Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.
48049 June 29, 1989
A. The conclusion in law of respondent Court that respondent insurer has the right to rescind the policy contract when insured is already dead is not in accordance with existing law and applicable jurisprudence. B. The conclusion in law of respondent Court that respondent insurer may be allowed to avoid the policy on grounds of concealment by the deceased assured, is contrary to the provisions of the policy contract itself, as well as, of applicable legal provisions and established jurisprudence. C. The inference of respondent Court that respondent insurer was misled in issuing the policy are manifestly mistaken and contrary to admitted evidence. (Rollo, p. 7) The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance as rescission must allegedly be done during the lifetime of the insured within two years and prior to the commencement of action. The contention is without merit.
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners, vs. THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents. O.F. Santos & P.C. Nolasco for petitioners. Ferry, De la Rosa and Associates for private respondent. GUTIERREZ, JR., J.: This is a petition for review on certiorari of the Court of Appeals' decision affirming the decision of the Insurance Commissioner which dismissed the petitioners' complaint against respondent Philippine American Life Insurance Company for the recovery of the proceeds from their late father's policy. The facts of the case as found by the Court of Appeals are: Petitioners appeal from the Decision of the Insurance Commissioner dismissing herein petitioners' complaint against respondent Philippine American Life Insurance Company for the recovery of the proceeds of Policy No. 1082467 in the amount of P 80,000.00. On September 23,1973, Tan Lee Siong, father of herein petitioners, applied for life insurance in the amount of P 80,000.00 with respondent company. Said application was approved and Policy No. 1082467 was issued effective November 6,1973, with petitioners the beneficiaries thereof (Exhibit A). On April 26,1975, Tan Lee Siong died of hepatoma (Exhibit B). Petitioners then filed with respondent company their claim for the proceeds of the life insurance policy. However, in a letter dated September 11, 1975, respondent company denied petitioners' claim and rescinded the policy by reason of the alleged misrepresentation and concealment of material facts made by the deceased Tan Lee Siong in his application for insurance (Exhibit 3). The premiums paid on the policy were thereupon refunded . Alleging that respondent company's refusal to pay them the proceeds of the policy was unjustified and unreasonable, petitioners filed on November 27, 1975, a complaint against the former with the Office of the Insurance Commissioner, docketed as I.C. Case No. 218. After hearing the evidence of both parties, the Insurance Commissioner rendered judgment on August 9, 1977, dismissing petitioners' complaint. (Rollo, pp. 91-92) The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for lack of merit Hence, this petition. The petitioners raise the following issues in their assignment of errors, to wit:
The pertinent section in the Insurance Code provides: Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract. After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindable by reason of the fraudulent concealment or misrepresentation of the insured or his agent. According to the petitioners, the Insurance Law was amended and the second paragraph of Section 48 added to prevent the insurance company from exercising a right to rescind after the death of the insured. The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations or concealment of material facts insofar as health and previous diseases are concerned if the insurance has been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section 48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in the second paragraph of Section 48 is "for a period of two years." As noted by the Court of Appeals, to wit: The policy was issued on November 6,1973 and the insured died on April 26,1975. The policy was thus in force for a period of only one year and five months. Considering that the insured died before the two-year period had lapsed, respondent company is not, therefore, barred from proving that the policy is void ab initio by reason of the insured's fraudulent concealment or misrepresentation. Moreover, respondent company rescinded the contract of insurance and refunded the premiums paid on September 11, 1975, previous to the commencement of this action on November 27,1975. (Rollo, pp. 99-100) xxx xxx xxx
that by January. They supply all the information. The petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who dies right after taking out and paying for a life insurance policy.1972. no longer lie. 5. It was he who accomplished the application. He could have obtained a bigger insurance. the deceased was complaining of progressive weight loss and abdominal pain and was diagnosed to be suffering from hepatoma.1976. 73 Phil. by affixing his signature on the application form. not just P 80. submitting the application to their companies. no matter how patent or well founded. At one time or another most of us have been subjected to that pressure. Rule 131. Feliciano. Inc. The agents in short do what the company set them out to do. For. The Insular Life case was decided some forty years ago when the pressure of insurance salesmanship was not overwhelming as it is now. at page 205: It is of common knowledge that the selling of insurance today is subjected to the whirlwind pressure of modern salesmanship. having been subjected to the whirlwind pressure of insurance salesmanship this Court itself has long denounced.n. Urbano Guinto. Rules of Court]. Part II. The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy. pp. (t. (t." (p. [Sec. 201. Rollo) The legislative answer to the arguments posed by the petitioners is the "incontestability clause" added by the second paragraph of Section 48. he certainly could have gotten a bigger insurance. August 23. The same is not well taken. For as long as no adverse medical history is revealed in the application form. pp. Exhibit 6) Because of the concealment made by the deceased of his consultations and treatments for hypertension.n. This court took judicial cognizance of the whirlwind pressure of insurance selling-especially of the agent's practice of 'supplying the information. He was the object of solicitations and visits. would not have affixed his signature on the application form unless he clearly understood its significance. 1973 for consolation and claimed to have been diabetic for five years.s. prepare and answer the applications. Guinto. preparing and answering the application.. et al. concluding the transactions and otherwise smoothing out all difficulties. v. 68).1976.n. should stand charged of fraudulent concealment and misrepresentation. the assured who dies within the two-year period. when the insurance companies competing with one another could be counted by the fingers. Insurer Philamlife could have presented as witness its Medical Examiner Dr. that practice. Aug. it would be unjust if. whether or not. affirmed the correctness of all the entries and answers appearing therein. (pp. 23. These agents are to be found all over the length and breadth of the land. Another physician. a businessman. Guinto. 83 SCRA 361 ).s. respondent company was thus misled into accepting the risk and approving his application as medically standard (Exhibit 5. We call attention to what this Honorable Court said in Insular Life v. Philamlife could have put to the witness stand its Agent Bienvenido S.s. the petitioners allege that the policy intends that the medical examination must be conducted before its issuance otherwise the insurer "waives whatever imperfection by ratification. the insured still lives within such period. He did not.000. submit the applications to their companies. Teves. He was only pressured by insistent salesmen to do so.C) and dispensing with further medical investigation and examination (Exhibit 5-A). conclude the transactions. (pp. a relative to Dr. The deceased. 142." We agree with the Court of Appeals which ruled: On the other hand. If his purpose were to misrepresent and to conceal his ailments in anticipation of death during the two-year period.. The petitioners cite:
This Honorable Supreme Court has had occasion to denounce the pressure and practice indulged in by agents in selling insurance. p. (Sweet Lines. The petitioners argue that no evidence was presented to show that the medical terms were explained in a layman's language to the insured. testified that the deceased came to see him on December 14. Insurance companies send detailed instructions to their agents to solicit and procure applications. (t. Assured did not knock at the door of the insurer to buy insurance. They state that the insurer should have presented its two medical field examiners as witnesses. Assured was a man of means. petitioners argue that no evidence was presented by respondent company to show that the questions appearing in Part II of the application for insurance were asked. Wenceslao Vitug. The petitioners state: Here then is a case of an assured whose application was submitted because of repeated visits and solicitations by the insurer's agent. Rollo) xxx xxx xxx
. 96-98) There is no strong showing that we should apply the "fine print" or "contract of adhesion" rule in this case. They are stimulated to more active efforts by contests and by the keen competition offered by the other rival insurance companies. 1976. Again Philamlife did not. pp. Dr. and otherwise smooth out all difficulties. an applicant for insurance is presumed to be healthy and physically fit and no further medical investigation or examination is conducted by respondent company. would be allowed to collect on the policy even if the insured fraudulently concealed material facts.00. medical. 140-142. when the population of this country was less than one-fourth of what it is now. diabetes and liver disorders..The petitioners contend that there could have been no concealment or misrepresentation by their late father because Tan Lee Siong did not have to buy insurance. Philamlife did not. Exhibit 2). the deceased was examined by Dr. 1973. 138139. It is but to be expected that he. 8-10. The evidence for respondent company shows that on September 19. the defenses of concealment or misrepresentation. Victoriano Lim and was found to be diabetic and hypertensive. April 8. Congress felt this was a sufficient answer to the various tactics employed by insurance companies to avoid liability. Moreover. 5(c) and (d). After two years. Rollo) xxx xxx xxx
In the face of all the above. (Rollo. the presumption is that a person intends the ordinary consequence of his voluntary act and takes ordinary care of his concerns. explained to and understood by the deceased so as to prove concealment on his part.
petitioner rejected respondent's claim for the insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It owns two oil mills. however. 306-7432321-9 (Ps 6M) and 306-7432324-4 (Ps 3M) extend insurance coverage to your oil mill under Building No. Branch 53. in a letter dated October 15. J. that is for Congress or the Insurance Commission to provide as protection against high pressure insurance salesmanship."7 Petitioner moved for reconsideration.
