X. LOSS AND NOTICE OF LOSS (SECTIONS 85-94) Christmas lights; and (3) delivery receipts of the raw materials.
d (3) delivery receipts of the raw materials. However, the
UMC VS COUNTRY BANKERS (G.R. NO. 198588 JULY 11, 2012)
United Merchants Corporation vs Country Bankers Insurance Corporation
G.R. No. 198588 July 11, 2012
Facts:
Petitioner United Merchants Corporation (UMC) is engaged in the business of
buying, selling, and manufacturing Christmas lights. UMC leased a warehouse
at 19-B Dagot Street, San Jose Subdivision, Barrio Manresa, Quezon City,
where UMC assembled and stored its products. On 6 September 1995, UMCs
General Manager Alfredo Tan insured UMCs stocks in trade of Christmas lights
against fire with defendant Country Bankers Insurance Corporation (CBIC) for P
15,000,000.00. The Fire Insurance Policy No. F-HO/95-576 (Insurance Policy)
and Fire Invoice No. 12959A, valid until 6 September 1996. On 7 May 1996,
UMC and CBIC executed Endorsement F/96-154 and Fire Invoice No. 16583A
to form part of the Insurance Policy. Endorsement F/96-154 provides that UMCs
stocks in trade were insured against additional perils, to wit: typhoon, flood, ext.
cover, and full earthquake. The sum insured was also increased to
P50,000,000.00 effective 7 May 1996 to 10 January 1997. On 9 May 1996,
CBIC issued Endorsement F/96-157 where the name of the assured was
changed from Alfredo Tan to UMC. On 3 July 1996, a fire gutted the warehouse
rented by UMC. CBIC designated CRM Adjustment Corporation (CRM) to
investigate and evaluate UMCs loss by reason of the fire. CBICs reinsurer,
Central Surety, likewise requested the National Bureau of Investigation (NBI) to
conduct a parallel investigation. On 6 July 1996, UMC, through CRM, submitted
to CBIC its Sworn Statement of Formal Claim, with proofs of its loss.
Issue: Whether or not UMC is entitled to claim from CBIC the full coverage of its
fire insurance policy.
Held: No. Burden of proof is the duty of any party to present evidence to
establish his claim or defense by the amount of evidence required by law, which
is preponderance of evidence in civil cases. The party, whether plaintiff or
defendant, who asserts the affirmative of the issue has the burden of proof to
obtain a favorable judgment.
Particularly, in insurance cases, once an insured makes out a prima facie case
in its favor, the burden of evidence shifts to the insurer to controvert the insureds
prima facie case. In the present case, UMC established a prima facie case
against CBIC. CBIC does not dispute that UMCs stocks in trade were insured
against fire under the Insurance Policy and that the warehouse, where UMCs
stocks in trade were stored, was gutted by fire on 3 July 1996, within the
duration of the fire insurance. However, since CBIC alleged an excepted risk,
then the burden of evidence shifted to CBIC to prove such exception.
An insurer who seeks to defeat a claim because of an exception or limitation in
the policy has the burden of establishing that the loss comes within the purview
of the exception or limitation. If loss is proved apparently within a contract of
insurance, the burden is upon the insurer to establish that the loss arose from a
cause of loss which is excepted or for which it is not liable, or from a cause
which limits its liability.
In Uy Hu & Co. v. The Prudential Assurance Co., Ltd., the Court held that where
a fire insurance policy provides that if the claim be in any respect fraudulent, or if
any false declaration be made or used in support thereof, or if any fraudulent
means or devices are used by the Insured or anyone acting on his behalf to
obtain any benefit under this Policy, and the evidence is conclusive that the
proof of claim which the insured submitted was false and fraudulent both as to
the kind, quality and amount of the goods and their value destroyed by the fire,
such a proof of claim is a bar against the insured from recovering on the policy
even for the amount of his actual loss.
In the present case, as proof of its loss of stocks in trade amounting to P
50,000,000.00, UMC submitted its Sworn Statement of Formal Claim together
with the following documents: (1) letters of credit and invoices for raw materials,
Christmas lights and cartons purchased; (2) charges for assembling the
charges for assembling the Christmas lights and delivery receipts could not
support its insurance claim. The Insurance Policy provides that CBIC agreed to
insure UMCs stocks in trade. UMC defined stock in trade as tangible personal
property kept for sale or traffic. Applying UMCs definition, only the letters of
credit and invoices for raw materials, Christmas lights and cartons may be
considered.
It has long been settled that a false and material statement made with an intent
to deceive or defraud voids an insurance policy.
The most liberal human judgment cannot attribute such difference to mere
innocent error in estimating or counting but to a deliberate intent to demand from
insurance companies payment for indemnity of goods not existing at the time of
the fire. This constitutes the so-called fraudulent claim which, by express
agreement between the insurers and the insured, is a ground for the exemption
of insurers from civil liability.
COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY
MULTI-PURPOSE COOPERATIVE, INC.
G.R. No.136914, January 25, 2002
Facts: Country Banker’s Insurance Corp. (CBIC) insured the building of
respondent Lianga Bay and Community Multi-Purpose Corp., Inc. against fire,
loss, damage, or liability during the period starting June 20, 1990 for the sum of
Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred.
The respondent filed the insurance claim but the petition denied the same on the
ground that the building was set on fire by two NPA rebels and that such loss
was an excepted risk under par.6 of the conditions of the insurance policy that
the insurance does not cover any loss or damage occasioned by among others,
mutiny, riot, military or any uprising. Respondent filed an action for recovery of
loss, damage or liability against petitioner and the Trial Court ordered the
petition to pay the full value of the insurance.
Issue: Whether or not the insurance corporation is exempted to pay based on
the exception clause in the insurance policy.
Held: The Supreme Court held that the insurance corporation has the burden of
proof to show that the loss comes within the purview of the exception or
limitation set-up. But the insurance corporation cannot use a witness to prove
that the fire was caused by the NPA rebels on the basis that the witness learned
this from others. Such testimony is considered hearsay and may not be received
as proof of the truth of what he has learned. The petitioner, failing to prove the
exception, cannot rely upon on exemption or exception clause in the fire
insurance policy. The petition was granted.
