LOSS AND NOTICE OF LOSS
from CBIC
1.) UNITED MERCHANTS CORP v. COUNTRY BANKERS
INSURANCE CORPORATION
Doctrine: Burden of proof is the duty of any party to present evidence
to establish his claim or defense by the amount of evidence required by
law, which is preponderance of evidence in civil cases. The party,
whether plaintiff or defendant, who asserts the affirmative of the issue
has the burden of proof to obtain a favorable judgment.
o False and Material statement made with intent to deceive or defraud
voids an insurance policy
FACTS:
· United Merchants Corp (UMC) is engaged in buying, selling, and
manufacturing CHRISTMAS LIGHTS
o Leased warehouse 19B Dagot St., San Jose
subdivision, Barrio Manresa, Quezon City. This is
where they Assembled and stored its products
· September 6, 1995. UMC’s General Manager ALFREDO TAN
insured UMC’s Stocks in Trade of Christmas Lights against Fire with
Country Bankers Insurance Corp (CBIC) for 15M,
o Fire insurance policy No HO/95-576 (Insurance policy)
and Fire invoice 12959A, Valid until Sept 6, 1996.
· On May 7, 1996 UMC and COUNTRY executed another
ENDORSEMENT and INVOICE to FORM PART OF THE INSURANCE
POLICY
o this was to insure stocks against ADDITIONAL PERILS
“Typhoon, flood, ext. cover, and full earthquake”
o The Sum was INCREASED to 50M. effective May 7,
1996 to January 10, 1997.
o CBIC issued Endorsement where ALREDO TAN’S
name was CHANGED TO UMC.
· On July 3, 1996 FIRE gutted warehouse rented by UMC.
o CBIC designated CRM adjustment corp (CRM) to
INVESTIGATE
o CBIC’s Reinsurer, Central Surety, requested NBI to
conduct parallel investigation
· July 6, 1996 UMC submitted to COUNTRY Sworn Statement of
Formal Claim, with Proofs of its loss.
· Nov 20, 1996 UMC demanded atleast 50% payment of its claim
o Feb 1997, CBIC sent letter REJECTING CLAIM due to
BREACH OF CONDITION #15
“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 in his behalf to obtain any bene t under this
Policy; or if the loss or damage be occasioned by the
willful act, or with the connivance of the Insured, all the
benefits under this Policy shall be forfeited”
· Feb 19, 1998 UMC complaint against CBIC with RTC of manila
o UMC Anchored it with Sworn Statement of Formal
Claim and Certification made by Deputy Fire Chief/
Senior Superintendent Garcia of Bureau of Fire
Protection.
§ “ FIRE BROKE out at 6:10pm, incurring
damage of 55M to building and contents,
while insurance coverage amount to 50M
with CBIC”
§ NO EVIDENCE to prove that intentionally set
on fire
§ closed being ACCIDENTAL in nature.
o CBIC Counterclaim:
§ No cause of action
§ Claim already Prescribed
§ Tainted with fraud bc.
· UMC’s statement of inventory said
it HAD NO STOCKS as of Dec 31,
1995
· Suspicious purchases DOESN’T
AMOUNT to 25M
· Financial reports revealed that it
had INSUFFICIENT CAPITAL,
therefore couldn’t afford 50M stocks
in trade.
 o UMC denied making false declaration, that it’s all
genuine, Statement of inventory was for Internal
Revenue only
§ Presented 5 witnesses
· Disbursing Officer: testified it had
raw materials for lights, lights
already made, and lights purchased
from other people, delivered aug
1995 to may 1996. Was delivered
to warehouse with receipts
o In 1996 no importations and
bought from local suppliers
o UMC only had sales from
fruits of business, not from
lights
· ANNIE PABUSTAN
· Metropolitan Bank and Trust
Company Officer
· Ernesto Luna- Delivery checker of
cargo delivery
· CRM’s Adjuster
o CBIC presented
§ Claims manager
§ SEC representative
§ NBI investigator
· ARSON WAS COMMITTED based
from interview with BRGY officials,
however DIDN’T CONDUCT
forensic investigation, nor did they
file a case for Arson.
RTC: In favor of UMC
o pay 43M
o no dispute to insurance contract
o Fraud is NEVER PRESUMED, CBIC failed to establish
by clear and convincing evidence that documents by
SEC and BIR were true
CA: In favor of CBIC
o UMC claim under insurance policy VOID
o UMC failure to explain details of the alleged fire
accident, claim was overhauled by fraudulent
transactions (financial report showed they had 825k in
1995 raised to 20M in 1996)
ISSUE: Whether or not UMC may claim the full coverage of its fire
insurance policy.
HELD: No, Burden of proof is the duty of any party to present evidence
to establish his claim or defense by the amount of evidence required by
law, which is preponderance of evidence in civil cases. The party,
whether plaintiff or defendant, who asserts the affirmative of the issue
has the burden of proof to obtain a favorable judgment.
o UMC Proof of its loss of stocks in trade amounting to P
50,000,000.00,
o UMC submitted its Sworn Statement of Formal Claim
together with the following documents: (1) letters of
credit and invoices for raw materials, Christmas
lights and cartons purchased; (2) charges for
assembling the Christmas lights; and (3) delivery
receipts of the raw materials.
o However, the charges for assembling the Christmas
lights and delivery receipts could not support its
insurance claim.
o The Insurance Policy provides that CBIC AGREED TO
INSURE UMCs stocks in trade.
§ UMC defined stock in trade as tangible
personal property kept for sale or traffic.
§ ONLY letters of credit and invoices for raw
materials, Christmas lights and cartons may
be considered.
o UMC deliberate intent to demand from insurance companies
payment for indemnity of goods not existing at the time of the fire. This
constitutes the so-called fraudulent claim which, by express
agreement between the insurers and the insured, is a ground for the
exemption of insurers from civil liability.
Further. ARSON and FRAUD are two separate grounds on 2 different
sets of evidence.
2.) COUNTRY BANKERS INSURANCE CORPORATION v LIANGA
BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE
Doctrine:
1. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; A PARTY
MUST PROVE HIS OWN AFFIRMATIVE ALLEGATIONS. — 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.
o 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.
o 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 expected or for which it is not liable, or from a cause which
limits its liability. Stated elsewise, 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. ADMISSIBILITY; HEARSAY RULE; ELUCIDATED. — A witness
can testify only to those facts which he knows of his personal
knowledge, which means those facts which are derived from his
perception.
o Consequently, a witness may not testify as to what he merely
learned from others either because he was told or read or heard the
same.
o Such testimony is considered hearsay and may not be received
as proof of the truth of what he has learned.
o The hearsay rule is based upon serious concerns about the
trustworthiness and reliability of hearsay evidence inasmuch as such
evidence are not given under oath or solemn affirmation and, more
importantly, have not been subjected to cross-examination by opposing
counsel to test the perception, memory, veracity and articulateness of
the out-of-court declarant or actor upon whose reliability on which the
worth of the out-of-court statement depends.
o Thus, the Sworn Statements of Jose Lomocso and Ernesto
Urbiztondo are inadmissible in evidence, for being hearsay, inasmuch
as they did not take the witness stand and could not therefore be cross-
examined. There are exceptions to the hearsay rule, among which are
entries in official records. To be admissible in evidence, however, three
(3) requisites must concur, to wit: (a) that the entry was made by a
public officer, or by another person specially enjoined by law to do so;
(b) that it was made by the public officer in the performance of his
duties, or by such other person in the performance of a duty specially
enjoined by law; and (c) that the public officer or other person had
sufficient knowledge of the facts by him stated, which must have been
acquired by him personally or through official information. The third
requisite was not met in this case since no investigation, independent of
the statements gathered from Jose Lomocso, was conducted by Pfc.
Arturo V. Juarbal.
Facts:
o CBIC, engaged in insurance business.
o Lianga Bay and community multi-purpose cooperative is a Duly
registered cooperate judicially declared insolvent, represented by
Cornelio Jamero.
o In 1989. CBIC and LIANGA BAY entered contract of FIRE
INSURANCE for stocks in trade
o from June 20, 1989 4pm to June 20, 1990
o July 1, 1989 12:40 am Lianga bay builfing in Lianga Surigao del sur
was gutted by fire and reduced to ashes, resulting into total loss of
stocks in trade, furniture and fixtures, equipments and records
o Lianga filed an Insurance claim with CBIC submitting
o Spot report by Pfc. Artuto Juarbal, INP Investigator.
o Sworn Statement : by Jose Lomocoso
o Sworn Statement: by Ernesto Urbiztondo
o CBIC denied based on the documents that iwas set on fire by 2
NPA rebels who wanted canned goods, rice and medicines for
comrades in forest. Such was an EXCEPTED RISK in the policy
 “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:
xxx xxx xxx
(d) Mutiny, riot, military or popular uprising, insurrection,
rebellion, revolution, military or usurped power.
