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LOSS AND NOTICE OF LOSS · Nov 20, 1996 UMC demanded atleast 50% payment of its claim

from CBIC
1.) UNITED MERCHANTS CORP v. COUNTRY BANKERS o Feb 1997, CBIC sent letter REJECTING CLAIM due to
INSURANCE CORPORATION BREACH OF CONDITION #15
“If the claim be in any respect fraudulent, or if any false
Doctrine: Burden of proof is the duty of any party to present evidence declaration be made or used in support thereof, or if any
to establish his claim or defense by the amount of evidence required by fraudulent means or devices are used by the Insured or
law, which is preponderance of evidence in civil cases. The party, anyone acting in his behalf to obtain any bene t under this
whether plaintiff or defendant, who asserts the affirmative of the issue Policy; or if the loss or damage be occasioned by the
has the burden of proof to obtain a favorable judgment. willful act, or with the connivance of the Insured, all the
o False and Material statement made with intent to deceive or defraud benefits under this Policy shall be forfeited”
voids an insurance policy
FACTS: · Feb 19, 1998 UMC complaint against CBIC with RTC of manila
· United Merchants Corp (UMC) is engaged in buying, selling, and o UMC Anchored it with Sworn Statement of Formal
manufacturing CHRISTMAS LIGHTS Claim and Certification made by Deputy Fire Chief/
o Leased warehouse 19B Dagot St., San Jose Senior Superintendent Garcia of Bureau of Fire
subdivision, Barrio Manresa, Quezon City. This is Protection.
where they Assembled and stored its products § “ FIRE BROKE out at 6:10pm, incurring
· September 6, 1995. UMC’s General Manager ALFREDO TAN damage of 55M to building and contents,
insured UMC’s Stocks in Trade of Christmas Lights against Fire with while insurance coverage amount to 50M
Country Bankers Insurance Corp (CBIC) for 15M, with CBIC”
o Fire insurance policy No HO/95-576 (Insurance policy) § NO EVIDENCE to prove that intentionally set
and Fire invoice 12959A, Valid until Sept 6, 1996. on fire
· On May 7, 1996 UMC and COUNTRY executed another § closed being ACCIDENTAL in nature.
ENDORSEMENT and INVOICE to FORM PART OF THE INSURANCE o CBIC Counterclaim:
POLICY § No cause of action
o this was to insure stocks against ADDITIONAL PERILS § Claim already Prescribed
“Typhoon, flood, ext. cover, and full earthquake” § Tainted with fraud bc.
o The Sum was INCREASED to 50M. effective May 7, · UMC’s statement of inventory said
1996 to January 10, 1997. it HAD NO STOCKS as of Dec 31,
o CBIC issued Endorsement where ALREDO TAN’S 1995
name was CHANGED TO UMC. · Suspicious purchases DOESN’T
· On July 3, 1996 FIRE gutted warehouse rented by UMC. AMOUNT to 25M
o CBIC designated CRM adjustment corp (CRM) to · Financial reports revealed that it
INVESTIGATE had INSUFFICIENT CAPITAL,
o CBIC’s Reinsurer, Central Surety, requested NBI to therefore couldn’t afford 50M stocks
conduct parallel investigation in trade.
· July 6, 1996 UMC submitted to COUNTRY Sworn Statement of
Formal Claim, with Proofs of its loss.
o UMC denied making false declaration, that it’s all o UMC failure to explain details of the alleged fire
genuine, Statement of inventory was for Internal accident, claim was overhauled by fraudulent
Revenue only transactions (financial report showed they had 825k in
§ Presented 5 witnesses 1995 raised to 20M in 1996)
· Disbursing Officer: testified it had
raw materials for lights, lights ISSUE: Whether or not UMC may claim the full coverage of its fire
already made, and lights purchased insurance policy.
from other people, delivered aug HELD: No, Burden of proof is the duty of any party to present evidence
1995 to may 1996. Was delivered to establish his claim or defense by the amount of evidence required by
to warehouse with receipts law, which is preponderance of evidence in civil cases. The party,
o In 1996 no importations and whether plaintiff or defendant, who asserts the affirmative of the issue
bought from local suppliers has the burden of proof to obtain a favorable judgment.
o UMC only had sales from o UMC Proof of its loss of stocks in trade amounting to P
fruits of business, not from 50,000,000.00,
lights o UMC submitted its Sworn Statement of Formal Claim
· ANNIE PABUSTAN together with the following documents: (1) letters of
· Metropolitan Bank and Trust credit and invoices for raw materials, Christmas
Company Officer lights and cartons purchased; (2) charges for
· Ernesto Luna- Delivery checker of assembling the Christmas lights; and (3) delivery
cargo delivery receipts of the raw materials.
· CRM’s Adjuster o However, the charges for assembling the Christmas
o CBIC presented lights and delivery receipts could not support its
§ Claims manager insurance claim.
§ SEC representative o The Insurance Policy provides that CBIC AGREED TO
§ NBI investigator INSURE UMCs stocks in trade.
· ARSON WAS COMMITTED based § UMC defined stock in trade as tangible
from interview with BRGY officials, personal property kept for sale or traffic.
however DIDN’T CONDUCT § ONLY letters of credit and invoices for raw
forensic investigation, nor did they materials, Christmas lights and cartons may
file a case for Arson. be considered.
o UMC deliberate intent to demand from insurance companies
RTC: In favor of UMC payment for indemnity of goods not existing at the time of the fire. This
o pay 43M constitutes the so-called fraudulent claim which, by express
o no dispute to insurance contract agreement between the insurers and the insured, is a ground for the
o Fraud is NEVER PRESUMED, CBIC failed to establish exemption of insurers from civil liability.
by clear and convincing evidence that documents by
SEC and BIR were true Further. ARSON and FRAUD are two separate grounds on 2 different
CA: In favor of CBIC sets of evidence.
o UMC claim under insurance policy VOID
2.) COUNTRY BANKERS INSURANCE CORPORATION v LIANGA the out-of-court declarant or actor upon whose reliability on which the
BAY AND COMMUNITY MULTI-PURPOSE COOPERATIVE worth of the out-of-court statement depends.
Doctrine: o Thus, the Sworn Statements of Jose Lomocso and Ernesto
1. REMEDIAL LAW; EVIDENCE; BURDEN OF PROOF; A PARTY Urbiztondo are inadmissible in evidence, for being hearsay, inasmuch
MUST PROVE HIS OWN AFFIRMATIVE ALLEGATIONS. — A party is as they did not take the witness stand and could not therefore be cross-
bound by his own affirmative allegations. This is a well-known postulate examined. There are exceptions to the hearsay rule, among which are
echoed in Section 1 of Rule 131 of the Revised Rules of Court. entries in official records. To be admissible in evidence, however, three
o Each party must prove his own affirmative allegations by the amount (3) requisites must concur, to wit: (a) that the entry was made by a
of evidence required by law which in civil cases, as in this case, is public officer, or by another person specially enjoined by law to do so;
preponderance of evidence, to obtain a favorable judgment. (b) that it was made by the public officer in the performance of his
o Where a risk is excepted by the terms of a policy which insures duties, or by such other person in the performance of a duty specially
against other perils or hazards, loss from such a risk constitutes a enjoined by law; and (c) that the public officer or other person had
defense which the insurer may urge, since it has not assumed that risk, sufficient knowledge of the facts by him stated, which must have been
and from this it follows that an insurer seeking to defeat a claim because acquired by him personally or through official information. The third
of an exception or limitation in the policy has the burden of proving that requisite was not met in this case since no investigation, independent of
the loss comes within the purview of the exception or limitation set up. If the statements gathered from Jose Lomocso, was conducted by Pfc.
a proof is made of a loss apparently within a contract of insurance, the Arturo V. Juarbal.
