Sps. Antonio Tibay and Violeta Tibay et. al. v.

Court of Appeals

G.R. No. 119655, 24 May 1996, 257 SCRA 126

FACTS:

On 22 January 1987 private respondent Fortune Life and General Insurance Co., Inc. (FORTUNE) issued
Fire Insurance Policy in favor of Violeta R. Tibay and/or Nicolas Roraldo on their two-storey residential
building in Makati City, together with all their personal effects therein. The insurance was for
P600,000.00 covering the period from 23 January 1987 to 23 January 1988. On 23 January 1987, of the
total premium of P2,983.50, petitioner Violeta Tibay only paid P600.00 thus leaving a considerable
balance unpaid.

On 8 March 1987 the insured building was completely destroyed by fire. Two days later or on 10 March
1987 Violeta Tibay paid the balance of the premium. On the same day, she filed with FORTUNE a claim
on the fire insurance policy. In a letter dated 11 June 1987 FORTUNE denied the claim of Violeta for
violation of Policy Condition No. 2 and of Sec. 77 of the Insurance Code.

On 3 March 1988 Violeta and the other petitioners sued FORTUNE for damages in the amount of
P600,000.00 representing the total coverage of the fire insurance policy plus 12% interest per annum, P
100,000.00 moral damages, and attorney’s fees equivalent to 20% of the total claim.

On 19 July 1990 the trial court ruled for petitioners and adjudged FORTUNE liable for the total value of
the insured building and personal properties in the amount of P600,000.00 plus interest at the legal rate
of 6% per annum from the filing of the complaint until full payment, and attorney’s fees equivalent to
20% of the total amount claimed plus costs of suit.

On 24 March 1995 the Court of Appeals reversed the court a quo by declaring FORTUNE not to be liable
to plaintiff-appellees therein but ordering defendant-appellant to return to the former the premium of
P2,983.50 plus 12% interest from 10 March 1987 until full payment.

Hence this petition for review with petitioners contending mainly that contrary to the conclusion of the
appellate court, FORTUNE remains liable under the subject fire insurance policy inspite of the failure of
petitioners to pay their premium in full.

ISSUE:

Whether a fire insurance policy is valid, binding and enforceable upon mere partial payment of
premium?
RULING:

The Supreme Court finds no merit in the petition. Hence, it affirms the decision of the Court of Appeals.

Insurance is a contract whereby one undertakes for a consideration to indemnify another against loss,
damage or liability arising from an unknown or contingent event.The consideration is the premium,
which must be paid at the time and in the way and manner specified in the policy, and if not so paid, the
policy will lapse and be forfeited by its own terms.

Clearly the Policy entered into between Sps. Antonio and Violeta Tibay and Fortune Life and General
Insurance Co. provides for payment of premium in full. Accordingly, where the premium has only been
partially paid and the balance paid only after the peril insured against has occurred, the insurance
contract did not take effect and the insured cannot collect at all on the policy. This is fully supported by
Sec. 77 of the Insurance Code which provides:

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

Thus, no vinculum juris whereby the insurer bound itself to indemnify the assured according to law ever
resulted from the fractional payment of premium. The insurance contract itself expressly provided that
the policy would be effective only when the premium was paid in full. It would have been altogether
different were it not so stipulated. Ergo, petitioners had absolute freedom of choice whether or not to
be insured by FORTUNE under the terms of its policy and they freely opted to adhere thereto.

UCPB vs MASAGANA

FACTS: Plaintiff Masagana [herein Respondent] obtained from defendant UCPB [herein Petitioner] five
(5) insurance policies on its properties. All five (5) policies reflect on their face the effectivity

term: "from 4:00 P.M. of 22 May 1991 to 4:00 P.M. of 22 May 1992."

On June 13, 1992, plaintiffs properties were razed by fire. On July 13, 1992, plaintiff tendered, and
defendant accepted, five (5) Equitable Bank Manager's Checks as renewal premium payments for which
Official Receipt Direct Premium was issued by defendant.

