Loss and Notice of Loss

Sections 83-87, IC
Paris-Manila Perfume v Phoenix Assurance, 49 Phil 753 (1926)EUNICE
DOCTRINE:
Loss, the immediate cause of which was the peril insured against, if the proximate cause thereof
was NOT excepted in the contract (Insurance)

FACTS:
May 22, 1924: A fire insurance policy was issued by Phoenix Assurance Company, Limited to
Messrs. Paris-Manila Perfumery Co. (Peter Johnson, Prop.) for P13,000 . Also insured with other
insurance companies for P1,200 and P5,000 respectively
July 4, 1924: The Perfumery was burned unknown of the cause totalling a loss of P38.025.56
Phoenix refused to pay nor to appoint an arbitrator stating that the policy did not cover any loss or
damage occasioned by explosion and stating that the claim was fraudulent
RTC: ordered Phoenix to pay P13,000
Phoenix appealed
The insurance policy contains:
Section 6: Unless otherwise expressly stated in the policy the insurance does not cover
(h)
Loss or damage occasioned by the explosion; but loss or damage by explosion of gas for
illuminating or domestic purposes in a building in which gas is not generated and which does not
form a part of any gas works, will be deemed to be loss by fire within the meaning of this policy.
While Paris Perfume relies upon section 5 of the policy as a defense which states:
(d) loss or damage occasioned directly or indirectly, approximately or remotely by or through or in
consequence of:
(1) earthquake, hurricane, volcanic eruption or other convulsion of nature and the company shall
not be liable for loss or damage arising during or within a reasonable time after any of the said
occurrences, unless it be proved by the insured to the satisfaction of the company that such loss
or damage was not in any way occasioned by or through or in consequence of any of the said
occurrences.
ISSUE: W/N Phoenix should be liable for the loss because there was no explosion which is an
exemption from the policy
HELD: YES.
It will be noted that section 5 excludes not only the damages which may immediately result from
an earthquake, but also any damage which may follow the earthquake, and that section 6
excludes only the damages which are the direct result of the explosion itself, and that it does not
except damages which occurred from the fire occuring after the explosion, even though the
explosion may have been the primary cause of the fire. If it be a fact that the fire resulted from an
explosion, that fact, if proven, would be a complete defense, the burden of the proof of that fact is
upon the defendant, and upon that point, there is a failure of proof.
(there is no competent evidence as to whether the explosion caused the fire or the fier caused the
explosion)
lower court also found that there was no fraud in the insurance, and that the value of the property
destroyed by the fire was more than the amount of the insurance.
Judgment of the lower court is therefore, AFFIRMED.

-------------------------------------------------------------------------------------------------------------Prats v Phoenix Assurance, 52 Phil 807 (1929)JEROME

PRATS & COMPANY, a registered partnership, plaintiff-appellant,
vs.
PHOENIX INSURANCE COMPANY, HARTFORD, CONNECTICUT, a
corporation, defendant-appellee.

DOCTRINE: Sec. 87. An insurer is not liable for a loss caused by the willful
act or through the connivance of the insured; but he is not exonerated by
the negligence of the insured, or of the insurance agents or others.
FACTS:
Francisco Prats, Elias Hanna and Isidro Bejar registered two mercantile
partnerships in the Bureau of Commerce and Industry for the purpose of
engaging in mercantile business. The articles of copartnership of these two
entities were the same except in the firm names.
Of the three individuals mentioned Elias Hanna and Isidro Bejar were Turkish
subjects of unsavory reputation in insurance circle of Manila, while Francisco
Prats was a Spanish subject who had had some success as a merchant and,
prior to his connection with the two associates above mentioned, apparently
enjoyed a fair reputation. Another individual, who figures in the case as an
instrument of the three partners, is one Domingo Romero, who at that the time
which we are here concerned, was an employee of the Bureau of Internal
Revenue, with a salary of P150 per month. Ramon Prats, a son of Francisco
Prats, was united in marriage to a daughter of Domingo Romero, with the
result that social relations between Francisco Prats and Domingo Romero
were close. Francisco Prats appear to have acted as manager for both Prats &
Co. and Hanna, Bejar & Co.
Prats, acting for Hanna, Bejar & Co., purchased a one-story building at 95
Plaza Gardenia, Manila; and soon thereafter he begun to assemble in this
place the stock of merchandise which was the subject of insurance in this
case. The building referred to was purchasd outright for the sum of P1,600. It
was old and was scarcely more than a shed but had been used in times past
for human habitation.
By August 21, 1924, there had been assembled and stored by Prats in the
place above described a stock of goods which, according to the documents
exhibited by him, had a valuation of P211,329.72, on which he had taken out
insurance to the extent of P410,000. At midnight of the day mentioned a fire
occurred at 95 Plaza Gardenia, which destroyed the building and ruined its
contents, the amount realized from the salvage of the stock being P11,731.93.
(the scheme involved herein will be placed after the dispositive portion.
Nilagay ko nalang in case magtanong si maam pero deins na kailangan
basahin un)
Plaintiff sued for collection. For answer, the defendant, Pheonix Insurance Co.,
admitted the insurance of the policy of insurance but, by way of special
defense, alleged, among other things, that the fire in question had been set by
the plaintiff, or with its connivance, and that the plaintiff had submitted under
oath to the defendant a fraudulent claim of loss, in contravention of the
express terms of the policy.
ISSUE: WON plaintiff submitted a false claim? YES
WON insurer is Liable. NO
RATIO:
1 issue: Proof that plaintiff submitted a false claim: first, that the plaintiff had
submitted a claim for jewelry lost in the fire as of a value of P12,800 when the
true value of said jewelry was about P600; and, secondly, that the plaintiff had
sought to recover from the insurance company the value of goods which had
st

been surreptitiously withdrawn by it from the bodega prior to the fire. Neither
of these two facts are consistent with good faith on the part of the plaintiff, and
each constituted a breach of the stipulations of the policy against the use of
fraudulent devices and false proof with respect to the loss.
2 issue: FACTS NUNG PAGSUNOG
Domingo Romero assisted one Ramon Osete to rent No. 69 Calle Gardenia,
which was close to the rear of the building at 95 Plaza Gardenia. Osete he slept
at the place mentioned until the night of the fire. A night or two before the fire
this Osete, accompanied by one Antonio Prats, appears to have brought two
cans of petroleum to his lodging place at 69 Calle Gardenia. After these cans
had been taken to Osete's bathroom by his muchacho, the latter was sent out
on an errand; and while he was gone the petroleum disappeared. After the fire
had been started in the plaintiff's bodega shortly after midnight on August 21,
1924, Osete conveyed this boy in his automobile to the fire alarm box on Plaza
Gardenia. Reaching this place, Osete planted the boy there with instructions to
stop anyone who might attempt to turn in the alarm by telling him that he (the
boy) had already done so; and in fact, after the fire had gained some headway,
one Joaquin Silos, who lived near the bodega, ran to the box to turn on the
alarm but was stopped in the act by a person who stated that he had already
given the alarm. Nevertheless, when Fire Chief Vanderford reached the scene
of the fire a few minutes later, he found that the box had not been disturbed
and he himself turned on the alarm. The boy stated that when he was on the
way with Osete to the alarm box, as just stated, an explosion took place in
thebodega and a dull sound was emitted. Vanderford says that upon his arrival
he saw that the smoke issuing from the bodega black, suggesting the
combustion of some inflammable material like petroleum. He also noted the
odor of petroleum, as did also some of the firemen who reached the scene. It
may be added that when the debris of the fire was subsequently searched,
merchandise soaked with petroleum was found in the ruins.
Domingo Romero, who had been living at 97 Plaza Gardenia, had before the
fire taken his family temporarily to the home of Prats in Pasay. But after the fire
was over the family moved back to 97 Plaza Gardenia, although that place had
been considerably damaged by the flames.
Among those who suffered from the fire were the members of the Artigas
family, living at 93 Gardenia, on the side opposite Romero's house. Another
neighbor who likewise suffered from the fire was one Juan Atayde, occupant
of 67 Calle Gardenia, at the side of the house occupied by Osete. Soon after
the fire Domingo Romero quietly passed a 100-peso bill into the hand of Maria
Luisa Artigas, a daughter belonging to the Artigas family. Romero likewise
gave the same amount to Juan Atayde. It is self-evident that the gifts thus
made by Romero to Luisa Artigas and Juan Atayde had other motives than
pure charity and that the money probably came from some other source than
his own modest earnings. After the fire that a special investigation was made
by the police department with the result that Deputy Chief Lorenzo came to the
conclusion that the fire had originated from an intentional act. Reflection upon
the proof before the court engenders in us the same belief and conducts us to
the further conclusion that Prats & Co. was not alien to the deed.
The appealed decision will therefore be affirmed, and it is also ordered, with
costs against the appellant.
nd