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 Facts:
limits its liability. Stated elsewise, since the petitioner in this case is o CBIC, engaged in insurance business.
defending on the ground of non-coverage and relying upon an o Lianga Bay and community multi-purpose cooperative is a Duly
exemption or exception clause in the fire insurance policy, it has the registered cooperate judicially declared insolvent, represented by
burden of proving the facts upon which such excepted risk is based, by Cornelio Jamero.
a preponderance of evidence. But petitioner failed to do so. o In 1989. CBIC and LIANGA BAY entered contract of FIRE
INSURANCE for stocks in trade
2. ADMISSIBILITY; HEARSAY RULE; ELUCIDATED. — A witness o from June 20, 1989 4pm to June 20, 1990
can testify only to those facts which he knows of his personal o July 1, 1989 12:40 am Lianga bay builfing in Lianga Surigao del sur
knowledge, which means those facts which are derived from his was gutted by fire and reduced to ashes, resulting into total loss of
perception. stocks in trade, furniture and fixtures, equipments and records
o Consequently, a witness may not testify as to what he merely o Lianga filed an Insurance claim with CBIC submitting
learned from others either because he was told or read or heard the o Spot report by Pfc. Artuto Juarbal, INP Investigator.
same. o Sworn Statement : by Jose Lomocoso
o Such testimony is considered hearsay and may not be received o Sworn Statement: by Ernesto Urbiztondo
as proof of the truth of what he has learned. o CBIC denied based on the documents that iwas set on fire by 2
o The hearsay rule is based upon serious concerns about the NPA rebels who wanted canned goods, rice and medicines for
trustworthiness and reliability of hearsay evidence inasmuch as such comrades in forest. Such was an EXCEPTED RISK in the policy
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
“This insurance does not cover any loss or damage presupposes that the loss occurred sure to causes which could not have
occasioned by or through or in consequence, directly or been prevented by insured, despite exercise of due diligence
indirectly, of any of the following occurrences, namely:
xxx xxx xxx DIFFERENCE BETWEEN ORDINARY NEGLIGENCE AND GROSS
(d) Mutiny, riot, military or popular uprising, insurrection, NEGLIGENCE. Authorities to prove that persons insured cannot recover
rebellion, revolution, military or usurped power. for a loss occasioned by their own wrongful acts are hardly necessary,
Any loss or damage happening during the existence of as the proposition involves an elementary principle of universal
abnormal conditions (whether physical or otherwise) which application. Losses may be recovered by the insured, though remotely
are occasioned by or through or in consequence, directly occasioned by the negligence or misconduct of the master or crew, if
or indirectly, of any of said occurrences shall be deemed proximately caused by the perils insured against, because such
to be loss or damage which is not covered by this mistakes and negligence are incident to navigation and constitute a part
insurance, except to the extent that the Insured shall prove of the perils which those who engage in such adventures are obliged to
that such loss or damage happened independently of the incur; but it was never supposed that the insured could recover
existence of such abnormal conditions.” indemnity for a loss occasioned by his own wrongful act or by that of
any agent for whose conduct he was responsible.
Trial Court: in favor LIANGA FACTS:
CA: AFFIREMD RTC o Anco enterprises company (ANCO) a partnership between Ang
Gui and Co To, engaged in shipping business
ISSUE: Whether or not Lianga may claim amount under the o owned M/T ANCO tugboat and D/B Lucio barge which
insurance policy operated as Common Carriers
HELD: Yes, A party is bound by his own affirmative allegations. This is o D/B Lucio had no engine, had to be towed by a tugboat
a well-known postulate echoed in Section 1 of Rule 131 of the Revised from one place to the other.
Rules of Court. Each party must prove his own affirmative allegations by o September 23, 1979 San Miguel Corporation shipped from
the amount of evidence required by law which in civil cases, as in this Mandaue, cebu ON BOARD d/b Lucio
case, is preponderance of evidence, to obtain a favorable judgment. o Bill of Lading No.
CBIC claimed that source of burning was an expected risk, it is o #1, 25,000 cases Pale Pilsen 350 cases Cerveza
burdened upon him to prove that the loss arose from a cause of loss Negra to ILOILO
which is excepted or for which it is not liable, or from a cause which § Consignee: SMC beer Marketing division-
limits its liability, but CBIC failed to do so. They relied on statements of estancia beer sales office iloilo
LOMOSCO and URBIZTONDO and JUARBAL, which were o # 2, 15,000 cases Pale Pilsen 200 cases Cerveza
inadmissible because they were hearsay. Negra to ANTIQUE
§ Consignee: SMC BMD- San Jose Beer sales
office, antique
3.) FGU INSURANCE CORPORATION V CA, SAN MIGUEL o D/B Lucio was towed by M/T ANCO to Mandaue to Antique at 1pm
CROPORATION, ESTATE OF ANG GUI Sept 30, 1979. The tugboat left the barge after reaching Antique
Doctrine: Basic rule in insurance that the carelessness and negligence o When they reached antique, clouds were dark and waves were big,
of the insured against the consequences of his own negligence or his o Arrastre were complaining it was hard to unload cargo
agents constitute no defense on the part of the insurer. However,
o MACABUAG, SMCs district sales supervisor, o Indeed lost by fortuitous events, failure on ANCO to observe degree
requested it be transferred to safer place because of diligence required and would exonerate them from liability.
vessel might not be able to stand big waves. o FGUI liable to bear 53% of the amountof the lost cargoe.
o ANCO’s representative didn’t heed request. AND
THEY WERE THE ONLY BOAT LEFT IN THE DOCK. CA: Affirmed
o Waves grew bigger 10,790 cases of beer were discharged into ISSUE: Whether or not FGU liable under insurance contract considering
custody of the arrastre operator circumstances surrounding the loss
o 10-11pm oct 1,1979. The crew of D/B Lucio abandoned HELD: NO, A Basic rule in insurance that the carelessness and
the vessel bc the rope attached to the wharf was cut negligence of the insured against the consequences of his own
off by the waves. negligence or his agents constitute no defense on the part of the
o 12pm barge was broken and cargoes of beer were insurer. However, presupposes that the loss occurred sure to causes
swept away. which could not have been prevented by insured, despite exercise of
o ANCO Failed to deliver to SMC’s consignee 29,210 cases of pale due diligence. In the case at bar the lower court and appellate court held
Pilsen and 550 cases of cerveza negra. Total amount of 1,346,197. that there was blatant negligence between the crewmembers of both
o SMC filed a complaint of breach of contract and damages against boats. Theferore fgu is exonerated from liability under the insurance
ANCO for 1,346,197 plus interest, litigation and attorney’s fees. contract
o ANCO Partnership was dissolved on January 26, 1993 upon ANG
GUI’s DEATH
o second amended complaint against CO TO and TRAVELLERS INSURANCE & SURETY CORPORTATION V CA and
ESTATE of ANG GUI, represented by Julian and VICENTE MENDOZA
Jaime ANG. Doctrine:
o ANCO admitted the cases of beer were loaded in their vessel. NECESSITY OF AFFIXING A COPY THEREOF TO COMPLAINT;
however it claimed its not liable for reason of fortuitous event. ANCO CASE AT BENCH. — When private respondent filed his amended
further asserted that there was an agreement between them and SMC complaint to implead petitioner as party defendant and therein alleged
to insure the cargoes in order to recover indemnity in case of loss. that petitioner was the third-party liability insurer of the Lady Love
o 20,000 cases were insured with FGU for total 858,500 taxicab that fatally hit private respondent's mother, private respondent
per marine insurance policy29591 did not attach a copy of the insurance contract to the amended
o ANCO filed 3rd party complaint with FGU, because it was insured for complaint. Private respondent does not deny this omission. It is
858,500 pesos under marine insurance, and to pay for losses because significant to point out at this juncture that the right of a third person to
of fortuitous event. ANCO went to assert that remote possibility that sue the insurer depends on whether the contract of insurance is
court order ANCO to pay SMC, or whatever amount it may be required intended to benefit third persons also or only the insured. . . Since
to pay. private respondent failed to attach a copy of the insurance contract to
o FGU denied ANCO, alleged that loss was not attributed to risks his complaint, the trial court could not have been able to apprise itself of
insured against in the policy the real nature and pecuniary limits of petitioner's liability. More
o Total loss of the entire shipment importantly, the trial court could not have possibly ascertained the right
o loss of any case as a result of the sinking of the vessel of private respondent as third person to sue petitioner as insurer of the
o loss as a result of the vessel being on fire. Lady Love taxicab because the trial court never saw nor read the
insurance contract and learned of its terms and conditions. Petitioner,
TRIAL COURT: Held estate of ANG GUI and CO TO liable to SMC understandably, did not volunteer to present any insurance contract
covering the Lady Love taxicab that fatally hit private respondent's o She was sprawled on the pavement, Marvilla went to
mother, considering that petitioner precisely presented the defense of feliza and held in his lap to ask her what happened.
lack of insurance coverage before the trial court. Neither did the trial She was in shock and couldn’t talk
court issue a subpoena duces tecum to have the insurance contract o A private jeep stopped. The driver and the two helped
produced before it under pain of contempt. We thus find hardly a basis feliza to enter jeep and they brought her to Mary
in the records for the trial court to have validly found petitioner liable Johnstron Hospital in Tondo
jointly and severally with the owner and the driver of the Lady Love o Ernesto Lopez, a jeepney driver along Tayuman form Pritil, tondo to
taxicab, for damages accruing to private respondent. 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
NOTICE OF CLAIM; AN INDISPENSABLE PRE-REQUISITE TO SUE happened and they went to the hospital where physician told them to
UNDER AN INSURANCE CONTRACT; REASONS; CASE AT bring her to the National Orthopedic hospital because of her fractured
BENCH. — Petitioner did not tire in arguing before the trial court and bones but they brought her to the UST hospital where she died.
the respondent appellate court that, assuming arguendo that it had
issued the insurance contract over the Lady Love taxicab, private o found DUMLAO, driver, driving in a careless, reckless and imprudent
respondent's cause of action against petitioner did not successfully manner and at a speed grater than what was reasonable and proper
accrue because he failed to file with petitioner a written notice of claim without taking the necessary precaution to avoid accident to persons.
within six (6) months from the date of the accident as required by Moreover, the driver fled the scene.