Any loss or damage happening during the existence of
abnormal conditions (whether physical or otherwise) which
are occasioned by or through or in consequence, directly
or indirectly, of any of said occurrences shall be deemed
to be loss or damage which is not covered by this
insurance, except to the extent that the Insured shall prove
that such loss or damage happened independently of the
existence of such abnormal conditions.”
Trial Court: in favor LIANGA
CA: AFFIREMD RTC
ISSUE: Whether or not Lianga may claim amount under the
insurance policy
HELD: Yes, 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.
CBIC claimed that source of burning was an expected risk, it is
burdened upon him 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, but CBIC failed to do so. They relied on statements of
LOMOSCO and URBIZTONDO and JUARBAL, which were
inadmissible because they were hearsay.
3.) FGU INSURANCE CORPORATION V CA, SAN MIGUEL
CROPORATION, ESTATE OF ANG GUI
Doctrine: Basic rule in insurance that the carelessness and negligence
of the insured against the consequences of his own negligence or his
agents constitute no defense on the part of the insurer. However,
presupposes that the loss occurred sure to causes which could not have
been prevented by insured, despite exercise of due diligence
DIFFERENCE BETWEEN ORDINARY NEGLIGENCE AND GROSS
NEGLIGENCE. Authorities to prove that persons insured cannot recover
for a loss occasioned by their own wrongful acts are hardly necessary,
as the proposition involves an elementary principle of universal
application. Losses may be recovered by the insured, though remotely
occasioned by the negligence or misconduct of the master or crew, if
proximately caused by the perils insured against, because such
mistakes and negligence are incident to navigation and constitute a part
of the perils which those who engage in such adventures are obliged to
incur; but it was never supposed that the insured could recover
indemnity for a loss occasioned by his own wrongful act or by that of
any agent for whose conduct he was responsible.
FACTS:
o Anco enterprises company (ANCO) a partnership between Ang
Gui and Co To, engaged in shipping business
o owned M/T ANCO tugboat and D/B Lucio barge which
operated as Common Carriers
o D/B Lucio had no engine, had to be towed by a tugboat
from one place to the other.
o September 23, 1979 San Miguel Corporation shipped from
Mandaue, cebu ON BOARD d/b Lucio
o Bill of Lading No.
o #1, 25,000 cases Pale Pilsen 350 cases Cerveza
Negra to ILOILO
§ Consignee: SMC beer Marketing division-
estancia beer sales office iloilo
o # 2, 15,000 cases Pale Pilsen 200 cases Cerveza
Negra to ANTIQUE
§ Consignee: SMC BMD- San Jose Beer sales
office, antique
o D/B Lucio was towed by M/T ANCO to Mandaue to Antique at 1pm
Sept 30, 1979. The tugboat left the barge after reaching Antique
o When they reached antique, clouds were dark and waves were big,
o Arrastre were complaining it was hard to unload cargo
 o MACABUAG, SMCs district sales supervisor,
requested it be transferred to safer place because
vessel might not be able to stand big waves.
o ANCO’s representative didn’t heed request. AND
THEY WERE THE ONLY BOAT LEFT IN THE DOCK.
o Waves grew bigger 10,790 cases of beer were discharged into
custody of the arrastre operator
o 10-11pm oct 1,1979. The crew of D/B Lucio abandoned
the vessel bc the rope attached to the wharf was cut
off by the waves.
o 12pm barge was broken and cargoes of beer were
swept away.
o ANCO Failed to deliver to SMC’s consignee 29,210 cases of pale
Pilsen and 550 cases of cerveza negra. Total amount of 1,346,197.
o SMC filed a complaint of breach of contract and damages against
ANCO for 1,346,197 plus interest, litigation and attorney’s fees.
o ANCO Partnership was dissolved on January 26, 1993 upon ANG
GUI’s DEATH
o second amended complaint against CO TO and
ESTATE of ANG GUI, represented by Julian and
Jaime ANG.
o ANCO admitted the cases of beer were loaded in their vessel.
however it claimed its not liable for reason of fortuitous event. 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.
o 20,000 cases were insured with FGU for total 858,500
per marine insurance policy29591
o ANCO filed 3rd party complaint with FGU, because it was insured for
858,500 pesos under marine insurance, and to pay for losses because
of fortuitous event. ANCO went to assert that remote possibility that
court order ANCO to pay SMC, or whatever amount it may be required
to pay.
o FGU denied ANCO, alleged that loss was not attributed to risks
insured against in the policy
o Total loss of the entire shipment
o loss of any case as a result of the sinking of the vessel
o loss as a result of the vessel being on fire.
TRIAL COURT: Held estate of ANG GUI and CO TO liable to SMC
o Indeed lost by fortuitous events, failure on ANCO to observe degree
of diligence required and would exonerate them from liability.
o FGUI liable to bear 53% of the amountof the lost cargoe.
CA: Affirmed
ISSUE: Whether or not FGU liable under insurance contract considering
circumstances surrounding the loss
HELD: NO, A Basic rule in insurance that the carelessness and
negligence of the insured against the consequences of his own
negligence or his agents constitute no defense on the part of the
insurer. However, presupposes that the loss occurred sure to causes
which could not have been prevented by insured, despite exercise of
due diligence. In the case at bar the lower court and appellate court held
that there was blatant negligence between the crewmembers of both
boats. Theferore fgu is exonerated from liability under the insurance
contract
TRAVELLERS INSURANCE & SURETY CORPORTATION V CA and
VICENTE MENDOZA
Doctrine:
NECESSITY OF AFFIXING A COPY THEREOF TO COMPLAINT;
CASE AT BENCH. — When private respondent filed his amended
complaint to implead petitioner as party defendant and therein alleged
that petitioner was the third-party liability insurer of the Lady Love
taxicab that fatally hit private respondent's mother, private respondent
did not attach a copy of the insurance contract to the amended
complaint. Private respondent does not deny this omission. It is
significant to point out at this juncture that the right of a third person to
sue the insurer depends on whether the contract of insurance is
intended to benefit third persons also or only the insured. . . Since
private respondent failed to attach a copy of the insurance contract to
his complaint, the trial court could not have been able to apprise itself of
the real nature and pecuniary limits of petitioner's liability. More
importantly, the trial court could not have possibly ascertained the right
of private respondent as third person to sue petitioner as insurer of the
Lady Love taxicab because the trial court never saw nor read the
insurance contract and learned of its terms and conditions. Petitioner,
understandably, did not volunteer to present any insurance contract
covering the Lady Love taxicab that fatally hit private respondent's
mother, considering that petitioner precisely presented the defense of
lack of insurance coverage before the trial court. Neither did the trial
court issue a subpoena duces tecum to have the insurance contract
produced before it under pain of contempt. We thus find hardly a basis
in the records for the trial court to have validly found petitioner liable
jointly and severally with the owner and the driver of the Lady Love
taxicab, for damages accruing to private respondent.
NOTICE OF CLAIM; AN INDISPENSABLE PRE-REQUISITE TO SUE
UNDER AN INSURANCE CONTRACT; REASONS; CASE AT
BENCH. — Petitioner did not tire in arguing before the trial court and
the respondent appellate court that, assuming arguendo that it had
issued the insurance contract over the Lady Love taxicab, private
respondent's cause of action against petitioner did not successfully
accrue because he failed to file with petitioner a written notice of claim
within six (6) months from the date of the accident as required by
Section 384 of the Insurance Code. . . We have certainly ruled with
consistence, that the prescriptive period to bring suit in court under an
insurance policy, begins to run front the date of the insurer's rejection of
the claim filed by the insured, the beneficiary or any person claiming
under an insurance contract. This ruling is premised upon the
compliance by the persons suing under an insurance contract, with the
indispensable requirement of having filed the written claim mandated by
Section 384 of the Insurance Code before and after its amendment.
Absent such written claim filed by the person suing under an insurance
contract, no cause of action accrues under such insurance contract,
considering that it is the rejection of that claim that triggers the running
of the one-year prescriptive period to bring suit in court, and there can
be no opportunity for the insurer to even reject a claim if none has been
filed in the first place, as in the instant case.
Facts:
o 5:30 am, July 20, 198. FELIZA VINEZA DE MENDOZA, 75 yrs old,
was on her way to mass in Tayuman Cathedral.
o She was bumped by a fast taxi running along tayuman
corner gregorio perfecto.
o It was witnessed by Rolando Marvilla, Ernesto Lopes
and Eulogio Tabalno.
o She was sprawled on the pavement, Marvilla went to
feliza and held in his lap to ask her what happened.
She was in shock and couldn’t talk
o A private jeep stopped. The driver and the two helped
feliza to enter jeep and they brought her to Mary
Johnstron Hospital in Tondo
o Ernesto Lopez, a jeepney driver along Tayuman form Pritil, tondo to
Rizal avenue. Saw the incident. He saw it on his return trip from rizal.
He saw Vicente Mendoza and his brother crying, Lopez told them what
happened and they went to the hospital where physician told them to
bring her to the National Orthopedic hospital because of her fractured
bones but they brought her to the UST hospital where she died.
o found DUMLAO, driver, driving in a careless, reckless and imprudent
manner and at a speed grater than what was reasonable and proper
without taking the necessary precaution to avoid accident to persons.