Summary nung scheme

INSURANCE CONTRACT:
In the month of June preceeding the fire, nine policies aggregating
P160,000 were taken out by Prats in the name of Hanna, Bejar & Co. on
merchandise stored at 95 Plaza Gardenia
Later, prats procured a 200k policy from the agent of the defendant, the
agent said told him that if Hanna or Bejar had any interest in the stock to be
insured the policy could not be issued for the reason that, in such case, the
defendant would not be able to obtain reinsurance for any part of the policy,
owing to the bad reputation of Hanna and Bejar.
Then, he kept procuring policies which later totaled to the extent of 410k.
Also, at this time, Prats caused the first nine policies which had been taken out
in the name of Hanna, Bejar & Co. to be indorsed to Prats & Co., thereby
making this firm the sole insured firm with respect to this stock of
merchandise.
Origin of the stock:
Prats and Co. allegedly improted 22 boxes of silk. However as found by
the trial court, it was fictitious.
Manipulation in storage: (short version nalang)
forty-five cases of old stock of Hanna, Bejar & Co., at Legaspi, P. I., were
shipped to Manila before the fire, but instead of being taken directly to 95
Plaza Gardenia, they were housed for a time in the back part of the lower floor
of the Bazar Filipino in which Prats & Co. and Hanna, Bejar & Co. had their
offices
before the fire goods were removed from the bodega to the store of B.
Abolafia, at Manila, where they were received without invoice.
-------------------------------------------------------------------------------------------------------------The East Furniture, Inc. vs. The Globe & Rutgers Fire Insurance Co. of New York - JON
Doctrine: An insurer is not liable for a loss caused by the willful act or through the connivance of
the insured.
Facts:
The East Furniture, Inc. (TEFI), a duly registered partnership engaged in the sale of furniture,
obtained fire insurance policies with certain insurance companies, namely: (1) the Globe &
Rutgers Fire Insurance Co. of New York (Globe & Rutgers) [in the amount of P5000], (2)
Commercial Union Assurance Company, Ltd. (Commercial Union) [in the amount of P5000], and
(3) the Continental Insurance Co., of New York (The Continental) [in the amount of P10000]
insuring against fire the articles existing in its establishment situated at Nos. 626 and 628 Rizal
Avenue, Manila.
Condition 12 of each of the insurance policies 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; or, if the loss or damage be occasioned by the wilful act, or with the
connivance of the Insured, all benefit under this policy shall be forfeited."
On 2 March 1929, a fire broke out in TEFI's establishment, as a result of which the insured
articles therein found were destroyed by the fire. Within the period marked in the policies, TEFI

presented to the insurance companies an inventory of the insured furniture which was destroyed
by the fire, the value of which it alleged, before or at the time of the fire, amounted to P52,061.99
and out of which, the insured properties amounting to P5,000 more or less were saved.
The insurance companies refused the claim of TEFI. Therefore, TEFI filed claims against the
insurance companies. (The three actions were tried jointly in a single RTC by agreement of the
parties)
The insurance companies in their respective answers interposed a general denial and as special
defenses alleged in substance (1) that the fire in question was of intentional origin; (2) that
the claims of loss presented by TEFI were false and fraudulent; (3) that the furniture in
question had been mortgaged by TEFI to the Manila Finance and Discount Corporation, so that at
the time of the fire, TEFI was not the only party interested therein, contrary to the representations
made in its claims of loss; and (4) that TEFI violated one of the conditions of the policies by
refusing to furnish the defendants with a physical inventory of the contents of its store at
the time of the fire.
With regard to the origin of fire, the evidence shows that it started at about 9.55 p. m. in the
second floor of the building which was occupied by TEFI as office and workshop. That floor was
constructed of wood, with a galvanized iron roof. Immediately after the fire was extinguished,
Captain Lorenzo (Capt. Lorenzo), the deputy chief of the fire department, investigated its
origin and found in the second floor three cans containing gasoline and kapok saturated
with gasoline. For this reason, in Capt. Lorenzos official report of that fire, he stated the cause
to be: "Suspected incendiary. Intentional. Preventable."
Filoteo Miranda (Miranda), the proprietor and manager of the East Furniture Store, while
testifying as a witness for TEFI, made no attempt to deny the presence of three cans of
gasoline and kapok saturated with gasoline.
It also appears from the record that in connection with the fire in question, Miranda caused one
Eugenio Lim Pineda (Pineda) to be prosecuted for calumny, alleging that Pineda had
imputed to Miranda the commission of a crime, namely, that Miranda had caused his store
to be burned or ordered a certain person to set it on fire. However, Pineda was acquitted
on the ground that it was proven that the imputation made by him against Miranda was
true.
Pineda testified that about six months before the fire in question, Miranda intimated to him
that he (Miranda) intended to burn the East Furniture Store because it was on the verge of
bankruptcy. Pineda communicated this information to Attorney Eriberto de Silva, who in turn
communicated it to his friend Aurelio Periquet, an insurance agent, and the latter thereupon
caused one of the policies issued by Smith, Bell & Co. to be cancelled. Pineda further
testified that he saw Garcia, the cashier of TEFI enter the back door of the building in question,
and that ten minutes later the building burned.
Attorney Eriberto de Silva, testifying in these cases, corroborated the testimony of Pineda
regarding the cancellation of the Smith-Bell policy.
It further appears from the record that at the time of the fire, TEFI was heavily indebted to
the Manila Finance & Discount Corporation, to the Bank of the Philippine Islands, and to
Attorney Alfonso E. Mendoza.
RTC: dismissed the complaints; in relation to first defense: although much might be said against
the manager of TEFI, it is not necessary to make a detailed analysis of the proofs with respect to
the fire, inasmuch as for the purposes of this decision a consideration of the second special
defense is sufficient."; in relation to the second defense: claims presented by TEFI were

notoriously fraudulent; in relation to the third and fourth defenses; it overruled the said special
defenses. (Tefi appealed to the SC)
Issue: Whether TEFI may claim the insurance proceeds on its policies with the insurance
companies
Held: No.
Based from the pieces of evidence, the fire in question was of intentional origin and was
caused with the connivance of TEFI. Neither the interest of the justice nor public policy would
be promoted by an omission of the courts to expose and condemn incendiarism once the same is
established by competent evidence. It would tend to encourage rather than suppress that great
public menace if the courts do not expose the crime to public condemnation when the evidence in
a case like the present shows that it has really been committed.
Side Notes:
Claims of loss were deemed fraudulent because:
(1) Value claimed higher than the selling price.
(2) Testimony of Capt. Lorenzo that it lasted only twelve minutes and caused no damage to the
first floor of the building were most of the insured furniture was located. Capt. Lorenzo also
testified that he found but few pieces of furniture in the second floor and that he believed none
had been completely burned.
(3) The inventory, which was offered in evidence contains 202 pieces of furniture, the cost price
of which according to Guevara's, a furniture manufacturer which was commissioned by the
insurance companies, appraisal is the total sum of P4,184.60. However, TEFI claimed that at the
time of the fire there were 506 pieces of furniture in the building of the total value of P52,061.99.
The fact that the insured (TEFI) only had approximately 202 pieces of furniture in the building at
the time of the fire and sought to compel the insurance companies to pay for 506 pieces
conclusively shows that its claim was not honestly conceived.
Dispositive Portion: The judgment appealed from is affirmed, with costs against the appellant. So
ordered.
Separate Opinions
MALCOLM, HULL, and VICKERS, JJ., concurring:
It has been established that TEFIs claims of loss were false and fraudulent.
BUTTE, J., dissenting: (Avancena, Villa-Real and Abad Santos, concurs)
The conclusion that the claim presented by TEFI to the insurance companies was fraudulent
because it was excessive and the conclusion that the fire in question was of an intentional origin
and caused with the connivance of TEFI seem to be entirely warranted by the resume of the
evidence made in the foregoing opinion.
There is no direct evidence whatever that the plaintiff and appellant set his building on fire to
collect the insurance. Nor can I reconcile the suspicion that gasoline was put in the building in
open cans to start the fire, with the finding that the same gasoline was found unconsumed after
the conflagration.
I feel disposed to give the benefit of the doubt to the insured. Suspicion of fraud is not enough
for, I daresay, there never was a fire where some circumstance could not be found that could be
alleged as a ground for an inference of fraud.

--------------------------------------------------------------------------------------------------------------

Country Bankers v Lianga Bay Multipurpose Cooperative, 374 SCRA 653

(2002)KARLA
Doctrine:
Where a risk is excepted by the terms of a policy which insures
against other perils or hazards, loss from such a risk constitutes a
defense which the insurer may urge, since it has not assumed
that risk, and from this it follows that an insurer seeking to
defeat a claim because of an exception or limitation in the policy
has the burden of proving that the loss comes within the purview
of the exception or limitation set up.

If a proof is made of a loss apparently within a contract of

insurance, the burden is upon the insurer to prove 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.
The insurance claim in this case is evidently not a forbearance
of money, goods or credit, and thus the interest rate should be as
it is hereby fixed at six percent (6%) computed from the date of
filing of the complaint.

Facts:
The petitioner is a domestic corporation principally engaged in
the
insurance
business
wherein
it
undertakes,
for
a
consideration, to indemnify another against loss, damage or
liability from an unknown or contingent event including fire

The respondent is a duly registered cooperative judicially

declared insolvent and represented by the elected assignee,
Cornelio Jamero.
It appears that sometime in 1989, the petitioner and the
respondent entered into a contract of fire insurance. Under Fire
Insurance Policy No. F-1397, the petitioner insured the
respondents stocks-in-trade against fire loss, damage or liability
during the period starting from June 20, 1989 at 4:00 p.m. to June
20, 1990 at 4:00 p.m., for the sum of Two Hundred Thousand
Pesos (P200,000.00)
On July 1, 1989, at or about 12:40 a.m., the respondents
building located at Barangay Diatagon, Lianga, Surigao del Sur
was gutted by fire and reduced to ashes, resulting in the total
loss of the respondents stocks-in-trade, pieces of furnitures and
fixtures, equipments and records.

 Due to the loss, the respondent filed an insurance claim with

the petitioner under its Fire Insurance Policy No. F-1397
The petitioner, however, denied the insurance claim on the
ground that, based on the submitted documents, the building was
set on fire by two (2) NPA rebels who wanted to obtain canned
goods, rice and medicines as provisions for their comrades in the
forest, and that such loss was an excepted risk under paragraph
No. 6 of the policy conditions of Fire Insurance Policy No. F-1397,
which provides:
This insurance does not cover any loss or damage occasioned by
or through or in consequence, directly or indirectly, of any of the
following occurrences, namely:
(d) Mutiny, riot, military or popular uprising, insurrection,
rebellion, revolution, military or usurped power. [...]
Finding the denial of its claim unacceptable, the respondent
then instituted in the trial court the complaint for recovery of
loss, damage or liability against petitioner.

