PHILAMCARE HEALTH SYSTEMS, INC.

V CA
(TRINOS)
379 SCRA 357
YNARES-SANTIAGO; March 18, 2002

NATURE
Petition for review of CA decision

FACTS
- Ernani TRINOS, deceased husband of respondent Julita, applied for a health care coverage with
Philamcare Health Systems, Inc. In the standard application form, he answered no to the question: Have
you or any of your family members ever consulted or been treated for high blood pressure, heart trouble,
diabetes, cancer, liver disease, asthma or peptic ulcer? (If Yes, give details).
- The application was approved for period of one year; upon termination, it was extended for another 2
years. Amount of coverage was increased to a maximum sum of P75T per disability.
- During this period, Ernani suffered a HEART ATTACK and was confined at the Manila Medical Center
(MMC) for one month. While her husband was in the hospital, Julita tried to claim the hospitalization
benefits.
- Petitioner treated the Health Care Agreement (HCA) as void since there was a concealment regarding
Ernanis medical history. Doctors at the MMC allegedly discovered at the time of his confinement, he was
hypertensive, diabetic and asthmatic. Julita then paid the hospitalization expenses herself, amounting to
about P76T.
- After her husband died, Julita instituted action for damages against Philamcare and its Pres. After trial,
the lower court ruled in her favor and ordered Philamcare to reimburse medical and hospital coverage
amounting to P76T plus interest, until fully paid; pay moral damages of P10T; pay exemplary damages of
P10T; attorneys fees of P20T.
- CA affirmed the decision of the trial court but deleted all awards for damages and absolved petitioner
Reverente.

Petitioners Claims
(1) Agreement grants living benefits such as medical check-ups and hospitalization which
a member may immediately enjoy so long as he is alive upon effectivity of the agreement
until its expiration.
(2) Only medical and hospitalization benefits are given under the agreement without any
indemnification, unlike in an insurance contract where the insured is indemnified for his loss.
(3) HCAs are only for a period of one year; therefore, incontestability clause does not apply ,
as it requires effectivity period of at least 2 yrs.
(4) It is not an insurance company , governed by Insurance Commission, but a Health
Maintenance Organization under the authority of DOH.
(5) Trinos concealed a material fact in his application.
(6) Julita was not the legal wife since at the time of their marriage, the deceased was
previously married to another woman who was stillalive.*

ISSUES
1. WON a health care agreement is an insurance contract (If so, incontestability clause
under the Insurance Code is applicable)
2. WON the HCA can be invalidated on the basis of alleged concealment

HELD
YES
Ratio Every person has an insurable interest in the life and health of himself
. The health care agreement was in the nature of non-life insurance, which is primarily a
contract of indemnity. Once the member incurs hospital, medical or any other expense
arising from sickness, injury or other stipulated contingent, the health care provider must
pay for the same to the extent agreed upon under the contract.
Reasoning
- A contract of insurance is an agreement whereby one undertakes for a consideration to
indemnify another against loss, damage or liability arising from an unknown or contingent event.
- An insurance contract exists where the following elements concur:
(a)The insured has an insurable interest;
(b) The insured is subject to a risk of loss by the happening of the peril;
(c)The insurer assumes the risk;
(d) Such assumption of risk is part of a general scheme to distribute actual losses
among a large group of persons bearing a similarrisk; and
(e) In consideration of the insurer s promise, the insured pays apremium.
2. NO
Ratio Where matters of opinion or judgment are called for , answers made in good faith
and without intent to deceive will not avoid a policy even though they are untrue; since in such
case the insurer is not justified in relying upon such statement, but is obligated to make further
inquiry .
Reasoning
- The fraudulent intent on the part of the insured must be established to warrant
rescission of the insurance contract. The right to rescind should be exercised previous to
the commencement of an action on the contract. No rescission was made. Besides, the
cancellation of health care agreements as in insurance policies requires:
(a)Priornotice of cancellation to insured;
Sec.10. Every person has aninsurable interest in the life and
health:
(1) of himself, of his spouseandof his children;
(2) of any person on whom he depends wholly or in part for education or support, or in whomhe has a
pecuniary interest;
(3) of any person under a legal obligation tohimfor the payment of
money, respecting property or service, of which death or illness might delay or prevent the performance;
and
(4) of any person upon whose life any estate or interest vested in him depends.
Section 2 (1)of the Insurance Code
(b) Notice must be based on the occurrence after effective date of the policy of one or
more of the grounds mentioned;
(c) Must be in writing, mailed or delivered to the insured at the address shown inthe policy;
(d) Must state the grounds relied upon provided in Section 64 of the Insurance Code and
upon request of insured, to furnish facts on which cancellation is based.
- These conditions have not been met. When the terms of insurance contract contain
limitations on liability , courts should construe them in such a way as to preclude insurer
from non-compliance of obligation. Being a contract of adhesion, terms of an insurance contract are
to be construed strictly against the party which prepared it the insurer .
- Also, Philamcare had 12 months from the date of issuance of the Agreement within
which to contest the membership of the patient if he had previous ailment of asthma, and
six months from the issuance.
of the agreement if the patient was sick of diabetes
or hypertension.
* The health care agreement is in the nature of a
contract of indemnity. Hence, payment should be
made to the party who incurred the expenses. It is
clear that respondent paid all the hospital and
medicalbills;thus, she is entitled to reimbursement.
Disposition Petition DENIED