Section 384 of the Insurance Code. . . We have certainly ruled with o 3 witnesses identified the taxi, though not necessarily
consistence, that the prescriptive period to bring suit in court under an the driver.
insurance policy, begins to run front the date of the insurer's rejection of o Marvilla noticed it was a LADY LOVE TAXI plate
the claim filed by the insured, the beneficiary or any person claiming number 438 painted maroon with baggage bar
under an insurance contract. This ruling is premised upon the attached on the baggage compartment with antenna
compliance by the persons suing under an insurance contract, with the attached to the right side.
indispensable requirement of having filed the written claim mandated by o 3rd witness= similar descriptions, he was only to see #8
Section 384 of the Insurance Code before and after its amendment. because it was fast.
Absent such written claim filed by the person suing under an insurance o They all pointed out the taxi.
contract, no cause of action accrues under such insurance contract, o ARMANDO ABELLON, the registered owner, certified
considering that it is the rejection of that claim that triggers the running that RODRIGO DUMLAO was the last driver of the
of the one-year prescriptive period to bring suit in court, and there can car. Based on this police apprehended Rodrigo.
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.
Vicente Mendoza filed a complaint for damages against ABELLON as
Facts: the owner, ad DUMLAO as the driver
o 5:30 am, July 20, 198. FELIZA VINEZA DE MENDOZA, 75 yrs old,
was on her way to mass in Tayuman Cathedral. RTC= in favor of Mendoza
o She was bumped by a fast taxi running along tayuman o Dumlao, Abellon, Travellers to pay jointly and severally heirs.
corner gregorio perfecto.
o It was witnessed by Rolando Marvilla, Ernesto Lopes CA= Affirmed:
and Eulogio Tabalno.
ISSUE: Whether or not Travellers is liable as compulsory insurer. o Trial court didn’t distinguished cause of action against owner and
HELD: driver. The owner being based on torts , and the driver for quasi delicts.
No, Therefore there was a misapplication of the joint and severable liability
1. Because under BP 874, section 384 of the insurer.
“Any person having any claim upon the policy issued o Since Abellon failed to attach a copy of the insurance contract to his
pursuant to this chapter shall, without any unnecessary delay, present complaint, the trial court could not have been able to apprise itself of the
to the insurance company concerned a written notice of claim setting real nature and pecuniary limits of his liability. Most importantly the right
forth the amount of his loss, and/or the nature, extent and duration of of the private respondent to sue the insurance contract.
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 SUN INSURANCE OFFICE, LTD., petitioner, vs. THE HON. COURT OF
recovery of damage due to loss or injury must be brought in proper APPEALS and NERISSA LIM
cases, with the Commission or the Courts within one year from date of
accident, otherwise the claimant’s right of action shall prescribe” DEFINITION OF TERM "ACCIDENT"; INSURED PERSON'S DEATH
CONSIDERED AN ACCIDENT. — The term "accident" has been defined as
Amended by BP 874 follows: The words "accident" and "accidental" have never acquired any
““action or suit for recovery of damage due to loss or technical signification in law, and when used in an insurance contract are to
injury must be brought in proper cases, with the Commissioner or the be construed and considered according to the ordinary understanding and
Courts within one year from denial of the claim, otherwise the common usage and speech of people generally. In substance, the courts are
claimant’s right of action shall prescribe” practically agreed that the words "accident" and "accidental" mean that
which happens by chance or fortuitously, without intention or design, and
Absence of written claim filed by person suing under an insurance which is unexpected, unusual, and unforeseen. The definition that has
contract, no cause of action accrues under such insurance contract, usually been adopted by the courts is that an accident is an event that takes
consider in that is the rejection of that claim that triggers the running of place without one's foresight or expectation - an event that proceeds from an
the one year prescriptive period to bring suit in court, and there can be unknown cause, or is an unusual effect of a known case, and therefore not
no opportunity for the insurer to even reject claim if none has been filed expected. An accident is an event which happens without any human
in the first place 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
2.) The right of person injured to sure the insurer of the party at fault happens. It has also been defined as an injury which happens by reason of
depends on whether the contract of insurance intended to benefit 3rd some violence or casualty to the insured without his design, consent, or
persons for indemnity against liability to 3rd persons. The test applied voluntary cooperation.
has been this: Where the contract provides for indemnity against SUICIDE AND WILLFUL EXPOSURE TO NEEDLESS PERIL, BOTH IN
liability to third persons, then third persons to whom the insured is liable PARI MATERIA BUT DIFFERS ONLY IN DEGREE; CASE AT BAR. — The
can sue the insurer. Where the contract is for indemnity against actual parties agree that Lim did not commit suicide. Nevertheless, the petitioner
loss or payment, then third persons cannot proceed against the insurer, contends that the insured willfully exposed himself to needless peril and thus
the contract being solely to reimburse the insured for liability actually removed himself from the coverage of the insurance policy. It should be
discharged by him thru payment to third persons, said third persons’ noted at the outset that suicide and willful exposure to needless peril are in
recourse being thus limited to the insured alone.” 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 Under the insurance contract, the company wasn’t liable for bodily injury
suicidal in intent. To illustrate, a person who walks a tightrope one thousand caused by attempted suicide or by one needlessly exposing himself to
meters above the ground and without any safety device may not actually be danger except to save another’s life.
intending to commit suicide, but his act is nonetheless suicidal. He would Lim wasn’t thought to needlessly expose himself to danger due to the
thus be considered as "willfully exposing himself to needless peril" within the witness testimony that he took steps to ensure that the gun wasn’t loaded.
meaning of the exception in question. The petitioner maintains that by the He even assured his secretary that the gun was loaded.
mere act of pointing the gun to his temple, Lim had willfully exposed himself There is nothing in the policy that relieves the insurer of the responsibility to
to needless peril and so came under the exception. The theory is that a gun pay the indemnity agreed upon if the insured is shown to have contributed to
is per se dangerous and should therefore be handled cautiously in every his own accident.
case. That posture is arguable. But what is not is that, as the secretary “In order that a person may be made liable to the payment of moral
testified, Lim had removed the magazine from the gun and believed it was damages, the law requires that his act be wrongful. The adverse result of an
no longer dangerous. He expressly assured her that the gun was not loaded. action does not per se make the act wrongful and subject the act or to the
It is submitted that Lim did not willfully expose himself to needless peril when payment of moral damages. The law could not have meant to impose a
he pointed the gun to his temple because the fact is that he thought it was penalty on the right to litigate; such right is so precious that moral damages
not unsafe to do so. The act was precisely intended to assure Nalagon that may not be charged on those who may exercise it erroneously. For these the
the gun was indeed harmless. law taxes costs.”
FACTS: Petitioner issued a personal accident policy P200k to Felix Lim Jr. 2 If a party wins, he cannot, as a rule, recover attorney's fees and litigation
months later he was dead with a bullet wound in his head. As beneficiary, expenses, since it is not the fact of winning alone that entitles him to recover
his wife Nerissa Lim sought payment on the policy but her claim was such damages of the exceptional circumstances enumerated in Art. 2208.
rejected. Petitioner said there was no suicide but there was no accident Otherwise, every time a defendant wins, automatically the plaintiff must pay
either.Pilar Nalagon, Lim's secretary, was the only eyewitness to his death. It attorney's fees thereby putting a premium on the right to litigate which should
happened on October 6, 1982, at about 10 o'clock in the evening, after his not be so. For those expenses, the law deems the award of costs as
mother's birthday party. According to Nalagon, Lim was in a happy mood sufficient.”
(but not drunk) and was playing with his handgun, from which he had
previously removed the magazine. As she watched the television, he stood CLAIMS SETTLEMENT AND SUBROGATION
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. FINMAN GENERAL ASSURANCE CORPORATION, petitioner, vs.