The petitioner answered the complaint and reiterated the

ground it earlier cited to deny the insurance claim, that is, that
the loss was due to NPA rebels, an excepted risk under the fire
insurance policy.
RTC decided on December 26, 1991 in favor of the respondent,
declaring that the defenses of petitioners are weak, ordering said
defendant-Country Bankers to pay the plaintiff-Insolvent
Cooperative, as follows:
1. To fully pay the insurance claim for the loss the insuredplaintiff sustained as a result of the fire under its Fire
Insurance Policy No. F-1397 in its full face value of
P200,000.00 with interest of 12% per annum from date of
filing of the complaint until the same is fully paid;
2. To pay as and in the concept of actual or compensatory
damages in the total sum of P50,000.00;
3. To pay as and in the concept of exemplary damages in the
total sum of P50,000.00;
4. To pay in the concept of litigation expenses the sum of
P5,000.00;
5. To pay by way of reimbursement the attorneys fees in the
sum of P10,000.00; and

6. To pay the costs of the suit.

CA affirmed
ISSUES:
1.
Whether the CA failed to appreciate the evidence TO THE
SPOT REPORT OF PFC. ARTURO JUARBAL (EXH. 3) AND THE
SWORN STATEMENT OF JOSE LOMOCSO (EXH. 4) THAT THE
RESPONDENTS STOCK-IN-TRADE WAS BURNED BY THE NPA
REBELS, HENCE AN EXCEPTED RISK UNDER THE FIRE INSURANCE
POLICY.
2.
Whether the CA ERRED IN HOLDING PETITIONER LIABLE FOR
12% INTEREST PER ANNUM ON THE FACE VALUE OF THE POLICY
FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID.
3.
Whether THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THE PETITIONER LIABLE FOR ACTUAL AND EXEMPLARY
DAMAGES, LITIGATION EXPENSES, ATTORNEYS FEES AND COST OF
SUIT.
HELD.
1. NO. A party is bound by his own affirmative allegations. This is
a well-known postulate echoed in Section 1 of Rule 131 of the
Revised Rules of Court. Each party must prove his own affirmative
allegations by the amount of evidence required by law which in
civil cases, as in this case, is preponderance of evidence, to
obtain a favorable judgment.
In the instant case, the petitioner does not dispute that the
respondents stocks-in-trade were insured against fire loss,
damage or liability under Fire Insurance Policy No. F- 1397 and
that the respondent lost its stocks-in-trade in a fire that occurred
on July 1, 1989, within the duration of said fire insurance. The
petitioner, however, posits the view that the cause of the loss was
an excepted risk under the terms of the fire insurance policy.
Since the petitioner in this case is defending on the ground of
non-coverage and relying upon an exemption or exception clause
in the fire insurance policy, it has the burden of proving the facts
upon which such excepted risk is based, by a preponderance of
evidence. But petitioner failed to do so.
2. YES. The insurance claim in this case is evidently not a
forbearance of money, goods or credit, and thus the interest rate
should be as it is hereby fixed at six percent (6%) computed from
the date of filing of the complaint.
We find no justification for the award of actual damages of Fifty
Thousand Pesos (P50,000.00). Well-entrenched is the doctrine
that actual, compensatory and consequential damages must be
proved, and cannot be presumed. That part of the dispositive
portion of the Decision of the trial court ordering the petitioner to
pay actual damages of Fifty Thousand Pesos (P50,000.00) has no
basis at all. The justification, if any, for such an award of actual

damages does not appear in the body of the decision of the trial
court. Neither is there any testimonial and documentary evidence
on the alleged actual damages of Fifty Thousand Pesos
(P50,000.00) to warrant such an award. Thus, the same must be
deleted.
3. YES. Concerning the award of exemplary damages for Fifty
Thousand Pesos (P50,000.00), we likewise find no legal and valid
basis for granting the same. Article 2229 of the New Civil Code
provides that exemplary damages may be imposed by way of
example or correction for the public good. Exemplary damages
are imposed not to enrich one party or impoverish another but to
serve as a deterrent against or as a negative incentive to curb
socially deleterious actions. They are designed to permit the
courts to mould behavior that has socially deleterious
consequences, and its imposition is required by public policy to
suppress the wanton acts of an offender. However, it cannot be
recovered as a matter of right. It is based entirely on the
discretion of the court. We find no cogent and valid reason to
award the same in the case at bar.
-------------------------------------------------------------------------------------------------------------Heirs of Coscolluela v Rico General, 179 SCRA 511 (1989)KIKOY
G.R. No. 84628 November 16, 1989
HEIRS OF ILDEFONSO COSCOLLUELA, SR., INC., petitioner,
vs.
RICO GENERAL INSURANCE CORPORATION, COURT OF APPEALS (11th
Division), and HON. ENRIQUE T. JOCSON, Judge, Regional Trial Court of
Negros Occidental Branch, respondents.
Doctrine:
A policy of insurance with a narration of exceptions tending to work a forfeiture of the
policy shall be interpreted liberally in favor of the insured and strictly against the
insurance company or the party for whose benefit they are inserted.
Where the insurer denies liability for a loss alleged to be due to a risk not insured
against, but fails to establish the truth of such fact by concrete proofs, the Court rules
that the insurer is liable under the terms and conditions of the policy by which it has
bound itself. In this case, the dismissal order without hearing and reception of
evidence to prove that the firing incident was indeed a result of a civil commotion,
rebellion or insurrection constitutes reversible error on the part of the trial court.
Facts:
Petitioner, Heirs of Ildefonso Coscoluella, Inc. is a domestic corporation and
the registered owner of an Isuzu KBD Pick-up truck. The vehicle was insured with
the private respondent Rico General Insurance Corporation for a consideration of
P100,000.00 excluding third party liability under Commercial Vehicle Policy No. CV122415 per Renewal Certificate No. 02189. The premiums and other expenses for
insurance paid covered the period from October 1, 1986 to October 1, 1987.

On August 28, 1987 and within the period covered by the insurance, the
insured vehicle was severely damaged and rendered unserviceable when fired upon
by a group of unidentified armed persons, In the same incident, four persons died.
Petitioner filed its claim of P80,000.00 for the repair of the vehicle but private
respondent refused to grant it. As a consequence, the petitioner was prompted to file
a complaint to recover the claim of P80,000.00 plus interest and attorney's fees.
The private respondent filed a motion to dismiss alleging that the complaint
lacks a cause of action because the firing by armed men is a risk excepted under the
following provisions in the insurance policy: The Company shall not be liable under
any Section of the Policy in respect of: .. warlike operations (whether war be
declared or not), civil commotion, mutiny, rebellion, insurrection, military or usurped
power, or by any direct or indirect consequences of any of the said occurrences and
in the event of any claim hereunder, the insured shall prove that the accident, loss or
damage or liability arose independently of, and was in no way connected with, or
occasioned by, or contributed to, any of the said occurrences, or any consequence
thereof, and in default of such proof, the Company shall not be liable to make any
payment in respect of such claim
The private respondent alleged that the firing was "an indirect consequence
of rebellion, insurrection or civil commotion." The petitioner opposed the motion,
saying that the quoted provision does not apply in the absence of an official
governmental proclamation of any of the above-enumerated conditions.
TC - dismissal of the complaint for lack of cause of action stating that the
damage arose from a civil commotion or was a direct result thereof.
CA - affirmed
Issue/s: Was there a cause of action despite the existence of the quoted provision in
the policy? - Yes
Held:
The facts as alleged clearly define the existence of a right of the petitioner to
a just claim against the insurer for the payment of the indemnity for a loss due to an
event against which the petitioner's vehicle was insured. The insurance contract
mentioned therein manifests a right to pursue a claim and a duty on the part of the
insurer or private respondent to compensate the insured in case of a risk insured
against. The refusal of the insurer to satisfy the claim and the consequent loss to the
petitioner in incurring the cost of acquiring legal assistance on the matter constitutes
a violation or an injury brought to the petitioner.
The private respondent's invocation of the exceptions clause in the insurance
policy as the basis for its non-liability and the consequent dismissal of the complaint
is without merit. We also reiterate the established rule that when the terms of an
insurance contract contain limitations on liability, the court "should construe them in
such a way as to preclude the insurer from non-compliance with his obligations."
(Taurus Taxi Co. Inc. v. Capital Insurance and Surety Company, Inc., 24 SCRA 454
[l968]) A policy of insurance with a narration of exceptions tending to work a forfeiture
of the policy shall be interpreted liberally in favor of the insured and strictly against
the insurance company or the party for whose benefit they are inserted.
The facts alleged in the complaint do not give a complete scenario of the real
nature of the firing incident. Hence, it was incumbent upon the trial judge to have
made a deeper scrutiny into the circumstances of the case by receiving evidence
instead of summarily disposing of the case. Contrary to what the respondent
appellate court says, this case does not present a pure question of law but demands