The two oil mills were separately covered by fire insurance policies issued by petitioner American Home Assurance Co. following such undertakings by fine print conditions which destroy the substance of the promise.000. 1995 is hereby AFFIRMED in toto. 5. judgment is rendered in favor of the plaintiff ordering defendant to pay plaintiff: (a) P4. No. Philippine Branch. the instant appeal is hereby DISMISSED for lack of merit and the trial court's Decision dated October 16.2 The new oil mill was insured for six million pesos (P6. 1999.R. after trial. 2001
(b) (c) (d)
P80. respondent. 14. The latter came to be commonly referred to as the new oil mill. They have failed to discharge that burden. Orient Protective Assurance Assn. Respondent Tantuco Enterprises.
SO ORDERED. the pertinent portion of which states: "WHEREFORE. 306-7432321-9 for the same term. where petitioner ascribes to the appellate court the following errors: "(1) The Court of Appeals erred in its conclusion that the issue of non-payment of the premium was beyond its jurisdiction because it was raised for the first time on appeal.1 The first oil mill was insured for three million pesos (P3.4 A fire that broke out in the early morning of September 30. 306-7432324-3 for the period March 1. Thereafter. 1995. Lucena City in Civil Case No. The questioned decision of the Court of Appeals is AFFIRMED. SO ORDERED.000. Both are located at factory compound at Iyam.00 for and as attorney's fees. and Pay the costs. On October 16. 184) There is no showing that the questions in the application form for insurance regarding the insured's medical history are in smaller print than the rest of the printed form or that they are designed in such a way as to conceal from the applicant their importance. TANTUCO ENTERPRISES..1991 gutted and consumed the new oil mill. Inc. 1991 to 1992. petitioner. 92-51 dated October 16. 1999.000. 1999. It stated that the description of the insured establishment referred to another building thus: "Our policy nos. CV No. Respondent immediately notified the petitioner of the incident."8
AMERICAN HOME ASSURANCE COMPANY. INC. We are limited in this petition to ascertaining whether or not the respondent Court of Appeals committed reversible error. the present course of action.000.: Before us is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals in CA-G.406. P300. Branch 53 of Lucena City..00 for litigation expenses.
Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G. whilst the affected oil mill was under Building No. or exceptions which in any way tend to work a forfeiture of the policy should be construed most strongly against those for whose benefit they are inserted. it started operating its second oil mill. conditions."6 Petitioner assailed this judgment before the Court of Appeals. If a warning in bold red letters or a boxed warning similar to that required for cigarette advertisements by the Surgeon General of the United States is necessary.40 representing damages for loss by fire of its insured property with interest at the legal rate. PUNO. 1991.
. "5 A complaint for specific performance and damages was consequently instituted by the respondent with the RTC. Lucena City. In 1988. vs. is engaged in the coconut oil milling and refining industry.00) under Policy No. 138941 October 8. the lower court rendered a Decision finding the petitioner liable on the insurance policy thus: "WHEREFORE. (Trinidad v. was denied for lack of merit in a Resolution promulgated on June 10..00) under Policy No.000. All provisions. WHEREFORE. The appellate court upheld the same in a Decision promulgated on January 14.R. Hence. 52221 promulgated on January 14. The latter then sent its appraisers who inspected the burned premises and the properties destroyed.000.3 Official receipts indicating payment for the full amount of the premium were issued by the petitioner's agent. the petition is hereby DENIED for lack of merit. It appears that respondent commenced its business operations with only one oil mill. 67 Phil.536. 1995. which affirmed in toto the Decision of the Regional Trial Court. and most favorably toward those against whom they are meant to operate.It is a matter of common knowledge that large amounts of money are collected from ignorant persons by companies and associations which adopt high sounding titles and print the amount of benefits they agree to pay in large black-faced type. It is the petitioners' burden to show that the factual findings of the respondent court are not based on substantial evidence or that its conclusions are contrary to applicable law and jurisprudence. The motion.
we find that the same proceeds from a wrong assumption. Left: Adjoining thence an imperfect wall by Bldg. 4. the policy issuing clerk just merely (sic) copied the wording from the old policy and what she typed is that the description of the boundaries from the old policy was copied but she inserted covering the new oil mill and to me at that time the important thing is that it covered the new oil mill because it is just within one compound and there are only two oil mill[s] and so just enough. G."14 (emphasis supplied) It is thus clear that the source of the discrepancy happened during the preparation of the written contract. In other words. Anent petitioner's argument that the respondent is barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong. Despite the fact that the policy in question was issued way back in 1988. among others.12 Notwithstanding. it would be absurd to assume that respondent would protect its first oil mill for different amounts and leave uncovered its second one. Right: by an open space thence by Bldg. because it retained the policy without having the same corrected before the fire by an endorsement in accordance with its Condition No. 4. is that it did not have the supposed wrong description or mistake corrected."10 The petition is devoid of merit. not to the burned oil mill. and its policy issuing clerk.''13 (emphasis supplied. it argues that this specific boundary description clearly pertains. This irreconcilable difference can only be clarified by admitting evidence aliunde. What exacerbates respondent's predicament. two policies were prepared having the same date one for the old one and the other for the new oil mill and exactly the same policy period. In fact. No. then there is no need to specify it as new."9 "(3) With due respect. Under the Rules of Court.) If the parties really intended to protect the first oil mill. The latter ought to know that a second agreement over that same realty results in its over insurance. the oil mill insured is specifically described in the policy by its boundaries in the following manner: "Front: by a driveway thence at 18 meters distance by Bldg. The imperfection in the description of the insured oil mill's boundaries can be attributed to a misunderstanding between the petitioner's general agent. 306-7432324-4 issued by the petitioner. However. 2. the courts are inclined to consider that the policy of insurance covers any building which the parties manifestly intended to insure. Camaligan:
However. LUCENA CITY UNBLOCKED. the contractual intention of the parties cannot be understood from a mere reading of the instrument. the greatest liberality is shown by the courts in giving effect to the insurance. return it immediately for alteration. and despite the "Important Notice" in the policy that "Please read and examine the policy and if incorrect. copra cake and copra mills whilst contained in the new oil mill building. Borja assured Mr. a party may present evidence to modify. By way of conclusion." just as it is "barred by estoppel from claiming that the description of the insured oil mill in the policy was wrong. explain or add to the terms of the written agreement if he puts in issue in his pleading. Edison Tantuco. to our mind. therefore. In construing the words used descriptive of a building insured. No. sir. it is beyond dispute. Borja: "Atty. Evidence on record reveals that respondent's operating manager. Edison Tantuco is to cover the new oil mill that is why when I presented the existing policy of the old policy. Rear: by an open space thence at 8 meters distance. Alfredo Borja. notified Mr. IYAM. that what the parties manifestly intended to insure was the new oil mill.
. and since a mistake as to the identity and character of the building is extremely unlikely."
"On machineries and equipment with complete accessories usual to a coconut oil mill including stocks of copra. petitioner argues that respondent is "barred by the parole evidence rule from presenting evidence (other than the policy in question) of its self-serving intention (sic) that it intended really to insure the burned oil mill. Tantuco that the use of the adjective new will distinguish the insured property. the first oil mill is already covered under Policy No. which will explain the imperfection and clarify the intent of the parties. Mr. These facts lead us to hold that the present case falls within one of the recognized exceptions to the parole evidence rule." respondent apparently did not call petitioner's attention with respect to the misdescription. The primary reason advanced by the petitioner in resisting the claim of the respondent is that the burned oil mill is not covered by any insurance policy. As mentioned earlier. while the contract explicitly stipulated that it was for the insurance of the new oil mill."(2) The Court of Appeals erred in its legal interpretation of 'Fire Extinguishing Appliances Warranty' of the policy. Mr. the oil mill gutted by fire was not the one described by the specific boundaries in the contested policy. It is unthinkable for respondent to obtain the other policy from the very same company. Mr. or about three years before the fire. BO. No. its failure to express the true intent and agreement of the parties thereto. but to the other mill. Thus. petitioner posits." These contentions can not pass judicial muster. however inaccurate the description may be. the boundary description written on the policy concededly pertains to the first oil mill. situate (sic) at UNNO. the misdescription in the policy. who made the error of copying the boundaries of the first oil mill when typing the policy to be issued for the new one. 28. ALONG NATIONAL HIGH WAY. the conclusion of the Court of Appeals giving no regard to the parole evidence rule and the principle of estoppel is erroneous.15 Here. I had the policy prepared. extending its protection:
What did you do when you received the report?