The next moment there was an explosion and Lim slumped to the floor. He COURT OF APPEALS and USIPHIL INCORPORATED
was dead before he fell. INSURANCE CLAIM; SUBMISSION OF DOCUMENT TO PROVE LOSS;
RTC Zamboanga City: widow sued petitioner was sustained sentenced to SUBSTANTIAL COMPLIANCE WITH REQUIREMENT, SUFFICIENT. — A
pay P200k, P10k moral damages, P5k exemplary damages, P50k actual & perusal of the records shows that private respondent, after the occurrence of
compensatory damages and P5k attorney fees the fire, immediately notified petitioner thereof. Thereafter, private
CA: sustained respondent submitted the following documents: (1) Sworn Statement of Loss
ISSUE: Whether or not Lim’s widow is eligible to receive benefits? and Formal Claim and; (2) Proof of Loss. The submission of these
HELD: Yes, there was an accident. documents, to the Court's mind, constitutes substantial compliance to proof
De la Cruz v. Capital Insurance says that "there is no accident when a loss. Indeed, as regards the submission of documents to prove loss,
deliberate act is performed unless some additional, unexpected, substantial, not strict as urged by petitioner, compliance with the
independent and unforeseen happening occurs which produces or brings requirements will always be deemed sufficient.
about their injury or death." This was true when he fired the gun.
TWENTY-FOUR PERCENT (24%) INTEREST PER ANNUM UNTIL FULL 1. Your formal claim (which may be accomplished in the
PAYMENT IS AUTHORIZED BY THE INSURANCE CODE. — Anent the enclosed form) accompanied by a detailed inventory of the
payment of 24% interest per annum computed from the date insurance claim documents submitted.
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 2. Certification from the appropriate government office indicating
prima facie evidence of unreasonable delay in payment of the claim is the date of the occurrence of the fire, the property involved, its
created by the failure of the insurer to pay the claim within 30 days after location and possible point oforigin.
proof of loss, the time fixed in both Sections 243 and 244. 3. Proof of premium payment.
FACTS: On September 15, 1981, private respondent obtained a fire
insurance policy from petitioner (then doing business under the name 4. Three color photographs of the debris properly
Summa Insurance Corporation) covering certain properties, e.g., office, captioned/identified/dated and initiated by the claimant at the
furniture, fixtures, shop machinery and other trade equipment. Under Policy back.
No. F3100 issued to private respondent, petitioner undertook to indemnify
private respondent for any damage to or loss of said properties arising from 4.1 Close-up (not more than 2 meters away) of the most
fire. Sometime in 1982, private respondent filed with petitioner an insurance severely damaged.
claim amounting to P987,126.11 for the loss of the insured properties due to 4.2 Close-up (not more than 2 meters away) of the least
fire. Acting thereon, petitioner appointed Adjuster H.H. Bayne to undertake damaged.
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 4.3 Original view of the debris (may be from farther than
therewith, private respondent submitted its Sworn Statement of Loss and 2 meters away); splice two or more frames if necessary.
Formal Claim, dated July 22, 1982, signed by Reynaldo Cayetano, private
respondent's Manager. Respondent likewise submitted Proof of Loss signed Though our adjusters will also take photographs in the manner
by its Accounting Manager Pedro Palallos and countersigned by H.H. prescribed above, please do not rely on his photographs in the
Bayne's Adjuster F.C. Medina. Palallos personally followed-up private preservations of your evidence of loss thru pictures.
respondent's claim with petitioner's President Joaquin Ortega. During their
5. Copies of purchase invoices.
meeting, Ortega instructed their Finance Manager, Rosauro Maghirang, to
reconcile the records. Thereafter, Maghirang and Palallos signed a 6. In the absence of No. 5, suppliers' certificates of sales and
Statement/Agreement, dated February 28, 1985, which indicated that the delivery.
amount due respondent was P842,683.40. Despite repeated demands by
private respondent, petitioner refused to pay the insurance claim. Thus, 7. Appraisal report, if any.
private respondent was constrained to file a complaint against petitioner for
8. Where initial estimated loss is exceeding P20,000.00, submit
the unpaid insurance claim. In its Answer, petitioner maintained that the
estimate by at least 2 contractors/suppliers.
claim of private respondent could not be allowed because it failed to comply
with Policy Condition No. 13 regarding the submission of certain documents 9. Others (to be specified)
to prove the loss.
To be able to expedite adjustment of this case, please submit to us without 1. Repairs cost of the affected items including quotation or
delay the following documents and/or particulars: invoices in support thereof ;

For FFF, Machineries/Equipment Claims 2. Complete lists of furniture, fixtures & fittings including date and
cost of acquisition, and;
3. Statement of salvage on burned items. 6. Certified copies of income tax returns for the last three years
and the accompanying financial statements.
Your preferential attention to this request will be fully appreciated.
7. Latest inventory of merchandise filed with a financial
institution, the Bureau of Internal Revenue or any government
While the other letter stated: entity prior to the loss.

Please submit to us without delay the following documents and/or 8. A detailed inventory of the articles damaged or destroyed,
particulars. showing the cost price of each, extent of loss, if any, if the risk
sustained partial or water damaged.
For Stock Claim
9. Certificates of registration.
1. Your formal claim (which may be accomplished in the
enclosed), accompanied by a detailed inventory of the 10. Bank Statements.
documents submitted. 11. For losses where the estimated value of stocks claimed
2. Certification from the appropriate government office showing which are burned but of sight and/or which may no longer be
that the Insured's property was involved in the fire as a subject to actual physical count exceeds P50,000.00, a CPA's
consequence of which the claim is being filed. detailed computations in support of such estimated value.

3. Proof of premium payment. 12. In the absence of purchase invoices/delivery receipts (state
reason for absence), submit suppliers' certificate of sales and
4. Three colored photographs of the debris, property delivery.
captioned/identified/dated and initiated by the claimant at the
back; in a floor plan, indicate the point from where the picture 13. Others (to be specified).
was taken and by an arrow where the camera was facing. Statement of salvage of the affected stocks in trade.
4.1 Close-up (not more than 2 meters away) of the most Your compliance with this request will enable us to expedite
severely damaged. adjustment of the loss in caption.
4.2 Close-up (not more than 2 meters away) of the least TC: in favor of private respondent
damaged. CA: affirmed
4.3 Overall view of the debris (may be from farther than ISSUE: Whether or not private respondent committed a violation of the
2 meters away); splice two or more frames if necessary. insurance policy
Held: No, A perusal of the records shows that private respondent, after the
Our adjuster will also take photographs. occurrence of the fire, immediately notified petitioner thereof. Thereafter,
private respondent submitted the following documents: (1) Sworn Statement
5. Books of accounts bill, invoices and other vouchers, or of Loss and Formal Claim (Exhibit C) and; (2) Proof of Loss (Exhibit D). The
certified copies thereof if originals be lost. This requirement submission of these documents, to the Court's mind, constitutes substantial
includes, but. is not limited to, purchase and sales invoices, compliance with the above provision. Indeed, as regards the submission of
delivery
documents to prove loss, substantial, not strict as urged by petitioner, insured with Prudential for P45M for hull and machinery. The Hull Policy
compliance with the requirements will always be deemed sufficient. included an "Additional Perils (INCHMAREE)" Clause covering loss of or
Anent the payment of 24% interest per annum computed from May 3, 1985 damage to the vessel through the negligence of, among others, ship
until fully paid, suffice it to say that the same is authorized by Sections 243 repairmen. The Policy provided as follows:
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 "Subject to the conditions of this Policy, this insurance also
failure of the insurer to pay the claim within the time fixed in both Sections covers loss of or damage to Vessel directly caused by the
243 and 244. 10 Further, Section 29 of the policy itself provides for the following:
payment of such interest. xxx xxx xxx

CEBU SHIPYARD AND ENGINEERING WORKS, INC., petitioner, vs. Negligence of Charterers and/or Repairers, provided such
WILLIAM LINES, INC. and PRUDENTIAL GUARANTEE and Charterers and/or Repairers are not an Assured hereunder.
ASSURANCE COMPANY, INC
MARINE INSURANCE; THE INTENTION OF THE PARTIES TO MAKE xxx xxx xxx
EACH OTHER A CO-ASSURED UNDER AN INSURANCE POLICY IS TO provided such loss or damage has not resulted from want of due
BE GLEANED PRINCIPALLY FROM THE INSURANCE CONTRACT OR diligence by the Assured, the Owners or Managers of the Vessel,
POLICY ITSELF AND NOT FROM ANY OTHER CONTRACT OR
of any of them. Masters, Officers, Crew or Pilots are not to be
AGREEMENT BECAUSE THE INSURANCE POLICY ITSELF
considered Owners within the meaning of this Clause should they
DENOMINATES THE ASSURED AND BENEFICIARIES OF THE hold shares in the Vessel."
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 CSEW was insured for only Php 10 million for the shiprepairer’s liability
during the period of dry-docking or repair. Concededly, such a stipulation policy. Under the limited liability clause, to wit:
works to the benefit of CSEW as the ship repairer. However, the fact that "7. Limit of Liability
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 The limit of liability under this insurance, in respect of any one accident or
a co-assured under an insurance policy is to be gleaned principally from the series of accidents, arising out of one occurrence, shall be [P10 million],
insurance contract or policy itself and not from any other contract or including liability for costs and expense which are either:
agreement because the insurance policy denominates the assured and the (a) incurred with the written consent of the underwriters
beneficiaries of the insurance. The hull and machinery insurance procured hereon; or
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. (b) awarded against the Assured."