a factual determination of whether the incident was a result of events falling under
the exceptions to the liability of private respondent contained in the policy of
insurance.
We agree with the petitioner's claim that the burden of proof to show that the
insured is not liable because of an excepted risk is on the private respondent. The
Rules of Court in its Section 1, Rule 131 provides that "each party must prove his
affirmative allegations."
Where the insurer denies liability for a loss alleged to be due to a risk not
insured against, but fails to establish the truth of such fact by concrete proofs, the
Court rules that the insurer is liable under the terms and conditions of the policy by
which it has bound itself. In this case, the dismissal order without hearing and
reception of evidence to prove that the firing incident was indeed a result of a civil
commotion, rebellion or insurrection constitutes reversible error on the part of the
trial court.
Dispositive: WHEREFORE, considering the foregoing, the petition is hereby
GRANTED. The decision of the respondent Court of Appeals affirming the dismissal
order by the Regional Trial Court is hereby REVERSED and SET ASIDE. Let the
case be remanded to the lower court for trial on the merits.
-------------------------------------------------------------------------------------------------------------FGU Insurance v CA, 454 SCRA 339 (2005)KLAIRE
DOCTRINE
A basic rule in insurance is that the carelessness and negligence of the insured or
his agents does not constitute a good defense on the part of the insurer. This rule
however presupposes that the loss has occurred due to causes which could not
have been prevented by the insured, despite the exercise of due diligence. However,
when evidence shows that the insureds negligence or recklessness is so gross as to
be sufficient to constitute a willful act, the insurer must be exonerated.
FACTS
Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was
engaged in the shipping business. It owned the M/T ANCO tugboat and the D/B
Lucio barge which were operated as common carriers. Since the D/B Lucio had no
engine of its own, it had to be towed by a tugboat for it to move from one place to
another. On 23 September 1979, San Miguel Corporation (SMC) shipped from
Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO cargoes
heading to Estancia IloIlo and San Jose Antique
When the barge and tugboat arrived at San Jose, Antique, the clouds over the area
were dark and the waves were already big. SMCs District Sales Supervisor,
Fernando Macabuag, requested ANCOs representative to transfer the barge to a
safer place because the vessel might not be able to withstand the big waves.
ANCOs representative did not heed the request because he was confident that the
barge could withstand the waves. Only Ten Thousand Seven Hundred Ninety
(10,790) cases of beer were discharged into the custody of the arrastre operator. At
about ten to eleven oclock in the evening of the following day, the crew of D/B Lucio
abandoned the vessel because the barges rope attached to the wharf was cut off by

the big waves. At around midnight, the barge run aground and was broken and the
cargoes of beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two
Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of
Cerveza Negra. SMCs claim against ANCO amounted to One Million Three
Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).
SMC filed a complaint for Breach of Contract of Carriage and Damages against
ANCO. ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra
mentioned in the complaint were indeed loaded on the vessel belonging to ANCO. It
claimed however that it had an agreement with SMC that ANCO would not be liable
for any losses or damages resulting to the cargoes by reason of fortuitous event.
Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a
storm, a fortuitous event which battered and sunk the vessel in which they were
loaded, they should not be held liable. ANCO further asserted that there was an
agreement between them and SMC to insure the cargoes in order to recover
indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of
Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation
(FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred
Pesos (P858,500.00) per Marine Insurance Policy No. 29591.
FGU admitted the existence of the Insurance Policy under Marine Cover Note No.
29591 but maintained that the alleged loss of the cargoes covered by the said
insurance policy cannot be attributed directly or indirectly to any of the risks insured
against in the said insurance policy. According to FGU, it is only liable under the
policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the
following:
a)
total loss of the entire shipment;
b)
loss of any case as a result of the sinking of the vessel; or
c)
loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC
failed to exercise ordinary diligence or the diligence of a good father of the family in
the care and supervision of the cargoes insured to prevent its loss and/or
destruction.
ISSUE:
Whether or not there is a certain degree of negligence on the part of the insured or
his agents that will deprive him the right to recover under the insurance contract?
HELD
Yes. However, to what extent such negligence must go in order to exonerate the
insurer from liability must be evaluated in light of the circumstances surrounding
each case. When evidence show that the insureds negligence or recklessness is so
gross as to be sufficient to constitute a willful act, the insurer must be exonerated. In
the case at bar, both the trial court and the appellate court had concluded from the
evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were
blatantly negligent. ANCOs representatives had failed to exercise extraordinary

diligence required of common carriers in the shipment of SMCs cargoes. Such

blatant negligence being the proximate cause of the loss of the cargoes amounting
to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven
Pesos (P1,346,197.00)
Xxx There was blatant negligence on the part of the employees of defendantsappellants when the patron (operator) of the tug boat immediately left the barge at
the San Jose, Antique wharf despite the looming bad weather. Negligence was
likewise exhibited by the defendants-appellants representative who did not heed
Macabuags request that the barge be moved to a more secure place. The prudent
thing to do, as was done by the other sea vessels at San Jose, Antique during the
time in question, was to transfer the vessel to a safer wharf. The negligence of the
defendants-appellants is proved by the fact that on 01 October 1979, the only simple
vessel left at the wharf in San Jose was the D/B Lucio.xxx
-------------------------------------------------------------------------------------------------------------Sections 88-92, IC
Malayan Insurance v Cruz Arnaldo, 154 SCRA 683 (1987)NIKKI
DOCTRINE:
FACTS:
ISSUE:
HELD:
-------------------------------------------------------------------------------------------------------------Yu Ban Chan v Fieldmens Insurance, 14 SCRA 491 (1965)RIKKI
DOCTRINE:
FACTS:
ISSUE:
HELD:
-------------------------------------------------------------------------------------------------------------Go Lu v Yorkshire Insurance, 43 Phil 633 (1930)TRICIA
-------------------------------------------------------------------------------------------------------------Pacific Banking v CA, 168 SCRA 1 (1988)YSA
DOCTRINE: Generally, the cause of action on the policy accrues when the loss occurs, But when
the policy provides that no action shall be brought unless the claim is first presented
extrajudicially in the manner provided in the policy, the cause of action will accrue from the time
the insurer finally rejects the claim for payment.
FACTS (lifted from digest of Klaire):
On October 21,1963, Fire Policy No. F-3770, an open policy, was issued to the Paramount Shirt
Manufacturing Co., by which private respondent Oriental Assurance Corporation bound itself to
indemnify Paramount for any loss or damage, not exceeding P61,000.00, to its property.
Paramount was at the time of the issuance of the policy, a debtor of Pacific Bank and the goods
described in the policy were held in trust by Paramount for the Pacific Bank under trust receipts.
Said policy was duly endorsed to Pacific Bank as mortgagee/ trustor of the properties insured,
with the knowledge and consent of Oriental Assurance to the effect that "loss if any under this
policy is payable to the Pacific Banking Corporation".
While the policy was in full force and effect, a fire broke out on the subject premises destroying
the goods contained in its ground and second floors.

Counsel for the Pacific Bank sent a letter of demand to Oriental for indemnity due to the loss of
property by fire under the endorsement of said policy. Oriental informed counsel for the Pacific
that it was not yet ready to accede to the latter's demand as the former is awaiting the final report
of the insurance adjuster, H.H. Bayne Adjustment Company.
On March 25, 1964, the said insurance adjuster notified counsel for Pacific Bank that Paramount
under the policy had not filed any claim with it, nor submitted proof of loss which is a clear
violation of Policy Condition No.11, and for which reason, determination of the liability of Oriental
could not be had.
For failure of the insurance company to pay the loss as demanded, Pacific Bank on April 28, 1
964, filed in the court a quo an action for a sum of money against Oriental Assurance
Corporation, in the principal sum of P61,000.00 issued in favor of Paramount Shirt Manufacturing
Co.
Oriental Assurance raised the following defenses in its answer to wit: (a) lack of formal claim by
insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had
submitted any proof of loss on the basis of which defendant would determine its liability and the
amount thereof, either to the private respondent or its adjuster H.H. Bayne Adjustment Co., both
in violation of Policy Condition No.11
RTC: Ordered Oriental to pay Pacific Bank. CA: Reversed.
ISSUE: WON the action was prematurely filed as neither plaintiff nor insured had submitted any
proof of loss on the basis of which defendant would determine its liability and the amount thereof.
HELD: YES. Generally, the cause of action on the policy accrues when the loss occurs, But when
the policy provides that no action shall be brought unless the claim is first presented
extrajudicially in the manner provided in the policy, the cause of action will accrue from the time
the insurer finally rejects the claim for payment.
In the case at bar, policy condition No. 11 specifically provides that the insured shall on the
happening of any loss or damage give notice to the company and shall within fifteen (15) days
after such loss or damage deliver to the private respondent (a) a claim in writing giving particular
account as to the articles or goods destroyed and the amount of the loss or damage and (b)
particulars of all other insurances, if any. Likewise, insured was required "at his own expense to
produce, procure and give to the company all such further particulars, plans, specifications,
books, vouchers, invoices, duplicates or copies thereof, documents, proofs and information with
respect to the claim".
The evidence adduced shows that twenty-four (24) days after the fire, petitioner merely wrote
letters to private respondent to serve as a notice of loss, thereafter, the former did not furnish the
latter whatever pertinent documents were necessary to prove and estimate its loss. Instead,
petitioner shifted upon private respondent the burden of fishing out the necessary information to
ascertain the particular account of the articles destroyed by fire as well as the amount of loss. It is
noteworthy that private respondent and its adjuster notified petitioner that insured had not yet filed
a written claim nor submitted the supporting documents in compliance with the requirements set
forth in the policy. Despite the notice, the latter remained unheedful. Since the required claim by
insured, together with the preliminary submittal of relevant documents had not been complied
with, it follows that private respondent could not be deemed to have finally rejected petitioner's
claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No.
11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of
petitioner's right can be attributable to private respondent. This is so, as before such final
rejection, there was no real necessity for bringing suit. Petitioner should have endeavored to file

the formal claim and procure all the documents, papers, inventory needed by private respondent
or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its
claim. Indeed, the law does not encourage unnecessary litigation.
Verily, petitioner prematurely filed the case and dismissal thereof was warranted under the
circumstances. PETITION DISMISSED.

