the date of filing of the complaint until June 30, 2013; and six percent (6%) interest per annum from July 1, 2013 until full payment thereof; (2) P100,000.00 as attorney's fees; and (3) P60,713.32 as costs of suit.
Ratio Decidendi
On whether petitioner is entitled to payment of the premiums: The Supreme Court held that an insurance policy is valid and binding when the insurer extends credit to the insured for the premium payment. The Court reiterated that an insurer is entitled to payment of the premium as soon as the insured thing is exposed to the peril insured against, unless there is a clear agreement to grant credit. The Placing Instructions clearly indicated a 90-day credit term for premium payment, which was further extended. The Court found that CCTL accepted the terms of the credit, thus creating a valid and binding contract of insurance. The Court emphasized that the second sentence of Section 77 of the Insurance Code, which states that no policy is valid and binding unless the premium is paid, must be read in conjunction with the first sentence and jurisprudence that allows for credit extensions. The Court clarified that the insured's obligation to pay the premium is conditioned on the mere exposure of the insured item to the peril, not necessarily the occurrence of loss. Therefore, Chartis, having been exposed to risk during the credit period, is entitled to the earned premiums. On whether the "time on risk" provisions are contrary to law, morals, and/or public policy: The Supreme Court disagreed with the CA's ruling that the 'time on risk' provisions were void. The Court found these provisions to be fair and consistent with Sections 79 and 80 of the Insurance Code, which deal with earned and unearned premiums. The Court explained that these sections allow for the computation of earned premiums on a pro rata or short rate basis, depending on the agreement between the parties. The Court noted that the policies provided for a short period rate cancellation if CCTL cancelled, and a pro rata computation if Chartis cancelled. The Court concluded that these provisions are valid and reinforce the understanding that if Chartis was on risk for a given period, CCTL is obligated to pay the corresponding premiums. The Court also affirmed the RTC's award of attorney's fees and costs of suit, finding that CCTL's refusal to pay was unjustified. On whether CCTL is obligated to reimburse petitioner for the documentary stamps tax paid by Chartis: The Supreme Court ruled that CCTL is obligated to reimburse Chartis for the DST paid. The Court clarified that the amounts due under the policies included both premiums and taxes, as indicated in the policies and the Placing Instructions. The Court distinguished the present case from Phil. Home Assurance Corp. v. CA, stating that while DST is due upon issuance of the policy, there is nothing legally preventing parties from stipulating that the insured shall bear the taxes. The Court found that CCTL's obligation under the policies encompassed the DST. Therefore, Chartis is entitled to reimbursement for the DST it paid.
Main Doctrine
An insurance policy is valid and binding when the insurer extends credit to the insured for the premium payment, and the insurer is entitled to the payment of the premium as soon as the insured thing is exposed to the peril insured against, even if the premium has not been actually paid, provided the credit term has not expired.