FGU Insurance Corporation V. CA (2005)
G.R.No. 137775 March 31, 2005
Lessons Applicable: Loss caused by negligence of the insured (Insurance)
FACTS: Anco Enterprises Company (ANCO), a partnership between Ang Gui
and Co To, was engaged in the shipping business operating two common
carriers
M/T ANCO tugboat
D/B Lucio barge - no engine of its own, it could not maneuver by itself and had
to be towed by a tugboat for it to move from one place to another.
September 23 1979: San Miguel Corporation (SMC) shipped from Mandaue
City, Cebu, on board the D/B Lucio, for towage by M/T ANCO:
25,000 cases Pale Pilsen and 350 cases Cerveza Negra consignee SMC’s
Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo
15,000 cases Pale Pilsen and 200 cases Cerveza Negra - consignee SMC’s
BMD-San Jose Beer Sales Office, San Jose, Antique
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September 30, 1979: D/B Lucio was towed by the M/T ANCO arrived and M/T
ANCO left the barge immediately
The clouds were dark and the waves were big so SMC’s District Sales
Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer
the barge to a safer place but it refused so around the midnight, the barge sunk
along with 29,210 cases of Pale Pilsen and 500 cases of Cerveza Negra
totalling to P1,346,197
When SMC claimed against ANCO it stated that they agreed that it would not be
liable for any losses or damages resulting to the cargoes by reason of fortuitous
event and it was agreed to be insured with FGU for 20,000 cases or P858,500
ANCO filed against FGU
FGU alleged that ANCO and SMC failed to exercise ordinary diligence or the
diligence of a good father of the family in the care and supervision of the
cargoes
RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes
CA affirmed
ISSUE: W/N FGU should be exempted from liability to ANCO for the lost
cargoes because of a fortuitous event and negligence of ANCO
HELD: YES. Affirmed with modification. Third-party complainant is dismissed.
Art. 1733. Common carriers, from the nature of their business and for reasons
of public policy are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in
Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only cause
of the loss. However, the common carrier must exercise due diligence to
prevent or minimize loss before, during and after the occurrence of flood, storm,
or other natural disaster in order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the goods . . .
Caso fortuito or force majeure
extraordinary events not foreseeable or avoidable, events that could not be
foreseen, or which though foreseen, were inevitable
not enough that the event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to avoid - not in
this case
other vessels in the port of San Jose, Antique, managed to transfer to another
place
To be exempted from responsibility, the natural disaster should have been the
proximate and only cause of the loss. There must have been no contributory
negligence on the part of the common carrier.
there was blatant negligence on the part of M/T ANCO’s crewmembers, first in
leaving the engine-less barge D/B Lucio at the mercy of the storm without the
assistance of the tugboat, and again in failing to heed the request of SMC’s
representatives to have the barge transferred to a safer place
When evidence show that the insured’s negligence or recklessness is so gross
as to be sufficient to constitute a willful act, the insurer must be exonerated.
ANCO’s employees is of such gross character that it amounts to a wrongful act
which must exonerate FGU from liability under the insurance contract
both the D/B Lucio and the M/T ANCO were blatantly negligent
Sun v CA G.R. No. 92383 July 17, 1992
J. Cruz
Facts: Lim accidentally killed himself with his gun after removing the magazine,
showing off, pointing the gun at his secretary, and pointing the gun at his temple.
The widow, the beneficiary, sued the petitioner and won 200,000
as indemnity with additional amounts for other damages and attorney’s fees.
This was sustained in the Court of Appeals then sent to the Supreme court by
the insurance company.
Issue: 1. Was Lim’s widow eligible to receive the benefits?
2. Were the other damages valid?
Held: 1. Yes 2. No
Ratio: 1.There was an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a deliberate
act is performed unless some additional, unexpected, independent and
unforeseen happening occurs which produces or brings about their injury or
death." This was true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury caused
by attempted suicide or by one needlessly exposing himself to danger except to
save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness
testimony that he took steps to ensure that the gun wasn’t loaded. He even
assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility to pay
the indemnity agreed upon if the insured is shown to have contributed to his own
accident.
2. “In order that a person may be made liable to the payment of moral damages,
the law requires that his act be wrongful. The adverse result of an action does
not per se make the act wrongful and subject the act or to the payment of moral
damages. The law could not have meant to impose a penalty on the right to
litigate; such right is so precious that moral damages may not be charged on
those who may exercise it erroneously. For these the law taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation
expenses, since it is not the fact of winning alone that entitles him to recover
such damages of the exceptional circumstances enumerated in Art. 2208.
Otherwise, every time
Pacific Timber v CA G.R. No. L-38613 February 25, 1982
J. De Castro
Facts: The plaintiff secured temporary insurance from the defendant for its
exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be
shipped from Quezon Province to Okinawa and Tokyo, Japan.
Workmen’s Insurance issued a cover note insuring the cargo of the plaintiff
subject to its terms and conditions.
The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033. Policy
No. 53 H0 1033 was for 542 pieces of logs equivalent to 499,950 board feet.
Policy No. 53 H0 1033 was for 853 pieces of logs equivalent to 695,548
board feet. The total cargo insured under the two marine policies consisted of
1,395 logs, or the equivalent of 1,195.498 bd. ft.
After the issuance of the cover note, but before the issuance of the two marine
policies Nos. 53 HO 1032 and 53 HO 1033, some of the logs intended to be
exported were lost during loading operations in the Diapitan Bay.
While the logs were alongside the vessel, bad weather developed resulting in 75
pieces of logs which were rafted together co break loose from each other. 45
2
pieces of logs were salvaged, but 30 pieces were verified to have been lost or
washed away as a result of the accident.
Pacific Timber informed Workmen’s about the loss of 32 pieces of logs during
loading of SS woodlock.
Although dated April 4, 1963, the letter was received in the office of
the defendant only on April 15, 1963. The plaintiff claimed for insurance to the
value of P19,286.79.
Woodmen’s requested an adjustment company to assess the damage. It
submitted its report, where it found that the loss of 30 pieces of logs is not
covered by Policies Nos. 53 HO 1032 and 1033 but within the 1,250,000 bd. ft.
covered by Cover Note 1010 insured for $70,000.00.
The adjustment company submitted a computation of the defendant's probable
liability on the loss sustained by the shipment, in the total amount of P11,042.04.
Woodmen’s wrote the plaintiff denying the latter's claim on the ground they
defendant's investigation revealed that the entire shipment of logs covered by
the two marine policies were received in good order at their point of destination.