FILIPINO MERCHANTS INS. v. CA (CHOA TIEK SENG) 179 SCRA 638 REGALADO; November 28,
1989
NATURE
Review of the decision of the CA
FACTS - Plaintiff insured said shipment with defendant insurance company under said cargo for the
goods described as 600 metric tons of fishmeal in new gunny bags of 90 kilos each from Bangkok,
Thailand to Manila against all risks under warehouse to warehouse terms. - Some of the goods arrived in
bad condition. Plaintiff made a claim against Filipino Merchants Insurance Company. The latter refused to
pay. Plaintiff brought an action against them. The defendant insurance company presented a third party
complaint against the vessel and the arrastre contractor. - Judgment was rendered against the insurance
company. On the third party complaint, the third party defendants were ordered to pay the third party
plaintiffs. The CA affirmed, but modified the same with regard to the adjudication of the third-party
complaint
ISSUES
1. WON some fortuity, casualty or accidental cause is needed to be proved despite the all risks policy (as
asserted by the insurance company) 2. WON the respondent has an insurable interest
HELD
1. NO - The very nature of the term "all risks" must be given a broad and comprehensive meaning as
covering any loss other than a willful and fraudulent act of the insured.
7
This is pursuant to the very
purpose of an "all risks" insurance to give protection to the insured in those cases where difficulties of
logical explanation or some mystery surround the loss or damage to property.
- Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but
under an "all risks" policy the burden is not on the insured to prove the precise cause of loss or damage
for which it seeks compensation. The insured under an "all risks insurance policy" has the initial burden of
proving that the cargo was in good condition when the policy attached and that the cargo was damaged
when unloaded from the vessel; thereafter, the burden then shifts to the insurer to show the exception to
the coverage. As we held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is
that the insurance company has the burden of proving that the loss is caused by the risk excepted and for
want of such proof, the company is liable. In the present case, there being no showing that the loss was
caused by any of the excepted perils, the insurer is liable under the policy.
2. YES - Section 13 of the Insurance Code defines insurable interest in property as every interest in
property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature
that a contemplated peril might directly damnify the insured. In principle, anyone has an insurable interest
in property who derives a benefit from its existence or would suffer loss from its destruction whether he
has or has not any title in, or lien upon or possession of the property y.
16
Insurable interest in property
may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arises. - Respondents
interest over the goods is based on the perfected contract of sale. The perfected contract of sale between
him and the shipper of the goods operates to vest in him an equitable title even before delivery or before
be performed the conditions of the sale. - Further, Article 1523 of the Civil Code provides that where, in
pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer,
delivery of the goods to a carrier, whether named by the buyer or not, for, the purpose of transmission to
the buyer is deemed to be a delivery of the goods to the buyer, the exceptions to said rule not obtaining
in the present case. The Court has heretofore ruled that the delivery of the goods on board the carrying
vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the
risks of loss of the goods and paid the insurance premium covering them
- Moreover, the issue of lack of insurable interest was not raised in petitioners answer.
Disposition Petition denied