Moreover, the driver fled the scene.
o 3 witnesses identified the taxi, though not necessarily
the driver.
o Marvilla noticed it was a LADY LOVE TAXI plate
number 438 painted maroon with baggage bar
attached on the baggage compartment with antenna
attached to the right side.
o 3rd witness= similar descriptions, he was only to see #8
because it was fast.
o They all pointed out the taxi.
o ARMANDO ABELLON, the registered owner, certified
that RODRIGO DUMLAO was the last driver of the
car. Based on this police apprehended Rodrigo.
Vicente Mendoza filed a complaint for damages against ABELLON as
the owner, ad DUMLAO as the driver
RTC= in favor of Mendoza
o Dumlao, Abellon, Travellers to pay jointly and severally heirs.
CA= Affirmed:
ISSUE: Whether or not Travellers is liable as compulsory insurer.
HELD:
No,
1. Because under BP 874, section 384
“Any person having any claim upon the policy issued
pursuant to this chapter shall, without any unnecessary delay, present
to the insurance company concerned a written notice of claim setting
forth the amount of his loss, and/or the nature, extent and duration of
the injuries sustained as certified by a duly licensed physician. Notice of
claim must be filed within six months from date of the accident,
otherwise, the claim shall be deemed waived. Action or suit for
recovery of damage due to loss or injury must be brought in proper
cases, with the Commission or the Courts within one year from date of
accident, otherwise the claimant’s right of action shall prescribe”
Amended by BP 874
““action or suit for recovery of damage due to loss or
injury must be brought in proper cases, with the Commissioner or the
Courts within one year from denial of the claim, otherwise the
claimant’s right of action shall prescribe”
Absence of written claim filed by person suing under an insurance
contract, no cause of action accrues under such insurance contract,
consider in that is the rejection of that claim that triggers the running of
the one year prescriptive period to bring suit in court, and there can be
no opportunity for the insurer to even reject claim if none has been filed
in the first place
2.) The right of person injured to sure the insurer of the party at fault
depends on whether the contract of insurance intended to benefit 3rd
persons for indemnity against liability to 3rd persons. 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.”
o Trial court didn’t distinguished cause of action against owner and
driver. The owner being based on torts , and the driver for quasi delicts.
Therefore there was a misapplication of the joint and severable liability
of the insurer.
o Since Abellon failed to attach a copy of the insurance contract to his
complaint, the trial court could not have been able to apprise itself of the
real nature and pecuniary limits of his liability. Most importantly the right
of the private respondent to sue the insurance contract.
SUN INSURANCE OFFICE, LTD., petitioner, vs. THE HON. COURT OF
APPEALS and NERISSA LIM
DEFINITION OF TERM "ACCIDENT"; INSURED PERSON'S DEATH
CONSIDERED AN ACCIDENT. — The term "accident" has been defined as
follows: The words "accident" and "accidental" have never acquired any
technical signification in law, and when used in an insurance contract are to
be construed and considered according to the ordinary understanding and
common usage and speech of people generally. In substance, the courts are
practically agreed that the words "accident" and "accidental" mean that
which happens by chance or fortuitously, without intention or design, and
which is unexpected, unusual, and unforeseen. The definition that has
usually been adopted by the courts is that an accident is an event that takes
place without one's foresight or expectation - an event that proceeds from an
unknown cause, or is an unusual effect of a known case, and therefore not
expected. An accident is an event which happens without any human
agency or, if happening through human agency, an event which, under the
circumstances, is unusual to and not expected by the person to whom it
happens. It has also been defined as an injury which happens by reason of
some violence or casualty to the insured without his design, consent, or
voluntary cooperation.
SUICIDE AND WILLFUL EXPOSURE TO NEEDLESS PERIL, BOTH IN
PARI MATERIA BUT DIFFERS ONLY IN DEGREE; CASE AT BAR. — The
parties agree that Lim did not commit suicide. Nevertheless, the petitioner
contends that the insured willfully exposed himself to needless peril and thus
removed himself from the coverage of the insurance policy. It should be
noted at the outset that suicide and willful exposure to needless peril are in
pari materia because they both signify a disregard for one's life. The only
difference is in degree, as suicide imports a positive act of ending such life
whereas the second act indicates a reckless risking of it that is almost
suicidal in intent. To illustrate, a person who walks a tightrope one thousand
meters above the ground and without any safety device may not actually be
intending to commit suicide, but his act is nonetheless suicidal. He would
thus be considered as "willfully exposing himself to needless peril" within the
meaning of the exception in question. The petitioner maintains that by the
mere act of pointing the gun to his temple, Lim had willfully exposed himself
to needless peril and so came under the exception. The theory is that a gun
is per se dangerous and should therefore be handled cautiously in every
case. That posture is arguable. But what is not is that, as the secretary
testified, Lim had removed the magazine from the gun and believed it was
no longer dangerous. He expressly assured her that the gun was not loaded.
It is submitted that Lim did not willfully expose himself to needless peril when
he pointed the gun to his temple because the fact is that he thought it was
not unsafe to do so. The act was precisely intended to assure Nalagon that
the gun was indeed harmless.
FACTS: Petitioner issued a personal accident policy P200k to Felix Lim Jr. 2
months later he was dead with a bullet wound in his head. As beneficiary,
his wife Nerissa Lim sought payment on the policy but her claim was
rejected. Petitioner said there was no suicide but there was no accident
either.Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It
happened on October 6, 1982, at about 10 o'clock in the evening, after his
mother's birthday party. According to Nalagon, Lim was in a happy mood
(but not drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched the television, he stood
in front of her and pointed the gun at her. She pushed it aside and said it
might be loaded. He assured her it was not and then pointed it to his temple.
The next moment there was an explosion and Lim slumped to the floor. He
was dead before he fell.
RTC Zamboanga City: widow sued petitioner was sustained sentenced to
pay P200k, P10k moral damages, P5k exemplary damages, P50k actual &
compensatory damages and P5k attorney fees
CA: sustained
ISSUE: Whether or not Lim’s widow is eligible to receive benefits?
HELD: Yes, there was an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a
deliberate act is performed unless some additional, unexpected,
independent and unforeseen happening occurs which produces or brings
about their injury or death." This was true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury
caused by attempted suicide or by one needlessly exposing himself to
danger except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the
witness testimony that he took steps to ensure that the gun wasn’t loaded.
He even assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility to
pay the indemnity agreed upon if the insured is shown to have contributed to
his own accident.
“In order that a person may be made liable to the payment of moral
damages, the law requires that his act be wrongful. The adverse result of an
action does not per se make the act wrongful and subject the act or to the
payment of moral damages. The law could not have meant to impose a
penalty on the right to litigate; such right is so precious that moral damages
may not be charged on those who may exercise it erroneously. For these the
law taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation
expenses, since it is not the fact of winning alone that entitles him to recover
such damages of the exceptional circumstances enumerated in Art. 2208.
Otherwise, every time a defendant wins, automatically the plaintiff must pay
attorney's fees thereby putting a premium on the right to litigate which should
not be so. For those expenses, the law deems the award of costs as
sufficient.”
CLAIMS SETTLEMENT AND SUBROGATION
FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs.
COURT OF APPEALS and USIPHIL INCORPORATED
INSURANCE CLAIM; SUBMISSION OF DOCUMENT TO PROVE LOSS;
SUBSTANTIAL COMPLIANCE WITH REQUIREMENT, SUFFICIENT. — A
perusal of the records shows that private respondent, after the occurrence of
the fire, immediately notified petitioner thereof. Thereafter, private
respondent submitted the following documents: (1) Sworn Statement of Loss
and Formal Claim and; (2) Proof of Loss. The submission of these
documents, to the Court's mind, constitutes substantial compliance to proof
loss. Indeed, as regards the submission of documents to prove loss,
substantial, not strict as urged by petitioner, compliance with the
requirements will always be deemed sufficient.
TWENTY-FOUR PERCENT (24%) INTEREST PER ANNUM UNTIL FULL
PAYMENT IS AUTHORIZED BY THE INSURANCE CODE. — Anent the
payment of 24% interest per annum computed from the date insurance claim
should be paid until fully paid, suffice it to say that the same is authorized by
Sections 243 and 244 of the Insurance Code. Notably, under Section 244, a
prima facie evidence of unreasonable delay in payment of the claim is
created by the failure of the insurer to pay the claim within 30 days after
proof of loss, the time fixed in both Sections 243 and 244.