-------------------------------------------------------------------------------------------------------------Pacific Timber v CA, 112 SCRA 199 (1982)JEZ

DOCTRINE:
FACTS:
ISSUE:
HELD:
-------------------------------------------------------------------------------------------------------------Phil. Charter Ins. v ChemoilLighterage, 462 (SCRA 77 (2005)AIYU
DOCTRINE:
FACTS:

Chemoil Lighterage Corporation - domestic corporation engaged in

the transport of goods
January 24, 1991, Samkyung Chemical Company, Ltd., based in
South Korea, shipped 62.06 metric tons of the liquid chemical
DIOCTYL PHTHALATE (DOP) on board MT TACHIBANA which
was valued at US$90,201.57 and another 436.70 metric tons of DOP
valued at US$634,724.89 to the Philippines.
The consignee was Plastic Group Phils., Inc. (PGP) in Manila. PGP
insured the cargo with Philippine Charter Insurance Corporation
against all risks.
The ocean tanker MT TACHIBANA unloaded the cargo to the
tanker barge, which shall transport the same to Del Pan Bridge in
Pasig River and haul it by land to PGPs storage tanks in Calamba,
Laguna. Upon inspection by PGP, the samples taken from the
shipment showed discoloration demonstrating that it was damaged.
PGP then sent a letter where it formally made an insurance claim for
the loss it sustained.
Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to
conduct a Quantity and Condition Survey of the shipment which
issued a report stating that DOP samples taken were discolored.
Inspection of cargo tanks showed:
o manhole covers of ballast tanks ceilings loosely secured and
that the rubber gaskets of the manhole covers of the ballast
tanks re-acted to the chemical causing shrinkage thus,
loosening the covers and cargo ingress.
Insurer paid PGP the full and final payment for the loss and issued a
Subrogation Receipt. Meanwhile, PGP paid the Chemoil the full
payment for the latters services.

 July 15, 1991 insurer filed an action for damages was before RTC
Manila against Chemoil.
o Chemoil filed an answer in which it admitted that it undertook
to transport the shipment, but alleged that before the DOP was
loaded into its barge, the representative of PGP, Adjustment
Standard Corporation, inspected it and found the same clean,
dry, and fit for loading, thus accepted the cargo without any
protest or notice. As carrier, no fault and negligence can be
attributed against respondent as it exercised extraordinary
diligence in handling the cargo.
RTC in favor of insurer
CA reversed RTC
ISSUE: WON notice of claim was filed within the required period
HELD:
-------------------------------------------------------------------------------------------------------------Double Insurance
Sections 93-94, IC
Geagonia v CA, 241 SCRA 152 (1995)DJ
DOCTRINE:
A double insurance exists where the same person is insured by several insurers
separately in respect of the same subject and interest. As earlier stated, the
insurable interests of a mortgagor and a mortgagee on the mortgaged property are
distinct and separate. Since the two policies of the PFIC do not cover the same
interest as that covered by the policy of the private respondent, no double insurance
exists. The non-disclosure then of the former policies was not fatal to the petitioner's
right to recover on the private respondent's policy.
FACTS:
Petitioner is the owner of Normans Mart located in the public market of San
Francisco, Agusan Del Sur. He obtained from Country Bankers Insurance Co. (CBIC)
a fire insurance policy for P100K. The 1-year policy covered the following: : "Stockin-trade consisting principally of dry goods such as RTW's for men and women wear
and other usual to assured's business."
Petitioner declared in the policy under the subheading entitled CO-INSURANCE
that Mercantile Insurance Co., Inc. was the co-insurer for P50K.
The fire insurance policy contained the following condition:
3. The insured shall give notice to the Company of any insurance or insurances
already affected, 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 such 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.

Fire broke out and petitioners insured stock-in-trade were completely by fire. He
then filed a claim against CBIC which was subsequently DENIED because
Geagonia's stocks-in-trade were likewise covered by fire insurance policies GA28146 and GA-28144, for P100K each, issued by the Cebu Branch of the Philippines
First Insurance Co., Inc. (PFIC). These policies indicate that the insured was
"Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage
clause reading ""MORTGAGEE: Loss, if any, shall be payable to Messrs. Cebu
Tesing Textiles, Cebu City as their interest may appear subject to the terms of
this policy. CO-INSURANCE DECLARED: P100,000. Phils. First CEB/F24758" The basis of Country Bankers' denial was Geagonia's alleged violation
of Condition 3 of the policy.
Geagonia then filed a complaint against the private respondent in the Insurance
Commission for the recovery of P100K under fire insurance policy and damages. He
claimed that he knew the existence of the other two policies. However, he had no
knowledge of the provision in the private respondent's policy requiring him to inform
it of the prior policies and this requirement was not mentioned to him by the private
respondent's agent.
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 Geagonia's
testimony that he came to know of the PFIC policies only when he filed his claim with
Country Bankers and that Cebu Tesing Textile obtained them and paid for their
premiums without informing him thereof. The Insurance Commission then ordered
the respondent company to pay complainant the sum of P100K with interest and
attorneys 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.
ISSUE/S:
W/N 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?
W/N there is double insurance in the case at bar so as to deny Geagonia from
recovering on the insurance policy?
RULING:
1.
YES. Petitioner knew of the prior policies issued 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 madeante litem motam. It was,
indeed, incredible that he did not know about the prior policies since these policies
were not new or original.
2.
NONE. Condition 3 of the private respondent's Policy No. F-14622 is a
condition which is not proscribed by law. Its incorporation in the policy is allowed by
Section 75 of the Insurance Code which provides that "[a] policy may declare that a
violation of specified provisions thereof shall avoid it, otherwise the breach of an
immaterial provision does not avoid the policy." Such a condition is a provision which
invariably appears in fire insurance policies and is intended to prevent an increase in
the moral hazard. It is commonly known as the additional or "other insurance" clause

and has been upheld as valid and as a warranty that no other insurance exists. Its
violation would thus avoid the policy. However, in order to constitute a violation, the
other insurance must be upon same subject matter, the same interest therein, and
the same risk.
As to a mortgaged property, the mortgagor and the mortgagee have each an
independent insurable interest therein and both interests may be one policy, or each
may take out a separate policy covering his interest, either at the same or at
separate times. The mortgagor's insurable interest covers the full value of the
mortgaged property, even though the mortgage debt is equivalent to the full value of
the property. The mortgagee's insurable interest is to the extent of the debt, since the
property is relied upon as security thereof, and in insuring he is not insuring the
property but his interest or lien thereon. His insurable interest is prima facie the value
mortgaged and extends only to the amount of the debt, not exceeding the value of
the mortgaged property. Thus, separate insurances covering different insurable
interests may be obtained by the mortgagor and the mortgagee.
A mortgagor may, however, take out insurance for the benefit of the mortgagee,
which is the usual practice. The mortgagee may be made the beneficial payee in
several ways. He may become the assignee of the policy with the consent of the
insurer; or the mere pledgee without such consent; or the original policy may contain
a mortgage clause; or a rider making the policy payable to the mortgagee "as his
interest may appear" may be attached; or a "standard mortgage clause," containing
a collateral independent contract between the mortgagee and insurer, may be
attached; or the policy, though by its terms payable absolutely to the mortgagor, may
have been procured by a mortgagor under a contract duty to insure for the
mortgagee's benefit, in which case the mortgagee acquires an equitable lien upon
the proceeds.
In the policy obtained by the mortgagor with loss payable clause in favor of the
mortgagee as his interest may appear, the mortgagee is only a beneficiary under the
contract, and recognized as such by the insurer but not made a party to the contract
himself. Hence, any act of the mortgagor which defeats his right will also defeat the
right of the mortgagee. This kind of policy covers only such interest as the
mortgagee has at the issuing of the policy.
On the other hand, a mortgagee may also procure a policy as a contracting party in
accordance with the terms of an agreement by which the mortgagor is to pay the
premiums upon such insurance. It has been noted, however, that although the
mortgagee is himself the insured, as where he applies for a policy, fully informs the
authorized agent of his interest, pays the premiums, and obtains on the assurance
that it insures him, the policy is in fact in the form used to insure a mortgagor with
loss payable clause.
The fire insurance policies issued by the PFIC name Geagonia as the assured and
contain a mortgage clause which reads:
"Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their
interest may appear subject to the terms of the policy."
This is clearly a simple loss payable clause, not a standard mortgage clause.
The Court concludes that (a) the prohibition in Condition 3 of the subject policy
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. The first conclusion is
supported by the portion of the condition referring to other insurance "covering any of
the property or properties consisting of stocks in trade, goods in process and/or

inventories only hereby insured," and the portion regarding the insured's declaration
on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co.,
Inc. in the sum of P50K. A double insurance exists where the same person is insured
by several insurers separately in respect of the same subject and interest. Since the
insurable interests of a mortgagor and a mortgagee on the mortgaged property are
distinct and separate; the two policies of the PFIC do not cover the same interest as
that covered by the policy of Country Bankers, no double insurance exists. The nondisclosure then of the former policies was not fatal to Geagonia's right to recover on
Country Bankers' policy.
PETITION GRANTED.
-------------------------------------------------------------------------------------------------------------Sta. Ana v Commercial Union Insurance, 55 Phil 329EUNICE
DOCTRINE:
Additional insurance obtained by the insured is commonly known as the additional or other
insurance clause and is intended to prevent an increase in the moral hazard. It is valid and
reasonable, and in the absence of consent, waiver or estoppel on the part of the insurer, a breach
thereof will prevent a recovery on the policy.
FACTS:
In 1923, Sta. Ana built his house in Pasig and insured it against fire for (1) P3,000 to Phoenix
Assurance Company and (2) P6,000 to Guardian Assurance Company, Limited, for a period of
one year.
In November 1925, Santa Ana mortgaged this house to Garcia for P5,000, for a period of two
years, the contract being drawn up as a retro sale for the sum of P5,000. The 2 policies were
endorsed to Garcia.
In December 1925, Santa Ana reinsured said house with the defendant companies, the Globe
and Rutgers Fire Insurance Company of New York, and the Commercial Union Assurance
Company Limited of London, through their common agent duly authorized to represent them in
the Philippine Islands, the Pacific Commercial Company which was to be effective for one year.
On September 20, 1926, Santa Ana took out another insurance policy on the house in question
for P6,000 in the "Filipinas, Compania de Seguros, which issued the one-year policy upon
receiving from Sta. Ana premium thereon.
Twelve hours before the expiration of the policies issued by the Phoenix Assurance Company and
the Guardian Assurance Company, Limited for P3,000 and P6,000 respectively, the entire house
was burned. Santa Ana gave notice in due time of the loss to each and every one of the
companies in which he had insured the house and demanded payment of the respective policies.
The insurance companies refused payment on the ground that the claim of P21,000 filed by him
was fraudulent, being in excess of the real value of the insured property; that none of said
companies had been informed of the existence of the other policies in the other companies, and
that the fire was intentional.
Sta. Ana filed civil cases in RTC against The Commercial Union Assurance Company, Limited;
the Globe and Rutgers Fire Insurance Company of New York; and the Phoenix Assurance
Company, Limited, the Guardian Assurance Company, Limited, and the "Filipinas, Compania de
Seguros. All the defendants are absolved in their alleged liabilities by the RTC. Hence this
petition.
ISSUE:W/N the insured can claim against the insurance companies?
HELD: NO.
Without deciding whether notice of other insurance upon the same property must be given in
writing, or whether a verbal notice is sufficient to render an insurance valid which requires such
notice, whether oral or written, the SC held that in the absolute absence of such notice when it is
one of the conditions specified in the fire insurance policy, the policy is null and void. Since the
policy is null and void, plaintiff cannot recover from the defendants insurance companies.