GAISANO CAGAYAN v. INSURANCE Co. OF NORTH AMERICA
490 SCRA 296
Austria-Martinez; June 8, 2006
NATURE
Petition for review on certiorari of the Decision of the Court of Appeals
FACTS
- Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi
Strauss (Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi
Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies
with book debt endorsements. The insurance policies provide for coverage on book debts in
connection with ready-made clothing materials which have been sold or delivered to various
customers and dealers of the Insured anywhere in the Philippines. The policies defined
book debts as the unpaid account still appearing in the Book of Account of the Insured 45 days
after the time of the loss covered under this Policy . The policies also provide for the following
conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of
the merchandise sold and delivered by the Insured which are outstanding at the date of
loss for a period in excess of six (6) months from the date of the covering invoice or actual
delivery of the merchandise whichevershallfirst occur .
2. Warranted that the Insured shall submit to the Company within twelve (12) days after
the close of every calendar month all amount shown in their books of accounts as
unpaid and thus become receivable item from their customers and dealers. xxx
- Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the
Gaisano Superstore Complex in Cagayan de Oro City , owned by petitioner , was consumed by fire.
Included in the items lost or destroyed in the fire were stocks of ready-made clothing
materials sold and delivered by IMC and LSPI. On February 4, 1992, respondent filed a
complaint for damages against petitioner . It alleges that IMC and LSPI filed with respondent their
claims under their respective fire insurance policies with book debt endorsements; that as
of February 25, 1991, the unpaid accounts of petitioner on the sale and delivery of
ready-made clothing materials with IMC was P2,119,205.00 while with LSPI it was
P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof, respondent
was subrogated to their rights against petitioner; that respondent made severaldemands for
payment upon petitioner but these went unheeded. In its Answer with Counter Claim dated
July 4, 1995, petitioner contends that it could not be held liable because the property covered by
the insurance policies were destroyed due to fortuities event or force majeure; that
respondent s right of subrogation has no basis inasmuch as there was no breach of
contract committed by it since the loss was due to fire which it could not prevent or foresee;
that IMC and LSPI never communicated to it that they insured their properties; that it
never consented to paying the claimof the insured.
- At the pre-trial conference the parties failed to arrive at an amicable settlement. Thus,
trial on the merits ensued. On August 31, 1998, the RTC rendered its decision dismissing
respondent s complaint. It held that the fire was purely accidental; that the cause of the fire was not
attributable to the negligence of the petitioner; that it has not been established that
petitioner is the debtor of IMC and LSPI; that since the sales invoices state that it is
further agreed that merely for purpose of securing the payment of purchase price, the
above-described merchandise remains the property of the vendor until the purchase price is
fully paid , IMC and LSPI retained ownership of the delivered goods and must bear the loss.
Dissatisfied, petitioner appealed to the CA. On October 11, 2000, the CA rendered its decision
setting aside the decision of the RTC. The CA held that the sales invoices are proofs
of sale, being detailedstatements of the nature, quantityand cost of the thing sold; that loss of
the goods in the fire must be borne by petitioner since the proviso contained in the sales
invoices is an exception under Article 1504 (1) of the Civil Code, to the general rule that if the thing is
lost by a fortuitous event, the risk is borne by the owner of the thing at the time the loss
under the principle of res perit domino; that petitioner s obligation to IMC and LSPI is
not the delivery of the lost goods but the payment of its unpaid account and as such
the obligation to pay is not extinguished, even if the fire is considered a fortuitous
event;that by subrogation, the insurer has the right to go against petitioner; that, being a fire
insurance with book debt endorsements, what was insured was the vendor s interest as a
creditor . Petitioner filed a motion for reconsideration but it was denied by the CA in its
Resolution dated April 11, 2001.