FACTS: On September 15, 1981, private respondent obtained a fire
insurance policy from petitioner (then doing business under the name
Summa Insurance Corporation) covering certain properties, e.g., office,
furniture, fixtures, shop machinery and other trade equipment. Under Policy
No. F3100 issued to private respondent, petitioner undertook to indemnify
private respondent for any damage to or loss of said properties arising from
fire. Sometime in 1982, private respondent filed with petitioner an insurance
claim amounting to P987,126.11 for the loss of the insured properties due to
fire. Acting thereon, petitioner appointed Adjuster H.H. Bayne to undertake
the valuation and adjustment of the loss. H.H. Bayne then required private
respondent to file a formal claim and submit proof of loss. In compliance
therewith, private respondent submitted its Sworn Statement of Loss and
Formal Claim, dated July 22, 1982, signed by Reynaldo Cayetano, private
respondent's Manager. Respondent likewise submitted Proof of Loss signed
by its Accounting Manager Pedro Palallos and countersigned by H.H.
Bayne's Adjuster F.C. Medina. Palallos personally followed-up private
respondent's claim with petitioner's President Joaquin Ortega. During their
meeting, Ortega instructed their Finance Manager, Rosauro Maghirang, to
reconcile the records. Thereafter, Maghirang and Palallos signed a
Statement/Agreement, dated February 28, 1985, which indicated that the
amount due respondent was P842,683.40. Despite repeated demands by
private respondent, petitioner refused to pay the insurance claim. Thus,
private respondent was constrained to file a complaint against petitioner for
the unpaid insurance claim. In its Answer, petitioner maintained that the
claim of private respondent could not be allowed because it failed to comply
with Policy Condition No. 13 regarding the submission of certain documents
to prove the loss.
To be able to expedite adjustment of this case, please submit to us without
delay the following documents and/or particulars:
For FFF, Machineries/Equipment Claims
1. Your formal claim (which may be accomplished in the
enclosed form) accompanied by a detailed inventory of the
documents submitted.
2. Certification from the appropriate government office indicating
the date of the occurrence of the fire, the property involved, its
location and possible point oforigin.
3. Proof of premium payment.
4. Three color photographs of the debris properly
captioned/identified/dated and initiated by the claimant at the
back.
4.1 Close-up (not more than 2 meters away) of the most
severely damaged.
4.2 Close-up (not more than 2 meters away) of the least
damaged.
4.3 Original view of the debris (may be from farther than
2 meters away); splice two or more frames if necessary.
Though our adjusters will also take photographs in the manner
prescribed above, please do not rely on his photographs in the
preservations of your evidence of loss thru pictures.
5. Copies of purchase invoices.
6. In the absence of No. 5, suppliers' certificates of sales and
delivery.
7. Appraisal report, if any.
8. Where initial estimated loss is exceeding P20,000.00, submit
estimate by at least 2 contractors/suppliers.
9. Others (to be specified)
1. Repairs cost of the affected items including quotation or
invoices in support thereof ;
2. Complete lists of furniture, fixtures & fittings including date and
cost of acquisition, and;
 3. Statement of salvage on burned items.
Your preferential attention to this request will be fully appreciated.
While the other letter stated:
Please submit to us without delay the following documents and/or
particulars.
For Stock Claim
1. Your formal claim (which may be accomplished in the
enclosed), accompanied by a detailed inventory of the
documents submitted.
2. Certification from the appropriate government office showing
that the Insured's property was involved in the fire as a
consequence of which the claim is being filed.
3. Proof of premium payment.
4. Three colored photographs of the debris, property
captioned/identified/dated and initiated by the claimant at the
back; in a floor plan, indicate the point from where the picture
was taken and by an arrow where the camera was facing.
4.1 Close-up (not more than 2 meters away) of the most
severely damaged.
4.2 Close-up (not more than 2 meters away) of the least
damaged.
4.3 Overall view of the debris (may be from farther than
2 meters away); splice two or more frames if necessary.
Our adjuster will also take photographs.
5. Books of accounts bill, invoices and other vouchers, or
certified copies thereof if originals be lost. This requirement
includes, but. is not limited to, purchase and sales invoices,
delivery
6. Certified copies of income tax returns for the last three years
and the accompanying financial statements.
7. Latest inventory of merchandise filed with a financial
institution, the Bureau of Internal Revenue or any government
entity prior to the loss.
8. A detailed inventory of the articles damaged or destroyed,
showing the cost price of each, extent of loss, if any, if the risk
sustained partial or water damaged.
9. Certificates of registration.
10. Bank Statements.
11. For losses where the estimated value of stocks claimed
which are burned but of sight and/or which may no longer be
subject to actual physical count exceeds P50,000.00, a CPA's
detailed computations in support of such estimated value.
12. In the absence of purchase invoices/delivery receipts (state
reason for absence), submit suppliers' certificate of sales and
delivery.
13. Others (to be specified).
Statement of salvage of the affected stocks in trade.
Your compliance with this request will enable us to expedite
adjustment of the loss in caption.
TC: in favor of private respondent
CA: affirmed
ISSUE: Whether or not private respondent committed a violation of the
insurance policy
Held: No, A perusal of the records shows that private respondent, after the
occurrence of the fire, immediately notified petitioner thereof. Thereafter,
private respondent submitted the following documents: (1) Sworn Statement
of Loss and Formal Claim (Exhibit C) and; (2) Proof of Loss (Exhibit D). The
submission of these documents, to the Court's mind, constitutes substantial
compliance with the above provision. Indeed, as regards the submission of
documents to prove loss, substantial, not strict as urged by petitioner,
compliance with the requirements will always be deemed sufficient.
Anent the payment of 24% interest per annum computed from May 3, 1985
until fully paid, suffice it to say that the same is authorized by Sections 243
and 244 of the Insurance Code. Notably, under Section 244, a prima facie
evidence of unreasonable delay in payment of the claim is created by the
failure of the insurer to pay the claim within the time fixed in both Sections
243 and 244. 10 Further, Section 29 of the policy itself provides for the
payment of such interest.
CEBU SHIPYARD AND ENGINEERING WORKS, INC., petitioner, vs.
WILLIAM LINES, INC. and PRUDENTIAL GUARANTEE and
ASSURANCE COMPANY, INC
MARINE INSURANCE; THE INTENTION OF THE PARTIES TO MAKE
EACH OTHER A CO-ASSURED UNDER AN INSURANCE POLICY IS TO
BE GLEANED PRINCIPALLY FROM THE INSURANCE CONTRACT OR
POLICY ITSELF AND NOT FROM ANY OTHER CONTRACT OR
AGREEMENT BECAUSE THE INSURANCE POLICY ITSELF
DENOMINATES THE ASSURED AND BENEFICIARIES OF THE
INSURANCE. — Clause 20 of the Work Order in question is clear in the
sense that it requires William Lines to maintain insurance on the vessel
during the period of dry-docking or repair. Concededly, such a stipulation
works to the benefit of CSEW as the ship repairer. However, the fact that
CSEW benefits from the said stipulation does not automatically make it as a
co-assured of William Lines. The intention of the parties to make each other
a co-assured under an insurance policy is to be gleaned principally from the
insurance contract or policy itself and not from any other contract or
agreement because the insurance policy denominates the assured and the
beneficiaries of the insurance. The hull and machinery insurance procured
by William Lines, Inc. from Prudential named only "William Lines, Inc." as the
assured. There was no manifestation of any intention of William Lines, Inc.
to constitute CSEW as a co-assured under subject policy. It is axiomatic that
when the terms of a contract are clear its stipulations control. Thus, when
the insurance policy involved named only William Lines, Inc. as the assured
thereunder, the claim of CSEW that it is a co-assured is unfounded.
FACTS: Cebu Shipyard and Engineering Works, Inc. repaired marine
vessels while the Prudential is in the non-life insurance business. William
Lines, Inc., the owner of M/V Manila City, a luxury passenger-cargo vessel,
which caught fire and sank. At the time of the incident, subject vessel was
insured with Prudential for P45M for hull and machinery. The Hull Policy
included an "Additional Perils (INCHMAREE)" Clause covering loss of or
damage to the vessel through the negligence of, among others, ship
repairmen. The Policy provided as follows:
"Subject to the conditions of this Policy, this insurance also
covers loss of or damage to Vessel directly caused by the
following:
xxx xxx xxx
Negligence of Charterers and/or Repairers, provided such
Charterers and/or Repairers are not an Assured hereunder.
xxx xxx xxx
provided such loss or damage has not resulted from want of due
diligence by the Assured, the Owners or Managers of the Vessel,
of any of them. Masters, Officers, Crew or Pilots are not to be
considered Owners within the meaning of this Clause should they
hold shares in the Vessel."
CSEW was insured for only Php 10 million for the shiprepairer’s liability
policy. Under the limited liability clause, to wit:
"7. Limit of Liability
The limit of liability under this insurance, in respect of any one accident or
series of accidents, arising out of one occurrence, shall be [P10 million],
including liability for costs and expense which are either:
(a) incurred with the written consent of the underwriters
hereon; or
(b) awarded against the Assured."
They entered into a contract where negligence was the only factor that could
make CSEW liable for damages. Moreover, liability of CSEW was limited to
only Php 1million for damages. The Hull Policy included an “Additional Perils
(INCHMAREE)” Clause covering loss of or damage to the vessel through the
negligence of, among others, ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs. The officers
and cabin crew stayed at the ship while it was being repaired. After the
vessel was transferred to the docking quay, it caught fire and sank, resulting
to its total loss.
