G.R. No. L-1669; G.R. No. L-1670 – 87 Phil. 248 – Mercantile Law – Law on Insurance – Premium Payment – Insurance Contract in Times of War – Premium Payment not excused by war
There were two cases consolidated here. First was that of Arcadio Constantino who acquired a life insurance from Asia Life Insurance Company in September 1941. He paid the first premium which was good until September 1942. War broke out and he was not able to pay the second and subsequent premiums. He died in 1944. His beneficiary was Paz Lopez De Constantino.
The second case was that of Tomas Ruiz who acquired his life insurance from Asia Life in August 1938. He has been paying his premium religiously but due to the war, he was not able to pay his subsequent premiums in 1942. He died in 1945. His beneficiary was Agustina Peralta.
The beneficiaries from both insurance policies filed their respective claims when the war was over. They point out that the obligation of the insured to pay premiums was excused (suspended) during the war owing to impossibility of performance, and that consequently no unfavorable consequences should follow from such failure (New York Rule).
Asia Life argued that the nonpayment of premiums cancelled the insurance policy. An insurance contract is one in which time is material and of the essence. Non-payment at the day involves absolute forfeiture if such be the terms of the contract (United States Rule).
ISSUE: Whether or not the beneficiaries are entitled to the claims.
HELD: No. The Supreme Court adopts the United States Rule. It should be noted that the parties contracted not only for peacetime conditions but also for times of war, because the policies contained provisions applicable expressly to wartime days. The logical inference, therefore, is that the parties contemplated uninterrupted operation of the contract even if armed conflict should ensue.