ISSUES
1. WON the CA erred in construing a fire insurance policy on book debts as one covering
the unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-
made clothing materials sold and delivered to petitioner .
2. WON IMC bears the risk of loss because it expressly reserved ownership of the
goods by stipulating in the sales invoices that [i]t is further agreed that merely for
purpose of securing the payment of the purchase price the above described merchandise
remains the property of the vendor untilthe purchase price thereof isfullypaid.
3. WON the petitioner liable for the unpaid accounts

HELD
1. NO
- It is well-settled that when the words of a contract are plain and readily understood, there is
no room for construction. In this case, the questioned insurance policies provide coverage
for book debts in connection with ready-made clothing materials which have been sold or
delivered to various customers and dealers of the Insured anywhere in the Philippines. ;
and defined book debts as the unpaid account still appearing in the Book of Account of
the Insured 45 days after the time of the loss covered under this Policy . Nowhere is it
provided in the questioned insurance policies that the subject of the insurance is the goods sold
and delivered to the customers and dealers of the insured.
- Indeed, when the terms of the agreement are clear and explicit that they do not justify an
attempt to read into it any alleged intention of the parties, the terms are to be understood
literally just as they appear on the face of the contract. Thus, what were insured against were
the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the loss
through fire, and not the loss or destruction of the goods delivered.
2. NO
- The present case clearly falls under paragraph (1), Article1504 of the CivilCode:
ART . 1504. Unless otherwise agreed, the goods remain at the seller s risk until the
ownership therein is transferred to the buyer , but when the ownership therein is
transferred to the buyer the goods are at the buyer s risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been made to thebuyerorto a bailee for the buyer , in pursuance of
the contract and the ownership in the goods has been retained by the seller merely to
secure performance by the buyer of his obligations under the contract, the goods are at the
buyers risk from the time of such delivery;(Emphasis supplied)
- Thus, when the seller retains ownership only to insure that the buyer willpay its debt, the risk
of loss is borne by the buyer . Accordingly , petitioner bears the risk of loss of the goods
delivered.
- IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law concept of res
perit domino, where ownership is the basis for consideration of who bears the risk of loss, in
property insurance, ones interest is not determined by concept of title, but whether
insured has substantial economic interest intheproperty.
- Section 13 of our Insurance Code defines insurable interest as every interest in property ,
whether real or personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured. Parenthetically , under
Section 14 of the same Code, an insurable interest in property may consist in:
(a) an existing interest; (b) an inchoate interest founded on existing interest; or
(c) an expectancy , coupled with an existing interest in that out of which the
expectancyarises.
- Therefore, an insurable interest in property does not necessarily imply a property interest in,
or a lien upon, or possession of, the subject matter of the insurance, and neither the title
nor a beneficial interest is requisite to the existence of such an interest, it is sufficient that
the insured is so situated with reference to the propertythat he would be liable to loss should it be
injured or destroyed by the peril against which it is insured. Anyone has an insurable interest in
property who derives a benefit from its existence or would suffer loss from its
destruction. Indeed, a vendor or seller retains an insurable interest in the property sold