Masagana made its formal demand for indemnification for the burned insured properties. On the same
day, defendant returned the five (5) manager's checks stating in its letter) that it was rejecting
Masagana's claim on the following grounds:

"a) Said policies expired last May 22, 1992 and were not renewed for another term;

b) Defendant had put plaintiff and its alleged broker on notice of non-renewal earlier; and
c) The properties covered by the said policies were burned in a fire that took place last June 13, 1992, or
before tender of premium payment."

The following facts have been established:

1. For years, UCPB had been issuing fire policies to th Masagana, and these policies were annually
renewed.

2. UCPB had been granting Masagana a 60-90-day credit term within which to pay the premiums on the
renewed policies.

3. There was no valid notice of non-renewal of the policies, as there is no proof that the notice sent by
ordinary mail was received by Masagana, and the copy allegedly sent to Zuellig was ever transmitted to
Masagana.

4. The premiums for the policies were paid by Masagana within the 60- 90-day credit term and were
duly accepted and received by UCPB’s cashier.

ISSUE: WON IC 77 must be strictly applied to UCPB’s advantage despite its practice of granting a 60- to
90-day credit term for the payment of premiums.

HELD: NO.

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

This was formerly Act 2427, Section 72:

SEC. 72. An insurer is entitled to payment of premium as soon as the thing insured is exposed to the
peril insured against, unless there is clear agreement to grant the insured credit extension of the
premium due. No policy issued by an insurance company is valid and binding unless and until the
premium thereof has been paid. (Underscoring supplied)

IC 77 does not restate the portion of IC 72 expressly permitting an agreement to extend the period to
pay the premium. However, there are exceptions to IC 77.

In case of a life or industrial life policy whenever the grace period provision applies [Sec. 77]

Any acknowledgment of the receipt of premium is conclusive evidence of payment [Sec. 78]

If the parties have agreed to the payment in installments of the premium and partial payment has been
made at the time of loss [Makati Tuscany Condominium v. CA]

The insurer may grant credit extension for the payment of the premium [Makati Tuscany Condominium]

Estoppel

IC 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not paid,
but does not expressly prohibit an agreement granting credit extension, and such an agreement is not
contrary to morals, good customs, public order or public policy. [Makati Tuscany Condominium v. CA]
ON EXCEPTION #4. If the insurer has granted the insured a credit term for the payment of the premium
and loss occurs before the expiration of the term, recovery on the policy should be allowed even though
the premium is paid after the loss but within the credit term.

It would be unjust and inequitable if recovery on the policy would not be permitted against UCPB, which
had consistently granted a 60-90-day credit term for the payment of premiums despite its full
awareness of IC 77. Estoppel bars it from taking refuge under said section, since Masagana relied in
good faith on such practice.

VALENZUELA vs. CA

FACTS: Petitioner Arturo P. Valenzuela is a General Agent of private respondent Philippine American
General Insurance Company, Inc. since 1965. As such, he was authorized to solicit and sell in behalf of
Philamgen all kinds of non-life insurance, and in consideration of services rendered was entitled to
receive the full agent’s commission of 32.5% from Philamgen under the scheduled commission rates.
From 1973 to 1975, Valenzuela solicited marine insurance from Delta Motors, Inc. in the amount of P4.4
Million from which he was entitled to a commission of 32% . However, Valenzuela did not receive his full
commission which amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta
Motors. During the period 1976 to 1978, premium payments amounting to P1,946,886.00 were paid
directly to Philamgen and Valenzuela’s commission to which he is entitled amounted to P632,737.00.

In 1977, Philamgen started to become interested in and expressed its intent to share in the commission
due Valenzuela on a fifty-fifty basis. Valenzuela refused.

On June 16,1978, Valenzuela firmly reiterated his objection to the proposals of respondents stating that:
“It is with great reluctance that I have to decline upon request to signify my conformity to your
alternative proposal regarding the payment of the commission due me. However, I have no choice for to
do otherwise would be violative of the Agency Agreement executed between our goodselves.”