It was further stated that the said loss may be considered as covered under
Cover Note No. 1010 because the said Note had become null and void by virtue
of the issuance of Marine Policy Nos. 53 HO 1032 and 1033.
The denial of the claim by the defendant was brought by the plaintiff to the
attention of the Insurance Commissioner. The Insurance Commissioner ruled in
favor of indemnifying Pacific Timber. The company added that the cover note is
null and void for lack of valuable consideration. The trial court ruled in
petitioner’s favor while the CA dismissed the case. Hence this appeal.
Issues:WON the cover note was null and void for lack of valuable consideration
WON the Insurance company was absolved from responsibility due to
unreasonable delay in giving notice of loss.
Held: No. No. Judgment reversed.
Ratio:1. The fact that no separate premium was paid on the Cover Note before
the loss occurred does not militate against the validity of the contention even if
no such premium was paid. All Cover Notes do not contain particulars of the
shipment that would serve as basis for the computation of the premiums. Also,
no separate premiums are required to be paid on a Cover Note.
The petitioner paid in full all the premiums, hence there was no account unpaid
on the insurance coverage and the cover note. If the note is to be treated as a
separate policy instead of integrating it to the regular policies, the purpose of the
note would be meaningless. It is a contract, not a mere application for insurance.
It may be true that the marine insurance policies issued were for logs no longer
including those which had been lost during loading operations. This had to be so
because the risk insured against is for loss during transit, because the logs were
safely placed aboard.
The non-payment of premium on the Cover Note is, therefore, no cause for the
petitioner to lose what is due it as if there had been payment of premium, for
non-payment by it was not chargeable against its fault. Had all the logs been lost
during the loading operations, but after the issuance of the Cover Note, liability
on the note would have already arisen even before payment of premium.
Otherwise, the note would serve no practical purpose in the realm of commerce,
and is supported by the doctrine that where a policy is delivered without
requiring payment of the premium, the presumption is that a credit was intended
and policy is valid.
2. The defense of delay can’t be sustained. The facts show that instead of
invoking the ground of delay in objecting to petitioner's claim of recovery on the
cover note, the insurer never had this in its mind. It has a duty to inquire when
the loss took place, so that it could determine whether delay would be a valid
ground of objection.
There was enough time for insurer to determine if petitioner was guilty of delay
in communicating the loss to respondent company. It never did in the Insurance
Commission. Waiver can be raised against it under Section 84 of the Insurance
Act.
Insurance Case Digest: Malayan Insurance Co., Inc. V. Arnaldo (1987)
G.R. No. L-67835 October 12, 1987
Lessons Applicable: Authority to Receive Payment/Effect of Payment
(Insurance)
Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the
Insurance Code
FACTS:
June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca,
Fire Insurance Policy for her property effective July 22, 1981, until July 22, 1982
October 15,1981: MICO allegedly cancelled the policy for non-payment, of the
premium and sent the corresponding notice to Pinca
December 24, 1981: payment of the premium for Pinca was received by
Domingo Adora, agent of MICO
January 15, 1982: Adora remitted this payment to MICO,together with other
payments
January 18, 1982: Pinca's property was completely burned
February 5, 1982: Pinca's payment was returned by MICO to Adora on the
ground that her policy had been cancelled earlier but Adora refused to accept it
and instead demanded for payment
Under Section 416 of the Insurance Code, the period for appeal is thirty days
from notice of the decision of the Insurance Commission. The petitioner filed its
motion for reconsideration on April 25, 1981, or fifteen days such notice, and the
reglementary period began to run again after June 13, 1981, date of its receipt of
notice of the denial of the said motion for reconsideration. As the herein petition
was filed on July 2, 1981, or nineteen days later, there is no question that it is
tardy by four days.
Insurance Commission: favored Pinca
MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was authorized to
receive it
HELD: YES. petition is DENIED
SEC. 77. An insurer is entitled to payment of the premium as soon as the thing
is exposed to the peril insured against. Notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is
valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision
applies.
SEC. 306. xxx xxx xxx
Any insurance company which delivers to an insurance agant or insurance
broker a policy or contract of insurance shall be demmed to have authorized
such agent or broker to receive on its behalf payment of any premium which is
due on such policy or contract of insurance at the time of its issuance or delivery
or which becomes due thereon.
Payment to an agent having authority to receive or collect payment is equivalent
to payment to the principal himself; such payment is complete when the money
delivered is into the agent's hands and is a discharge of the indebtedness owing
to the principal.
SEC. 64. No policy of insurance other than life shall be cancelled by the
insurer except upon prior notice thereof to the insured, and no notice of
cancellation shall be effective unless it is based on the occurrence, after the
effective date of the policy, of one or more of the following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured
against;
(c) discovery of fraud or material misrepresentation;
3
(d) discovery of willful, or reckless acts or commissions increasing the hazard
insured against;
(e) physical changes in the property insured which result in the property
becoming uninsurable;or
(f) a determination by the Commissioner that the continuation of the policy
would violate or would place the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:
SEC. 65. All notices of cancellation mentioned in the preceding section shall
be in writing, mailed or delivered to the named insured at the address shown in
the policy, and shall state (a) which of the grounds set forth in section sixty-four
is relied upon and (b) that, upon written request of the named insured, the
insurer will furnish the facts on which the cancellation is based.
A valid cancellation must, therefore, require concurrence of the following
conditions:
(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the
policy, of one or more of the grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named
insured, (c) at the address shown in the policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied
upon and (b) that upon written request of the insured, the insurer will furnish the
facts on which the cancellation is based.
All MICO's offers to show that the cancellation was communicated to the insured
is its employee's testimony that the said cancellation was sent "by mail through
our mailing section." without more
It stands to reason that if Pinca had really received the said notice, she would
not have made payment on the original policy on December 24, 1981. Instead,
she would have asked for a new insurance, effective on that date and until one
year later, and so taken advantage of the extended period.
