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    Iclo2018 02

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    Iclo2018 02

    Uploaded by

    maybaguio7
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    Original Title

    ICLO2018_02

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    Copyright:

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    4 views3 pages

    Iclo2018 02

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    of 3

    Republic of the Philippines

    Department of Finance rsl


    t:l
    INSURANCE COMMISSION lnTa
    1071 United Nations Avenue
    Manila
    @t
    @
    I

    CN: AJAI6-0061

    Leoal Opinion No. IO-2018-02


    Date January ?5r ?O1E

    ENGR. JOSEFINO M. MELGAR, JR.


    District Engineer
    DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS
    Mindoro Occidental District Engineering Office
    Regional Office lV-B
    Mamburao, Occidental Mindoro

    Subject: Request for Legal Opinion Regarding


    the Wordings of Performance Bond
    "Up to Final Acceptance of the Project"

    Dear Engr. Melgar:

    This refers to your request for legal opinion regarding the interpretation on the words "up
    to final acceptance of the project" provided as the expiration date in the Performance
    Bond.

    Specifically, you raised the following issues for this Commission's consideration:

    t. Whether or not the wordings "up to final acceptance of the project" provided
    as the expiration date in the Performance Bond is valid;

    il. Whether or not in the event that the project is extended (with approved
    suspensions/time extensions), the contractor is required to post a new bond.

    Our Opinion

    On the first issue, this Commission answers in the affirmative.

    Head Office; P.O. Box 3589 Manila FAX No. 522-14-34Tel. Nos. 523-84-51 to 70 Website: www.insurance.gov.ph
    Non-life insurance products, which include bonds, are usually issued for a period of one
    year. However, Section 39.5 of the 2016 Revised lmplementing Rules and Regulations
    requires that Performance Bond shall remain valid until issuance by the procuring entity
    of the Final Certificate of Acceptance. !n this regard, said bond is considered as a
    continuing bond.

    Please take note of the provision in Section 179 of the Amended Insurance Code
    regarding continuing bond, which states that:

    'SEC. 179. The surety is entitled to payment of the premium as soon


    as the contract of suretyship or bond is perfected and delivered to the
    obligor. No contract of suretyship or bonding shall be valid and binding
    unless and until the premium therefor has been paid, except where
    the obligee has accepted the bond, in which case the bond becomes
    valid and enforceable irrespective of whether or not the premium has
    been paid by the obligor to the surety: Provided, that if the contract of
    suretyship or bond is not accepted by, or filed with the obligee, the
    surety shall collect only a reasonable amount, not exceeding fifty
    percent (50%) of the premium due thereon as service fee plus the
    cost of stamps or other taxes imposed for the issuance of the contract
    or bond: Provided, however, That if the non- acceptance of the bond
    be due to the fault or negligence of the surety, no such service fee,
    stamps or taxes shall be collected.

    ln the case of a continuing bond, the obligor shall pay the


    subsequent annual premium as it falls due until the contract of
    suretyship is cancelled by the obligee or by the Commissioner
    or by a court of competent jurisdiction, as the case may be."

    The lnsurance Code recognizes the validity of the bond even beyond one yeat. The term
    "up to final acceptance of the project" as the expiration date of the Performance Bond
    denotes that the bond is more than one year or may be extended to such period. Applying
    the above provision, the said bond is valid as long as the applicable premium is duly paid.
    il

    As to the second issue, this Commission answers in the negative.

    ln the event that a project is extended, the contractor need not post a new bond since the
    Performance Bond is valid until the issuance of certificate of final acceptance.
    Nonetheless, it must be noted that the corresponding premium must be continuously paid
    until the certificate of final acceptance has been issued, otherwise the surety company
    has the right to demand for the cancellation of the said performance bond.

    Please note that the opinion rendered by this Commission is based solely on the particular
    facts disclosed in the query and relevant solely to the particular issues raised therein and
    shall not be used, in any manner, in the nature of a standing rule binding upon the
    Commission in other cases whether for similar or dissimilar circumstances.

    Very trUU yolirs,

    DENlIItrS B. FUNA
    I nsu ralnce Comm issioner

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