Because of the refusal of Valenzuela, Philamgen and its officers took drastic action against Valenzuela.
They:

(a) reversed the commission due him by not crediting in his account the commission earned from the
Delta Motors, Inc. insurance;

(b) placed agency transactions on a cash and carry basis;

(c) threatened the cancellation of policies issued by his agency; and

(d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these acts
resulted in the decline of his business as insurance agent. Then on December 27, 1978, Philamgen
terminated the General Agency Agreement of Valenzuela.
The petitioners sought relief by filing the complaint against the private respondents in the court a quo.

ISSUE:

Whether or not Philamgen could continue to hold Valenzuela jointly and severally liable with the insured
for unpaid premiums.

RULING:

We agree with the court a quo that the principal cause of the termination of Valenzuela as General
Agent of Philamgen arose from his refusal to share his Delta commission. The records sustain the
conclusions of the trial court on the apparent bad faith of the private respondents in terminating the
General Agency Agreement of petitioners.

As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and uncollected
premiums which the respondent court ordered Valenzuela to pay Philamgen the amount of One Million
Nine Hundred Thirty-Two Thousand Five Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with
legal interest thereon until fully paid, we rule that the respondent court erred in holding Valenzuela
liable. We find no factual and legal basis for the award. Under Section 77 of the Insurance Code, the
remedy for the non-payment of premiums is to put an end to and render the insurance policy not
binding

Sec. 77 … [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid
and binding unless and until the premiums thereof have been paid except in the case of a life or
industrial life policy whenever the grace period provision applies (P.D. 612, as amended otherwise
known as the Insurance Code of 1974).

JAIME GAISANO vs DEVELOPMENT INSURANCE

FACTS: Petitioner was the registered owner of a 1992 Mitsubishi Montero , while respondent is a
domestic corporation engaged in the insurance business. On September 27, 1996, respondent issued a
comprehensive commercial vehicle policy to petitioner in the amount of ₱1,500,000.00 over the vehicle
for a period of one year commencing on September 27, 1996 up to September 27, 1997.

Respondent also issued two other commercial vehicle policies to petitioner covering two other motor
vehicles for the same period.9
To collect the premiums and other charges on the policies, respondent's agent, Trans-Pacific
Underwriters Agency

(Trans-Pacific), issued a statement of account to petitioner's company, Noah's Ark Merchandising

(Noah's Ark).

Noah's Ark immediately processed the payments and issued a Far East Bank check dated September 27,
1996 payable to Trans-Pacific on the same day. The check bearing the amount of ₱140,893.50
represents payment for the three insurance policies, with ₱55,620.60 for the premium and other
charges over the vehicle.

However, nobody from Trans-Pacific picked up the check that day (September 27) because its president
and general manager, Rolando Herradura, was celebrating his birthday. Trans-Pacific informed Noah's
Ark that its messenger would get the check the next day, September 28.

In the evening of September 27, 1996, while under the official custody of Noah's Ark marketing manager
Achilles

Pacquing (Pacquing) as a service company vehicle, the vehicle was stolen in the vicinity of SM Megamall
at Ortigas,

Mandaluyong City. Pacquing reported the loss to the Philippine National Police Traffic Management
Command at Camp

Crame in Quezon City. Despite search and retrieval efforts, the vehicle was not recovered.

Oblivious of the incident, Trans-Pacific picked up the check the next day, September 28. It issued an
official receipt numbered 124713 dated September 28, 1996, acknowledging the receipt of ₱55,620.60
for the premium and other

charges over the vehicle.16 The check issued to Trans-Pacific for ₱140,893.50 was deposited with
Metrobank for

encashment on October 1, 1996.17

On October 1, 1996, Pacquing informed petitioner of the vehicle's loss. Thereafter, petitioner reported
the loss and filed

a claim with respondent for the insurance proceeds of ₱1,500,000.00.18

After investigation, respondent denied

petitioner's claim on the ground that there was no insurance contract.19 Petitioner, through counsel,
sent a final demand

on July 7, 1997.20 Respondent, however, refused to pay the insurance proceeds or return the premium
paid on the vehicle.

ISSUE:

Whether there is a binding insurance contract between petitioner and respondent.