Incidentally, Adora had not been informed of the cancellation either and saw no
reason not to accept the said payment
Although Pinca's payment was remitted to MICO's by its agent on January 15,
1982, MICO sought to return it to Adora only on February 5, 1982, after it
presumably had learned of the occurrence of the loss insured against on
January 18, 1982 make the motives of MICO highly suspicious
Travellers Insurance & Surety Corporation vs Court of Appeals
G.R. No. 82036 May 22, 1997
Facts:
At about 5:30 oclock in the morning of July 20, 1980, a 78-year old woman by
the name of Feliza Vineza de Mendoza was on her way to hear mass at the
Tayuman Cathedral. While walking along Tayuman corner Gregorio Perfecto
Streets, she was bumped by a taxi that was running fast. Several persons
witnessed the accident, among whom were Rolando Marvilla, Ernesto Lopez
and Eulogio Tabalno. After the bumping, the old woman was seen sprawled on
the pavement. Right away, the good Samaritan that he was, Marvilla ran
towards the old woman and held her on his lap to inquire from her what had
happened, but obviously she was already in shock and could not talk. At this
moment, a private jeep stopped. With the driver of that vehicle, the two helped
board the old woman on the jeep and brought her to the Mary Johnston Hospital
in Tondo. The victim was brought to the U.S.T. Hospital where she expired at
9:00 oclock that same morning. Death was caused by traumatic shock as a
result of the severe injuries she sustained. The evidence shows that at the
moment the victim was bumped by the vehicle, the latter was running fast, so
much so that because of the strong impact the old woman was thrown away and
she fell on the pavement. The trial court in it’s decision held Travellers Insurance
to be solidarily liable against private respondent with the taxicab driver and
operator.
Issue:
Whether or not the trial court’s decision is proper.
Held:
No. The right of the person injured to sue the insurer of the party at fault
(insured), depends on whether the contract of insurance is intended to benefit
third persons also or on the insured. And the test applied has been this: Where
the contract provides for indemnity against liability to third persons, then third
persons to whom the insured is liable can sue the insurer. Where the contract is
for indemnity against actual loss or payment, then third persons cannot proceed
against the insurer, the contract being solely to reimburse the insured for liability
actually discharged by him thru payment to third persons, said third persons
recourse being thus limited to the insured alone.
While it is true that where the insurance contract provides for indemnity against
liability to third persons, such third persons can directly sue the insurer,
however, the direct liability of the insurer under indemnity contracts against third
party liability does not mean that the insurer can be held solidarily liable with the
insured and/or the other parties found at fault. The liability of the insurer is based
on contract; that of the insured is based on tort.
We have certainly ruled with consistency that the prescriptive period to bring suit
in court under an insurance policy, begins to run from the date of the insurers
rejection of the claim filed by the insured, the beneficiary or any person claiming
under an insurance contract. This ruling is premised upon the compliance by the
persons suing under an insurance contract, with the indispensable requirement
of having filed the written claim mandated by Section 384 of the Insurance Code
before and after its amendment. Absent such written claim filed by the person
suing under an insurance contract, no cause of action accrues under such
insurance contract, considering that it is the rejection of that claim that triggers
the running of the one-year prescriptive period to bring suit in court, and there
can be no opportunity for the insurer to even reject a claim if none has been filed
in the first place, as in the instant case.
XI. DOUBLE INSURANCE AND REINSURANCE (SECTIONS 95-100 AND
SECTIONS 222-228)
Gonzalez Lao v. Yek Tong Lin Fire & Marine Insurance - Insurance Premiums
55 PHIL 386
Facts:
> Gonzales was issued 2 fire insurance policies by Yek for 100T covering his
leaf tobacco prducts.
> They were stored in Gonzales’ building on Soler St., which on Jan. 11, 1928,
burned down.
> Art. 3 of the Insurance policies provided that: “Any insurance in force upon all
or part of the things unsured must be declared in writing by the insured and he
(insured) should cause the company to insert or mention it in the policy. Without
such requisite, such policy will be regarded as null and void and the insured will
be deprived of all rights of indemnity in case of loss.”
> Notwithstanding said provision, Gonzales entered into other insurance
contracts. When he sought to claim from Yek after the fire, the latter denied any
liability on the ground of violation of Art. 3 of the said policies.
> Gonzales however proved that the insurer knew of the other insurance
policies obtained by him long efore the fire, and the insurer did NOT rescind the
insurance polices in question but demanded and collected from the insured the
premiums.
Issue:Whether or not Yek is still entitled to annul the contract.
Held:NO.The action by the insurance company of taking the premiums of the
insured notwithstanding knowledge of violations of the provisions of the policies
amounted to waiver of the right to annul the contract of insurance.
Gen. Insurance & Surety Corp v. NG Hua - Misrepresentation
106 PHIL 1117
Facts:> In 1952, General issued a fire policy to Ng Hua to cover the contents of
the Central Pomade Factory owned by him.
4
> There was a provision in the policy that should there be any insurance already
effected or to be subsequently procured, the insured shall give notice to the
insurer.
> Ng Hua declared that there was non. The very next day, the building and the
goods stored therein burned.
> Subsequently, the claim of Ng Hua for the proceeds was denied by General
since it discovered that Ng Hua had obtained an insurance from General
Indemnity for the same goods and for the same period of time.
Issue:Whether or not General Insurance can refuse to pay the proceeds.
Held:Yes.Violation of the statement which is to be considered a warranty entitles
the insurer to rescind the contract of insurance. Such misrepresentation is fatal.
UNION MANUFACTURING CO., INC. VS. PHILIPPINE GUARANTYCO.,
INC.47 SCRA 271 (G.R. NO. L-27932)OCTOBER 30, 1972
Petitioner: Republic BankRespondent: Philippine Guaranty Co.. Inc
.FACTS:
On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans
from the Republic Bank in the total sum of 415,000.00. To
₱ and approved by the Central Bank before July 17, 1959 are exempt from the
secure the payment thereof, UMC executed real and chattel mortgage on
certain properties. The Republic Bank procured from the defendant Philippine
Guaranty Co., Inc. an insurance coverage on loss against fire for 500,000.00
₱ was denied, hence the petition.
over the properties of the UMC, as described in defendant’s cover note dated
September 25, 1962, with the annotation that loss or damage, if any, under said
cover note is payable to Republic Bank as its interestmay appear, subject
however to the printed conditions of saiddefendant’s Fire Insurance Policy Form.
On September 6, 1964, a fire occurred in the premises of UMC and on
October 6, 1964, UMC filed its fire claim with the PGC Inc., thru itsadjuster, H.H.
Bayne Adjustment Co., which was denied by saiddefendant in its letter dated
November 26, 1964 on the following ground:“Policy Condition No. 3 and/or the
‘Other Insurance Clause’ of the policywas violated because you did not give
notice to us of the other insurancewhich you had taken from New India for
80,000.00. Sincere Insurance
₱ contracts for insurance; reinsurance policies or cessions are contracts of
for 25,000.00 and Manila Insurance for 200,000.00 with the result
₱₱
that these insurances of which we became aware of only after the fire,were not
endorsed on our policy.