It has been expressed in the ruling of the trial court that it has been provided in English and
Spanish in the notices attached to the insurance policies issued by all of the defendants that no
other insurance should be admitted upon the property thereby assured without the consent of the
said companies duly given by endorsement. Ulpiano Sta. Ana claims that he gave notices to all
the insurance companies, however, he has been contradicted by all persons he mentioned (he
mentioned a lot of names stating that he gave notices to them (insurance companies) through
these people). Considering that such advises or notices, so basic and essential to the existence
and validity of the policies, must be given in writing as required in the noted attached to the
policies, and must be given in writing as required in the note attached to the four policies, and
must be endorsed upon each of them, so that in case of necessity, as in the instant one, when a
loss occurs, the insured may clearly show that he has fulfilled this indispensable requisite, since
all companies, to which people apply for insurance upon property already assured, have an
interest in knowing what other policies issued by other companies the insured already holds, for
the purpose of knowing just what interest the applicant has in the preservation of the property,
and the care and precaution to be taken for the prevention of loss.
The SC upheld the finding of the trial court that the policies provide that no other insurance
should be admitted upon the property thereby assured without the consent of said companies
duly given by endorsement. Judgment of the lower court is affirmed.

-------------------------------------------------------------------------------------------------------------Emilio Gonzalez La O v Yek Tong Lin (1930)JEROME

DOCTRINE: 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.
Here, the policy provides that any other insurance upon the thing insured must
be declared. The insured failed to comply. However, the insurer is already
estopped.
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.
ART. 3. Any insurance in force upon all or part of the things insured must be
declared in writing by the insured and he should cause the company to insert
or mention it in the policy, and without such requisite said policy will be
regarded as null and void, and the assured deprived of all rights of indemnity
in case of loss.

The following clause has been inserted with a typewriter in the policies:
"Subject to clauses G and A and other insurances with a special short period
attached to this policy." And attached to said policies issued by the defendant
there is a sheet of "Other insurances" with the amount and the assurance
companies in blank, which, according to the appellee, constitutes a
notification that there were other insurances existing at the time.
In the case of Benedict vs. Ocean Insurance Co. (31 N.Y., 391-393), the
construction of the clause, "privilege for $4,500 additional insurance," was
discussed. One of the printed clauses of the policy reads as follows:
If said assured, or his assigns, shall hereafter make any other insurance upon
the same property, and shall not, with all reasonable diligence, give notice to
this corporation, and have the same indorsed on this instrument, or otherwise
acknowledged by them, in writing, this policy shall cease and be of no further
effect.
The Supreme Court of New York held that the words "Privilege for $4,500
additional insurance" made it unnecessary for the assured to inform the
insurer of any other policy up to that amount.
In the case cited the same goods insured by the defendant company were
reinsured to the amount of $4,500 in accordance with the clause "privilege for
$4,500 additional insurance;" but in the instant case it may be said that the
tobacco insured in the other companies was different from that insured with
the defendant, since the number of bales of tobacco in the warehouse greatly
exceeded that insured with the defendant and the other companies put
together. And according to the doctrine enunciated in 26 Corpus Juris, 188, "to
be insurance of the sort prohibited the prior policy must have been insurance
upon the same subject matter, and upon the same interest therein
Furthermore, the appellant cannot invoke the violation of article 3 of the
conditions of the insurance policies for the first time on appeal, having failed
to do so in its answer; besides, as the appellee correctly contends in his brief,
Guillermo Cu Unjieng, who was then president and majority shareholder of the
appellant company, the Yek Tong Lin Fire & Marine Insurance Co., knew that
there were other insurances, at least from the attempt to raise the insurance
premium on the warehouse and the appellee's tobacco deposited therein to 1
per centum, and it was later reduced upon petition of the appellant itself and
other assurance companies to 0.75 per centum presented to the association of
assurance companies in the year 1927, and notwithstanding this, said
appellant did not rescind the insurance policies in question, but demanded
and collected from the appellee the increased premium.
That the defendant had knowledge of the existence of other policies obtained
by the plaintiff from other insurance companies, is specifically shown by the
defendant's answer wherein it alleges, by way of special defense, the fact that
there exist other policies issued by the companies mentioned therein. If, with
the knowledge of existence of other insurances which the defendant deemed
violations of the contract, it has preferred to continue the policy, its action
amounts to a waiver of the annulment of the contract, in accordance with the
following doctrine in 19 Cyc., 791, 792:.
FAILURE TO ASSERT FORFEITURE IN GENERAL. While the weight of
authority is that a policy conditioned to become void upon a breach of a
warranty is void ipso facto upon such a breach without formal proceedings on

the part of the insurer, yet it is true that such conditions are inserted for the
benefit of the insurer and may be waived, and that the insurer may elect to
continue the policy despite the breach. If it does the policy is revived and
restored. Its failure to assert a forfeiture therefore is at least evidence tending
to show a waiver thereof. Many authorities go further, however, and hold that
the failure to assert a forfeiture after knowledge of a ground thereof will
amount of itself to waiver. . . .
DISPOSITIVE: AFFIRM LOWER COURT.
-------------------------------------------------------------------------------------------------------------General Insurance and Surety Corporation vs. Ng Hua - JON
Doctrine:
Co-insurance exists when:
(1) A condition of the policy requires the insured to bear ratable proportion of the loss when the
value of the insured property exceeds the face value of the policy.
(2) Several insurers insure the same property against the same risk/hazard.
Facts:
On 15 April 1952, Ng Hua obtained a fire insurance policy (Policy No. 471) with the General
Insurance and Surety Corporation (GISC) insuring against fire, for one year, the stock in
trade of the Central Pomade Factory owned by Ng Hua.
Policy No. 471 contains a stipulation on the back thereof, to wit:
The insured shall give notice to the company of any insurance or insurances
already affected, 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 the policy shall
be forfeited.
Moreover, the face of Policy No. 471 bore the annotation: "Co-Insurance Declared NIL".
However, at the time of the application of Policy No. 471, Ng Hua had already obtained a
fire insurance on the same goods, for the same period of time, in the amount of P20,000.00
from General Indemnity Co (General Indemnity).
On 16 April 1952, the said factory burned, resulting in destruction by fire of the insured properties.
Ng Hua claimed indemnity from GISC. However, GISC refused to pay for various reasons,
namely (a) the action was not filed in time; (b) violation of warranty; (c) submission of fraudulent
claim; and (d) failure to pay the premium.
RTC: ordered GISC to pay Ng Hua.
CA: affirmed; there was no violation of the other insurance clause since co-insurance only exists
when a condition of the policy requires the insured to bear ratable proportion of the loss when the
value of the insured property exceeds the face value of the policy."
Issue/s:
(1) Whether there was double insurance / co-insurance.
(2) Whether Ng Hua may claim the insurance proceeds on Policy No. 471 from GISC

Held:
(1) Yes.
Undoubtedly, co-insurance exists under the condition described by CA. However, it is not the only
situation where co-insurance exists. Other insurers of the same property against the same
hazard are sometimes referred as co-insurers and the ensuing combination as coinsurance. Considering the terms of the policy which required the insured to declare other
insurances, the statement in question must be deemed to be a warranty binding on both insurer
and insured, that there were no other insurance on the property.
(2) No.
The annotation (stipulation at the back of the policy) must be deemed to be a warranty that the
property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec.
69. Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana vs.
Commercial Union Assurance Company, Ltd., 55 Phil., 329. The materiality of non-disclosure of
other insurance policies is not open to doubt.
Furthermore, even if the annotations were overlooked, GISC would still be free from liability
because there is no question that the policy issued by General Indemnity had not been stated in
nor endorsed on Policy No. 471 and failure of which would forfeit all the benefits under the policy.
Dispositive Portion: Wherefore, the judgment under review will be revoked, and the defendant
insurer (herein petitioner) acquitted from all the liability under the policy. Costs against
respondent. So ordered.

-------------------------------------------------------------------------------------------------------------Union Manufacturing & Republic Bank v Philippine Guaranty, 47 SCRA 271

(1972)KARLA
DOCTRINE:
Without deciding- whether notice of other insurance upon the same property must be given in writing, or
whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral
or written, we hold that in the absolute absence of such notice when it is one 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).
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 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 over the properties of the UMC, as described in defendants 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 interest may appear, subject however to the printed conditions of said
defendants 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 its adjuster, H.H. Bayne Adjustment Co., which was denied by said defendant
in its letter dated November 26, 1964 on the following ground: Policy Condition No. 3 and/or the Other
Insurance Clause of the policy was violated because you did not give notice to us of the other insurance
which you had taken from New India for 80,000.00. Sincere Insurance 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:
NO. Without deciding- whether notice of other insurance upon the same property must be given in writing,
or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether
oral or written, we hold that in the absolute absence of such notice when it is one 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 insured accepted or adhered to and which is the law between the
contracting parties.