HELD:

NO. Insurance is a contract whereby one undertakes for a consideration to indemnify another against
loss, damage or

liability arising from an unknown or contingent event.Just like any other contract, it requires a cause or
consideration.

The consideration is the premium, which must be paid at the time and in the way and manner specified
in the policy. If

not so paid, the policy will lapse and be forfeited by its own terms.

The law, however, limits the parties' autonomy as to when payment of premium may be made for the
contract to take effect.

The general rule in insurance laws is that unless the premium is paid, the insurance policy is not valid
and binding. Section 77 of the Insurance Code, applicable at the time of the issuance of the policy,
provides:

Sec. 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the
peril

insured against.

Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an

insurance company is valid and binding unless and until the premium thereof has been paid, except in
the case of a life or an industrial life policy whenever the grace period provision applies.

Here, there is no dispute that the check was delivered to and was accepted by respondent's agent,
Trans-Pacific, only on September 28, 1996. No payment of premium had thus been made at the time of
the loss of the vehicle on September 27, 1996.

While petitioner claims that Trans-Pacific was informed that the check was ready for pick-up on
September 27, 1996, the notice of the availability of the check, by itself, does not produce the effect of
payment of the premium.

Trans-Pacific could not be considered in delay in accepting the check because when it informed
petitioner that it will only be able to pick-up the check the next day, petitioner did not protest to this,
but instead allowed Trans-Pacific to do so.

Thus, at the time of loss, there was no payment of premium yet to make the insurance policy effective.

In UCPB General Insurance Co., Inc., the Supreme Court summarized the exceptions as follows:

(1) in case of life or industrial life policy, whenever the grace period provision applies, as expressly
provided

by Section 77 itself;

(2) where the insurer acknowledged in the policy or contract of insurance itself the receipt of premium,
even if
premium has not been actually paid, as expressly provided by Section 78 itself;

(3) where the parties agreed that premium payment shall be in installments and partial payment has
been

made at the time of loss, as held in Makati Tuscany Condominium Corp. v. Court of Appeals;

(4) where the insurer granted the insured a credit term for the payment of the premium, and loss occurs
before

the expiration of the term, as held in Makati Tuscany Condominium Corp.; and

(5) where the insurer is in estoppel as when it has consistently granted a 60 to 90-day credit term for the

payment of premiums.

The insurance policy in question does not fall under the first to third exceptions laid out in UCPB General
Insurance

Co., Inc.: (1) the policy is not a life or industrial life policy; (2) the policy does not contain an
acknowledgment of the

receipt of premium but merely a statement of account on its face;54 and (3) no payment of an
installment was made at

the time of loss on September 27.

The Supreme Court cannot sustain petitioner's claim that the parties agreed that the insurance contract
is immediately effective upon issuance despite nonpayment of the premiums.1âwphi1 Even if there is a
waiver of pre-payment of premiums, that in itself does not become an exception to Section 77, unless
the insured clearly gave a credit term or extension.

This is the clear import of the fourth exception in the UCPB General Insurance Co., Inc. To rule otherwise
would render nugatory the requirement in Section 77 that "notwithstanding any agreement to the
contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless
and until the premium thereof has been paid

Other Issue:

Petitioner argues that his case falls under the fourth and fifth exceptions because the parties intended
the contract of insurance to be immediately effective upon issuance, despite non-payment of the
premium.

This waiver to a pre-payment in full of the premium places respondent in estoppel.

The fourth and fifth exceptions to Section 77 operate under the facts obtaining in Makati Tuscany
Condominium Corp. and UCPB General Insurance Co., Inc. Both contemplate situations where the
insurers have consistently granted the insured a credit extension or term for the payment of the
premium.

Here, however, petitioner failed to establish the fact of a grant by respondent of a credit term in his
favor, or that the grant has been consistent.
While there was mention of a credit agreement between Trans-Pacific and respondent, such
arrangement was not proven and was internal between agent and principal. Under the principle of
relativity of contracts, contracts bind the parties who entered into it. It cannot favor or prejudice a third
person, even if he is aware of the contract and has acted with knowledge.