A: I told them as will be shown by the map the intention really of Mr. Borja (the petitioner's agent with whom respondent negotiated for the contract) about the inaccurate description in the policy. Indeed. As testified to by Mr. This is obvious from the categorical statement embodied in the policy.11 In view of the custom of insurance agents to examine buildings before writing policies upon them. According to it.
the courts will read and construe the policy as a whole and if possible. Gerardo Zarsuela. however. From the admission of respondent's own witness. contests this finding of the appellate court. keeping in mind always.19 Petitioner.16 We again stress that the object of the court in construing a contract is to ascertain the intent of the parties to the contract and to enforce the agreement which the parties have entered into. implicitly assumed a valid and subsisting insurance policy. give effect to all the parts of the contract. This fact was admitted by the oil mill's expeller operator. the former only paid it P75. The amount of the premium stated on the face of the policy was P89. Borja. Borja. hence.20. sir. Tantuco: "ATTY. those identified in the list.The assurance convinced respondent. Certainly. that at least in so far as Exhibit A is concern you have read what the policy contents.18 The Court of Appeals refused to consider this contention of the petitioner." Petitioner adds that the issue was the subject of the cross-examination of Mr. we find that neither did it require that the appliances are restricted to those mentioned in the warranty. as a matter of fact. petitioner argues. petitioner claims that respondent forfeited the renewal policy for its failure to pay the full amount of the premium and breach of the Fire Extinguishing Appliances Warranty. The deficiency. which will serve as the oil mill's first line of defense in case any part of it bursts into flame.. any witness to testify that respondent indeed failed to pay the full amount of the premium. despite the impreciseness in the specification of the boundaries. will you tell us as the manager of the company whether the boundaries stated in Exhibit A-2 are the boundaries of the old (sic) mill that was burned or not. petitioner contends that respondent violated the express terms of the Fire Extinguishing Appliances Warranty. Borja. Again. A: It was not.00. Borja regarding this matter and he told me that what is important is the word new oil mill. Borja's testimony.: "24. fire fighting equipments such as. We agree with the appellate court's conclusion that the aforementioned warranty did not require respondent to provide for all the fire extinguishing appliances enumerated therein.770. both during direct and cross examinations. Likewise. Within the vicinity of the new oil mill can be found the following devices: numerous portable fire extinguishers. leaving a difference of P14. you will only do that if you will make to increase the amount and it is by indorsement not by another policy. Additionally. Most significant to point. sir. Though it briefly touched on the alleged deficiency. who acknowledged that the paid amount was lacking by P14. was not for the purpose of proving this fact.623. which the petitioner cited. or that it did not pay the full amount. this doubt is to be resolved against the insurer. In other words. respondent was able to comply with the warranty. The argument fails to impress. Borja said. Mr. suffices to invalidate the policy. To be sure. In determining the intent of the parties to the contract.20. on the other hand. the argument lacks merit. two fire
. what the warranty mandates is that respondent should maintain in efficient working condition within the premises of the insured property. you can never insured (sic) one property with two (2) policies. Mr.147. such was made in the course of discussing a discount or rebate. petitioner fatally neglected to present. I called up Mr. Fire Extinguishing Appliances as mentioned below shall be maintained in efficient working order on the premises to which insurance applies: PORTABLE EXTINGUISHERS INTERNAL HYDRANTS EXTERNAL HYDRANTS FIRE PUMP 24-HOUR SECURITY SERVICES
BREACH of this warranty shall render this policy null and void and the Company shall no longer be liable for any loss which may occur. The said warranty provides: "WARRANTED that during the currency of this Policy. but not limited to. It must be remembered that he was called to the stand basically to demonstrate that an existing policy issued by the petitioner covers the burned building. It insists that the issue was raised in paragraph 24 of its Answer. SALONGA: Q: You mentioned. the question of the supposed inadequate payment was never raised. the courts will consider the purpose and object of the contract. viz. the whole tenor of Mr. during the whole course of the trial. Section 18 of the Rules of Court. It held that this issue was raised for the first time on appeal. The thrust of the cross-examination of Mr. in accordance with Section 77 of the Insurance Code. when the issues to be resolved in the trial court were formulated at the pre-trial proceedings. the insurance will cover the new oil mill. It is true that the asseverations petitioner made in paragraph 24 of its Answer ostensibly spoke of the policy's condition for payment of the renewal premium
on time and respondent's non-compliance with it.20 by reason of a discount or rebate.623. 361 of the Insurance Code is illegal. or that it did not pay the amount on time. which the agent apparently gave the respondent.17 In a further attempt to avoid liability. pursuant to Rule 46."20 Petitioner argues that the warranty clearly obligates the insured to maintain all the appliances specified therein. which rebate under Sec. The breach occurred when the respondent failed to install internal fire hydrants inside the burned building as warranted. Finally. Plaintiff has not complied with the condition of the policy and renewal certificate that the renewal premium should be paid on or before renewal date. beyond its jurisdiction to resolve. Yet. In determining what the parties intended. it did not contain any specific and definite allegation that respondent did not pay the premium. the prime rule that in the event of doubt. (sic) Kindly take a look in the page of Exhibit A which was marked as Exhibit A-2 particularly the boundaries of the property insured by the insurance policy Exhibit A. This can be seen from the testimony on cross of Mr. however.
thus. which read "Endorsement to Include Earthquake Shock (Exh. computed as follows: Item -
Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G. 1990 under Policy No.00 -
GULF RESORTS.: Before the Court is the petition for certiorari under Rule 45 of the Revised Rules of Court by petitioner GULF RESORTS. "earthquake shock endt. "C". La Union and had its properties in said resort insured originally with the American Home Assurance Company (AHAC-AIU). "Item 5" in those policies referred to the two
. PHILIPPINE CHARTER INSURANCE CORPORATION.. It ought to be remembered that not only are warranties strictly construed against the insurer.22 and an emergency fire engine.700. vs.00 and paid P42. etc. that subsequently AHAC(AIU) issued in plaintiff’s favor Policy No.R. "H") which carried the entry under "Endorsement/Warranties at Time of Issue". Petitioner assails the appellate court decision1 which dismissed its two appeals and affirmed the judgment of the trial court. Petitioner avers that. "2-B". against respondent PHILIPPINE CHARTER INSURANCE CORPORATION. pursuant to its earthquake shock endorsement rider. ‘D-1". IN VIEW WHEREOF. 1. J.
(2) swimming pools only (Exhs. INC.00 on the furniture. Exhibits "E" and "F-1" was deleted and the entry under Endorsements/Warranties at the time of issue read that plaintiff renewed its policy with AHAC (AIU) for the period of March 14. 1985-86. 1986-1987.21 fire hydrant.14 (Exhs.. and (3) a fire hose which has a connection to one of the external hydrants. Insurance Policy No. 156167 May 16." (Item 5 only) (Exhs. No. 1989 (Exhs.800. "3-B" and "F-2").691. the instant petition is hereby DISMISSED. 1989 to March 14.00 on the Clubhouse only @ .00 other buildings include as follows: a) Tilter House P19. "C-1". The facts as established by the court a quo. 393. "2". "1-B". 206-4182383-0 covering the period March 14. "D-1.000. 206-4568061-9 (Exh. contained in the building above-mentioned@ .hoses. by themselves be reasonably interpreted. "D-1". and affirmed by the appellate court are as follows: [P]laintiff is the owner of the Plaza Resort situated at Agoo.392%.00 on the two swimming pools. 31944 covers all damages to the properties within its resort caused by earthquake. only (against the peril of earthquake shock only) @ 0.600. petitioner.000." and "E" and two (2) swimming pools only (Exhs. "6-B-1") in the amount of P10. finding no reversible error in the impugned Decision. "D". Here. and 1987-88 (Exhs. likewise. "C-1". also Exhs.500.23 All of these equipments were in efficient working order when the fire occurred.24 That reasonableness is to be ascertained in light of the factual conditions prevailing in each case.658. the risk of loss from earthquake shock was extended only to plaintiff’s two swimming pools. "G" also "G-1") and in said policy the earthquake endorsement clause as indicated in Exhibits "C-1". (2) an emergency fire engine. we find that there is no more need for an internal hydrant considering that inside the burned building were: (1) numerous portable fire extinguishers.490%. INC. "6-A" and "6-B") as premium thereof. DECISION PUNO. respondent. "1". "E" and "F".000. but they should.100% 116. 2005
P7. "E" and "F-1"). Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner. For review are the warring interpretations of petitioner and respondent on the scope of the insurance company’s liability for earthquake damage to petitioner’s properties. In the first four insurance policies issued by AHAC-AIU from 1984-85. "3" and "4" respectively). 1988 to March 14.