so long as he has any interest therein, in other words, so long as he would suffer by its
destruction, as where he has a vendor s lien. In this case, the insurable interest of IMC and
LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time
of the loss covered by the policies.
3. YES
- Petitioner s argument that it is not liable because the fire isa fortuitous event under
Article1174 of the Civil Code is misplaced. As held earlier , petitioner bears the loss under
Article 1504 (1) of the Civil Code.
- Moreover , it must be stressed that the insurance in this case is not for loss of goods by fire
but for petitioner s accounts with IMC and LSPI that
remained unpaid 45 days after the fire. Accordingly , petitioner s obligation is for the payment
of money. Where the obligation consists in the payment of money, the failure of the
debtor to make the payment even by reason of a fortuitous event shall not relieve him of his
liability . The rationale for this is that the rule that an obligor should be held exempt from liability
when the loss occurs thru a fortuitous event only holds true when the obligation consists in the
delivery of a determinate thing and there is no stipulation holding him liable even in
case of fortuitous event. It does not apply when the obligation ispecuniaryin nature.
- Under Article 1263 of the Civil Code, [i]n an obligation to deliver a generic thing,
the loss or destruction of anything of the same kind does not extinguish the obligation. If
the obligation is generic in the sense that the object thereof is designated merely by its
class or genus without any particular designation or physical segregation from all others of the
same class, the loss or destruction of anything of the same kind even without the debtor s fault
and before he has incurred in delay will not have the effect of extinguishing the
obligation. This rule is based on the principle that the genus of a thing can never perish.
Genus nunquan perit. An obligation to pay money is generic; therefore, it is not excused
by fortuitous loss of any specific property of the debtor.
-Thus, whether fire isa fortuitous event or petitioner was negligent are matters immaterial to this
case. What is relevant here is whether it has been
established that petitioner has outstanding accounts with IMC and LSPI.
- With respect to IMC, the respondent has adequately established its claim. Petitioner has
an outstanding account with IMC in the amount of
P2,119,205.00, check voucher evidencing payment to IMC, subrogation receipt executed by IMC in
favor of respondent upon receipt of the insurance proceeds. All these documents have
been properly identified, presented and marked as exhibits in court. The subrogation receipt, by
itself , is sufficient to establish not only the relationship of respondent as insurer and IMC as
the insured, but also the amount paid to settle the insurance claim. The right of subrogation
accrues simply upon payment by the insurance company of the insurance claim.
Respondent s action against petitioner is squarely sanctioned by Article 2207 of the Civil
Code which provides:
Art. 2207. If the plaintiff s property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the contract. xx x
-Petitionerfailed to refute respondent s evidence.
- As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No
evidentiary weight can be given to Exhibit F Levi Strauss , a letter dated April 23, 1991
from petitioner s General Manager , Stephen S. Gaisano, Jr . , since it is not an admission
of petitioner s unpaid account with LSPI. It only confirms the loss of Levi s products in
the amount of P535,613.00 in the fire that razed petitioner s buildingon February 25, 1991.
- Moreover , there is no proof of full settlement of the insurance claim of LSPI; no subrogation
receipt was offered in evidence. Thus, there is no evidence that respondent has been
subrogated to any right which LSPI may have against petitioner . Failure to substantiate the
claim of subrogation is fatal to petitioner s case for recovery of the amount of
P535,613.00.