MAKATI TUSCANY vs. CA

FACTS: In 1982, private respondent American Home Assurance Co. (AHAC), represented by American
International Underwriters (Phils.), Inc., issued in favor of petitioner Makati Tuscany Condominium
Corporation (TUSCANY) Insurance Policy on the latter’s building and premises, for a period beginning 1
March 1982 and ending 1 March 1983. The premium was paid on installments on 12 March 1982, 20
May 1982, 21 June 1982 and 16 November 1982, all of which were accepted by private respondent.

The policy was renewed the following year and payments were made in the same manner.

In 1984, the policy was again renewed and petitioner made two installment payments, both accepted by
private respondent, the first on 6 February 1984 for P52,000.00 and the second, on 6 June 1984 for
P100,000.00. Thereafter, petitioner refused to pay the balance of the premium.

American Home Assurance Co.,consequently filed an action to recover the unpaid balance for Insurance
Policy.

Petitioner explained that it discontinued the payment of premiums because the policy did not contain a
credit clause in its favor. Petitioner further claimed that the policy was never binding and valid, and no
risk attached to the policy.

The Trial Court dismissed the complaint and counterclaim. The Court of Appeals rendered a decision
modifying the that of the trial court by ordering herein petitioner to pay the balance of the premiums
due.

ISSUE:

Whether payment by installment of the premiums due on an insurance policy invalidates the contract of
insurance, in view of Sec. 77 of P.D. 612, otherwise known as the Insurance Code, as amended, which
provides:

Sec. 77. An insurer is entitled to the payment of the premium as soon as the thing is exposed to the peril
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

RULING:

The Supreme Court ruled that the subject policies are valid even if the premiums were paid on
installments. The records clearly show that petitioner and private respondent intended subject
insurance policies to be binding and effective notwithstanding the staggered payment of the premiums.
The initial insurance contract entered into in 1982 was renewed in 1983, then in 1984. In those three (3)
years, the insurer accepted all the installment payments. Such acceptance of payments speaks loudly of
the insurer’s intention to honor the policies it issued to petitioner. Certainly, basic principles of equity
and fairness would not allow the insurer to continue collecting and accepting the premiums, although
paid on installments, and later deny liability on the lame excuse that the premiums were not prepared in
full.

The Supreme Court sustained the decision of Court of Appeals that while Section 77 which states that
prepayment of premiums is strictly required as a condition to the validity of the contract, It was not
prepared to rule that the request to make installment payments duly approved by the insurer, would
prevent the entire contract of insurance from going into effect despite payment and acceptance of the
initial premium or first installment.

Section 78 of the Insurance Code in effect allows waiver by the insurer of the condition of prepayment
by making an acknowledgment in the insurance policy of receipt of premium as conclusive evidence of
payment so far as to make the policy binding despite the fact that premium is actually unpaid.

Section 77 merely precludes the parties from stipulating that the policy is valid even if premiums are not
paid, but does not expressly prohibit an agreement granting credit extension, and such an agreement is
not contrary to morals, good customs, public order or public policy.

At the very least, both parties should be deemed in estoppel to question the arrangement they have
voluntarily accepted.

TAN IT vs. SUN INSURANCE

FACTS: On November 25, 1924, the Sun Insurance Office issued to Tan It a policy of fire insurance
covering certain goods and merchandise then deposited in the bodega in Binondo, Manila. The policy
was good for one year. It stipulated that in case of fire the insurer was to pay the insured three-fourths
of the value of the goods, but not exceeding P30,000. The policy contained other clauses, particularly
one relating to fraudulent claims.

On November 1, 1925, a fire of unknown origin, destroyed a portion of the goods and merchandise
covered by the insurance policy. On November 3, 1925, Tan It presented a verified claim of the alleged
loss suffered by him on account of the fire.

The parties having found it impossible to arrive at an amicable settlement Tan It filed an action on
policy of fire insurance for the recovery of the sum of P23,895.64.
Sun Insurance Office pleaded false swearing and fraud by way of defense. It claimed that there
is a serious discrepancy between the actual value of the property and that sworn in the proof of
loss.