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 They entered into a contract where negligence was the only factor that could
the insurance policy involved named only William Lines, Inc. as the assured make CSEW liable for damages. Moreover, liability of CSEW was limited to
thereunder, the claim of CSEW that it is a co-assured is unfounded. only Php 1million for damages. The Hull Policy included an “Additional Perils
FACTS: Cebu Shipyard and Engineering Works, Inc. repaired marine (INCHMAREE)” Clause covering loss of or damage to the vessel through the
vessels while the Prudential is in the non-life insurance business. William negligence of, among others, ship repairmen.
Lines, Inc., the owner of M/V Manila City, a luxury passenger-cargo vessel, William brought Manila City to the dry dock of CSEW for repairs. The officers
which caught fire and sank. At the time of the incident, subject vessel was 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 The facts and evidence reveal the presence of these conditions. First, the
to its total loss. fire would not have happened in the ordinary course of things if reasonable
William brought suit against CSEW alleging that it was through the latter’s care and diligence had been exercised.
negligence that the ship caught fire and sank. Prudential was impleaded as Second, the agency charged with negligence, as found by the trial court and
co-plaintiff after it had paid the value of insured items. It was subrogated to the CA and as shown by the records, is CSEW, which had control over
45 million, or the value it claimed to indemnify. subject vessel when it was docked for annual repairs.
The trial court brought judgment against CSEW 45 million for the ship What is more, in the present case the trial court found direct evidence to
indemnity, 65 million for loss of income, and more than 13 million in other prove that the workers didn’t exercise due diligence in the care of subject
damages. The CA affirmed the TC decision. vessel. The direct evidence substantiates the conclusion that CSEW was
CSEW contended that the cause of the fire was due to William’s hotworks on really negligent even without applying such doctrine.
the said portion of the ship which they didn’t ask CSEW permission for. 3. Yes, Petitioner contends that Prudential is not entitled to be subrogated to
Prudential, on the other hand, blamed the negligence of the CSEW workers the rights of William Lines, Inc., theorizing that (1) the fire which gutted M/V
in the instance when they didn’t mind rubber insulation wire coming out of Manila City was an excluded risk and (2) it is a co-assured under the Marine
the air-conditioning unit that was already burning. Hull Insurance Policy. This was wrong. The one who caused the fire has
TC: against CSEW already been adjudicated by the courts as CSEW.
CA: partial dismissal of the case insofar as CSEW and William Lines are Upon proof of payment by Prudential to William Lines, Inc., the former was
concerned; affirmed TC subrogated to the right of the latter to indemnification from CSEW. As aptly
ISSUES: ruled by the Court of Appeals, the law says:
1. WON CSEW had “management and supervisory control“ of the ship at the Art. 2207. If the plaintiff’s property has been insured, and he has received
time the fire broke out indemnity from the insurance company for the injury or loss arising out of the
2. WON the doctrine of res ipsa loquitur applies against the crew wrong or breach of contract complained of, the insurance company shall be
3. WON Prudential has the right of subrogation against its own insured subrogated to the rights of the insured against the wrongdoer or the person
4. WON the provisions limiting CSEW’s liability for negligence to a maximum who has violated the contract. If the amount paid by the insurance company
of Php 1 million are valid does not fully cover the injury or loss, the aggrieved party shall be entitled to
HELD: recover the deficiency from the person causing the loss or injury.
1. Yes, the that factual findings by the CA are conclusive on the parties and When Prudential paid the latter the total amount covered by its insurance
are not reviewable by this Court. They are entitled to great weight and policy, it was subrogated to the right of the latter to recover the insured loss
respect when the CA affirmed the factual findings arrived at by the trial court. from the liable party, CSEW.
The CA and the Cebu RTC are agreed that the fire which caused the total Petitioner theorizes further that there can be no right of subrogation as it is
loss of subject M/V Manila City was due to the negligence of the employees deemed a co-assured under the subject insurance policy with reliance on
and workers of CSEW. Clause 20 of the Work Order which states:
Furthermore, in petitions for review on certiorari, only questions of law may 20. The insurance on the vessel should be maintained by the customer
be put into issue. Questions of fact cannot be entertained. and/or owner of the vessel during the period the contract is in effect.
2. Yes, For the doctrine of res ipsa loquitur to apply to a given situation, the Clause 20 of the Work Order in question is clear in the sense that it requires
following conditions must concur: (1) the accident was of a kind which does William Lines to maintain insurance on the vessel during the period of dry-
not ordinarily occur unless someone is negligent; and (2) that the docking or repair. However, the fact that CSEW benefits from the said
instrumentality or agency which caused the injury was under the exclusive stipulation does not automatically make it as a co-assured of William Lines.
control of the person charged with negligence. 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 of paying an amount very much lower than the actual damage suffered by
denominates the beneficiaries of the insurance. The hull and machinery William.
insurance procured by William Lines, Inc. from Prudential named only
“William Lines, Inc.” as the assured. There was no manifestation of any VECTOR SHIPPING CORPORATION and FRANCISCO SORIANO,
intention of William Lines, Inc. to constitute CSEW as a co-assured under petitioners, vs. AMERICAN HOME ASSURANCE COMPANY and
subject policy. The claim of CSEW that it is a co-assured is unfounded. SULPICIO LINES, INC
Then too, in the Additional Perils Clause of the same Marine Insurance Subrogation under Article 2207 of the Civil Code gives rise to a cause of
Policy, it is provided that this insurance also covers loss of or damage to action created by law. For purposes of the law on the prescription of actions,
vessel directly caused by the negligence of charterers and repairers who the period of limitation is ten years.
are not assured. FACTS: Vector was the operator of the motor tanker M/T Vector, while
As correctly pointed out by respondent Prudential, if CSEW were deemed a Soriano was the registered owner of the M/T Vector. Respondent is a
co-assured under the policy, it would nullify any claim of William Lines, Inc. domestic insurance corporation. On September 30, 1987, Caltex entered
from Prudential for any loss or damage caused by the negligence of CSEW. into a contract of affreightment with Vector for the transport of Caltex's
Certainly, no shipowner would agree to make a shiprepairer a co-assured petroleum cargo through the M/T Vector. Caltex insured the petroleum cargo
under such insurance policy; otherwise, any claim for loss or damage under with respondent for P7,455,421.08 under Marine Open Policy No. 34-5093-
the policy would be invalidated. 6. In the evening of December 20, 1987, the M/T Vector and the M/V Doña
4. No, Although in this jurisdiction, contracts of adhesion have been Paz, the latter a vessel owned and operated by Sulpicio Lines, Inc., collided
consistently upheld as valid per se; as binding as an ordinary contract, the in the open sea near Dumali Point in Tablas Strait, located between the
Court recognizes instances when reliance on such contracts cannot be Provinces of Marinduque and Oriental Mindoro. The collision led to the
favored especially where the facts and circumstances warrant that subject sinking of both vessels. The entire petroleum cargo of Caltex on board the
stipulations be disregarded. Thus, in ruling on the validity and applicability of M/T Vector perished. On July 12, 1988, respondent indemnified Caltex for
the stipulation limiting the liability of CSEW for negligence to P1M only, the the loss of the petroleum cargo in the full amount of P7,455,421.08. On
facts and circumstances vis-a-vis the nature of the provision sought to be March 5, 1992, respondent filed a complaint against Vector, Soriano, and
enforced should be considered, bearing in mind the principles of equity and Sulpicio Lines, Inc. to recover the full amount of P7,455,421.08 it paid to
fair play. Caltex (Civil Case No. 92-620). 7 The case was raffled to Branch 145 of the
It is worthy to note that M/V Manila City was insured with Prudential for Regional Trial Court (RTC) in Makati City.
P45M. Upon thorough investigation by its hull surveyor, M/V Manila City RTC: dismissed; this action is upon a quasi-delict and as such must be
was found to be beyond economical salvage and repair. The evaluation of commenced within four [4] years from the day they may be brought. [Art.
the average adjuster also reported a constructive total loss. The said claim 1145 in relation to Art. 1150, Civil Code] "From the day [the action] may be
of William Lines, Inc., was then found to be valid and compensable such that brought" means from the day the quasi-delict occurred.