-------------------------------------------------------------------------------------------------------------Reinsurance
Sections 95-98, IC
Pioneer Insurance v CA, 175 SCRA 668 (1989)KIKOY
PIONEER INSURANCE & SURETY CORPORATION, petitioner,
vs.
THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC.,
(BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.
G.R. No. 84157 July 28, 1989
JACOB S. LIM, petitioner,
vs.
COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER
MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES and
CONSTANCIO MAGLANA,respondents.
Doctrine: In general a reinsurer, on payment of a loss acquires the same rights by
subrogation as are acquired in similar cases where the original insurer pays a loss
(Universal Ins. Co. v. Old Time Molasses Co. C.C.A. La., 46 F 2nd 925). The rules of
practice in actions on original insurance policies are in general applicable to actions or
contracts of reinsurance. (I.E. 2207)
Facts:
Jacob Lim, Bormaheco, Cervantes, and Maglana bought aircrafts from Japan Domestic Airlines
(JDA).

Petitioner pioneer became the surety in the said deal via (2) separate indemnity agreements (Exhibits
D-1 and D-2) in favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL,
Bormaheco and the Cervanteses. The indemnity agreements stipulated that the indemnitors principally
agree and bind themselves jointly and severally to indemnify and hold and save harmless Pioneer from
and against any/all damages, losses, costs, damages, taxes, penalties, charges and expenses of whatever
kind and nature which Pioneer may incur in consequence of having become surety upon the bond/note
and to pay, reimburse and make good to Pioneer, its successors and assigns, all sums and amounts of
money which it or its representatives should or may pay or cause to be paid or become liable to pay on
them of whatever kind and nature.
On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer
as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated
therein that Lim transfer and convey to the surety the two aircrafts.
Jacob lim et al failed to pay their obligations from the said deal.

Pioneer had reinsured its risk of liability under the surety bond in favor of JDA and subsequently
collected the proceeds of such reinsurance in the sum of P295,000.00.
Aside from being able to collect from JDA, Pioneer had the aircrafts foreclosed due to the chattel
mortgage executed by Jacob Lim.
Issue/s: Was there unjust enrichment on the part of Pioneer? - Yes
Held:
Plaintiff Pioneer's contention that it is representing the reinsurer to recover the amount from
defendants, hence, it instituted the action is utterly devoid of merit. Plaintiff did not even present any

evidence that it is the attorney-in-fact of the reinsurance company, authorized to institute an action for and
in behalf of the latter.
It appearing that Pioneer reinsured its risk of liability under the surety bond it had executed in favor
of JDA, collected the proceeds of such reinsurance in the sum of P295,000, and paid with the said amount
the bulk of its alleged liability to JDA under the said surety bond, it is plain that on this score it no longer
has any right to collect to the extent of the said amount.
In the first place, there is not the slightest indication in the complaint that Pioneer is suing as
attorney-in- fact of the reinsurers for any amount. Lastly, and most important of all, Pioneer has no right to
institute and maintain in its own name an action for the benefit of the reinsurers. It is well-settled that an
action brought by an attorney-in-fact in his own name instead of that of the principal will not prosper, and
this is so even where the name of the principal is disclosed in the complaint.
The total amount paid by Pioneer to JDA is P299,666.29. Since Pioneer has collected P295,000.00
from the reinsurers, the uninsured portion of what it paid to JDA is the difference between the two
amounts, or P3,666.28. This is the amount for which Pioneer may sue defendants, assuming that the
indemnity agreement is still valid and effective. But since the amount realized from the sale of the
mortgaged chattels are P35,000.00 for one of the airplanes and P2,050.00 for a spare engine, or a total of
P37,050.00, Pioneer is still overpaid by P33,383.72. Therefore, Pioneer has no more claim against
defendants.
The payment to the petitioner made by the reinsurers was not disputed in the
appellate court. Considering this admitted payment, the only issue that cropped up was
the effect of payment made by the reinsurers to the petitioner. Therefore, the
petitioner's argument that the respondents had no interest in the reinsurance contract
as this is strictly between the petitioner as insured and the reinsuring company pursuant
to Section 91 (should be Section 98) of the Insurance Code has no basis.
In general a reinsurer, on payment of a loss acquires the same rights by subrogation
as are acquired in similar cases where the original insurer pays a loss (Universal Ins. Co.
v. Old Time Molasses Co. C.C.A. La., 46 F 2nd 925).
The rules of practice in actions on original insurance policies are in general
applicable to actions or contracts of reinsurance. (Delaware, Ins. Co. v. Pennsylvania Fire
Ins. Co., 55 S.E. 330,126 GA. 380, 7 Ann. Con. 1134).
Hence the applicable law is Article 2207 of the new Civil Code, to wit:
Art. 2207. If the plaintiffs 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. If the
amount paid by the insurance company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.
Interpreting the aforesaid provision, we ruled in the case of Phil. Air Lines, Inc. v.
Heald Lumber Co. (101 Phil. 1031 [1957]) which we subsequently applied in Manila
Mahogany Manufacturing Corporation v. Court of Appeals(154 SCRA 650 [1987]):
Note that if a property is insured and the owner receives the indemnity from the insurer,
it is provided in said article that the insurer is deemed subrogated to the rights of the
insured against the wrongdoer and if the amount paid by the insurer does not fully cover
the loss, then the aggrieved party is the one entitled to recover the deficiency. Evidently,
under this legal provision, the real party in interest with regard to the portion of the
indemnity paid is the insurer and not the insured. (Emphasis supplied).
Dispositive: WHEREFORE, the instant petitions are DISMISSED. The questioned decision of the Court of
Appeals is AFFIRMED.

-------------------------------------------------------------------------------------------------------------Gibson v Revilla, 92 SCRA 219 (1979)KLAIRE

DOCTRINE:
FACTS:
Lepanto Consolidated Mining Company filed on September 27, 1974 in the Court of
First Instance of Rizal, Branch XIII a complaint with a plea for preliminary mandatory
injunction against Malayan Insurance Company, Inc.,

Two were shipments involved in the case which both encountered accidents during
their sea voyage due to bad weather. Lepanto notified Malayan and another insurer,
Commercial Union in London in November and December, 1971 of the accidents.
Formal claims under the open policy were also filed by Lepanto with Malayan in
March and July, 1972 upon the conclusion of the voyages and the determination of
the shortweight.
The claims were denied by Malayan tentatively at first claiming that it needed time to
determine whether or not the marine accidents resulted from the inherent vice or
nature of the cargo and finally Malayan rejected Lepanto's insurance claim for the
reason that the cargoes were inherently vicious on loading and such condition
caused the listing of the vessel.
The civil suit thus instituted by Lepanto against Malayan was founded on the fact that
on Sept. 9, 1971, Malayan issued Marine Open Policy covering an shipments of
copper, gold and silver concentrates in bulk from Poro, San Fernando, La Union to
Tacoma, Washington or to other places in the United States which Lepanto may
make on and after August 1, 1971 and until the cancellation of the policy upon thirty
(30) days' written notice. Thereafter, Malayan obtained reinsurance abroad through
Sedgwick, Collins & Co., Limited, a London insurance brokerage.
The Memorandum of Insurance issued by Sedgwick to Malayan on September 24,
1971 listed three groups of underwriters or re-insurers and their reinsurance interests
are as follows: Lloyds 62.808%, Companies (I.L.U.) 34.705%, and Other Companies
2.487%. At the top of the list of underwriting members of Lloyds is Syndicate No.
448, assuming 2.48% of the risk assumed by the reinsurer, which syndicate number
petitioner Ivor Robert Dayton Gibson claims to be himself.
On June 25, 1975, petitioner Ivor Robert Dayton Gibson filed a motion to intervene
as defendant. CFI denied the motion.
ISSUE: Whether the lower court committed reversible error in refusing the
intervention of petitioner Ivor Robert Dayton Gibson in the suit between Lepanto and
Malayan.
HELD:
No.
The questioned Order of the respondent Court was based strictly and squarely on
Section 2(b) of Rule 12 which specifically directs the Court in allowing or disallowing
a motion for intervention in the exercise of discretion to consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of the original
parties and whether or not the intervenor's rights may be fully protected in a separate
proceeding. The Court a quo has specifically and correctly complied with the Rule's
mandate. It reasonably ordered that to allow such intervention will unduly delay the
proceedings and that Gibsons rights may be fully protected in a separate
proceeding.
Since movant Ivor Robert Dayton Gibson appears to be only one of several reinsurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it
is highly probable that other re- insurers may likewise intervene. The record shows

that aside from the petitioner there are sixty-three (63) other syndicate members of
Lloyds, the twenty-six (26) companies in the " I.L.U. " group holding a 34.705 %
reinsurance interest and the two (2) "Other Companies" holding the balance of the
reinsurances, as listed in Annex "A", Sur-Rejoinder to Lepanto's Rejoinder, pp. 136138, Records. The high probability that these other re-insurers like the petitioner
herein may likewise intervene if the latter's motion is granted is not an arbitrary
assumption of the Court.
-------------------------------------------------------------------------------------------------------------Artex Development v Wellington Insurance, 81 SCRA 352 (1973)NIKKI
Title:Artex Development Co VS Wellington Insurance
Topic: Reinsurance
FACTS:
-Wellington insurance insured for P24,346,509 the building stocks and
machinery of plaintiff Artex against loss or damage by fire or lightning upon
august 2, 1963 with an additional sum of P833,034.
-Another insurance against business interruption (use and occupancy)for
P5,200,000.
-On September 22, 1963 the building, and machineries were burned and a
notice of loss and damage was given to Wellington.
-Insurance adjusters computed the loss for the fire as P10,106,544.40 and
Wellington paid only 6,481,870.07, leaving a balance of 3,624,683.43
-The computed business interruption loss was P3M but Wellington paid only
P1,864,134.08 leaving a balance of P1,748,460 (computation based on case)
-Artex through counsel Norberto Quisumbing made a manifestation that only
about P397,ooo is the remaining balance and liability which was the subject
of reinsurance with Alexander and Alexander Inc, of New York, Artex
acknowledging here the receipt of P3,600,000 as FINAL and FULL
SETTLEMENT of all claims against Welllington
-Artex further prays to the court to affirm the lower courts decision of
liquidation and prayed for modification of the amount of liability to be fixed to
P397,813.00 plus 12% interest per annum thereof for the late payment until
april 10, 1969 and attorneys fees of 15% of the recovery, expenses of
litigation, no writ of execution however to be made within 3years from july
10, 1969 per collateral agreement of the parties.
-Wellington in its brief raises the issue that Artex deemed to have agreed to
look SOLELY to the reinsurers for indemnity in case of loss since their paid up
capital stock is only P500,000 and that they have to secure such reinsurance
coverage the over P24M fire insurance coverage of the policy issued by
Wellington to Artex.
Issue:

WON reinsurance contract of the parties makes the insured to look SOLELY to
the reinsurers for indemnity in case of loss
Ruling:
NO, the insured who is not directly a party or privy to the reinsurance contract
between Wellington and Alexander and Alexander Inc., cannot demand
enforcement of such insurance contracts.
The Contracts take effect only between the parties, their assigns and heirs as
provide by Art 1311 of our civil code. Further it provides that a contract with
stipulations pour autrui or in favor of a third person not a party to the contract,
the parties must have CLEARLY and DELIBERATELY conferred favor upon a
third person
-The SC also stated that assuming that Artex directly sue the reinsurers for
payment this does not in any way affect or cancel out Wellingtons direct
contractual liability to Artex.
The SC dispose the case by affirming the prayer of Artex
-------------------------------------------------------------------------------------------------------------Guingon v Del Monte, 20 SCRA 1063 (1967)RIKKI
FACTS:
Julio Aguilar owned and operated several jeepneys in the City of Manila
among which was one with plate number PUJ-206-Manila, 1961. He
entered into a contract with the Capital Insurance & Surety Co., Inc.
insuring the operation of his jeepneys against accidents with third-party
liability. As a consequence thereof an insurance policy was executed by
the Capital Insurance & Surety Co., Inc., the pertinent provisions of
which in so far as this case is concerned contains the following:

Section II LIABILITY TO THE PUBLIC

1. The Company, will, subject to the limits of liability, indemnify the Insured in
the event of accident caused by or arising out of the use of the Motor Vehicle/s
or in connection with the loading or unloading of the Motor Vehicle/s, against
all sums including claimant's costs and expenses which the Insured shall
become legally liable to pay in respect of:
a. death of or bodily injury to any person
b. damage to property
During the effectivity of such insurance policy on February 20, 1961 Iluminado
del Monte, one of the drivers of the jeepneys operated by Aguilar, while driving
along the intersection of Juan Luna and Moro streets, City of Manila, bumped
with the jeepney abovementioned one Gervacio Guingon who had just alighted
from another jeepney and as a consequence the latter died some days
thereafter.
A corresponding information for homicide thru reckless imprudence was filed
against Iluminado del Monte, who pleaded guilty. A penalty of four months
imprisonment was imposed on him.

As a corollary to such action, the heirs of Gervacio Guingon filed an action for
damages praying that the sum of P82,771.80 be paid to them jointly and
severally by the defendants, driver Iluminado del Monte, owner and operator
Julio Aguilar, and the Capital Insurance & Surety Co., Inc. For failure to answer
the complaint, Del Monte and Aguilar were declared in default. Capital
Insurance & Surety Co., Inc. answered, alleging that the plaintiff has no cause
of action against it. During the trial the following facts were stipulated:
COURT: The Court wants to find if there is a stipulation in the policy whereby
the insured is insured against liability to third persons who are not passengers
of jeeps.
ALMARIO: As far as I know, in my honest belief, there is no particularization as
to the passengers, whether the passengers of the jeep insured or a passenger
of another jeep or whether it is a pedestrian. With those, we can submit the
stipulation.
SIMBULAN: I admit that. (T.s.n., p. 21, Jan. 23, 1962; p. 65 Rec. on Appeal)
On August 27, 1962, the Court of First Instance of Manila rendered its
judgment with the following dispositive portion:
WHEREFORE, judgment is rendered sentencing Iluminado del Monte and Julio
Aguilar jointly and severally to pay plaintiffs the sum of P8,572.95 as damages
for the death of their father, plus P1,000.00 for attorney's fees plus costs.
The defendant Capital Insurance and Surety Co., Inc. is hereby sentenced to
pay the plaintiffs the sum of Five Thousand (P5,000.00) Pesos plus Five
Hundred (P500.00) Pesos as attorney's fees and costs. These sums of
P5,000.00 and P500.00 adjudged against Capital Insurance and Surety Co., Inc.
shall be applied in partial satisfaction of the judgment rendered against
Iluminado del Monte and Julio Aguilar in this case.
SO ORDERED.
The case was appealed to the Court of Appeals which appellate court on
September 30, 1963 certified the case to Us because the appeal raises purely
questions of law.
THE ISSUES:
(1) As the company agreed to indemnify the insured Julio Aguilar, is it only the
insured to whom it is liable?
(2) Must Julio Aguilar first show himself to be entitled to indemnity before the
insurance company may be held liable for the same?
(3) Plaintiffs not being parties to the insurance contract, do they have a cause
of action against the company; and
(4) Does the fact that the insured is liable to the plaintiffs necessarily mean
that the insurer is liable to the insured?
In the discussion of the points thus raised, what is paramount is the
interpretation of the insurance contract with the aim in view of attaining the
objectives for which the insurance was taken. The Rules of Court provide that
parties may be joined either as plaintiffs or defendants, as the right to relief in
respect to or arising out of the same transactions is alleged to exist (Sec. 6,
Rule 3). The policy, on the other hand, contains a clause stating:

E. Action Against Company

No action shall lie against the Company unless, as a condition precedent
thereto, the Insured shall have fully complied with all of the terms of this
Policy, nor until the amount of the Insured's obligation to pay shall have been
finally determined either by judgment against the Insured after actual trial or
by written agreement of the Insured, the claimant, and the Company.
Any person or organization or the legal representative thereof who has
secured such judgment or written agreement shall thereafter be entitled to
recover under this policy to the extent of the insurance afforded by the Policy.
Nothing contained in this policy shall give any person or organization any
right to join the Company as a co-defendant in any action against the Insured
to determine the Insured's liability.
Bankruptcy or insolvency of the Insured or of the Insured's estate shall not
relieve the Company of any of its obligations hereunder.
Appellant contends that the "no action" clause in the policy closes the avenue
to any third party which may be injured in an accident wherein the jeepney of
the insured might have been the cause of the injury of third persons, alleging
the freedom of contracts. Will the mere fact that such clause was agreed upon
by the parties in an insurance policy prevail over the Rules of Court which
authorizes the joining of parties plaintiffs or defendants?
The foregoing issues raise two principal: questions: (1) Can plaintiffs sue the
insurer at all? (2) If so, can plaintiffs sue the insurer jointly with the insured?
The policy in the present case, as aforequoted, is one whereby the insurer
agreed to indemnify the insured "against all sums . . . which the Insured shall
become legally liable to pay in respect of: a. death of or bodily injury to any
person . . . ." Clearly, therefore, it is one for indemnity against liability; 1 from
the fact then that the insured is liable to the third person, such third person is
entitled to sue the insurer.1wph1.t
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 only 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. 2
The next question is on the right of the third person to sue the insurer jointly
with the insured. The policy requires, as afore-stated, that suit and final
judgment be first obtained against the insured; that only "thereafter" can the
person injured recover on the policy; it expressly disallows suing the insurer
as a co-defendant of the insured in a suit to determine the latter's liability. As
adverted to before, the query is which procedure to follow that of the
insurance policy or the Rules of Court.
The "no action" clause in the policy of insurance cannot prevail over the Rules
of Court provision aimed at avoiding multiplicity of suits. In a case squarely on

the point, American Automobile Ins. Co. vs. Struwe, 218 SW 534 (Texas CCA),
it was held that a "no action" clause in a policy of insurance cannot override
procedural rules aimed at avoidance of multiplicity of suits. We quote:
Appellants filed a plea in abatement on the grounds that the suit had been
prematurely brought against the insurance company, and that it had been
improperly joined with Zunker, as said insurance company, under the terms of
the policy, was only liable after judgment had been awarded against
Zunker. . . .
* * * That plea was properly overruled, because under the laws of Texas a dual
suit will always be avoided whenever all parties can have a fair trial when
joined in one suit. Appellee, had he so desired, could have prosecuted his
claim to judgment as against Zunker and then have sued on that judgment
against the insurance company, but the law does not make it imperative that
he should do so, but would permit him to dispose of the whole matter in one
suit.
The rule has often been announced in Texas that when two causes of action
are connected with each other, or grow out of the same transaction, they may
be properly joined, and in such suit all parties against whom the plaintiff
asserts a common or an alternative liability may be joined as defendants. . . .
Even if appellants had presented any plea in abatement as to joinder of
damages arising from a tort with those arising from a contract, it could not,
under the facts of this case, be sustained, for the rule is that a suit may include
an action for breach of contract and one for tort, provided they are connected
with each other or grew out of the same transaction.
Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder of causes of action"
and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be superseded,
at least with respect to third persons not a party to the contract, as herein, by a
"no action" clause in the contract of insurance.
Wherefore, the judgment appealed from is affirmed in toto. Costs against
appellant. So ordered.
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