Disposition Petition is partly GRANTED. The assailed Decision dated October 11, 2000 and
Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are
AFFIRMED with the MODIFICATION that the order to pay the INSURANCE amount of P535,613.00
to respondent is DELETED for lack of factual basis


PIONEER INSURANCE AND SURETY CORPORATION v. YAP 61 SCRA 426 FERNANDEZ; December
19, 1974
NATURE
Appeal by certiorari from CA decision affirming a CFI decision which declared plaintiff Yap entitled to
recover from defendant Pioneer Insurance and Surety Corp, the full amount of the damage inquired in
Policy No. 4219
FACTS
- Yap owned a store in a 2 storey building, where she sold shopping bags and footwear. Her son-in-law
was in charge of the store - April 19, 1962- Yap took out Fire Insurance Policy No. 4216 from Pioneer
with a face value of P25,000 covering her stocks, office furniture, fixtures, etc.
- among the conditions set forth: The Insured shall give notice to the
Company of any insurance or insurances already effected, or which may subsequently be effected,
covering any of the property hereby insured, and unless such notice be given and the particulars of such
insurance or insurances be stated in, or endorsed on this Policy by or on behalf of the Company before the
occurrence of any loss or damage, all benefits under this Policy shall be forfeited. (emphasis supplied)
It is understood that, except as may be stated on the face of this policy there is no other insurance on the
property hereby covered and no other insurance is allowed except by the consent of the Company
endorsed hereon. Any false declaration or breach or this condition will render this policy null and void.
- At the time of insurance of Policy 4219(April 19, 1962), an insurance policy for P20,000 issued by the
Great American Insurance Company covering the same properties was noted on said policy as co-
insurance.
- August 29, 1962 : parties executed an endorsement on Policy 4219 stating:
It is hereby declared and agreed that the co- insurance existing at present under this policy is as follows:
P20,000.00 Northwest Ins., and not as originally stated. (emphasis supplied)
Except as varied by this endorsement, all other
terms and conditions remain unchanged. - September 26, 1962: Yap took out another fire
insurance policy for P20,000 covering the same properties, from Federal Insurance Company. This policy
was procured without notice to and the written consent of Pioneer, and was therefore not noted as a co-
insurance in Policy 4219.
- December 19, 1962: Fire burned Yaps store
ISSUE
WON petitioner should be absolved from liability on Fire insurance Policy No. 4219 on account of any
violation by respondent Yap of the co-insurance clause therein
HELD
YES - The petitioner should be absolved. Reasoning - There was a violation by Yap of the co-
insurance clause contained in Policy No. 4219 which resulted in the avoidance of the petitioners
liability. - By the plain terms of the policy, other insurance without the consent of petitioner would ipso
facto avoid the contract. It required no affirmative act of election on the part of the company to make
operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations
ceased, unless, being informed of the fact, it consented to the additional insurance. - The obvious
purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the
perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a
fire would be profitable to the insured. According to Justice Story: "The insured has no right to complain,
for he assents to comply with all the stipulation on his side, in order to entitle himself to the benefit of the
contract, which, upon reason or principle, he has no right to ask the court to dispense with the
performance of his own part of the agreement, and yet to bind the other party to obligations, which, but
for those stipulation would not have been entered into." Disposition the appealed judgment of the Court
of Appeals is reversed and set aside, and the petitioner absolved from all liability under the policy.



GEAGONIA v. CA (COUNTRY BANKERS INSURANCE)
8 SCRA 343
DAVIDE; February 6 1995

FACTS
-Geagonia is the owner of Norman's Mart located in the public market of San Francisco, Agusan del
Sur. On 22 Dec 1989, he obtained from the private respondent fire insurance policy for
P100,000.00. The period of the policy was from 22 Dec 1989 to 22 Dec 1990 and covered the ff:
"Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and
other usual to assured's business.
- The policy contained the following condition:
"3. The insured shall give notice to the Company of any insurance or insurances already
effected, or which may subsequently be effected, covering any of the property or properties
consisting of stocks in trade, goods in process and/or inventories only hereby insured, and
unless notice be given and the particulars of such insurance or insurances be stated therein or
endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the
Company before the occurrence of any loss or damage, all benefits under this policy
shall be deemed forfeited, provided however , that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."
-On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public
market of San
Francisco, Agusan del Sur . The petitioner's insured stocks-in-trade were completely destroyed
prompting him to file w/ the priv ate respondent a claim under the policy . On 28 Dec
1990, the private respondent denied the claim because it found that at the time of the loss the
petitioner's stocks-in-trade were likewise covered by two fire insurance policies for P100,000.00
each, issued by the Cebu Branch of the Philippines First Insurance Co. , Inc.(PFIC).
- The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3
of the policy .
- Geagonia then filed a complaint against the private respondent w/ the Insurance Commission for
the recovery of P100,000.00 under fire insurance policy , for attorney's fees, and costs of
litigation. He claims that the time he obtained the private respondent's fire insurance policy
he knew that the two policies issued by the PFIC were already in existence; however , he
had no knowledge of the provision in the private respondent's policy requiring him to inform it of the
prior policies; this requirement was not mentioned to him by the private respondent's agent; and
had it been so mentioned, he would not have withheld such information. He further
asserted that the total of the amounts claimed under the three policies was below the
actual value of his stocks at the time of loss, w/c was P1M.
- The Insurance Commission found that the petitioner did not violate Condition 3 as he
had no knowledge of the existence of the two fire insurance policies obtained from the PFIC;
that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or
securing his consent; and that Cebu Tesing Textile, as his creditor , had insurable interest on the
stocks. These findings were based on the petitioner's testimony that he came to know of
the PFIC policies only when he filed his claim with the private respondent and that Cebu
Tesing Textile obtained them and paid for their premiums w/o informing him. The
Insurance Commission then ordered the respondent company to pay complainant the sum of
P100,000.00 with legal interest from the time the complaint was filed until fully satisfied
plus the amount of P10,000.00 as attorney's fees.
-CA reversed the decision of the Insurance Commission because it found that the
petitioner knew of the existence of the two other policies issued by the PFIC