Prudential paid the latter the total value of its insurance claim. Furthermore, CA: held Vector and Soriano jointly and severally liable to respondent for the
it was ascertained that the replacement cost of the vessel, amounts to reimbursement of the amount of P7,455,421.08 paid to Caltex; The
P55M. resolution of this case is primarily anchored on the determination of what
Considering the circumstances, it would unfair to limit the liability of kind of relationship existed between Caltex and M/V Doña Paz and between
petitioner to One Million Pesos only. To allow CSEW to limit its liability to Caltex and M/T Vector for purposes of applying the laws on prescription. The
P1M notwithstanding the fact that the total loss suffered by the assured and Civil Code expressly provides for the number of years before the extinctive
paid for by Prudential amounted to P45M would sanction the exercise of a prescription sets in depending on the relationship that governs the parties.
degree of diligence short of what is ordinarily required because, then, it ISSUE: Whether or not the action of respondent was already barred by
would not be difficult for petitioner to escape liability by the simple expedient prescription for bringing it only on March 5, 1992.
Held: The petition lacks merit. Verily, the contract of affreightment that Caltex and Vector entered into did
Vector and Soriano posit that the RTC correctly dismissed respondent's not give rise to the legal obligation of Vector and Soriano to pay the demand
complaint on the ground of prescription. They insist that this action was for reimbursement by respondent because it concerned only the agreement
premised on a quasi-delict or upon an injury to the rights of the plaintiff, for the transport of Caltex's petroleum cargo.
which, pursuant to Article 1146 of the Civil Code, must be instituted within It is undeniable that respondent preponderantly established its right of
four years from the time the cause of action accrued; that because subrogation. Its Exhibit C was Marine Open Policy No. 34-5093-6 that it had
respondent's cause of action accrued on December 20, 1987, the date of the issued to Caltex to insure the petroleum cargo against marine peril. 22 Its
collision, respondent had only four years, or until December 20, 1991, within Exhibit D was the formal written claim of Caltex for the payment of the
which to bring its action, but its complaint was filed only on March 5, 1992, insurance coverage of P7,455,421.08 coursed through respondent's
thereby rendering its action already barred for being commenced beyond the adjuster. 23 Its Exhibits E to H were marine documents relating to the
four-year prescriptive period; and that there was no showing that respondent perished cargo on board the M/V Vector that were processed for the
had made extrajudicial written demands upon them for the reimbursement of purpose of verifying the insurance claim of Caltex. 24 Its Exhibit I was the
the insurance proceeds as to interrupt the running of the prescriptive period. subrogation receipt dated July 12, 1988 showing that respondent paid Caltex
We concur with the CA's ruling that respondent's action did not yet P7,455,421.00 as the full settlement of Caltex's claim under Marine Open
prescribe. The legal provision governing this case was not Article 1146 of Policy No. 34-5093-6. 25 All these exhibits were unquestionably duly
the Civil Code, 16 but Article 1144 of the Civil Code, which states: presented, marked, and admitted during the trial. 26 Specifically, Exhibit C
Article 1144.The following actions must be brought within ten years from the was admitted as an authentic copy of Marine Open Policy No. 34-5093-6,
time the cause of action accrues: while Exhibits D, E, F, G, H and I, inclusive, were admitted as parts of the
(1) Upon a written contract; testimony of respondent's witness Efren Villanueva, the manager for the
(2) Upon an obligation created by law; adjustment service of the Manila Adjusters and Surveyors Company.
(3) Upon a judgment. Consistent with the pertinent law and jurisprudence, therefore, Exhibit I was
We need to clarify, however, that we cannot adopt the CA's characterization already enough by itself to prove the payment of P7,455,421.00 as the full
of the cause of action as based on the contract of affreightment between settlement of Caltex's claim. 28 The payment made to Caltex as the insured
Caltex and Vector, with the breach of contract being the failure of Vector to being thereby duly documented, respondent became subrogated as a matter
make the M/T Vector seaworthy, as to make this action come under Article of course pursuant to Article 2207 of the Civil Code. In legal contemplation,
1144 (1), supra. Instead, we find and hold that that the present action was subrogation is the "substitution of another person in the place of the creditor,
not upon a written contract, but upon an obligation created by law. Hence, it to whose rights he succeeds in relation to the debt;" and is "independent of
came under Article 1144 (2) of the Civil Code. This is because the any mere contractual relations between the parties to be affected by it, and
subrogation of respondent to the rights of Caltex as the insured was by is broad enough to cover every instance in which one party is required to
virtue of the express provision of law embodied in Article 2207 of the Civil pay a debt for which another is primarily answerable, and which in equity
Code, to wit: and conscience ought to be discharged by the latter."
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.
DOUBLE INSURANCE P100,000.00 each, issued by the Cebu Branch of the Philippines First
Insurance Co., Inc. (PFIC). These policies indicate that the insured was
Geagonia vs. Court of Appeals "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage
G.R. 114427, February 6, 1995 clause reading ""MORTGAGEE: Loss, if any, shall be payable to Messrs.
Davide Jr. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the
terms of this policy. CO-INSURANCE DECLARED: P100,000. — Phils. First
Facts: CEB/F-24758"
· Armando Geagonia is the owner of Norman's Mart located in the public · The basis of Country Bankers' denial was Geagonia's alleged violation
market of San Francisco, Agusan del Sur. of Condition 3 of the policy. Geagonia then filed a complaint against Country
· On 22 December 1989, he obtained from Country Bankers Insurance Bankers with the Insurance Commission (Case 3340) for the recovery of
Corporation fire insurance policy No. F-14622 2 for P100,000.00. The period P100,000.00 under fire insurance policy F-14622 and for attorney's fees and
of the policy was from 22 December 1989 to 22 December 1990 and costs of litigation. He attached his letter of 18 January 1991 which asked for
covered the following: "Stock-in-trade consisting principally of dry goods the reconsideration of the denial. He admitted in the said letter that at the
such as RTW's for men and women wear and other usual to assured's time he obtained Country Bankers's fire insurance policy he knew that the
business." two policies issued by the PFIC were already in existence; however, he had
· Geagonia declared in the policy under the subheading entitled CO- no knowledge of the provision in Country Bankers' policy requiring him to
INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for inform it of the prior policies; this requirement was not mentioned to him by
P50,000.00. From 1989 to 1990, Geagonia had in his inventory stocks Country Bankers' agent; and had it been so mentioned, he would not have
amounting to P392,130.50, itemized as follows: Zenco Sales, Inc., withheld such information. He further asserted that the total of the amounts
P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing claimed under the three policies was below the actual value of his stocks at
Textiles, 250,000.00 (on credit); totalling P392,130.50. The policy contained the time of loss, which was P1,000,000.00. In its decision of 21 June 1993,
the following condition, that "the insured shall give notice to the Company of the Insurance Commission found that Geagonia did not violate Condition 3
any insurance or insurances already effected, or which may subsequently be as he had no knowledge of the existence of the two fire insurance policies
effected, covering any of the property or properties consisting of stocks in obtained from the PFIC; that it was Cebu Tesing Textiles which procured the
trade, goods in process and/or inventories only hereby insured, and unless PFIC policies without informing him or securing his consent; and that Cebu
notice be given and the particulars of such insurance or insurances be Tesing Textile, as his creditor, had insurable interest on the stocks. These
stated therein or endorsed in this policy pursuant to Section 50 of the findings were based on Geagonia's testimony that he came to know of the
Insurance Code, by or on behalf of the Company before the occurrence of PFIC policies only when he filed his claim with Country Bankers and that
any loss or damage, all benefits under this policy shall be deemed forfeited, Cebu Tesing Textile obtained them and paid for their premiums without
provided however, that this condition shall not apply when the total informing him thereof.
insurance or insurances in force at the time of the loss or damage is not · The Insurance Commission ordered Country Bankers to pay Geagonia
more than P200,000.00." the sum of P100,000.00 with legal interest from the time the complaint was
· On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. filed until fully satisfied plus the amount of P10,000.00 as attorney's fees.
at the public market of San Francisco, Agusan del Sur. Geagonia's insured With costs. Its motion for the reconsideration of the decision having been
stocks-in-trade were completely destroyed prompting him to file with Country denied by the Insurance Commission in its resolution of 20 August 1993,
Bankers a claim under the policy. Country Bankers appealed to the Court of Appeals by way of a petition for
· On 28 December 1990, Country Bankers denied the claim because it review (CA-GR SP 31916).
found that at the time of the loss Geagonia's stocks-in-trade were likewise · In its decision of 29 December 1993, the Court of Appeals reversed the
covered by fire insurance policies GA-28146 and GA-28144, for 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 the same interest as that covered by the policy of Country Bankers, no
reconsider the adverse decision having been denied, Geagonia filed the double insurance exists. The non-disclosure then of the former policies was
petition for review on certiorari. not fatal to Geagonia's right to recover on Country Bankers' policy.

Issues: 2.