defendant’s Policy No. that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake (Exhs. 776. 31944 issued by defendant.068. Tax 409.600.551% c) House Shed P55. 31944 issued by defendant. "6-C-1".T.2
.00 for a total premium of P45.05 TOTAL 45.700. issued by AHAC (Exhs.89 Prem. that defendant issued Policy No. the premium against the peril of earthquake shock is the same. the following: Rate-Various Premium – P37.540% P100.00 0.159. "C" and "1-B". fixtures. 1990 to March 14. that in all the six insurance policies (Exhs.52 – Typhoon
– 1. "3-A".000. that the above break-down of premiums shows that plaintiff paid only P393. "C". "I").10 F. "F-02" and "4-A-1". Stamps 3. "I"). "G" and "H") and in Policy No.92 (Exh.00 – ES Doc. "1-D". notwithstanding what is stated in the printed conditions of this policy due to the contrary.030. 206-4568061-9 (Exh. 1991 for P10. "4-B".00 as premium against earthquake shock (ES).S. "5-A". that on July 16. that in Exhibit "7-C" the word "included" above the underlined portion was deleted. including the two swimming pools in its Agoo Playa Resort were damaged. which is the policy in question.061. "H") provided that the policy wording and rates in said policy be copied in the policy to be issued by defendant. "2-D". "C". "G-2" and "5-C1".00 (Exhs.00 for furniture.0.92. 31944 to plaintiff covering the period of March 14. 31944 (Exh. "F".000.60 F/L – 2. "D".000.420. the shock endorsement provide(sic): In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees. "2-B" and "3-B-1" and "3-B-2". lines air-con and operating equipment that plaintiff agreed to insure with defendant the properties covered by AHAC (AIU) Policy No. "D". that is P393. contained on the right-hand upper portion of page 7 thereof. "6-D" and "7-C").76 – EC – 393.551% b) Power House P41.159. "F". "E". 1990 an earthquake struck Central Luzon and Northern Luzon and plaintiff’s properties covered by Policy No. that in the computation of the premium.00 0. "E". "G" and "H").
000. there is no basis for the grant of the other damages prayed for by plaintiff.000.00. 31944. where the language used in an insurance contract or application is such as to create ambiguity the same should be resolved against the party responsible therefor. representing losses sustained by the insured properties.) Costs.427. To the mind of [the] Court. therefore. WHEREFORE.842. After review. 31944.8 Petitioner and respondent failed to arrive at a settlement. THE TRIAL COURT ERRED IN FINDING THAT PLAINTIFF-APPELLANT CAN ONLY RECOVER FOR THE DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS FIRE POLICY NO. 2.) The sum of P428. 1990. viz: The above schedule clearly shows that plaintiff paid only a premium of P393. with interest thereon.000. defendant is ordered to pay plaintiffs the sum of THREE HUNDRED EIGHTY SIX THOUSAND PESOS (P386.) The sum of P5. 1990.
Because it is the finding of the Court as stated in the immediately preceding paragraph that defendant is liable only for the damage caused to the two (2) swimming pools and that defendant has made known to plaintiff its willingness and readiness to settle said liability. petitioner filed its formal demand7 for settlement of the damage to all its properties in the Agoo Playa Resort. Inc. xxx We also find that the Court a quo was correct in not granting the plaintiff-appellant’s prayer for the imposition of interest – 24% on the insurance claim and 6% on loss of income allegedly amounting to P4. 1990.R. the insurance company which prepared the contract. 31944 for damages on its properties. representing continuing losses sustained by plaintiff on account of defendant’s refusal to pay the claims. on January 24. EXH "I") BY LIMITING ITSELF TO A CONSIDERATION OF THE SAID POLICY ISOLATED FROM THE CIRCUMSTANCES SURROUNDING ITS ISSUANCE AND THE ACTUATIONS OF THE PARTIES AFTER THE EARTHQUAKE OF JULY 16. On the other hand. On August 7. 1990.9 Thus. 4. then assigned the investigation of the claim to an independent claims adjuster. 1994.779.e. "E". No pronouncement as to costs. Plaintiff correctly points out that a policy of insurance is a contract of adhesion hence. Thus. after carefully perusing the documentary evidence of both parties. 1990.00.. which the plaintiffappellant had with AHAC (AIU) and upon which the subject insurance contract with Philippine Charter Insurance Corporation is said to have been based and copied (Exh. 1990. Defendant having admitted that the damage to the swimming pools was appraised by defendant’s adjuster at P386.00 per month.13 Petitioner’s Motion for Reconsideration was denied.000. 5. premises considered. by virtue of the contract of insurance. Inc. respondent denied petitioner’s claim on the ground that its insurance policy only afforded earthquake shock coverage to the two swimming pools of the resort. the Court does not agree that the action filed by plaintiff is baseless and highly speculative since such action is a lawful exercise of the plaintiff’s right to come to Court in the honest belief that their Complaint is meritorious. as computed under par. Respondent instructed petitioner to file a formal claim. thus: However. defendant must. 29 of the policy (Annex "B") until fully paid. The prayer.3 On July 30. with interest at 6% per annum from the date of the filing of the Complaint until defendant’s obligation to plaintiff is fully paid.00. through its adjuster. covered an extended earthquake shock insurance on all the insured properties.00 by way of attorney’s fees and expenses of litigation.After the earthquake. THE TRIAL COURT ERRED IN NOT HOLDING THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE DAMAGES CLAIMED.) The sum of P500. Mr.00) representing damage to the two (2) swimming pools. pay plaintiff said amount. As to the counterclaims of defendant. From the above observations the Court finds that only the two (2) swimming pools had earthquake shock coverage and were heavily damaged by the earthquake which struck on July 16. THE CIRCUMSTANCES SURROUNDING THE ISSUANCE OF SAID POLICY AND THE ACTUATIONS OF THE PARTIES SUBSEQUENT TO THE EARTHQUAKE OF JULY 16. "G" and "H"). respondent filed a partial appeal. Since the defendant-appellant has expressed its
. the same premium it paid against earthquake shock only on the two swimming pools in all the policies issued by AHAC(AIU) (Exhibits "C". through its Vice-President A. THE TRIAL COURT ERRED IN DETERMINING PLAINTIFF-APPELLANT’S RIGHT TO RECOVER UNDER DEFENDANT-APPELLEE’S POLICY (NO. 1991. petitioner filed an appeal with the Court of Appeals based on the following assigned errors:14 A. de Leon stated that "except for the swimming pools. 3. C.280. respondent. petitioner advised respondent that it would be making a claim under its Insurance Policy No. the appellate court affirmed the decision of the trial court and ruled. Bayne Adjusters and Surveyors.12 On February 21. Bayne Adjusters and Surveyors.000."6 On August 11. "D". requested petitioner to submit various documents in support of its claim.. petitioner filed a complaint10 with the regional trial court of Pasig praying for the payment of the following: 1. CONSIDERING ITS PROVISIONS. de Leon. by way of exemplary damages. the lower court after trial ruled in favor of the respondent.11 Respondent filed its Answer with Special and Affirmative Defenses with Compulsory Counterclaims. On August 23. assailing the lower court’s failure to award it attorney’s fees and damages on its compulsory counterclaim. all affected items have no coverage for earthquake shocks. WITH INTEREST COMPUTED AT 24% PER ANNUM ON CLAIMS ON PROCEEDS OF POLICY. B. We are not convinced that the last two (2) insurance contracts (Exhs.) The sum of P500. 1990. the language used in the policy in litigation is clear and unambiguous hence there is no need for interpretation or construction but only application of the provisions therein. of defendant for damages is likewise denied.00. i.4 rendered a preliminary report5 finding extensive damage caused by the earthquake to the clubhouse and to the two swimming pools. "F" and "G"). From this fact the Court must consequently agree with the position of defendant that the endorsement rider (Exhibit "7-C") means that only the two swimming pools were insured against earthquake shock. "I").00 against the peril of earthquake shock.