William brought suit against CSEW alleging that it was through the latter’s
negligence that the ship caught fire and sank. Prudential was impleaded as
co-plaintiff after it had paid the value of insured items. It was subrogated to
45 million, or the value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for the ship
indemnity, 65 million for loss of income, and more than 13 million in other
damages. The CA affirmed the TC decision.
CSEW contended that the cause of the fire was due to William’s hotworks on
the said portion of the ship which they didn’t ask CSEW permission for.
Prudential, on the other hand, blamed the negligence of the CSEW workers
in the instance when they didn’t mind rubber insulation wire coming out of
the air-conditioning unit that was already burning.
TC: against CSEW
CA: partial dismissal of the case insofar as CSEW and William Lines are
concerned; affirmed TC
ISSUES:
1. WON CSEW had “management and supervisory control“ of the ship at the
time the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the crew
3. WON Prudential has the right of subrogation against its own insured
4. WON the provisions limiting CSEW’s liability for negligence to a maximum
of Php 1 million are valid
HELD:
1. Yes, the that factual findings by the CA are conclusive on the parties and
are not reviewable by this Court. They are entitled to great weight and
respect when the CA affirmed the factual findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused the total
loss of subject M/V Manila City was due to the negligence of the employees
and workers of CSEW.
Furthermore, in petitions for review on certiorari, only questions of law may
be put into issue. Questions of fact cannot be entertained.
2. Yes, For the doctrine of res ipsa loquitur to apply to a given situation, the
following conditions must concur: (1) the accident was of a kind which does
not ordinarily occur unless someone is negligent; and (2) that the
instrumentality or agency which caused the injury was under the exclusive
control of the person charged with negligence.
The facts and evidence reveal the presence of these conditions. First, the
fire would not have happened in the ordinary course of things if reasonable
care and diligence had been exercised.
Second, the agency charged with negligence, as found by the trial court and
the CA and as shown by the records, is CSEW, which had control over
subject vessel when it was docked for annual repairs.
What is more, in the present case the trial court found direct evidence to
prove that the workers didn’t exercise due diligence in the care of subject
vessel. The direct evidence substantiates the conclusion that CSEW was
really negligent even without applying such doctrine.
3. Yes, Petitioner contends that Prudential is not entitled to be subrogated to
the rights of William Lines, Inc., theorizing that (1) the fire which gutted M/V
Manila City was an excluded risk and (2) it is a co-assured under the Marine
Hull Insurance Policy. This was wrong. The one who caused the fire has
already been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the former was
subrogated to the right of the latter to indemnification from CSEW. As aptly
ruled by the Court of Appeals, the law says:
Art. 2207. If the plaintiff’s property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person
who has violated the contract. 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.
When Prudential paid the latter the total amount covered by its insurance
policy, it was subrogated to the right of the latter to recover the insured loss
from the liable party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is
deemed a co-assured under the subject insurance policy with reliance on
Clause 20 of the Work Order which states:
20. The insurance on the vessel should be maintained by the customer
and/or owner of the vessel during the period the contract is in effect.
Clause 20 of the Work Order in question is clear in the sense that it requires
William Lines to maintain insurance on the vessel during the period of dry-
docking or repair. However, the fact that CSEW benefits from the said
stipulation does not automatically make it as a co-assured of William Lines.
The intention of the parties to make each other a co-assured under an
insurance policy is to be read from the insurance contract or policy itself and
not from any other contract or agreement because the insurance policy
denominates the beneficiaries of the insurance. The hull and machinery
insurance procured by William Lines, Inc. from Prudential named only
“William Lines, Inc.” as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-assured under
subject policy. The claim of CSEW that it is a co-assured is unfounded.
Then too, in the Additional Perils Clause of the same Marine Insurance
Policy, it is provided that this insurance also covers loss of or damage to
vessel directly caused by the negligence of charterers and repairers who
are not assured.
As correctly pointed out by respondent Prudential, if CSEW were deemed a
co-assured under the policy, it would nullify any claim of William Lines, Inc.
from Prudential for any loss or damage caused by the negligence of CSEW.
Certainly, no shipowner would agree to make a shiprepairer a co-assured
under such insurance policy; otherwise, any claim for loss or damage under
the policy would be invalidated.
4. No, Although in this jurisdiction, contracts of adhesion have been
consistently upheld as valid per se; as binding as an ordinary contract, the
Court recognizes instances when reliance on such contracts cannot be
favored especially where the facts and circumstances warrant that subject
stipulations be disregarded. Thus, in ruling on the validity and applicability of
the stipulation limiting the liability of CSEW for negligence to P1M only, the
facts and circumstances vis-a-vis the nature of the provision sought to be
enforced should be considered, bearing in mind the principles of equity and
fair play.
It is worthy to note that M/V Manila City was insured with Prudential for
P45M. Upon thorough investigation by its hull surveyor, M/V Manila City
was found to be beyond economical salvage and repair. The evaluation of
the average adjuster also reported a constructive total loss. The said claim
of William Lines, Inc., was then found to be valid and compensable such that
Prudential paid the latter the total value of its insurance claim. Furthermore,
it was ascertained that the replacement cost of the vessel, amounts to
P55M.
Considering the circumstances, it would unfair to limit the liability of
petitioner to One Million Pesos only. To allow CSEW to limit its liability to
P1M notwithstanding the fact that the total loss suffered by the assured and
paid for by Prudential amounted to P45M would sanction the exercise of a
degree of diligence short of what is ordinarily required because, then, it
would not be difficult for petitioner to escape liability by the simple expedient
of paying an amount very much lower than the actual damage suffered by
William.
VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO,
petitioners, vs. AMERICAN HOME ASSURANCE COMPANY and
SULPICIO LINES, INC
Subrogation under Article 2207 of the Civil Code gives rise to a cause of
action created by law. For purposes of the law on the prescription of actions,
the period of limitation is ten years.
FACTS: Vector was the operator of the motor tanker M/T Vector, while
Soriano was the registered owner of the M/T Vector. Respondent is a
domestic insurance corporation. On September 30, 1987, Caltex entered
into a contract of affreightment with Vector for the transport of Caltex's
petroleum cargo through the M/T Vector. Caltex insured the petroleum cargo
with respondent for P7,455,421.08 under Marine Open Policy No. 34-5093-
6. In the evening of December 20, 1987, the M/T Vector and the M/V Doña
Paz, the latter a vessel owned and operated by Sulpicio Lines, Inc., collided
in the open sea near Dumali Point in Tablas Strait, located between the
Provinces of Marinduque and Oriental Mindoro. The collision led to the
sinking of both vessels. The entire petroleum cargo of Caltex on board the
M/T Vector perished. On July 12, 1988, respondent indemnified Caltex for
the loss of the petroleum cargo in the full amount of P7,455,421.08. On
March 5, 1992, respondent filed a complaint against Vector, Soriano, and
Sulpicio Lines, Inc. to recover the full amount of P7,455,421.08 it paid to
Caltex (Civil Case No. 92-620). 7 The case was raffled to Branch 145 of the
Regional Trial Court (RTC) in Makati City.
RTC: dismissed; this action is upon a quasi-delict and as such must be
commenced within four [4] years from the day they may be brought. [Art.
1145 in relation to Art. 1150, Civil Code] "From the day [the action] may be
brought" means from the day the quasi-delict occurred.
CA: held Vector and Soriano jointly and severally liable to respondent for the
reimbursement of the amount of P7,455,421.08 paid to Caltex; The
resolution of this case is primarily anchored on the determination of what
kind of relationship existed between Caltex and M/V Doña Paz and between
Caltex and M/T Vector for purposes of applying the laws on prescription. The
Civil Code expressly provides for the number of years before the extinctive
prescription sets in depending on the relationship that governs the parties.
ISSUE: Whether or not the action of respondent was already barred by
prescription for bringing it only on March 5, 1992.
Held: The petition lacks merit.
Vector and Soriano posit that the RTC correctly dismissed respondent's
complaint on the ground of prescription. They insist that this action was
premised on a quasi-delict or upon an injury to the rights of the plaintiff,
which, pursuant to Article 1146 of the Civil Code, must be instituted within
four years from the time the cause of action accrued; that because
respondent's cause of action accrued on December 20, 1987, the date of the
collision, respondent had only four years, or until December 20, 1991, within
which to bring its action, but its complaint was filed only on March 5, 1992,
thereby rendering its action already barred for being commenced beyond the
four-year prescriptive period; and that there was no showing that respondent
had made extrajudicial written demands upon them for the reimbursement of
the insurance proceeds as to interrupt the running of the prescriptive period.