1. Whether the non-disclosure of other insurance policies violate condition · Unlike the "other insurance" clauses involved in General Insurance and
3 of the policy, so as to deny Geagonia from recovering on the policy. Surety Corp. vs. Ng Hua, 106 Phil. 1117 [1960], or in Pioneer Insurance &
2. Whether the violation of Condition 3 of the policy renders the policy Surety Corp. vs. Yap, 61 SCRA 426 [1974] which reads "The insured shall
void. give notice to the company of any insurance or insurances already effected,
or which may subsequently be effected covering any of the property hereby
Held: insured, and unless such notice be given and the particulars of such
1. insurance or insurances be stated in or endorsed on this Policy by or on
· Condition 3 of Country Bankers's Policy F-14622 is a condition which is behalf of the Company before the occurrence of any loss or damage, all
not proscribed by law. Its incorporation in the policy is allowed by Section 75 benefits under this Policy shall be forfeited"; or in the 1930 case of Santa
of the Insurance Code. Such a condition is a provision which invariably Ana vs. Commercial Union Assurance Co., 55 Phil. 329, 334 [1930], which
appears in fire insurance policies and is intended to prevent an increase in provided "that any outstanding insurance upon the whole or a portion of the
the moral hazard. It is commonly known as the additional or "other objects thereby assured must be declared by the insured in writing and he
insurance" clause and has been upheld as valid and as a warranty that no must cause the company to add or insert it in the policy, without which such
other insurance exists. Its violation would thus avoid the policy. policy shall be null and void, and the insured will not be entitled to indemnity
· However, in order to constitute a violation, the other insurance must be in case of loss," Condition 3 in Country Bankers' policy F-14622 does
upon the same subject matter, the same interest therein, and the same risk. not absolutely declare void any violation thereof. It expressly provides
· The fire insurance policies issued by the PFIC name Geagonia as the that the condition "shall not apply when the total insurance or insurances in
assured and contain a mortgage clause which reads: "Loss, if any, shall be force at the time of the loss or damage is not more than P200,000.00."
payable to MESSRS. TESING TEXTILES, Cebu City as their interest may · By stating within Condition 3 itself that such condition shall not apply if
appear subject to the terms of the policy." This is clearly a simple loss the total insurance in force at the time of loss does not exceed P200,000.00,
payable clause, not a standard mortgage clause. Country Bankers was amenable to assume a co-insurer's liability up to a loss
· The Court concludes that (a) the prohibition in Condition 3 of the not exceeding P200,000.00.
subject policy applies only to double insurance, and (b) the nullity of the · What it had in mind was to discourage over-insurance. Indeed, the
policy shall only be to the extent exceeding P200,000.00 of the total policies rationale behind the incorporation of "other insurance" clause in fire policies
obtained. The first conclusion is supported by the portion of the condition is to prevent over-insurance and thus avert the perpetration of fraud. When a
referring to other insurance "covering any of the property or properties property owner obtains insurance policies from two or more insurers in a
consisting of stocks in trade, goods in process and/or inventories only total amount that exceeds the property's value, the insured may have an
hereby insured," and the portion regarding the insured's declaration on the inducement to destroy the property for the purpose of collecting the
subheading CO-INSURANCE that the co-insurer is Mercantile Insurance insurance. The public as well as the insurer is interested in preventing a
Co., Inc. in the sum of P50,000.00. situation in which a fire would be profitable to the insured.
· 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
Malayan Insurance Co., Inc vs. Philippines First Insurance Co., Inc. threatened to kill the truck driver and two of his helpers should they refuse to
G.R. No. 184300, July 11, 2012 turn over the truck and its contents to the said highway robbers.
Reyes · 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.
Facts:
· Since 1989, Wyeth Philippines, Inc. (Wyeth) and respondent Reputable Issue: Whether or not there is double insurance in this case such that either
Forwarder Services, Inc. (Reputable) had been annually executing a Section 5 or Section 12 of the SR Policy may be applied.
contract of carriage, whereby the latter undertook to transport and deliver the
former’s products to its customers, dealers or salesmen. Held: No. By the express provision of Section 93 of the Insurance Code,
· On November 18, 1993, Wyeth procured Marine Policy No. MAR 13797 double insurance exists where the same person is insured by several
(Marine Policy) from respondent Philippines First Insurance Co., Inc. insurers separately in respect to the same subject and interest. The
(Philippines First) to secure its interest over its own products. Philippines requisites in order for double insurance to arise are as follows:
First thereby insured Wyeth’s nutritional, pharmaceutical and other products
usual or incidental to the insured’s business while the same were being 1. The person insured is the same;
transported or shipped in the Philippines. The policy covers all risks of direct 2. Two or more insurers insuring separately;
physical loss or damage from any external cause, if by land, and provides a 3. There is identity of subject matter;
limit of P6,000,000.00 per any one land vehicle. 4. There is identity of interest insured; and
· On December 1, 1993, Wyeth executed its annual contract of carriage 5. There is identity of the risk or peril insured against.
with Reputable. It turned out, however, that the contract was not signed by
Wyeth’s representative/s. Nevertheless, it was admittedly signed by In the present case, while it is true that the Marine Policy and the SR Policy
Reputable’s representatives, the terms thereof faithfully observed by the were both issued over the same subject matter, i.e. goods belonging to
parties and, as previously stated, the same contract of carriage had been Wyeth, and both covered the same peril insured against, it is, however,
annually executed by the parties every year since 1989. beyond cavil that the said policies were issued to two different persons or
· Under the contract, Reputable undertook to answer for “all risks with entities. It is undisputed that Wyeth is the recognized insured of Philippines
respect to the goods and shall be liable to the COMPANY (Wyeth), for the First under its Marine Policy, while Reputable is the recognized insured of
loss, destruction, or damage of the goods/products due to any and all Malayan under the SR Policy. The fact that Reputable procured Malayan’s
causes whatsoever, including theft, robbery, flood, storm, earthquakes, SR Policy over the goods of Wyeth pursuant merely to the stipulated
lightning, and other force majeure while the goods/products are in transit and requirement under its contract of carriage with the latter does not make
until actual delivery to the customers, salesmen, and dealers of the Reputable a mere agent of Wyeth in obtaining the said SR Policy.
COMPANY”.
· The contract also required Reputable to secure an insurance policy on The interest of Wyeth over the property subject matter of both insurance
Wyeth’s goods. Thus, on February 11, 1994, Reputable signed a Special contracts is also different and distinct from that of Reputable’s. The policy
Risk Insurance Policy (SR Policy) with petitioner Malayan for the amount of issued by Philippines First was in consideration of the legal and/or equitable
P1,000,000.00. interest of Wyeth over its own goods. On the other hand, what was issued by
· On October 6, 1994, during the effectivity of the Marine Policy and SR Malayan to Reputable was over the latter’s insurable interest over the safety
Policy, Reputable received from Wyeth 1,000 boxes of Promil infant formula of the goods, which may become the basis of the latter’s liability in case of
worth P2,357,582.70 to be delivered by Reputable to Mercury Drug loss or damage to the property and falls within the contemplation of Section
Corporation in Libis, Quezon City. Unfortunately, on the same date, the truck 15 of the Insurance Code.
carrying Wyeth’s products was hijacked by about 10 armed men. They
Therefore, even though the two concerned insurance policies were issued · Still the Auditor of the CB denied PHILAM’s claim for refund and
over the same goods and cover the same risk, there arises no double reconsideration was denied, ruling that: "Remittance of premia on insurance
insurance since they were issued to two different persons/entities having policies issued or renewed on or after July 16, 1959, or even if issued or
distinct insurable interests. Necessarily, over insurance by double insurance renewed before the said date, but their reinsurance was effected, only
cannot likewise exist. Hence, as correctly ruled by the RTC and CA, neither thereafter, are not exempt from the margin fee, even if the reinsurance treaty
Section 5 nor Section 12 of the SR Policy can be applied. 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
REINSURANCE 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:
The Philippine American Life Insurance Company vs. The Auditor
General Sec. 3. The provisions of this Act shall not apply to the liquidation of drafts
G.R. L-19255, January 18, 1968 drawn under letters of credit nor of contractual obligations calling for
Sanchez 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
Facts: conditions as the original contractual obligations: Provided, That the
· On January 1950, Philippine American Life Insurance Co. repayment of loans contracted by the government of the Philippines with
(PHILAM) and, foreign corporation, American International Reinsurance Co. foreign governments and/or private banks and the importation of
(AIRCO) entered into a reinsurance treaty where PHILAM agreed to reinsure machineries and equipment by provinces, cities or municipalities for the
with AIRCO the excess of life insurance on the lives of persons written by exclusive use in the operation of public utilities fully-owned and maintained
PHILAM. by them shall likewise be exempted from the operation of this Act.