No. FEA Warranty & Annual Payment Agreement On Long Term Policies. Inc. being the award thereof an exception rather than a rule. No additional premium was paid to warrant coverage of the other properties in the resort. B. On the other hand. Second. No costs. It was respondent which caused the ambiguity when it made the policy in issue. stated that such deletion was a mere inadvertence. that it is proper for it to avail of a petition for review by certiorari under Rule 45 of the Revised Rules of Court as its remedy. July 18. through Mr. this qualification in the title was deleted. the provisions in its policy were practically identical to its earlier policies. none of the previous policies issued by AHAC-AIU from 1983 to 1990 explicitly extended coverage against earthquake shock to petitioner’s insured properties other than on the two swimming pools. the unqualified and unrestricted nature of the earthquake shock endorsement is confirmed in the body of the insurance policy itself. petitioner told respondent that it wanted an exact replica of its latest insurance policy from American Home Assurance Company (AHAC-AIU).. holding that the plaintiff-appellant’s action is not baseless and highly speculative. Earthquake Shock Endt.. Sixth. CA. petitioner’s payment of additional premium in the amount of P393. Bayne Adjusters and Surveyors. categorically stated that its previous policy. We find that the Court a quo did not err in granting the same. Thus. that the policy’s earthquake shock endorsement clearly covers all of the properties insured and not only the swimming pools. When it secured an insurance policy from respondent. both appeals are hereby DISMISSED and judgment of the Trial Court hereby AFFIRMED in toto. under the doctrine of equitable estoppel.15 Petitioner filed the present petition raising the following issues:16 A. it is unbelievable for respondent to claim that it only made an inadvertent omission when it deleted the said qualification. The premium for the earthquake shock coverage was already included in the premium paid for the policy. WHEREFORE. from which respondent’s policy was copied. RATHER THAN ALL THE PROPERTIES COVERED THEREUNDER. Inc. v. The amount was the same amount paid by petitioner for earthquake shock coverage on the two swimming pools from 1990-1991. that the earthquake shock endorsement rider should be given precedence over the wording of the insurance policy. it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award (Country Bankers Insurance Corp. As per its agreement with petitioner. such as to remove the two swimming pools from the coverage for the risk of fire. 115838. likewise requested petitioner to submit the necessary documents for its building claims and other repair costs. there is no basis for the appellate court to hold that the additional premium was not paid under the extended coverage.. Lianga Bay and Community Multi-Purpose Coop. any ambiguity in the earthquake shock endorsement should be resolved in favor of petitioner and against respondent. that in their previous insurance policies. in view of all the foregoing. it cannot deny that the insurance policy it issued to petitioner covered all of the properties within the resort. It should not be used to limit the respondent’s liability for earthquake shock to the two swimming pools only. it will not be disturbed on appeal (Castro et al. ONLY THE TWO (2) SWIMMING POOLS." and it should be interpreted as all inclusive.
.. January 25. Moreover. ARE INSURED AGAINST THE RISK OF EARTHQUAKE SHOCK. ATTORNEY’S FEES AND EXPENSES OF LITIGATION. endorsements/warranties enumerated at the time of issue. in a letter19 by its representative Manuel C. the deletion of the phrase pertaining to the limitation of the earthquake shock endorsement to the two swimming pools in the policy schedule did not expand the earthquake shock coverage to all of petitioner’s properties. Coming to the defendant-appellant’s prayer for an attorney’s fees. because the rider is the more deliberate expression of the agreement of the contracting parties. Ninth.. 31944. the parties’ contemporaneous and subsequent acts show that they intended to extend earthquake shock coverage to all insured properties.. if such discretion is well-exercised. and there is no need for calibration of the evidence in order to establish the facts upon which this petition is based. Thus. Typhoon Endorsement. and there was no increase in the premium paid. Respondent’s insurance adjuster.R. It used the words "any property insured by this policy. that the qualification referring to the two swimming pools had already been deleted in the earthquake shock endorsement."17 Third. only the two swimming pools were insured against earthquake shock. G. Eleventh. WHETHER THE COURT OF APPEALS CORRECTLY HELD THAT UNDER RESPONDENT’S INSURANCE POLICY NO. in the last two policies. J. et al. respondent copied its policy from the AHAC-AIU policy provided by petitioner. WHETHER THE COURT OF APPEALS CORRECTLY DENIED PETITIONER’S PRAYER FOR DAMAGES WITH INTEREST THEREON AT THE RATE CLAIMED. From 1988 until 1990. After the July 16. Petitioner admitted that from 1984 to 1988.00 shows that the policy only covered earthquake shock damage on the two swimming pools. AHAC-AIU. 2002). respondent made the following counter arguments:18 First. 136914.willingness to pay the damage caused on the two (2) swimming pools. Tenth. covered only earthquake shock for the two swimming pools. as the Court a quo and this Court correctly found it to be liable only. Extended Coverage Endt. v. 2002). which covered all the resort’s properties for earthquake shock damage and respondent agreed. which states that it is "[s]ubject to: Other Insurance Clause. Eighth. the qualification of the endorsement limiting the earthquake shock endorsement should be interpreted as a caveat on the standard fire insurance policy. AHAC-AIU. it then cannot be said that it was in default and therefore liable for interest. limits were placed on the
Seventh. Third. Although the first five policies contained the said qualification in their rider’s title. Petitioner contends: First. 1990 earthquake.R. Therefore. G. Baranda III. Fourth. Fifth. This inadvertence did not make the policy incomplete. Quijano. Second. respondent assured petitioner that it was covered for earthquake shock. No. long-standing is the rule that the award thereof is subject to the sound discretion of the court.
the phrase "Item 5 – P393. four key items are important in the resolution of the case at bar.000. the rider attached to the policy. only the two swimming pools were specified as included. In addition. petitioner alleged that in its policies from 1984 through 1988. In all of its seven insurance policies. . Vehicle and Smoke). the use of the qualifier "ANY" instead of "ALL" to describe the property covered was done deliberately to enable the parties to specify the properties included for earthquake coverage. namely:-(a) Earthquake. that this insurance covers loss or damage (including loss or damage by fire) to any of the property insured by this Policy occasioned by or through or in consequence of Earthquake. The policy binds the petitioner. We hold that the petition is devoid of merit." stated. attorney’s fees and litigation expenses. 31944. . . it is not liable for interest. it had the opportunity to read its conditions. However. petitioner only paid P393. . the riders of the old policy and the policy in issue are identical. the only difference being the designation of the two swimming pools as "Item 3. Any ambiguity in the policy can be easily resolved by looking at the other provisions. . where only the two swimming pools were noted as covered for earthquake shock damage. it cannot be considered to be in default. . IN CONSIDERATION OF A DISCOUNT OF 5% OR 7 ½ % OF THE NET PREMIUM x x x POLICY HEREBY UNDERTAKES TO CONTINUE THE INSURANCE UNDER THE ABOVE NAMED x x x AND TO PAY THE PREMIUM. premiums must be paid for all the properties covered. Respondent complied with this requirement.nor did it broaden the scope of the endorsement whose descriptive title was merely enumerated. First. and therefore. . . . Respondent’s only deviation from the agreement was when it modified the provisions regarding the replacement cost endorsement. . Sixth. Petitioner’s own evidence shows that it only required respondent to follow the exact provisions of its previous policy from AHAC-AIU. No other premium was paid for earthquake shock coverage on the other properties. viz: ANNUAL PAYMENT AGREEMENT ON LONG TERM POLICIES THE INSURED UNDER THIS POLICY HAVING ESTABLISHED AGGREGATE SUMS INSURED IN EXCESS OF FIVE MILLION PESOS. in its Complaint. the words of the policy reflect the parties’ clear intention to limit earthquake shock coverage to the two swimming pools. there is no basis for petitioner to claim damages.000. under the breakdown for premium payments. The same phrase is used in toto in the policies from 1989 to 1990. Before petitioner accepted the policy.
. Petitioner anchors its claims on AHAC-AIU’s inadvertent deletion of the phrase "Item 5 Only" after the descriptive name or title of the Earthquake Shock Endorsement. With regard to the issue under litigation. petitioner did not inform respondent of its requirement that all of its properties must be included in the earthquake shock coverage.00 as premium for coverage of the swimming pools against earthquake shock. AMOUNT RATES PREMIUM xxx 3 393.100%-E/S 393. In Insurance Policy No. .21 it was stated that: PREMIUM RECAPITULATION ITEM NOS.00 – On the two (2) swimming pools only (against the peril of earthquake shock only)20 Second.00 – on the two swimming pools only (against the peril of earthquake shock only)" meant that only the swimming pools were insured for earthquake damage. in order for the earthquake shock endorsement to be effective. . titled "Extended Coverage Endorsement (To Include the Perils of Explosion. Earthquake Endorsement In consideration of the payment by the Insured to the Company of the sum of P. 6 stated: 6. 23 Fourth.00 0. ." Fifth. Seventh. The adjuster’s letter notifying petitioner to present certain documents for its building claims and repair costs was given to petitioner before the adjuster knew the full coverage of its policy. Since respondent was willing and able to pay for the damage caused on the two swimming pools. in the designation of location of risk. . directly or indirectly of any of the following occurrences. . Policy Condition No. notwithstanding what is stated in the printed conditions of this Policy to the contrary. respondent did not do any act or give any assurance to petitioner as would estop it from maintaining that only the two swimming pools were covered for earthquake shock. volcanic eruption or other convulsion of nature. Eighth. Fourth.0022] Third. It did not object to any deficiency nor did it institute any action to reform the policy. additional premium the Company agrees. This insurance does not cover any loss or damage occasioned by or through or in consequence. .000. viz:
ITEM 3 – 393. specially the enumeration of the items insured. Aircraft.
Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. In the procurement of the insurance police (sic) from March 14. 1991 pp. Yes.28 In the subject policy. Now Mr. Yes. It is limited to the two swimming pools. no premium payments were made with regard to earthquake shock coverage. Thus. Is Forte Insurance Agency a department or division of your company? A. As borne out by petitioner’s witnesses: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN.000. Q. although we made an oral instruction to that effect of extending the coverage on (sic) the other properties of the company.
. according to you. 1985 the coverage on earthquake shock was limited to the two swimming pools only? A.26 (Emphasis ours) An insurance premium is the consideration paid an insurer for undertaking to indemnify the insured against a specified peril. Yes. taken and interpreted together. The final action is still with us although they can recommend what insurance to take. damage or liability arising from an unknown or contingent event. If you are referring to Forte Insurance Agency. 4. For the period from March 14. neither do particular words or phrases necessarily determine its character.27 In fire. The policy cannot be construed piecemeal. 12-13 Q. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. November 25. 1989.00 corresponding to the two swimming pools only? A. sir. 1988 up to March 14.Provided always that all the conditions of this Policy shall apply (except in so far as they may be hereby expressly varied) and that any reference therein to loss or damage by fire should be deemed to apply also to loss or damage occasioned by or through or in consequence of Earthquake. indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only. This is consistent with the history of petitioner’s previous insurance policies from AHAC-AIU. Yes. Certain stipulations cannot be segregated and then made to control. sir. All the provisions and riders. Yes. did you give written instruction to Forte Insurance Agency advising it that the earthquake shock coverage must extend to all properties of Agoo Playa Resort in La Union? A. And they are independent of your company insofar as operations are concerned? A. sir. is that not correct? A. will it be correct to state also that insofar as your insurance policy during the period from March 4. yes. there is a provision here that it was only for item 5. The insured has an insurable interest. Yes. Did you also do this through your insurance agency? A. Section 2(1) of the Insurance Code defines a contract of insurance as an agreement whereby one undertakes for a consideration to indemnify another against loss. sir. Such assumption of risk is part of a general scheme to distribute actual losses among a large group of persons bearing a similar risk. Yes. and 5. They are our insurance agency. they are separate entity. 1991 pp. 3. Q.
Q. Mantohac. the policy extended earthquake shock coverage to all of the insured properties. the premium payable becomes a debt as soon as the risk attaches. Q. sir. And that instruction. was very important because in April 1987 there was an earthquake tremor in La Union? A. The insurer assumes the risk. except on the two swimming pools. We did not make any written instruction. Q. specifically shown in the warranty. sir. an insurance contract exists where the following elements concur: 1. 1988 to March 14. 1989. More specifically Item 5 states the amount of P393. No. The insured is subject to a risk of loss by the happening of the designated peril. In consideration of the insurer's promise. sir.24 Petitioner contends that pursuant to this rider. did you personally arrange for the procurement of this policy? A. There is no mention of any premium payable for the other resort properties with regard to earthquake shock. sir. sir. Q. No. But insofar as the procurement of the insurance policy is concerned they are of course subject to your instruction. casualty. is that correct? A.
2. Q.25 All its parts are reflective of the true intent of the parties. November 25. 23-26 Q. and marine insurance. no qualifications were placed on the scope of the earthquake shock coverage. Q. Thus. the insured pays a premium. 1984 to March 4. And you wanted to protect all your properties against similar tremors in the [future]. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other. A careful examination of the premium recapitulation will show that it is the clear intent of the parties to extend earthquake shock coverage only to the two swimming pools.
Typhoon Endorsement. 9-12 Atty. Now. I assure you that this one covers the two swimming pools with respect to earthquake shock endorsement. earthquake shock cannot stand alone without the other half of it." sir. ATTY. your Honor. sir. Is that for each of the six (6) policies namely: Exhibits C. in the Clauses and Warranties: Item 5 only (Earthquake Shock Endorsement). DIRECT EXAMINATION OF JUAN BARANDA III TSN. Plaintiff’s witness. For swimming pools we do cover earthquake shock. I examined the policy and seeing that the warranty on the earthquake shock endorsement has no more limitation referring to the two swimming pools only. they are normally affected by earthquake but not by fire. 1992 pp. on the basis on (sic) the wordings indicated in Exhibits C to H respectively what was the extent of the coverage [against] the peril of earthquake shock as provided for in each of the six (6) policies? xxx
Q. Are you referring to the insurance policy issued by American Home Assurance Company marked Exhibit "G"? Atty. the thing that comes to my mind is either insuring a swimming pool. Did you have occasion to review of (sic) these six (6) policies issued by your company [in favor] of Agoo Playa Resort? WITNESS: Yes[. Now. sir.Q. ATTY. Earthquake Shock Endorsement. as required under Section 50. 1992 pp. after this policy was delivered to you did you bother to check the provisions with respect to your instructions that all properties must be covered again by earthquake shock endorsement? A. However. in the enumeration "Earthquake Shock Endorsement. Q. Mr. E. wach (sic) of these six (6) policies marked in evidence as Exhibits C to H respectively carries an earthquake shock endorsement[?] My question to you is. The earthquake shock endorsement cannot stand alone. MEJIA: Witness referring to Exhibit C-1. August 11. underwriter for AHAC-AIU: DIRECT EXAMINATION OF JUAN BARANDA III30 TSN. August 11. warranties or endorsements to which the policy is subject. if we are going to look at the premium there has been no change
.] I remember having gone over these policies at one point of time. As I have mentioned earlier. sir. foundations. Yes. G and H? A. this phrase is merely an enumeration of the descriptive titles of the riders. For building we covered it for full earthquake coverage which includes earthquake shock… COURT: As far as earthquake shock endorsement you do not have a specific coverage for other things other than swimming pool? You are covering building? They are covered by a general insurance? WITNESS: Earthquake shock coverage could not stand alone. paragraph 2 of the Insurance Code. clauses. As explained by the testimony of Juan Baranda III. Extended Coverage Endorsement. Based on it. sir. F. Mantohac testified and he alleged that only Exhibits C. MEJIA: What is your basis for stating that the coverage against earthquake shock as provided for in each of the six (6) policies extend to the two (2) swimming pools only? WITNESS: Because it says here in the policies. FEA Warranty & Annual Payment Agreement on Long Term Policies"29 to the insurance policy as proof of the intent of the parties to extend the coverage for earthquake shock. If we are covering building or another we can issue earthquake shock solely but that the moment I see this. We also hold that no significance can be placed on the deletion of the qualification limiting the coverage to the two swimming pools. Witness: A. Petitioner also cited and relies on the attachment of the phrase "Subject to: Other Insurance Clause. WITNESS: We do not normally cover earthquake shock endorsement on stand alone basis. what can you say about that testimony of plaintiff’s witness? WITNESS:
WITNESS: The extent of the coverage is only up to the two (2) swimming pools. E and F inclusive [remained] its coverage against earthquake shock to two (2) swimming pools only but that Exhibits G and H respectively entend the coverage against earthquake shock to all the properties indicated in the respective schedules attached to said policies. I was contented already that the previous limitation pertaining to the two swimming pools was already removed. D. D. 23-25 Q. Mejia: Yes. Mejia: We respectfully manifest that the same exhibits C to H inclusive have been previously marked by counsel for defendant as Exhibit[s] 1-6 inclusive.
