Constantino v. Asia Life- Non-payment of Insurance Premiums

87 PHIL 248

Facts:

>  Appeal consolidates two cases.

>  Asia life insurance Company (ALIC) was incorporated in Delaware.

>  For the sum of 175.04 as annual premium duly paid to ALIC, it issued Policy No. 93912 whereby it insured the life of Arcadio Constantino for 20 years for P3T with Paz Constantino as beneficiary.

• First premium covered the period up to Sept. 26, 1942.  No further premiums were paid after the first premium and Arcadio died on Sept. 22, 1944.

>  Due to Jap occupation, ALIC closed its branch office in Manila from Jan. 2 1942-1945.

>  On Aug. 1, 1938, ALIC issued Policy no. 78145 covering the lives of Spouses Tomas Ruiz and Agustina Peralta for the sum of P3T for 20 years.  The annual premium stipulated was regularly paid from Aug. 1, 1938 up to and including Sept. 30, 1940.

• Effective Aug. 1, 1941, the mode of payment was changed from annually to quarterly and such quarterly premiums were paid until Nov. 18, 1941.
• Last payment covered the period until Jan. 31, 1942.
• Tomas Ruiz died on Feb. 16, 1945 with Agustina Peralta as his beneficiary.

>  Due to Jap occupation, it became impossible and illegal for the insured to deal with ALIC.  Aside from this the insured borrowed from the policy P234.00 such that the cash surrender value of the policy was sufficient to maintain the policy in force only up to Sept. 7, 1942.

>  Both policies contained this provision: All premiums are due in advance and any unpunctuality in making such payment shall cause this policy to lapse unless and except as kept in force by the grace period condition.

>  Paz Constantino and Agustina Peralta claim as beneficiaries, that they are entitled to receive the proceeds of the policies less all sums due for premiums in arrears.  They also allege that non-payment of the premiums were caused by the closing of ALIC’s offices during the war and the impossible circumstances by the war, therefore, they should be excused and the policies should not be forfeited.

>  Lower court ruled in favor of ALIC.

Issue:

May a beneficiary in a life insurance policy recover the amount thereof although the insured died after repeatedly failing to pay the stipulated premiums, such failure being caused by war?

Held:

NO.

Due to the express terms of the policy, non-payment of the premium produces its avoidance.  In Glaraga v. Sun Life, it was held that a life policy was avoided because the premium had not been paid within the time fixed; since by its express terms, non-payment of any premium when due or within the 31 day grace period ipso fact caused the policy to lapse.

When the life insurance policy provides that non-payment of premiums will cause its forfeiture, war does NOT excuse non-payment and does not avoid forfeiture.  Essentially, the reason why punctual payments are important is that the insurer calculates on the basis of the prompt payments.  Otherwise, malulugi sila.

It should be noted that the parties contracted not only as to peace time conditions but also as to war-time conditions since the policies contained provisions applicable expressly to wartime days.  The logical inference therefore is that the parties contemplated the uninterrupted operation of the contract even if armed conflict should ensue.