ISSUES
1. WON the petitioner had prior knowledge of the two insurance policies issued by the
PFIC when he obtained the fire insurance policy from the private respondent, thereby , for
not disclosing such fact, violating Condition 3 of the policy
2. if he had, WON he is precluded from recovering therefrom

HELD
1. YES
- We agree w/ the CA that the petitioner knew of the prior policies issue by the PFIC. His letter of 18
January 1991 to the private respondent conclusively proves this knowledge. His testimony to the
contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over
a written admission made ante litem motam. It was, indeed, incredible that he did not
know about the prior policies since these policies were not new or original.
2. NO
- It must, however , be underscored that unlike the "other insurance" clauses involved in
General Insurance and Surety Corp. vs. Ng Hua or in Pioneer Insurance & Surety Corp.
vs. Yap, which read:
"The insured shall give notice to the company of any insurance or insurances already effected, or which
may subsequently be effected covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in or endorsed on
this Policy by or on behalf of the Company before the occurrence of any loss or damage, all
benefits under this Policy shall be forfeited." or in the 1930 case of Santa Ana
vs. Commercial Union Assurance Co. which provided "that any outstanding insurance
upon the whole or a portion of the objects thereby assured must be declared by the
insured in writing and he must cause the company to add or insert it in the policy ,
without which such policy shall be null and void, and the insured will not be entitled
to indemnity in case of loss," Condition 3 in the private respondent's policy No. F-14622
does not absolutely declare void any violation thereof. It expressly provides that the
condition "shall not apply when the total insurance or insurances in force at the time of the loss or
damage is not more than P200,000.00."
- Interpretation: It is a cardinal rule on insurance that a policy or insurance contract is to
be interpreted liberally in favor of the insured and strictly against the company , the
reason being, undoubtedly , to afford the greatest protection which the insured was
endeavoring to secure when he applied for insurance. It is also a cardinal principle of
law that forfeitures are not favored and that any construction which would result in the
forfeiture of the policy benefits for the person claiming thereunder , will be avoided, if it
is possible to construe the policy in a manner which would permit recovery , as, for
example, by finding a waiver for such forfeiture. Stated differently , provisions, conditions or
exceptions in policies which tend to work a forfeiture of insurance policies should be construed most
strictly against those for whose benefits they are inserted, and most favorably toward those
against whom they are intended to operate. The reason for this is that, except for riders which
may later be inserted, the insured sees the contract already inits final form and has had no voice
in the selection or arrangement of the words employed therein. On the other hand, the language
of the contract was carefully chosen and deliberated upon by experts and legal advisers who
had acted exclusively in the interest of the insurers and the technical language employed therein is rarely
understood by ordinary laymen.
- With these principles in mind, we are of the opinion that Condition 3 of the subject policy is not
totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to
conclude that (a) the prohibition applies only
to double insurance, and (b) the nullity of the policy shall only be to the extent
exceeding P200,000.00 of the total policies obtained.
- Furthermore, by stating within Condition 3 itself that such condition shall not apply if
the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent
was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00.
What it had in mind was to
discourage over-insurance. Indeed, the rationale
behind the incorporation of "other insurance" clause
in fire policies is to prevent over-insurance and thus
avert the perpetration of fraud. When a property
owner obtains insurance policies from two or more
insurers in a total amount that exceeds the
property's value, the insured may have an
inducement to destroy the property for the purpose
of collecting the insurance. The public as well as the
insurer is interested in preventing a situation in
which a fire would be profitable to the insured.
Disposition Petition granted. The decision of the
Court of Appeals in CA-G.R. SP No. 31916 is SET
ASIDE and the decision of the Insurance Commission
inCase No. 3340 is REINSTATED.