ATTY. I (sic) can even be lesser. what exactly did you tell Atty. sir. I must say that the coverage was not broaden (sic) to include the other items. the phrase "Item no. sir. is it not? A. Yes. Witness. sir. CROSS-EXAMINATION OF JUAN BARANDA III TSN. all the provisions here will be the same except that of the premium rates? A. 1992 pp. Petitioner’s own witness testified to this agreement. Q. He assured me that with regards to the insurance premium rates that they will be charging will be limited to this one. As I see. September 7. Respondent only insured the properties as intended by the petitioner. Q. Will it be correct to state[. Yes. I did not discover any difference inasmuch (sic) as I was assured already that the policy wordings and rates were copied from the insurance policy I sent them but it was only when this case erupted that we discovered some discrepancies. Just to be clear about this particular answer of yours Mr. 12-14 Atty. January 14. We are not only going to consider the two (2) swimming pools of the other as stated in the policy. With respect to the items declared for insurance coverage did you notice any discrepancy at any time between those indicated in Exhibit "I" and those indicated in Exhibit "H" respectively? A. Mejia: Q. 1992 pp. it was inadvertent because of the previous policies that we have issued with no specific attachments. there is no increase in the amount of the premium. Yes. that you made a comparison of the provisions and scope of coverage of Exhibits "I" and "H" sometime in the third week of March. we don’t. Witness. 4-5 Q. January 14. the deletion of that particular phrase is inadvertent.00 on the two (2) swimming pools only against the peril of earthquake shock which I understood before that this provision will have to be placed here because this particular
. I think there is a substantial increase in the premium. 1990 or thereabout? A. premium rates and so on. Yes. 1992 pp. Q. about that time. It was inadvertent. If you are going to do some computation based on the rates you will arrive at the same premiums. sir.000.with respect to the rates. Everytime (sic) there is a renewal if the intention of the insurer was to include the earthquake shock. sir. So. sir.] Mr. With regard to the wordings I did not notice any difference because it was exactly the same P393. And at that time did you notice any discrepancy or difference between the policy wordings as well as scope of coverage of Exhibits "I" and "H" respectively? A. I told him that the insurance that they will have to get will have the same provisions as this American Home Insurance Policy No. sir. to Exhibit "H". Omlas (sic) to copy from Exhibit "H" for purposes of procuring the policy from Philippine Charter Insurance Corporation? A. viz: CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. . COURT: They are the same. You are referring to Exhibit "H" of course? A. That is why the phrase "earthquake shock to the two (2) swimming pools only" was placed. No. ANDRES: As an insurance executive will you not attach any significance to the deletion of the qualifying phrase for the policies? WITNESS: My answer to that would be. 206-4568061-9. Q. Exhibits G and H which you have pointed to during your direct-examination. ANDRES: Will you not also agree with me that these exhibits. Q. the premium rates? WITNESS: They are the same in the sence (sic). 4-6 ATTY. we do not cover. Being a company underwriter. in the amount of the coverage. CROSS EXAMINATION OF LEOPOLDO MANTOHAC TSN. your Honor. 5 only" meaning to (sic) the two (2) swimming pools was deleted from the policies issued by AIU.
The Court also rejects petitioner’s contention that respondent’s contemporaneous and subsequent acts to the issuance of the insurance policy falsely gave the petitioner assurance that the coverage of the earthquake shock endorsement included all its properties in the resort. is it not? xxx ATTY. ANDRES: Would you as a matter of practice [insure] swimming pools for fire insurance? WITNESS: No.
January 26. may we know from you Engr. Umlas categorically denied having given such assurances.provision under the peril of earthquake shock only is requested because this is an insurance policy and therefore cannot be insured against fire. 31944. I remember that when I returned to the office after the inspection. and secondly. viz: DIRECT EXAMINATION OF ALBERTO DE LEON (Bayne Adjusters and Surveyors. Yes. sir. the parties do not bargain on equal footing. Inc. while the other party merely affixes his signature or his "adhesion" thereto. so this has to be placed. No costs.. respondent never meant to lead petitioner to believe that the endorsement for earthquake shock covered properties other than the two swimming pools. I based my statement on my findings. I remember I had a talk with Atty. September 23. Petitioner cannot claim it did not know the provisions of the policy. Leopoldo Mantohac. prepares the stipulations in the contract. in compliance with the condition set by the petitioner. Omlas (sic) what kind of policy you would want for those facilities in Agoo Playa? A. specifically in the replacement cost endorsement.. copied AIU Policy No. 1993 pp. then enclosed in parenthesis (against the peril[s] of earthquake shock only). xxx
determine the efficacy of the claims of contending parties. Finally.37 IN VIEW WHEREOF. Bayne Adjusters and Surveyors. the judgment of the Court of Appeals is affirmed. is reflective of petitioner’s knowledge.
Q. Q. From the inception of the policy. Did you take any step Mr. Do you recall the circumstances that led to your discussion regarding the extent of coverage of the policy issued by Philippine Charter Insurance Corporation? A. The verbal assurances allegedly given by respondent’s representative Atty. What steps did you take? A. de Leon your basis. But as testified to by the representative of Bayne Adjusters and Surveyors.32 Consequently. we have called on lower courts to remain careful in scrutinizing the factual circumstances behind each case to
Q. because upon my examination of the policy I found out that under Item 3 it was specific on the wordings that on the two swimming pools only. sir. When I examined the policy of the Philippine Charter Insurance Corporation I specifically told him that the policy and wordings shall be copied from the AIU Policy No. usually a corporation. petitioner puts much stress on the letter of respondent’s independent claims adjuster. Petitioner cannot rely on the general rule that insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it. et al. these contracts are viewed as traps for the weaker party whom the courts of justice must protect. Consequently. Now. It is true that there was variance in some terms. Witness to ensure that the provisions which you wanted in the American Home Insurance policy are to be incorporated in the PCIC policy? A. Then. Respondent. I told him that I will agree to that renewal of this policy under Philippine Charter Insurance Corporation as long as it will follow the same or exact provisions of the previous insurance policy we had with American Home Assurance Corporation. for stating that except for the swimming pools all affected items have no coverage for earthquake shock? xxx A. viz: DIRECT EXAMINATION OF LEOPOLDO MANTOHAC36 TSN. 22-26 Q.31 A contract of adhesion is one wherein a party. Umlas were not proved. petitioner had required the respondent to copy verbatim the provisions and terms of its latest insurance policy from AHAC-AIU. but the principal provisions of the policy remained essentially similar to AHAC-AIU’s policy. a direct participant in securing the insurance policy of petitioner.) TSN. 206-45680619. if any. In Development Bank of the Philippines v. 206-4568061-9 in drafting its Insurance Policy No. when I examined the summary of premium payment only Item 3 which refers to the swimming pools have a computation for premium payment for earthquake shock and all the other items have no computation for payment of premiums. and I relayed to him what I had found out in the policy and he confirmed to me indeed only Item 3 which were the two swimming pools have coverage for earthquake shock. the weaker party's participation being reduced to the alternative to take it or leave it. 1991 pp. Did you indicate to Atty. Yes. The testimony of Mr.33 The case law will show that this Court will only rule out blind adherence to terms where facts and circumstances will show that they are basically one-sided. I got a photocopy of the insurance coverage policy and it was indicated under Item 3 specifically that the coverage is only for earthquake shock. Through the years.34 Thus.35 the parties. the courts have held that in these type of contracts. Umlas (sic). 20-21 Q. we cannot apply the "fine print" or "contract of adhesion" rule in this case as the parties’ intent to limit the coverage of the policy to the two swimming pools only is not ambiguous. In sum. National Merchandising Corporation. any ambiguity therein is resolved against the insurer. The petition for certiorari is dismissed. Atty. were presumed to have assented to the assailed documents with full knowledge. Thus. or construed liberally in favor of the insured. Inc. Inc. who were acute businessmen of experience. there is no ambiguity in the terms of the contract and its riders.
Republic of the Philippines SUPREME COURT Manila FIRST DIVISION
. We cannot apply the general rule on contracts of adhesion to the case at bar.
. Quezon that we have lost approximately 32 pieces of logs during loading of the SS Woodlock. The two marine policies bore the numbers 53 HO 1032 and 53 HO 1033 (Exhibits B and C. Except as shall be indicated in the discussion of the opinion of this Court the substantial correctness of still particular finding having been disputed. Bay. 53 H0 1033 (Exhibit B) was for 542 pieces of logs equivalent to 499. THE HONORABLE COURT OF APPEALS and WORKMEN'S INSURANCE COMPANY. 1963 (Exhibit H). 53 110 1032 and 713 HO 1033 were received in good order at their point of destination. The logs were to be loaded on the 'SS Woodlock' which docked about 500 meters from the shoreline of the Diapitan Bay. INC. the defendant requested the First Philippine Adjustment Corporation to inspect the loss and assess the damage. Thank you for your attention. 45 pieces of logs were salvaged. in the total amount of Pl1. but before the issuance of the two marine policies Nos. In a letter dated April 4. Policy No. Mandanas observed that 'it is only fair and equitable to indemnify the insured under Cover Note No. 53 HO 1032 and 53 HO 1033. the adjuster found that 'the loss of 30 pieces of logs is not covered by Policies Nos.R. The regular marine cargo policies were issued by the defendant in favor of the plaintiff on April 2.250. 1964. on the ground they defendant's investigation revealed that the entire shipment of logs covered by the two marines policies No.) EMMANUEL S.250. On September 14. 1964. 1963. m. The denial of the claim by the defendant was brought by the plaintiff to the attention of the Insurance Commissioner by means of a letter dated March 21. ft. No.