We concur with the CA's ruling that respondent's action did not yet
prescribe. The legal provision governing this case was not Article 1146 of
the Civil Code, 16 but Article 1144 of the Civil Code, which states:
Article 1144.The following actions must be brought within ten years from the
time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
We need to clarify, however, that we cannot adopt the CA's characterization
of the cause of action as based on the contract of affreightment between
Caltex and Vector, with the breach of contract being the failure of Vector to
make the M/T Vector seaworthy, as to make this action come under Article
1144 (1), supra. Instead, we find and hold that that the present action was
not upon a written contract, but upon an obligation created by law. Hence, it
came under Article 1144 (2) of the Civil Code. This is because the
subrogation of respondent to the rights of Caltex as the insured was by
virtue of the express provision of law embodied in Article 2207 of the Civil
Code, to wit:
Article 2207. If the plaintiff's property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall
be subrogated to the rights of the insured against the wrongdoer or the
person who has violated the contract. 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.
Verily, the contract of affreightment that Caltex and Vector entered into did
not give rise to the legal obligation of Vector and Soriano to pay the demand
for reimbursement by respondent because it concerned only the agreement
for the transport of Caltex's petroleum cargo.
It is undeniable that respondent preponderantly established its right of
subrogation. Its Exhibit C was Marine Open Policy No. 34-5093-6 that it had
issued to Caltex to insure the petroleum cargo against marine peril. 22 Its
Exhibit D was the formal written claim of Caltex for the payment of the
insurance coverage of P7,455,421.08 coursed through respondent's
adjuster. 23 Its Exhibits E to H were marine documents relating to the
perished cargo on board the M/V Vector that were processed for the
purpose of verifying the insurance claim of Caltex. 24 Its Exhibit I was the
subrogation receipt dated July 12, 1988 showing that respondent paid Caltex
P7,455,421.00 as the full settlement of Caltex's claim under Marine Open
Policy No. 34-5093-6. 25 All these exhibits were unquestionably duly
presented, marked, and admitted during the trial. 26 Specifically, Exhibit C
was admitted as an authentic copy of Marine Open Policy No. 34-5093-6,
while Exhibits D, E, F, G, H and I, inclusive, were admitted as parts of the
testimony of respondent's witness Efren Villanueva, the manager for the
adjustment service of the Manila Adjusters and Surveyors Company.
Consistent with the pertinent law and jurisprudence, therefore, Exhibit I was
already enough by itself to prove the payment of P7,455,421.00 as the full
settlement of Caltex's claim. 28 The payment made to Caltex as the insured
being thereby duly documented, respondent became subrogated as a matter
of course pursuant to Article 2207 of the Civil Code. In legal contemplation,
subrogation is the "substitution of another person in the place of the creditor,
to whose rights he succeeds in relation to the debt;" and is "independent of
any mere contractual relations between the parties to be affected by it, and
is broad enough to cover every instance in which one party is required to
pay a debt for which another is primarily answerable, and which in equity
and conscience ought to be discharged by the latter."
DOUBLE INSURANCE
Geagonia vs. Court of Appeals
G.R. 114427, February 6, 1995
Davide Jr.
Facts:
· Armando Geagonia is the owner of Norman's Mart located in the public
market of San Francisco, Agusan del Sur.
· On 22 December 1989, he obtained from Country Bankers Insurance
Corporation fire insurance policy No. F-14622 2 for P100,000.00. The period
of the policy was from 22 December 1989 to 22 December 1990 and
covered the following: "Stock-in-trade consisting principally of dry goods
such as RTW's for men and women wear and other usual to assured's
business."
· Geagonia declared in the policy under the subheading entitled CO-
INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for
P50,000.00. From 1989 to 1990, Geagonia had in his inventory stocks
amounting to P392,130.50, itemized as follows: Zenco Sales, Inc.,
P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing
Textiles, 250,000.00 (on credit); totalling P392,130.50. The policy contained
the following condition, that "the insured shall give notice to the Company of
any insurance or insurances already effected, or which may subsequently be
effected, covering any of the property or properties consisting of stocks in
trade, goods in process and/or inventories only hereby insured, and unless
notice be given and the particulars of such insurance or insurances be
stated therein or endorsed in this policy pursuant to Section 50 of the
Insurance Code, by or on behalf of the Company before the occurrence of
any loss or damage, all benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply when the total
insurance or insurances in force at the time of the loss or damage is not
more than P200,000.00."
· On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m.
at the public market of San Francisco, Agusan del Sur. Geagonia's insured
stocks-in-trade were completely destroyed prompting him to file with Country
Bankers a claim under the policy.
· On 28 December 1990, Country Bankers denied the claim because it
found that at the time of the loss Geagonia's stocks-in-trade were likewise
covered by fire insurance policies GA-28146 and GA-28144, for
P100,000.00 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/F-24758"
· The basis of Country Bankers' denial was Geagonia's alleged violation
of Condition 3 of the policy. Geagonia then filed a complaint against Country
Bankers with the Insurance Commission (Case 3340) for the recovery of
P100,000.00 under fire insurance policy F-14622 and for attorney's fees and
costs of litigation. He attached his letter of 18 January 1991 which asked for
the reconsideration of the denial. He admitted in the said letter that at the
time he obtained Country Bankers's fire insurance policy he knew that the
two policies issued by the PFIC were already in existence; however, he had
no knowledge of the provision in Country Bankers' policy requiring him to
inform it of the prior policies; this requirement was not mentioned to him by
Country Bankers' agent; and had it been so mentioned, he would not have
withheld such information. He further asserted that the total of the amounts
claimed under the three policies was below the actual value of his stocks at
the time of loss, which was P1,000,000.00. In its decision of 21 June 1993,
the Insurance Commission found that Geagonia 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 which procured the
PFIC policies without 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 ordered Country Bankers to pay Geagonia
the sum of P100,000.00 with legal interest from the time the complaint was
filed until fully satisfied plus the amount of P10,000.00 as attorney's fees.
With costs. Its motion for the reconsideration of the decision having been
denied by the Insurance Commission in its resolution of 20 August 1993,
Country Bankers appealed to the Court of Appeals by way of a petition for
review (CA-GR SP 31916).
· In its decision of 29 December 1993, the Court of Appeals reversed the
decision of the Insurance Commission because it found that Geagonia knew
of the existence of the two other policies issued by the PFIC. His motion to
reconsider the adverse decision having been denied, Geagonia filed the
petition for review on certiorari.
Issues:
1. Whether the non-disclosure of other insurance policies violate condition
3 of the policy, so as to deny Geagonia from recovering on the policy.
2. Whether the violation of Condition 3 of the policy renders the policy
void.
Held:
1.
· Condition 3 of Country Bankers's Policy 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. 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 the same subject matter, the same interest therein, and the same risk.
· 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 P50,000.00.
· 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 non-disclosure then of the former policies was
not fatal to Geagonia's right to recover on Country Bankers' policy.
2.
· Unlike the "other insurance" clauses involved in General Insurance and
Surety Corp. vs. Ng Hua, 106 Phil. 1117 [1960], or in Pioneer Insurance &
Surety Corp. vs. Yap, 61 SCRA 426 [1974] which reads "The insured shall
give notice to the company of any insurance or insurances already effected,
or which may subsequently be effected covering any of the property hereby
insured, and unless such notice be given and the particulars of such
insurance or insurances be stated in or endorsed on this Policy by or on
behalf of the Company before the occurrence of any loss or damage, all
benefits under this Policy shall be forfeited"; or in the 1930 case of Santa
Ana vs. Commercial Union Assurance Co., 55 Phil. 329, 334 [1930], which
provided "that any outstanding insurance upon the whole or a portion of the
objects thereby assured must be declared by the insured in writing and he
must cause the company to add or insert it in the policy, without which such
policy shall be null and void, and the insured will not be entitled to indemnity
in case of loss," Condition 3 in Country Bankers' policy F-14622 does
not absolutely declare void any violation thereof. It expressly provides
that the condition "shall not apply when the total insurance or insurances in
force at the time of the loss or damage is not more than P200,000.00."
· By stating within Condition 3 itself that such condition shall not apply if
the total insurance in force at the time of loss does not exceed P200,000.00,
Country Bankers was amenable to assume a co-insurer's liability up to a loss
not exceeding P200,000.00.
· What it had in mind was to discourage over-insurance. Indeed, the
rationale behind the incorporation of "other insurance" clause in fire policies
is to prevent over-insurance and thus avert the perpetration of fraud. When a
property owner obtains insurance policies from two or more insurers in a
total amount that exceeds the property's value, the insured may have an
inducement to destroy the property for the purpose of collecting the
insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured.
Malayan Insurance Co., Inc vs. Philippines First Insurance Co., Inc.
G.R. No. 184300, July 11, 2012
Reyes
Facts:
· Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable
Forwarder Services, Inc. (Reputable) had been annually executing a
contract of carriage, whereby the latter undertook to transport and deliver the
former’s products to its customers, dealers or salesmen.
· On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797
(Marine Policy) from respondent Philippines First Insurance Co., Inc.
(Philippines First) to secure its interest over its own products. Philippines
First thereby insured Wyeth’s nutritional, pharmaceutical and other products
usual or incidental to the insured’s business while the same were being
transported or shipped in the Philippines. The policy covers all risks of direct
physical loss or damage from any external cause, if by land, and provides a
limit of P6,000,000.00 per any one land vehicle.
