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American Home Assurance Company v. Antonio Chua (1999) Davide, Jr., CJ. Chua re-applies for fire insurance when his current one expired. He paid by check and the insurance agent accepted it, then gives Chua a renewal certificate which contains acknowledgement of receipt. The next day, Chuas business burns down. He files a claim but insurance company denies, saying that their contract is still not in effect. They say that Chua did not pay the premium s ince he th th gave the check April 5 , fire happens April 6 , but the check was only cleared and deposited in Insurance companys bank account th on April 10 . Issue: Was there valid premium paid? SC says yes. The fact that the company accepted the check means that it gave the agent authority to receive payment on companys behalf. And when the agent gave the renewal certificate an acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence of its payment (Sec 78). American Home Company granted fire insurance to Chua. o Insurance covers the stock-in trade of his business Moonlight Enterprises in Bukidnon o Insurance was to expire on March 25, 1990 (April 5, 1990) Chua issued to the company agent, a certain James Uy, a check as payment for the renewal of the fire insurance policy. o In turn, agent Uy delivered a renewal certificate. o Such renewal certificate contained an acknowledgement of that premium has been paid. Check was drawn and deposited in the companys bank account. o The official receipt was issued April 10. And so, a new fire insurance policy was issued. o This would cover damage or loss from March 25, 1990 to March 25, 1991. (April 6, 1990) Chuas business burned down. So he filed a claim with the insurance company plus 4 other co-insurers. o Insurance company refused to honor the claim. Chua files with trial court a claim against the insurance company. Argument of Insurance company: o There was no existing insurance contract when the fire happened since Chua did not pay the premium. When the fire happened on April 6, there was no contract yet because accdg to NCC 1249: a chack can only effect payment one it has been cashed. Although Chua gave the check on April 5, the bank could not have cleared the check by April 6 (the date when fire happened). In fact, the receipt was only issued April 10. o And some other arguments not related to lesson: o (That Chua was fraudulent in his submission of his income tax return and financial statements) o (Chua did not notify the insurance company of other insurance policies already in effect) TC decision: Chua won. CA affirmed.

Issue: Was there a valid payment of premium? Held: Yes. Ratio:

General rule in insurance law: Unless the premium is paid, the insurance policy is not valid. o Exceptions: Life and industrial life insurance. Whether payment was made is a question of fact which is best determined by the TC. o TC found, and CA affirmed, that there was a valid check payment by Chua to Insurance company. It is a well-settled rule that the factual findings and conclusions of the TC and CA are entitled to great weight. o SC sees no reason to disagree. Accdg to TC: Renewal certificate contained acknowledgment that premium has been paid. Sec 306 of Insurance Code says that any insurance company which delivers a policy or contract of insurance to an insurance agent or insurance broker 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 or contract of insurance at the time of its issuance or delivery or which becomes due thereon. In this case, the best evidence of such authority is that the insurance company accepted the check and issued the official receipt. It is bound by its agent's acknowledgment of receipt of payment. Sec. 78 of the Insurance Code explicitly provides: 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. This Section establishes a legal fiction of payment and should be interpreted as an exception to Section 77.

Decision partly affirmed (some modification of damages but Chua still wins)