DE CASTRO. The total cargo insured under the two marine policies accordingly consisted of 1. Although dated April 4. ft.000. 53 HO 1032 and 53 HO 1033. 1963 (Sgd. ft. 1010 (Exhibit A). respondents. L-38613 February 25. bad weather developed resulting in 75 pieces of logs which were rafted together co break loose from each other. printed Marine Policy form as filed with and approved by the Office of the Insurance Commissioner (Exhibit A). thereby raising a question of law reviewable by this Court 3 are as follows: March 19. 53 H0 1033 was for 853 pieces of logs equivalent to 695. On January 13. the plaintiff informed the defendant about the loss of 'appropriately 32 pieces of log's during loading of the 'SS Woodlock'.00.000.04 with interest at the rate of 12% interest from receipt of notice of loss on April 15. some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. we wish to remain. 1010 for shipment of 1. on March 29.000 bd. Manila.498 bd. In said report. Quezon Province to Okinawa and Tokyo. the sum of P3.: This petition seeks the review of the decision of the Court of Appeals reversing the decision of the Court of First Instance of Manila in favor of petitioner and against private respondent which ordered the latter to pay the sum of Pll. PACIFIC TIMBER EXPORT CORPORATION The findings of the of fact of the Court of Appeals. 1010. as shown by the stamp impression appearing on the left bottom corner of said letter.042. We would like to inform you that we have received advance preliminary report from our Office in Diapitan. and advised early settlement of the said marine loss and salvage claim (Exhibit L).395 logs. 1010 because the said Note had become 'null and void by virtue of the issuance of Marine Policy Nos. Very respectfully yours.250.286. 1963. 1963 up to the complete payment. General Manager. the loss of 30 pieces of logs is within the 1.195.000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan. The defendant issued on said date Cover Note No. Gentlemen: This has reference to Insurance Cover Note No. The said letter (Exhibit F) reads as follows: April 4. the letter was received in the office of the defendant only on April 15.950 board feet. Policy No. the defendant wrote the plaintiff denying the latter's claim. which are generally binding upon this Court. 1963. ** J. covered by Cover Note 1010 insured for $70. the plaintiff secured temporary insurance from the defendant for its exportation of 1. or the equivalent of 1. 1963.000 bd. the adjustment company submitted a computation of the defendant's probable liability on the loss sustained by the shipment. l963.G. 53 HO 1032 and 1033'(Exhibit J-1). In a reply letter dated March 30. but 30 pieces were verified to have been lost or washed away as a result of the accident. Philippines PACIFIC TIMBER EXPORT CORPORATION. 53 HO 1032 and 1033 inasmuch as said policies covered the actual number of logs loaded on board the 'SS Woodlock' However. 1963. After the issuance of Cover Note No. 1963. The adjustment company submitted its 'Report on August 23. respectively). 1963. Insurance Commissioner Francisco Y.548 board feet (Exhibit C). The logs were taken from the log pond of the plaintiff and from which they were towed in rafts to the vessel. in the total amount of P19. Inc.04 (Exhibit 4). petitioner. 1964 (Exhibit K).042. vs. On July 17. ATILANO Asst. 1982 Workmen's Insurance Company.00 as attorney's fees and the costs 1 thereby dismissing petitioner s complaint with costs.79 (Exhibit G). 2
. 1010'. Philippine Lauan and Apitong Logs. INC. The plaintiff subsequently submitted a 'Claim Statement demanding payment of the loss under Policies Nos. We will send you an accurate report all the details including values as soon as same will be reported to us. It was further stated that the said loss may be considered as covered under Cover Note No. insuring the said cargo of the plaintiff "Subject to the Terms and Conditions of the WORKMEN'S INSURANCE COMPANY. Japan. At about 10:00 o'clock a. while the logs were alongside the vessel.
6 It may be true that the marine insurance policies issued were for logs no longer including those which had been lost during loading operations.On June 26. In the proceedings that took place later in the Office of the Insurance Commissioner. This is a fact admitted by an official of respondent company. for non-payment by it was not chargeable against its fault. Thus Section 84 of the Insurance Act provides: Section 84. September 24. From April 1963 to July.—Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground. Petitioner contends that the Cover Note was issued with a consideration when.
. waiver can successfully be raised against private respondent. the presumption is that a credit was intended and policy is valid. 5 1. the logs having already been safely placed aboard. 1963. 1964. it would serve no practical purpose in the realm of commerce. no cause for the petitioner to lose what is due it as if there had been payment of premium. and is supported by the doctrine that where a policy is delivered without requiring payment of the premium. for no such premium could have been paid. it was not necessary to ask petitioner to pay premium on the Cover Note. This coverage could not have been no other than what was stipulated in the Cover Note. OBJECTIONS ON THAT GROUND ARE WAIVED UNDER SECTION 84 OF THE INSURANCE ACT. enough time was available for private respondent to determine if petitioner was guilty of delay in communicating the loss to respondent company. This would make no difference. for no loss or damage had to be assessed on the coverage arising from the marine insurance policies. If the Note is to be treated as a separate policy instead of integrating it to the regular policies subsequently issued. At any rate. The non-payment of premium on the Cover Note is. Juan Jose Camacho. II THE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT WAS RELEASED FROM LIABILITY UNDER THE COVER NOTE DUE TO UNREASONABLE DELAY IN GIVING NOTICE OF LOSS BECAUSE THE COURT DISREGARDED THE PROVEN FACT THAT PRIVATE RESPONDENT DID NOT PROMPTLY AND SPECIFICALLY OBJECT TO THE CLAIM ON THE GROUND OF DELAY IN GIVING NOTICE OF LOSS AND. the cover note is made subject to the terms and conditions of the marine policies. for the number or volume of logs lost can be determined independently as in fact it had been so ascertained at the instance of private respondent itself when it sent its own adjuster to investigate and assess the loss. after the issuance of the marine insurance policies. it did not contain. and the payment of premiums is one of the terms of the policies. which was on April 15. 1963 and its computation of respondent's liability on September 14. as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. with a view to the payment thereof on the insurance agreement. the appealed decision is set aside and the decision of the Court of First Instance is reinstated in toto with the affirmance of this Court. Had all the logs been lost during the loading operations. CONSEQUENTLY. therefore. It must be because it did not find any delay. for it is in a real sense a contract. thereby leaving no account unpaid by petitioner due on the insurance coverage. the more practical procedure is simply to deduct the premium from the amount due the petitioner on the Cover Note. The defense of delay as raised by private respondent in resisting the claim cannot be sustained. 4 Petitioner assigned as errors of the Court of Appeals. it is not disputed that petitioner paid in full all the premiums as called for by the statement issued by private respondent after the issuance of the two regular marine insurance policies. which must be deemed to include the Cover Note. by express stipulation. No special pronouncement as to costs. the defendant informed the Insurance Commissioner that. 7 2. does not militate against the validity of petitioner's contention. but for loss during transit. ACCORDINGLY. as this Court fails to find a real and substantial sign thereof. 1965). As a logical consequence. The fact that no separate premium was paid on the Cover Note before the loss insured against occurred. This is how the cover note as a "binder" should legally operate otherwise. the claim of the plaintiff is being denied on the ground that the cover note is null and void for lack of valuable consideration (Exhibit M). no separate premiums are intended or required to be paid on a Cover Note. The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. private respondent should then have raised this ground of delay to avoid liability. 1963. For obvious reasons. however. We find duly substantiated petitioner's assignments of error. as well as its computation of respondent's liability on the insurance coverage. The nature of this specific ground for resisting a claim places the insurer on duty to inquire when the loss took place. This had to be so because the risk insured against is not for loss during operations anymore. Thus it sent its adjuster to investigate and assess the loss in July. From what has been said. since by the nature of the Cover Note. 33. on advice of their attorneys. 1963. liability on the note would have already arisen even before payment of premium. it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. for the loss insured against having already occurred. 1963. From this undisputed fact. As already stated earlier. It did not do so. but after the issuance of the Cover Note. this Court is satisfied and convinced that as expressly provided by law. The adjuster went as far as submitting his report to respondent. The undisputed facts show that instead of invoking the ground of delay in objecting to petitioner's claim of recovery on the cover note. the purpose and function of the Cover Note would be set at naught or rendered meaningless. private respondent's reaction upon receipt of the notice of loss. not a mere application for insurance which is a mere offer. the following: I THE COURT OF APPEALS ERRED IN HOLDING THAT THE COVER NOTE WAS NULL AND VOID FOR LACK OF VALUABLE CONSIDERATION BECAUSE THE COURT DISREGARDED THE PROVEN FACTS THAT PREMIUMS FOR THE COMPREHENSIVE INSURANCE COVERAGE THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT INCLUDED THE COVER NOTE WAS PAID BY PETITIONER AND THAT NO SEPARATE PREMIUMS ARE COLLECTED BY PRIVATE RESPONDENT ON ALL ITS COVER NOTES. in charge of issuing cover notes of the respondent company (p. The adjuster submitted his report on August 23. and denied recovery therefrom. insofar as the
liability on the cover note is concerned. was to set in motion from July 1963 what would be necessary to determine the cause and extent of the loss. We uphold petitioner's submission that the Cover Note was not without consideration for which the respondent court held the Cover Note as null and void. But even on the assumption that there was delay. tsn. so that it could determine whether delay would be a valid ground upon which to object to a claim against it.