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All Jurisprudence based

0 tracked cards Commercial and Taxation Laws

A seven-month marine cargo policy is issued on January 15 for PHP 700,000 premium, paid in full. Policy period: January 15 to August 31. On March 15, the insured cancels due to a misstatement in risk. The insurer refuses any refund, contending that the premium is earned at inception. Under Presidential Decree No. 612, as amended by Republic Act No. 10607, which statement correctly describes the rule on when premium is earned and the correct unearned premium refund as of March 15?

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Premium is earned pro rata over the policy period; upon cancellation, the unearned premium is the unused portion of the premium, calculated as 5/7 of PHP 700,000 = PHP 500,000. Premium is earned at inception; upon cancellation by the insured, no refund of any premium is due. Unearned premium is computed on a daily proration basis and, as of March 15, would depend on the exact number of days elapsed. The insured is entitled to a full refund of the premium because the risk statement was misrepresented and cancelled before the policy term end.

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