· In their agreement it is also stipulated that even though PHILAM is
already on a risk for its maximum retention under policies previously issued, Issue: Whether PHILAM’s claim was covered by the exemption.
when new policies are applied for and issued they can cede automatically
any amount, within the limits specified. Held: No. The Court held in the negative stating that for an exemption to
· No question ever arose with respect to the remittances made by come into play, there must be a reinsurance policy or, as in the reinsurance
PHILAM to AiIRCO before July 16, 1959, the date of approval of the Margin treaty provided, a “reinsurance cession” which may be automatic or
Law. facultative.
· Subsequently, the Central Bank of the Philippines collected the
sum of P268,747.48 as foreign exchange margin on PHILAM remittances to To distinguish, a reinsurance policy is a contract of indemnity one insurer
AiIRCO made subsequent to July 16, 1959. makes with another to protect the first insurer from a risk it has already
· PHILAM then filed with the Central Bank a claim for refund for the assumed. On the other hand, a reinsurance treaty is merely an agreement
same amount arguing that the reinsurance premiums remitted were paid on between two insurance companies whereby one agrees to surrender and the
January 1950 and is therefore exempt from the 25% foreign exchange other to accept reinsurance business pursuant to provisions specified in the
margin fee. treaty. Treaties are contracts for insurance; reinsurance policies or cessions
· The Acting legal counsel of the Monetary Board resolved that are contracts of insurance.
reinsurance contracts entered into and approved by the Central Bank before
July 17, 1959 are exempt from the payment of the 25% foreign exchange Although the reinsurance treaty precedes the Margin Law by over nine years
margin, even if remittances thereof are made after July 17, 1959. 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 provided that MSAPL's business with PCSO shall be limited to the latter's
speaks of a probability; not a reality. 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
PHILAM’s obligation to remit reinsurance premiums becomes fixed and (BOT) Agreement with PCSO where it undertook to build a thermal paper
definite upon the execution of the reinsurance cession. Because, for every and bet slip manufacturing facility to supply all requirements of PCSO.
life insurance policy surrendered to AIRCO, PHILAM agrees to pay · However, PCSO unilaterally cancelled the BOT Agreement and
premium. It is only after a reinsurance cession is made that payment of granted supply contracts to Lamco Paper, Consolidated Paper and Trojan
reinsurance premium may be exacted, as it is only after PHILAM seeks to Computer Forms, which ultimately resulted in litigation between the parties.
remit that reinsurance premium that the obligation to pay the margin fee The suit was eventually settled when PCSO, MSAPL, and the three other
arises. 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
Communication and Information Systems Corporation vs. Mark thus decided to withhold payment of commissions.
Sensing Australia Pty. · As a result of MSAPL's refusal to pay, CISC filed a complaint
G.R. No. 192159, January 25, 2017 before the RTC in Quezon City for specific performance against MSAPL,
Jardaleza Mark Sensing Philippines, Inc. (MSPI), Atty. Ofelia Cajigal, and PCSO. CISC
prayed that private respondents be ordered to comply with its obligations
Facts: under the MOA. It also asked the RTC to issue a writ of preliminary
· Petitioner Communication and Information Systems Corporation mandatory injunction and/or writ of attachment. The RTC denied CISC's
(CISC) and respondent Mark Sensing Australia Pty. Ltd. (MSAPL) entered prayer for mandatory injunctive relief but ordered the PCSO to hold the
into a Memorandum of Agreement (MOA) dated March 1, 2002 whereby amount being contested until the final determination of the case. It
MSAPL appointed CISC as "the exclusive AGENT of MSAPL to PCSO later reversed itself, holding that its jurisdiction is limited to the
during the lifetime of the recently concluded MOA entered into between amount stated in the complaint and therefore had no jurisdiction to
MSAPL, PCSO and other parties." order PCSO to withhold payments in excess of such amount.
· The recent agreement referred to in the MOA is the thermal paper · The CA later reversed the RTC and ordered that the additional
and bet slip supply contract (the Supply Contract) between the PCSO, docket fees shall constitute a lien on the judgment.
MSAPL, and three other suppliers, namely Lamco Paper Products · On September 10, 2007, the RTC granted CISC's application for
Company, Inc. (Lamco Paper), Consolidated Paper Products, Inc. issuance of a writ of preliminary attachment, stating that "the non-
(Consolidated Paper) and Trojan Computer Forms Manufacturing payment of the agreed commission constitutes fraud on the part of the
Corporation (Trojan Computer Forms). defendant MSAPL in their performance of their obligation to the plaintiff."
· As consideration for CISC's services, MSAPL agreed to pay CISC a The RTC found that MSAPL is a foreign corporation based in Australia, and
commission of 24.5% of future gross sales to PCSO, exclusive of its Philippine subsidiary, MSPI, has no other asset except for its collectibles
duties and taxes, for six years. from PCSO. Thus, the RTC concluded that CISC may be left without any
· After initially complying with its obligation under the MOA, MSAPL security if ever MSAPL is found liable. But the RTC limited the attachment to
stopped remitting commissions to CISC during the second quarter of 2004. P4,861,312.00, which is the amount stated in the complaint, instead of the
MSAPL justified its action by claiming that Carolina de Jesus, President of amount sought to be attached by CISC, i.e., P113,197,309.10. The RTC
CISC, violated her authority when she negotiated the Supply Contract with explained that it "will have to await the Supreme Court judgment over the
PCSO and three of MSAPL's competitors. According to MSAPL, it lost issue of whether it has jurisdiction on the amounts in the excess of the
almost one-half of its business with PCSO because the Supply Contract 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 · On September 18, 2009, MSAPL, MSPI and Atty. Ofelia Cajigal
Resolution dated November 12, 2007. It became final and executory on filed a petition for certiorari before the CA, docketed as CA-G.R. SP No.
March 25, 2008. 110511, assailing the Orders of the RTC dated April 13, 2009, July 2, 2009,
· In view of this development, CISC moved to amend the order of July 8, 2009, and September 4, 2009. In its now-assailed Decision elated
attachment to include unpaid commissions in excess of the amount stated in November 25, 2009, the CA granted the petition. It concluded that the
the complaint. On December 22, 2008, the RTC granted CISC's motion and petition for certiorari was filed on time because MSAPL did not abandon their
issued a new writ of preliminary attachment. right to impugn the evidence submitted in the application for the writ of
· On April 13, 2009, the RTC, acting on the partial motions for preliminary attachment, because they filed a motion to determine the
reconsideration by both CISC and MSAPL, modified the amount covered by sufficiency of the bond. On the merits, it held that the RTC exceeded its
the writ to reflect the correct amount prayed for by CISC in its previous authority when it "ordered the issuance of the writ [of preliminary attachment]
motion to amend the attachment order conditioned upon the latter's payment despite a dearth of evidence to clearly establish [CISC's] entitlement thereto,
of additional docket fees. It also denied MSAPL's opposition to the let alone the latter's failure to comply with all requirements therefor." Noting
attachment order for lack of merit. that the posting of the attachment bond is a jurisdictional requirement, the
· On July 2, 2009, the RTC modified its order insofar as it allowed CA concluded that since Plaridel's capacity for single risk coverage is limited
CISC to pay docket fees within a reasonable time. 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."
IMPORTANT! · After the CA perfunctorily denied CISC's motion for reconsideration
· On July 8, 2009, CISC posted a bond in the amount of on April 23, 2010, it filed this petition for review on certiorari.
P113,197,309.10 through Plaridel Surety and Insurance Company
(Plaridel) in favor of MSAPL, which the RTC approved on the same date. Issue: Whether the RTC committed grave abuse of discretion when it
Two days later, MSAPL filed a motion to determine the sufficiency of the approved the attachment bond whose face amount exceeded the retention
bond because of questions regarding the financial capacity of Plaridel. But limit of the surety.
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 Held:
approval of the attachment bond on the ground that Plaridel had no · Section 215 of the old Insurance Code, the law in force at the time
capacity to underwrite the bond pursuant to Section 215 of the old Plaridel issued the attachment bond, limits the amount of risk that insurance
Insurance Code because its net worth was only P214,820,566.00 and companies can retain to a maximum of 20% of its net worth. However, in
could therefore only underwrite up to P42,964,113.20. computing the retention limit, risks that have been ceded to authorized
· On September 4, 2009, the RTC denied MSAPL's motion, finding reinsurers are ipso jure deducted.
that although Plaridel cannot underwrite the bond by itself, the amount · In mathematical terms, the amount of retained risk is computed by
covered by the attachment bond "was likewise re-insured to sixteen other deducting ceded/reinsured risk from insurable risk. If the resulting amount is
insurance companies." However, "for the best interest of both parties," the below 20% of the insurer's net worth, then the retention limit is not breached.
RTC ordered Plaridel to submit proof that the amount of P95,819,770.91 In this case, both the RTC and CA determined that, based on Plaridel's
was reinsured. Plaridel submitted its compliance on September 11, 2009, financial statement that was attached to its certificate of authority issued by
attaching therein the reinsurance contracts. 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.