· On December 1, 1993, Wyeth executed its annual contract of carriage
with Reputable. It turned out, however, that the contract was not signed by
Wyeth’s representative/s. Nevertheless, it was admittedly signed by
Reputable’s representatives, the terms thereof faithfully observed by the
parties and, as previously stated, the same contract of carriage had been
annually executed by the parties every year since 1989.
· Under the contract, Reputable undertook to answer for “all risks with
respect to the goods and shall be liable to the COMPANY (Wyeth), for the
loss, destruction, or damage of the goods/products due to any and all
causes whatsoever, including theft, robbery, flood, storm, earthquakes,
lightning, and other force majeure while the goods/products are in transit and
until actual delivery to the customers, salesmen, and dealers of the
COMPANY”.
· The contract also required Reputable to secure an insurance policy on
Wyeth’s goods. Thus, on February 11, 1994, Reputable signed a Special
Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of
P1,000,000.00.
· On October 6, 1994, during the effectivity of the Marine Policy and SR
Policy, Reputable received from Wyeth 1,000 boxes of Promil infant formula
worth P2,357,582.70 to be delivered by Reputable to Mercury Drug
Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck
carrying Wyeth’s products was hijacked by about 10 armed men. They
threatened to kill the truck driver and two of his helpers should they refuse to
turn over the truck and its contents to the said highway robbers.
· The hijacked truck was recovered two weeks later without its cargo.
Malayan questions its liability based on sections 5 and 12 of the SR Policy.
Issue: Whether or not there is double insurance in this case such that either
Section 5 or Section 12 of the SR Policy may be applied.
Held: No. By the express provision of Section 93 of the Insurance Code,
double insurance exists where the same person is insured by several
insurers separately in respect to the same subject and interest. The
requisites in order for double insurance to arise are as follows:
1. The person insured is the same;
2. Two or more insurers insuring separately;
3. There is identity of subject matter;
4. There is identity of interest insured; and
5. There is identity of the risk or peril insured against.
In the present case, while it is true that the Marine Policy and the SR Policy
were both issued over the same subject matter, i.e. goods belonging to
Wyeth, and both covered the same peril insured against, it is, however,
beyond cavil that the said policies were issued to two different persons or
entities. It is undisputed that Wyeth is the recognized insured of Philippines
First under its Marine Policy, while Reputable is the recognized insured of
Malayan under the SR Policy. The fact that Reputable procured Malayan’s
SR Policy over the goods of Wyeth pursuant merely to the stipulated
requirement under its contract of carriage with the latter does not make
Reputable a mere agent of Wyeth in obtaining the said SR Policy.
The interest of Wyeth over the property subject matter of both insurance
contracts is also different and distinct from that of Reputable’s. The policy
issued by Philippines First was in consideration of the legal and/or equitable
interest of Wyeth over its own goods. On the other hand, what was issued by
Malayan to Reputable was over the latter’s insurable interest over the safety
of the goods, which may become the basis of the latter’s liability in case of
loss or damage to the property and falls within the contemplation of Section
15 of the Insurance Code.
Therefore, even though the two concerned insurance policies were issued
over the same goods and cover the same risk, there arises no double
insurance since they were issued to two different persons/entities having
distinct insurable interests. Necessarily, over insurance by double insurance
cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither
Section 5 nor Section 12 of the SR Policy can be applied.
REINSURANCE
The Philippine American Life Insurance Company vs. The Auditor
General
G.R. L-19255, January 18, 1968
Sanchez
Facts:
· On January 1950, Philippine American Life Insurance Co.
(PHILAM) and, foreign corporation, American International Reinsurance Co.
(AIRCO) entered into a reinsurance treaty where PHILAM agreed to reinsure
with AIRCO the excess of life insurance on the lives of persons written by
PHILAM.
· In their agreement it is also stipulated that even though PHILAM is
already on a risk for its maximum retention under policies previously issued,
when new policies are applied for and issued they can cede automatically
any amount, within the limits specified.
· No question ever arose with respect to the remittances made by
PHILAM to AiIRCO before July 16, 1959, the date of approval of the Margin
Law.
· Subsequently, the Central Bank of the Philippines collected the
sum of P268,747.48 as foreign exchange margin on PHILAM remittances to
AiIRCO made subsequent to July 16, 1959.
· PHILAM then filed with the Central Bank a claim for refund for the
same amount arguing that the reinsurance premiums remitted were paid on
January 1950 and is therefore exempt from the 25% foreign exchange
margin fee.
· The Acting legal counsel of the Monetary Board resolved that
reinsurance contracts entered into and approved by the Central Bank before
July 17, 1959 are exempt from the payment of the 25% foreign exchange
margin, even if remittances thereof are made after July 17, 1959.
· Still the Auditor of the CB denied PHILAM’s claim for refund and
reconsideration was denied, ruling that: "Remittance of premia on insurance
policies issued or renewed on or after July 16, 1959, or even if issued or
renewed before the said date, but their reinsurance was effected, only
thereafter, are not exempt from the margin fee, even if the reinsurance treaty
under which they are reinsured was approved by the Central Bank before
July 16, 1959." So stated, the case calls into question the applicability of
Section 3 of the Margin Law (Republic Act 2609, approved on July 16, 1959)
which exempts certain obligations from payment of the margin fee, thus:
Sec. 3. The provisions of this Act shall not apply to the liquidation of drafts
drawn under letters of credit nor of contractual obligations calling for
payment of foreign exchange issued, approved and outstanding as of the
date this Act takes effect and the extension thereof, with the same terms and
conditions as the original contractual obligations: Provided, That the
repayment of loans contracted by the government of the Philippines with
foreign governments and/or private banks and the importation of
machineries and equipment by provinces, cities or municipalities for the
exclusive use in the operation of public utilities fully-owned and maintained
by them shall likewise be exempted from the operation of this Act.
Issue: Whether PHILAM’s claim was covered by the exemption.
Held: No. The Court held in the negative stating that for an exemption to
come into play, there must be a reinsurance policy or, as in the reinsurance
treaty provided, a “reinsurance cession” which may be automatic or
facultative.
To distinguish, a reinsurance policy is a contract of indemnity one insurer
makes with another to protect the first insurer from a risk it has already
assumed. On the other hand, a reinsurance treaty is merely an agreement
between two insurance companies whereby one agrees to surrender and the
other to accept reinsurance business pursuant to provisions specified in the
treaty. Treaties are contracts for insurance; reinsurance policies or cessions
are contracts of insurance.
Although the reinsurance treaty precedes the Margin Law by over nine years
nothing in that treaty obligates PHILAM to remit to AIRCO a fixed, certain,
and obligatory sum by way of reinsurance premiums. All that the reinsurance
treaty provides on this point is that PHILAM “agrees to reinsure.” The treaty
speaks of a probability; not a reality.
PHILAM’s obligation to remit reinsurance premiums becomes fixed and
definite upon the execution of the reinsurance cession. Because, for every
life insurance policy surrendered to AIRCO, PHILAM agrees to pay
premium. It is only after a reinsurance cession is made that payment of
reinsurance premium may be exacted, as it is only after PHILAM seeks to
remit that reinsurance premium that the obligation to pay the margin fee
arises.
Communication and Information Systems Corporation vs. Mark
Sensing Australia Pty.
G.R. No. 192159, January 25, 2017
Jardaleza
Facts:
· Petitioner Communication and Information Systems Corporation
(CISC) and respondent Mark Sensing Australia Pty. Ltd. (MSAPL) entered
into a Memorandum of Agreement (MOA) dated March 1, 2002 whereby
MSAPL appointed CISC as "the exclusive AGENT of MSAPL to PCSO
during the lifetime of the recently concluded MOA entered into between
MSAPL, PCSO and other parties."
· The recent agreement referred to in the MOA is the thermal paper
and bet slip supply contract (the Supply Contract) between the PCSO,
MSAPL, and three other suppliers, namely Lamco Paper Products
Company, Inc. (Lamco Paper), Consolidated Paper Products, Inc.
(Consolidated Paper) and Trojan Computer Forms Manufacturing
Corporation (Trojan Computer Forms).
· As consideration for CISC's services, MSAPL agreed to pay CISC a
commission of 24.5% of future gross sales to PCSO, exclusive of
duties and taxes, for six years.
· After initially complying with its obligation under the MOA, MSAPL
stopped remitting commissions to CISC during the second quarter of 2004.
MSAPL justified its action by claiming that Carolina de Jesus, President of
CISC, violated her authority when she negotiated the Supply Contract with
PCSO and three of MSAPL's competitors. According to MSAPL, it lost
almost one-half of its business with PCSO because the Supply Contract
provided that MSAPL's business with PCSO shall be limited to the latter's
Luzon operations, with MSAPL supplying 70% of thermal rolls and 50% of
bet slips. MSAPL pointed out that it used to have a Build Operate Transfer
(BOT) Agreement with PCSO where it undertook to build a thermal paper
and bet slip manufacturing facility to supply all requirements of PCSO.