ISSUE:Whether Republic Bank can recover.
HELD:Without deciding- whether notice of other insurance upon the
sameproperty must be given in writing, or whether a verbal notice is sufficientto
render an insurance valid which requires such notice, whether oral or written, we
hold that in the absolute absence of such notice when it isone of the conditions
specified in the fire insurance policy, the policy is null and void. (Santa Ana vs.
Commercial Union Ass. Co., 55 Phil. 128).If the insured has violated or failed to
perform the conditions of the contract, and such a violation or want of
performance has not been waived by the insurer, then the insured cannot
recover. Courts are not permitted to make contracts for the parties. The
functions and duty of the courts consist simply in enforcing and carrying out the
contracts actually made. While it is true, as a general rule, that contracts of
insurance are construed most favorably to the insured, yet contracts of
insurance, like other contracts, are to be construed according to the sense and
meaning of the terms which the parties themselves have used. If such terms are
clear and unambiguous they must be taken and understood in their plain,
ordinary and popular sense. The annotation then, must be deemed to be a
warranty that the property was not insured by any other policy. Violation thereof
entitles the insurer to rescind. The materiality of non-disclosure of other
insurance policies is not open to doubt. The insurance contract may be rather
onerous, but that in itself does not justify the abrogation of its express terms,
terms which the insuredaccepted or adhered to and which is the law between
the contracting parties.
Philamlife vs. Auditor General [GR. 19255 January 18, 1968]
Facts: On January 1950, Philippine American Life Insurance Co. (PHILAM) and,
foreign corporation, American International Reinsurance Co.(AIRCO) entered
into a reinsurance treaty where PHILAM agreed to reinsure with AIRCO the
excess of life insurance on the lives of persons written by PHILAM. In their
agreement it is also stipulated that even though PHILAM is already on a risk for
its maximum retention under policies previously issued, when new policies are
applied for and issued they can cede automatically any amount, within the limits
specified.
No question ever arose with respect to the remittances made by Philamlife to
Airco before July 16, 1959, the date of approval of the Margin Law.
Subsequently, the Central Bank of the Philippines collected the sum of
P268,747.48 as foreign exchange margin on Philamlife remittances to Airco
made subsequent to July 16, 1959.
PHILAM then filed with the CB a claim for refund for the same amount arguing
that the reinsurance premiums remitted were paid on January 1950 and is
therefore exempt from the 25% foreign exchange margin fee. The Acting legal
counsel of the Monetary board resolved that reinsurance contracts entered into
payment of the 25% foreign exchange margin, even if remittances thereof are
made after July 17, 1959.
Still the Auditor of the CB denied PHILAM’s claim for refund and reconsideration
Issue: Whether PHILAM’s claim was covered by the exemption
Held: The Court held in the negative stating that for an exemption to come into
play, there must be a reinsurance policy or, as in the reinsurance treaty
provided, a “reinsurance cession” which may be automatic or facultative.
To distinguish, a reinsurance policy is a contract of indemnity one insurer makes
with another to protect the first insurer from a risk it has already assumed. On
the other hand, a reinsurance treaty is merely an agreement between two
insurance companies whereby one agrees to surrender and the other to accept
reinsurance business pursuant to provisions specified in the treaty. Treaties are
insurance.
Although the reinsurance treaty precedes the Margin Law by over nine years
nothing in that treaty obligates PHILAM to remit to AIRCO a fixed, certain, and
obligatory sum by way of reinsurance premiums. All that the reinsurance treaty
provides on this point is that PHILAM “agrees to reinsure.” The treaty speaks of
a probability; not a reality.
PHILAM’s obligation to remit reinsurance premiums becomes fixed and definite
upon the execution of the reinsurance cession. Because, for every life insurance
policy surrendered to AIRCO, PHILAM agrees to pay premium. It is only after a
reinsurance cession is made that payment of reinsurance premium may be
exacted, as it is only after PHILAM seeks to remit that reinsurance premium that
the obligation to pay the margin fee arises.
FIELDMEN'S INSURANCE CO., INC.,vs. ASIAN SURETY & INSURANCE, CO.,
INC. and CA (1970)
MAKALINTAL, J.:
• On various dates the Asian Surety & Insurance and the Fieldmen's
insurance entered into 7 reinsurance agreements or treaties under the general
terms of which ASIAN, as the ceding company undertook to cede to
FIELDMEN’S, as the reinsuring company, a specified portion of the amount of
insurance underwritten by ASIAN upon payment to FIELDMEN'S of a
proportionate share of the gross rate of the premium applicable with respect to
each cession after deducting a commission.
o agreements were take effect from certain specific dates and were to be in
force until cancelled by either party upon previous notice of at least 3 months by
registered mail to the other party, the cancellation to take effect as of the 31st of
December of the year in which notice was given.
5

• Sept and Dec 1961 à FIELDMEN’S sent letters to ASIAN expressing its
desire to cancel all agreements between them as of DEC 31, 1961 alleging that
ASIAN had already incurred numerous violations àASIAN received but did not
reply
• Feb 1962 à FIELDMEN’S sent another letter to ASIAn repeating the fact
of cancellation and now requesting ASIAN to submit its final accounting of all
cessions made to the former for the preceding months when the reinsurance
agreements were in force.
• Meanwhile one of the risks reinsured by FIELDMENS issued in favor of
the GSIS became a liability when the insured property was burned on Feb 1962
à The next day ASIAN sent letter to FIELDMEN’S notifiying them of the loss and
stating…
o ... we beg to reiterate that your letter of December 7, 1961, terminating said
treaties by December 31, 1961, is not in accordance with the terms thereof,
since there was no prior three months' notice. However, considering the attitude
express (sic) in your aforesaid letter of December 7, 1961, we are willing to
waive provision that said treaties may be cancelled on December 31st of any
year, and will consider them cancelled at the end of three (3) months from
December 7, 1961, by which time we shall be able to render the final accounting
you desire.
• FIELDMEN’S filed a petition for declaratory relief with CFI Manila alleging
its first letter of notification on SEPT 19, 1961 was sufficient to meet the 3 month
period before cancellation and to obtain an order directing ASIAN to render final
accounting of the transactions between them with respect to said reinsurance
treaties as of the cut-off date.