The Court of First Instance of Manila ordered Sun Insurance Office to pay Tan It the amount of
P13,113. Both parties filed their appeal, Tam It seeks to obtain the full amount sued for, while Sun
Insurance Office to avoid any recovery.

ISSUE: Whether or not Tan It's claim is fraudulent and thus voidable as contended by the Sun
Insurance Office.

HELD: Clause 13 of the contract of insurance provides that: "If the claim be in any respect
fraudulent, or if any false declaration be made or used in support thereof, all benefit under this
Policy shall be forfeited."

A false and material statement made with an intent to defraud avoids an insurance policy. It
should not now be departed from out of a spirit of sympathy in one particular case. It is well
for those who are unfortunate enough to have losses by fire to know that they can only hope
to recoup themselves by fair dealing. No court could subscribe to a confirmation of a fire
insurance claim dishonesty made.

In this case, the serious discrepancy between the true value of the property and that sworn to in
the proofs of loss is to be considered as bearing upon the presence of fraud. It is more than an
honest misstatement, more than inadvertence or mistake, more than a mere error in opinion,
more than a slight exaggeration, and in connection with all the surrounding circumstances,
discloses a material overvaluation made intentionally and willfully. Since Tan It’s claim is
fraudulent, all the benefits in the policy shall be forfeited. Therefore, he cannot claim from the
policy.

NORMAN NODA vs. HON. GREGORIA ARNALDO

FACTS: Norman R. Noda obtained from respondent Zenith Insurance Corporation two fire insurance
policies. While both policies were in force, fire destroyed petitioner's insured properties at the
market site and at Barreda St.

When petitioner failed to obtain indemnity on his claims from respondent Zenith, he filed a
complaint with the Insurance Commission praying that respondent company be ordered to pay
him "the sum of P130,000 representing the value of the two [2] policies insured by respondent
with interest at 12% per annum, plus damages, attorney's fees and other expenses of litigation.

In its answer Zenith interposed that petitioner had no cause of action; that Policy No. F-03724
was not in full force and effect at the time of the fire because the premium on the policy was
not paid; that Zenith's liability under Policy No. F-03734, if any, was limited to P15,472.50 in
view of the coinsurance; and that petitioner failed to substantiate his claim as to the value of
the goods reputedly destroyed by fire and consequently, Zenith could not be held answerable for the
same. Insurance Commissioner did not allowed Noda to recover under said policy and the actual,
moral and exemplary damages prayed for.

ISSUE: Whether or not Zenith Insurance Corporation is liable.

 HELD: Yes. We find that respondent Commissioner acted with grave abuse of discretion when
she denied petitioner's claim for indemnity under Policy No. F-03734 because of what she
perceived as insufficient proof. To prove the existence of the stocks in trade covered by Policy
No. F-03734, petitioner offered his testimony and that of his wife as well as documentary
exhibits.

The foregoing evidence for petitioner preponderantly showed the presence of some P590,000
worth of goods in his retail store during the fire of November 9, 1977.

The report even took into account the appraisals of the other adjusters and concluded that the
total loss sustained by petitioner in his household effects and stocks in trade reached P379,302.12.

But after apportioning said amount among petitioner's six different insurers [the co-insurance
being known to Zenith], the liability of Zenith was placed at P60,592.10. It therefore
recommended that Zenith pay the petitioner the amount of P60,592.10.

While the insurer and the Insurance Commissioner for that matter, have the right to reject
proofs of loss if they are unsatisfactory, they may not set up for themselves an arbitrary
standard of satisfaction.

Substantial compliance with the requirements will always be deemed sufficient. The denial of
petitioner's demand for exemplary damages by respondent Commissioner must, however, be
sustained. There is no showing that Zenith, in contesting payment, had acted in a wanton,
oppressive or malevolent manner to warrant the imposition of corrective damages.

FINMAN ASSURANCE vs. CA and USIPHIL

FACTS: Private respondent obtained a fire insurance policy from petitioner under the name Summa
Insurance Corp.) covering certain properties.

Under the policy issued to private respondent, petitioner undertook to indemnify private respondent for
any damage to or loss of said properties arising from fire.