· However, PCSO unilaterally cancelled the BOT Agreement and
granted supply contracts to Lamco Paper, Consolidated Paper and Trojan
Computer Forms, which ultimately resulted in litigation between the parties.
The suit was eventually settled when PCSO, MSAPL, and the three other
suppliers entered into the Supply Contract, which was submitted and
approved by the Regional Trial Court (RTC), Branch 224 of Quezon City, as
a compromise agreement. MSAPL felt shortchanged by CISC's efforts and
thus decided to withhold payment of commissions.
· As a result of MSAPL's refusal to pay, CISC filed a complaint
before the RTC in Quezon City for specific performance against MSAPL,
Mark Sensing Philippines, Inc. (MSPI), Atty. Ofelia Cajigal, and PCSO. CISC
prayed that private respondents be ordered to comply with its obligations
under the MOA. It also asked the RTC to issue a writ of preliminary
mandatory injunction and/or writ of attachment. The RTC denied CISC's
prayer for mandatory injunctive relief but ordered the PCSO to hold the
amount being contested until the final determination of the case. It
later reversed itself, holding that its jurisdiction is limited to the
amount stated in the complaint and therefore had no jurisdiction to
order PCSO to withhold payments in excess of such amount.
· The CA later reversed the RTC and ordered that the additional
docket fees shall constitute a lien on the judgment.
· On September 10, 2007, the RTC granted CISC's application for
issuance of a writ of preliminary attachment, stating that "the non-
payment of the agreed commission constitutes fraud on the part of the
defendant MSAPL in their performance of their obligation to the plaintiff."
The RTC found that MSAPL is a foreign corporation based in Australia, and
its Philippine subsidiary, MSPI, has no other asset except for its collectibles
from PCSO. Thus, the RTC concluded that CISC may be left without any
security if ever MSAPL is found liable. But the RTC limited the attachment to
P4,861,312.00, which is the amount stated in the complaint, instead of the
amount sought to be attached by CISC, i.e., P113,197,309.10. The RTC
explained that it "will have to await the Supreme Court judgment over the
issue of whether it has jurisdiction on the amounts in the excess of the
amount prayed for by the plaintiff in their complaint" since MSAPL appealed
the adverse judgment in CA-G.R. SP No. 96620 to us. The Supreme Court
later denied MSAPL's petition for review assailing the CA Decision in CA-
G.R. SP No. 96620 (subsequently docketed as G.R. No. 179073) in a
Resolution dated November 12, 2007. It became final and executory on
March 25, 2008.
· In view of this development, CISC moved to amend the order of
attachment to include unpaid commissions in excess of the amount stated in
the complaint. On December 22, 2008, the RTC granted CISC's motion and
issued a new writ of preliminary attachment.
· On April 13, 2009, the RTC, acting on the partial motions for
reconsideration by both CISC and MSAPL, modified the amount covered by
the writ to reflect the correct amount prayed for by CISC in its previous
motion to amend the attachment order conditioned upon the latter's payment
of additional docket fees. It also denied MSAPL's opposition to the
attachment order for lack of merit.
· On July 2, 2009, the RTC modified its order insofar as it allowed
CISC to pay docket fees within a reasonable time.
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IMPORTANT!
· On July 8, 2009, CISC posted a bond in the amount of
P113,197,309.10 through Plaridel Surety and Insurance Company
(Plaridel) in favor of MSAPL, which the RTC approved on the same date.
Two days later, MSAPL filed a motion to determine the sufficiency of the
bond because of questions regarding the financial capacity of Plaridel. But
before the RTC could act on this motion, MSAPL, apparently getting hold of
Plaridel's latest financial statements, moved to recall and set aside the
approval of the attachment bond on the ground that Plaridel had no
capacity to underwrite the bond pursuant to Section 215 of the old
Insurance Code because its net worth was only P214,820,566.00 and
could therefore only underwrite up to P42,964,113.20.
· On September 4, 2009, the RTC denied MSAPL's motion, finding
that although Plaridel cannot underwrite the bond by itself, the amount
covered by the attachment bond "was likewise re-insured to sixteen other
insurance companies." However, "for the best interest of both parties," the
RTC ordered Plaridel to submit proof that the amount of P95,819,770.91
was reinsured. Plaridel submitted its compliance on September 11, 2009,
attaching therein the reinsurance contracts.
------------------------------------------------------------------------------------------------------
-----------
· On September 18, 2009, MSAPL, MSPI and Atty. Ofelia Cajigal
filed a petition for certiorari before the CA, docketed as CA-G.R. SP No.
110511, assailing the Orders of the RTC dated April 13, 2009, July 2, 2009,
July 8, 2009, and September 4, 2009. In its now-assailed Decision elated
November 25, 2009, the CA granted the petition. It concluded that the
petition for certiorari was filed on time because MSAPL did not abandon their
right to impugn the evidence submitted in the application for the writ of
preliminary attachment, because they filed a motion to determine the
sufficiency of the bond. On the merits, it held that the RTC exceeded its
authority when it "ordered the issuance of the writ [of preliminary attachment]
despite a dearth of evidence to clearly establish [CISC's] entitlement thereto,
let alone the latter's failure to comply with all requirements therefor." Noting
that the posting of the attachment bond is a jurisdictional requirement, the
CA concluded that since Plaridel's capacity for single risk coverage is limited
to 20% of its net worth, or P57,866,599.80, the RTC "should have set aside
the second writ outright for non-compliance with Sections 3 and 4 of Rule
57."
· After the CA perfunctorily denied CISC's motion for reconsideration
on April 23, 2010, it filed this petition for review on certiorari.
Issue: Whether the RTC committed grave abuse of discretion when it
approved the attachment bond whose face amount exceeded the retention
limit of the surety.
Held:
· Section 215 of the old Insurance Code, the law in force at the time
Plaridel issued the attachment bond, limits the amount of risk that insurance
companies can retain to a maximum of 20% of its net worth. However, in
computing the retention limit, risks that have been ceded to authorized
reinsurers are ipso jure deducted.
· In mathematical terms, the amount of retained risk is computed by
deducting ceded/reinsured risk from insurable risk. If the resulting amount is
below 20% of the insurer's net worth, then the retention limit is not breached.
In this case, both the RTC and CA determined that, based on Plaridel's
financial statement that was attached to its certificate of authority issued by
the Insurance Commission, its net worth is P289,332,999.00.
· Plaridel's retention limit is therefore P57,866,599.80, which is below · WHEREFORE, the petition is GRANTED. The Decision dated
the Pl13,197,309.10 face value of the attachment bond. However, it only November 25, 2009 and Resolution dated April 23, 2010 of the Court of
retained an insurable risk of P17,377,938.19 because the remaining amount Appeals in CA-G.R. SP No. 110511 are SET ASIDE.
of P98,819,770.91 was ceded to 16 other insurance companies. Thus, the
risk retained by Plaridel is actually P40 Million below its maximum retention
limit. Therefore, the approval of the attachment bond by the RTC was in
order. Contrary to MSAPL's contention that the RTC acted with grave abuse
of discretion, the Court held that the RTC not only correctly applied the law
but also acted judiciously when it required Plaridel to submit proof of its
reinsurance contracts after MSAPL questioned Plaridel's capacity to
underwrite the attachment bond. Apparently, MSAPL failed to appreciate
that by dividing the risk through reinsurance, Plaridel's attachment bond
actually became more reliable-as it is no longer dependent on the financial
stability of one company-and, therefore, more beneficial to MSAPL.
· In cancelling Plaridel's insurance bond, the CA also found that
because the reinsurance contracts were issued in favor of Plaridel, and not
MSAPL, these failed to comply with the requirement of Section 4, Rule 57 of
the Rules of Court requiring the bond to be executed to the adverse party.
This led the CA to conclude that "the bond has been improperly and
insufficiently posted."
· The Supreme Court then reversed the CA and held that the
reinsurance contracts were correctly issued in favor of Plaridel. A contract of
reinsurance is one by which an insurer (the "direct insurer" or "cedant")
procures a third person (the "reinsurer") to insure him against loss or liability
by reason of such original insurance. It is a separate and distinct
arrangement from the original contract of insurance, whose contracted risk is
insured in the reinsurance agreement. The reinsurer's contractual
relationship is with the direct insurer, not the original insured, and the latter
has no interest in and is generally not privy to the contract of reinsurance.
Put simply, reinsurance is the "insurance of an insurance."
· By its nature, reinsurance contracts are issued in favor of the direct
insurer because the subject of such contracts is the direct insurer's risk-in
this case, Plaridel's contingent liability to MSAPL and not the risk assumed
under the original policy. The requirement under Section 4, Rule 57 of the
Rules of Court that the applicant's bond be executed to the adverse party
necessarily pertains only to the attachment bond itself and not to any
underlying reinsurance contract. With or without reinsurance, the obligation
of the surety to the party against whom the writ of attachment is issued
remains the same.