• CFI DECISION à 6 of 7 agreements are cancelled as of DEC 1961 but
agreed with ASIAN that FIELDMEN’S is still liable for as long the previously
contracted policies are still valid. It also ordered FIELDMEN'S to make an
accounting with ASIAN within 30 days.
• CA à Affirmed with modification à the order for accounting was eliminated
ISSUE: WON cancellation had the effect of terminating also the liability of
FIELDMEN'S as reinsurer with respect to policies or cessions issued prior to the
termination of the principal reinsurance contracts or treaties?
• Only the cancelled agreements are being considered here à 2 of which
contain provisions, which clearly and expressly recognize the continuing
effectivity of policies ceded under them for reinsurance notwithstanding the
cancellation of the contracts themselves.
o Article 10 of the Facultative Obligatory Reinsurance Treaty Fire provides
"that in the event of termination of this Agreement ..., the liability of the
Fieldmen's under current cessions shall continue in full force and effect until
their natural expiry ...;" and the 4th paragraph of Article VI of the Personal
Accident Reinsurance Treaty states:
o 4. On the termination of this Agreement from any cause whatever, the
liability of the REINSURER (Fieldmen's) under any current cession including any
amounts due to be ceded under the terms of this Agreement and which are not
cancelled in the ordinary course of business shall continue in full force until their
expiry unless the COMPANY (Asian) shall, prior to the thirty-first December next
following such notice, elect to withdraw the existing cessions ....
• It is therefore clear that FIELDMEN’S is still liable despite the cancellation
àSuch cessions continued to be in force until their respective dates of expiration
à GSIS policy still valid and subsisting at time of loss à FIELDMEN’S IS LIABLE
• No need to go into other arguments (did not mention what they are)
because the cancellation of the agreements made them moot
• SC NOTES à ASIAN only claims continued liability of FIELDMEN’s as to
the 2 agreements that had the provision cited above (as compared to the other 4
cancelled agreements wherein FIELDMEN’S liability had terminated with the
contracts)
• FIELDMEN'S insists on its alternative prayer that all cessions under the
six reinsurance agreements be declared rescinded by reason of certain
violations thereof, as stated by FIELDMEN'S in its letter of December 7, 1961 à
Court reminds them that this action is for declaratory relief and not one for
rescission and no grounds found by lower courts that can justify rescission
anyway.
G.R. No. L-29508 June 27, 1973
ARTEX DEVELOPMENT CO., INC., plaintiff-appellee,
vs.
WELLINGTON INSURANCE CO., INC., defendant-appellant.
Norberto J. Quisumbing for plaintiff-appellee.
William R. Veto for defendant-appellant.
TEEHANKEE, J.:
In this appeal from the decision of the court of first instance of Rizal at Caloocan
city, the Court reiterates the establish doctrine that a third party not privy to a
contract that contains no stipulations pour autrui in its favor may not sue
enforcement of the contract.
Hence, in this case where the lower court ordered defendant insurer to pay
plaintiff-insured the balance of the insured property loss of P3,624,683.43 and its
ascertained business interruption loss of P1,748,460.00 with interest and
attorney's fees, the Court affirms the correctness of the lower court's ruling that it
is no defense for the insurer as against insured that the insurer had obtained
reinsurance from other companies to cover its liability.
Defendant-appellant's lone assignment of error that lower court should have
ruled instead "that plaintiff-appellant cause of action (as insured) should have
been directed against the reinsurers and not against defendant-appellant" is
manifestly untenable since there is no privity of contract between the insured
and the reinsurers. Plaintiff-appellee insured can only move for enforcement of
its insurance contract with its insurer, the defendant-appellant.
Unless there is a specific grant in, or assignment of, reinsurance contract in
favor of the insured or a manifest intention of the contracting parties to the
insurance contrary to grant such benefit or favor to the insured, not being privy
to the reinsurance contract, has no cause of action against the reinsurer. It is
expressly provided in section 91 the Insurance Act1 that "(T)he original insured
has no interest in a contract of insurance."
The lower court's judgment of April 2, 1968 was rendered the basis of the
parties' stipulation of facts and there is dispute as to the property and business
interruption loss of the insured as thus determined nor as to the partial payment
made by defendant-insurer that have greatly reduced the amount still due and
owing under the judgment under appeal.
Briefly, the trial court found that from the evidence and stipulation of facts
presented, it appears that the defendant, Wellington Insurance Co., Inc. insured
for P24,346,509.00 the buildings, stocks and machinery of plaintiff Artex
Development Co., Inc., against loss or damage by fire or lighting (Exh. A) upon
payment by plaintiff of the corresponding premiums; that on August 2, 1963, said
properties were insured for an additional sum of P833,034.00 (Exh. A-1) that on
May 12, 1963 defendant insured plaintiff against business interruption (use and
occupancy) for P5,200,000.00 (Exh. B); that on September 22, 1963, the
buildings, stocks and machineries of plaintiff's spinning department were burned;
that notice of the loss and damage was given the defendant, and the loss was
referred to the H. H. Bayne Adjustment Co. and the Allied Adjustment Co.; that
as per report of the adjusters, the total property loss of the plaintiff was the sum
of P10,106,554.40 and the total business interruption loss was P3,000,000.00;
that defendant has paid to the plaintiff the sum of P6,481,870.07 of the property
loss suffered by plaintiff and P1,864,134.08 on its business interruption loss,
leaving a balance of P3,624,683.43 and P1,748,460.00, respectively."2
On May 29, 1969, counsel for plaintiff-appellee filed a manifestation dated April
10, 1969, bearing the conformity of plaintiff itself under the signature of its
president, Domingo G. Castillo, as follows:
MANIFESTATION
Plaintiff-appellee, through counsel, respectfully manifests that, in view of the
Deeds of Discharge dated 10 April 1969 and Collateral Agreement dated 10
April 1969, hereto attached as Annexes "A" and "B", the only remaining liability
subject of litigation shall be that proportion of the loss reinsured with or through
6
Alexander and Alexander, Inc. of New York, U.S.A., namely, P397,813.00 — the
rest having been paid and settled per the said deeds Annexes "A" and "B".
Quezon City for Manila, 10 April 1969.
(Signed) NORBERTO J. QUISUMBING Counsel for Plaintiff-Appellant P.O. Box
No. 226, Manila.
CONFORME:
ARTEX DEVELOPMENT CO., INC.