TAI TONG CHUACHE & CO v. INSURANCE COMMISSION and TRAVELLERS MULTI- INDEMNITY
CORPORATION 158 SCRA 366
GANCAYCO; February 29, 1988
NATURE
Petition for review on certiorari of the decision of the Insurance Commission
FACTS
- Complainants Palomo acquired a parcel of land and a building located in Davao City. They assumed the
mortgage of the building in favor of SSS, which building was insured with respondent SSS Accredited
Group of Insurers for P25K.
- On April 19, 1975, Azucena Palomo obtained a P100K loan from Tai Tong Chuache Inc. (TTCC) and
executed a mortgage over the land and the building in favor of Tai Tong Chuache & Co. as security of
payment .On April 25, 1975, Arsenio Chua, representative of TTCC insured the latter's interest with
Travellers Multi-Indemnity Corporation (Travellers) for P100K (P70K for bldg and P30K for the contents
thereof)
- On June 11, 1975, Pedro Palomo secured a Fire Insurance Policy, covering the building for P50K with
respondent Zenith Insurance Corporation (ZIC). Another Fire Insurance Policy was later procured from
respondent Philippine British Assurance Company (PBAC), covering the same building for P50K and
contents thereof for P70K. On July 31, 1975, the building and the contents were totally razed by fire.
- Based on the computation of the loss, including the Travellers, respondents, ZIC, PBAC, and SSS paid
their corresponding shares of the loss. Complainants were paid the following: P41,546.79 by PBAC,
P11,877.14 by ZIC, and P5,936.57 by SSS. Demand was made from respondent Travellers for its share in
the loss but was refused. Hence, complainants demanded from the other 3 respondents the balance of
each share in the loss based on the computation excluding Travellers Multi-Indemnity in the amount of
P30,894.31 (P5,732.79-ZIC: P22,294.62, PBAC: and P2,866.90, SSS) but was refused, hence, this action.
ISSUE
WON petitioner Tai Tong has insurable interest in the said policy
HELD
YES - First, respondent insurance commission based its findings on mere inference. Respondent
Insurance Commission absolved respondent insurance company from liability on the basis of the
certification issued by the then CFI, that in a certain civil action against the Palomos, Arsenio Lopez Chua
stands as the complainant and not Tai Tong Chuache. From said evidence respondent commission inferred
that the credit extended by herein petitioner to the Palomos secured by the insured property must have
been paid. Such is a glaring error which this Court cannot sanction. - Second, it has been held in a long
line of cases that when the creditor is in possession of the document of credit, he need not prove non-
payment for it is presumed. The validity of the insurance policy taken b petitioner was not assailed by
private respondent. Moreover, petitioner's claim that the loan extended to the Palomos has not yet been
paid was corroborated by Azucena Palomo who testified that they are still indebted to herein petitioner. So
at the time of the fire, petitioner as mortgagee still had insurable interest therein. - And third,
petitioner's declaration that Arsenio Lopez Chua acts as the managing partner of the partnership was
corroborated by respondent insurance company. Thus Chua as the managing partner of the partnership
may execute all acts of administration including the right to sue debtors of the partnership in case of their
failure to pay their obligations when it became due and demandable. Or at the least, Chua being a partner
of petitioner Tai Tong Chuache & Company is an agent of the partnership. Being an agent, it is understood
that he acted for and in behalf of the firm.
Disposition Appealed decision SET ASIDE and ANOTHER judgment is rendered order private respondent
Travellers to pay petitioner the face value of Fire Insurance Policy in the amount of P100K. Costs against
said private respondent.