By:
(Signed) DOMINGO G. CASTILLO
President3
The amended documents recited further that:
1. Artex hereby acknowledges receipt of the sum of P3,600,000.00 in Philippine
currency paid by Minet on behalf itself and Willington and Minet & Co. in full and
final settlement of all any claims Artex may have against Willington, Minet and
Minet Co. in respect of the losses resulting from the said fire of 22nd September
1963 the Policies of Insurance and the Contracts Reinsurance specified in the
said Deeds of Discharge and discharge Willington, Minet and Minet & Co. jointly
and severally from all actions, proceedings, claims, demands, costs and
expenses in respect thereof including the said judgment obtained in the Court of
First Instance of Rizal and additionally Artex waives in favor of Minet and Minet
& Co. Artex's right of recourse against them under Article 1177 of the Civil Code
of the Philippines.4
Upon the parties' joint motion dated May 22, 1969 for temporary suspension of
the proceedings by virtue of such payment, the Court per its resolution of June
30, 1969 resolve to suspend the proceedings until July 30, 1969.5 The Court
also noted defendant-appellant's manifestation dated June 18, 1969, to the
effect that "the statement in plaintiff-appellee' Manifestation that the only
remaining amount of its claimant subject of litigation is the proportion of the loss
reinsured wit Alexander and Alexander, Inc. of New York, U.S.A. in the amount
of P397,813.00 because the reinsurers of defendant-appellant made additional
partial payments, is true and correct but without prejudice to the legal question
presented in defendant-appellant's brief."6
Thereafter, plaintiff-appellee filed on August 8, 1969 its brief, and prayed for
affirmance of the appealed judgment with modification, as follows:
In the light of the foregoing discussion, the lower court did not commit any error
in its appealed decision, which must accordingly be sustained and affirmed. It is
however respectfully prayed that the same be modified as to the amount of
liability adjudged against defendant appellant in favor of plaintiff-appellee, in
accordance with their Collateral Agreement executed by them on April 10, 1969
(Annex "B", of manifestation of the same date, filed in this Court on 29 May
1969), which should now be fixed at P397,813.00, plus of course 12% interest
per annum thereof for late payment until 10 April 1969, attorney's fees of 15% of
the recovery, expenses of litigation and costs of suit, already adjudged by the
lower court, no writ of execution to issue however on any adjudged liability until
after three (3) years from 10 April 1969, pursuant to the same 'Collateral
Agreement of the parties.
On the sole issue of law raised by defendant-appellant in its brief, the Court
finds, as above indicated, that no single clause in the reinsurance contracts has
been cited by defendant-insurer that would justify its claim that they contained a
stipulation pour autrui in favor of plaintiff-insured, and whereby "plaintiff-appellee
is deemed to have agreed to look solely to the reinsurers for indemnity in case of
loss."7
Article 1311 of our Civil Code expresses the universal rule that "Contracts take
effect only between the parties, their assigns and heirs" (with the heir being "not
liable beyond the value of the property he received from the decedent,") and
provides for the exception of stipulations pour autrui or in favor of a third person
not a party to the contract, in this wise:
If a contract should contain some stipulation in favor of a third person, he may
demand its fulfillment provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest of a person is not
sufficient. The contracting parties must have clearly and deliberately conferred
favor upon a third person. (Art. 1311, Civil Code, second paragraph)
The Court has a since the early case of Uy Tam vs. Leonard8 that the "intent of
the contracting parties to benefit third party by means of such stipulations pour
autrui must clearly expressed, and hence, a clause in a contractor's executed
solely in favor of the City of Manila and condition pay for all labor and materials
cannot be construed stipulation pour autrui available to materialmen who
supplied certain materials to the contractor for use in the performance of the
latter's contract with the city.
In Bonifacio Bros, Inc. vs. Mora9 the Court reiterated same established doctrine,
holding that the clause in a motor vehicle insurance policy authorizing the owner
of damaged vehicle to contract for its repair does not mean that the repairman
may collect the cost of the repair directly the insurer, there being no clause "from
which we can infer that there is an obligation on the part of the insurance
company to pay the cost of repairs directly to them,' and that the mortgagee of
the car (expressly named in the insure policy as beneficiary of any loss payable
thereunder) had better right than the repairman to the insurance proceeds.
Plaintiff-insured, not being a party or privy to defendant insurer's reinsurance
contracts, therefore, could not directly demand enforcement of such insurance
contracts. Defendant-appellant's contention that the insured should be deemed
have agreed to look solely to the reinsurers for indemnity case of loss, since it
was evident that with its mere P500,000. paid-up capital stock, it had to secure
reinsurance coverage the over P24-million fire insurance coverage of the policy
issued by it to plaintiff-insured, is manifestly untenable.
Assuming that plaintiff-insured could avail of the reinsurance contracts and
directly sue the reinsurers for payment of the loss, still such assumption would
not in any way affect or cancel out defendant-insurer's direct contractual liability
to plaintiff-insured under the insurance policy to indemnify plaintiff for the
property losses. Plaintiff's right as insured to sue defendant as insurer directly
and solely would thereby not be affected or curtailed in any way, without
prejudice to defendant in turn filing a third party complaint or separate suit
against its reinsurers: Thus, in Naga Development Corp. vs. Court of Appeals 10
the Court held that the contractor remain liable to the supplier for materials
delivered, notwithstanding arrangements made on its GSIS loan for the GSIS to
issue treasury warrants on account of such loan, directly in favor of the supplier,
since "such an arrangement obviously cannot destroy or modify the direct legal
responsibility of the (contractor) to the (supplier) to pay for what the latter gave
and rendered to the former."
On April 4, 1973, plaintiff-appellee filed a manifestation informing the Court that
in Republic of the Philippines vs. Wellington Insurance Co., Inc., docketed as
Civil Case No. 88046 of the court of first instance of Manila, an order was issued
on September 18, 1972 for the 'Liquidation of said insurance company, herein
defendant-appellant; that the Insurance Commissioner was designated receiver
and as such issued on November 4, 1972 an order for the filing of claims against
said defendant; that accordingly plaintiff filed its verified statement of claim
wherein it asked the Insurance Commissioner "to move to dismiss the above-
entitled appeal as filed only for delay."
Requested by the Court to file their comments, defendant through counsel
admitted the fact of liquidation proceedings but denied any dilatory motive in its
appeal, stating that "although it does not raise any issue of fact in (this) appeal,
yet the question of law raised (herein) is of first impression in this jurisdiction"
and of "utmost importance" to insurance companies taking out reinsurance
policies.
The Insurance Commissioner, in her manifestation of May 18, 1973, confirmed
the fact of her taking over "title to all property, contracts, rights of action and all
of the records of the (defendant) insurance company" as liquidator pursuant to
section 175-B of the Insurance claiming the sole right-now to officially represent
and act for defendant company and asserting "exclusive jurisdiction determine
this claim" even as against this Court according to her, should be deemed to
have "ceased to jurisdiction over the subject of this pending action," but at the
same time not moving to dismiss the appeal, as suggest plaintiff, and instead
manifesting that "the Insurance Commissioner is absolutely without any
knowledge information sufficient to form a belief as to the truth veracity of
Plaintiff Appellee's imputation to Defendant-Appellant that the latter had filed the
above-entitled a only for delay." 11
Since the claim at bar of plaintiff against defendant merely for the balance of a
proven undisputed claim (as amount) — long tried and decided as per the trial
court judgment of April 2, 1968 before the liquidation order issued only last year
on September 18, 1972 — the Court has herein resolved and disposed of the
sole issue of law raised in the appeal. Plaintiff's judgment claim as now judiciary
determined will have to be satisfied in compliance with requirements of the
Insurance Act governing distribution assets, priorities of payments of proven
claims, etc., insurance companies under liquidation and with prior authorization
7
of the court in the liquidation proceeding pending in the Manila court of first
instance.
ACCORDINGLY, as prayed for by plaintiff-appellee in brief, the judgment of the
lower court is affirmed, with the modification that the remaining liability of
defendant appellant to plaintiff-appellee in accordance with the "collateral
agreement" of April 10, 1969 is fixed at P397,813.00 with twelve (12%) percent
interest per annum until 10 April 1969, attorney's fees of fifteen (15%) percent of
the recovery, and cost of suit.
AVON INSURANCE PLC., ET AL. V. CA (G.R. NO. 97642)
Facts: Respondent Yupangco Cotton Mills engaged to secure with Worldwide
Security and Insurance Co. several of its properties which were then covered by
reinsurance treaties between Worldwide Security and several foreign
reinsurance companies, including herein petitioners. These reinsurance
agreements had been made through an international broker acting for
Worldwide Security. While the policies are in effect, Yupangco’s properties were
razed in fire giving rise to their indemnification. Worldwide acknowledged a
remaining balance and assigned to Yupangco all reinsurance proceeds still
collectible from all the reinsurance companies. Thus, as assignee and original
insured, Yupangco instituted a collection suit against petitioners. Petitioners
averred that they are foreign corporations not doing business in the Philippines
therefore cannot be subject to the jurisdiction of its courts. CA found for
Yupangco.
Issue:Whether or not petitioners are foreign corporations doing business in the
Philippines.
Ruling: NO.To qualify the petitioners’ business of reinsurance within the
Philippine forum, resort must be made to the established principles in
determining what is meant by “doing business in the Philippines.” The term
ordinarily implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the exercise of
the functions normally incident to and in progressive prosecution of the purpose
and object of its organization.
As it is, private respondent has made no allegation or demonstration of the
existence of petitioners’ domestic agent, but avers simply that they are doing
business not only abroad but in the Philippines as well. It does not appear at all
that the petitioners had performed any act which would give the general public
the impression that it had been engaging, or intends to engage in its ordinary
and usual business undertakings in the country. The reinsurance treaties
between the petitioners and Worldwide Surety and Insurance were made
through an international insurance broker, and not through any entity or means
remotely connected with the Philippines. Moreover, there is authority to the
effect that a reinsurance company is not doing business in a certain state merely
because the property or lives which are insured by the original insurer company
are located in that state. The reason for this is that a contract of reinsurance is
generally a separate and distinct arrangement from the original contract of
insurance, whose contracted risk is insured in the reinsurance agreement.
Hence, the original insured has generally no interest in the contract of
reinsurance.
Indeed, if a foreign corporation does not do business here, there would be no
reason for it to be subject to the State’s regulation. As we observed, in so far as
the State is concerned, such foreign corporation has no legal existence.
Therefore, to subject such corporation to the courts’ jurisdiction would violate the
essence of sovereignty.
Pioneer v Yap G.R. No. L-36232 December 19, 1974
J. Fernandez
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where
she sold shopping bags and footwear. Chua Soon Poon, her son-in-law, was in
charge of the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a
value of P25,000.00 covering her stocks, office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
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… Any false declaration or breach or this condition will render this policy
null and void.
Another insurance policy for P20,000.00 issued by Great American covering the
same properties. The endorsement recognized co-insurance by Northwest for
the same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the
same properties from the Federal Insurance Company, Inc., which was procured
without notice to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance
claim, but the same was denied for a breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy.
The insurance company refused to pay because she never informed Pioneer of
another insurer. The trial court decided in favor of Yap. The CA affirmed.
Issue:Whether or not petitioner should be absolved from liability on the Pioneeer
policy on account of any violation of the co-insurance clause
Held: No. Petition dismissed.
Ratio:There was a violation. The insurance policy for P20,000.00 issued by the
Great American, ceased to be recognized by them as a co-insurance policy.
The endorsement shows the clear intention of the parties to recognize on the
date the endorsement was made, the existence of only one co-insurance, the
Northwest one. The finding of the Court of Appeals that the Great American
Insurance policy was substituted by the Federal Insurance policy is indeed
contrary to said stipulation.
Other insurance without the consent of Pioneer would 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 validity of a clause in a fire insurance policy to the effect that the
procurement of additional insurance without the consentof the insurer renders
the policy void is in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and
practically all of the states is to the effect that a clause in a policy to the effect
that the procurement of additional insurance without the consent of the insurer
renders the policy void is a valid provision.”
In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua- “The
annotation then, must be deemed to be a warranty that the property was not
insured by any other policy. Violation thereof entitled the insurer to rescind.
Furthermore, even if the annotations were overlooked the defendant insurer
would still be free from liability because there is no question that the policy
issued by General Indemnity has not been stated in nor endorsed on Policy No.
471 of defendant. The obvious purpose of the aforesaid requirement in the
policy is to prevent over-insurance and thus avert the perpetration of fraud
where a fire would be profitable to the insured.“