Sometime in 1982 private respondent filed with petitioner an insurance claim for the loss of the insured
properties due to fire.

Petitioner appointed an adjuster to undertake the valuation and adjustment of the loss. Private
respondent submitted its sworn statement of loss and formal claim. Despite repeated demands by
private respondent, petitioner refused to pay the insurance claim. Thus, private respondent was
constrained to file a complaint against petitioner for the unpaid insurance claim.

In its answer, petitioner maintained that the claim of private respondent could not be allowed because
it failed to comply with the policy condition regarding the submission of certain documents to prove the
loss.

Trial ensued. The trial court rendered judgment in favor of private respondent. On appeal, the CA
substantially affirmed the decision of the trial court. Petitioner appealed to the SC assailing the decision
of the appellate court.
ISSUE :

Whether or not the insurer is liable for the payment of the insurance claim.

HELD:

Yes, well-settled is the rule that factual findings and conclusions of the trial court and the CA are entitled
to great weight and respect, and will not be disturbed on appeal in the absence of clear showing that
the trial court overlooked certain facts or circumstances which would substantially affect the disposition
of the case.

Both the trial court and the CA concur in holding that private respondent had substantially complied
with the policy no. 13 regarding the submission of the certain documents to prove the loss. As perusal of
the records shows that private respondent, after the occurrence of the fire, immediately notified
petitioner thereof following the submission of the documents. Petitioner itself acknowledged its liability
when through its Finance Manager signed the documents indicating that the amount due to private
respondent and as held correctly by the appellate court.

Under Sec. 243. The amount of any loss or damage for which an insurer may be liable, under any policy
other life insurance policy, shall be paid within 30days after the proof of the loss is received by the
insurer and ascertainment of the loss or damage is made either by agreement of between the insured
and the insurer or by arbitration; but if such ascertainment is not had or made within 60days after such
receipt by the insurer of the proof of loss, then the loss or damage shall be paid within 90days after such
receipt.

The policy itself obliges petitioner to pay the insurance claim within 30days after proof of loss and
ascertainment of the loss made in an agreement between private respondent and petitioner. For its
failure to do so, the CA and the trial court rightfully directed petitioner to pay 24 % interest per annum.

MALAYAN vs. GREGORIA CRUZ ARNALDO

FACTS: June 7, 1981: Malayan insurance co., inc. (MICO) issued to Coronacion Pinca, Fire Insurance
Policy for her property effective July 22, 1981, until July 22, 1982.

On October 15,1981, MICO allegedly cancelled the policy for non-payment of the premium and sent the
corresponding notice to Pinca. On December 24, 1981, payment of the premium for Pinca was received
by Domingo Adora, agent of MICO. On January 15, 1982 Adora remitted this payment to MICO, together
with other payments. On January 18, 1982, Pinca’s property was completely burned. On February 5,
1982, Pinca’s payment was returned by MICO to Adora on the ground that her policy had been cancelled
earlier but Adora refused to accept it and instead demanded for payment.

Under Section 416 of the Insurance Code, the period for appeal is thirty days from notice of the decision
of the Insurance Commission. The petitioner filed its motion for reconsideration on April 25, 1981, or
fifteen days such notice, and the reglementary period began to run again after June 13, 1981, date of its
receipt of notice of the denial of the said motion for reconsideration. As the herein petition was filed on
July 2, 1981, or nineteen days later, there is no question that it is tardy by four days. The Insurance
Commission favored Pinca. MICO thereafter appealed.

ISSUE:

Whether or not MICO should be liable because its agent Adora was authorized to receive it.

HELD:

YES. petition is DENIED.

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is exposed to the peril
insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance
issued by an insurance company is valid and binding unless and until the premium thereof has been
paid, except in the case of a life or an industrial life policy

whenever the grace period provision applies.

SEC. 306. Any insurance company which delivers to an insurance agent or insurance broker a policy or
contract of insurance shall be deemed to have authorized such agent or broker to receive on its behalf
payment of any premium which is due on such policy or contract of insurance at the time of its issuance
or delivery or which becomes due thereon.

 Payment to an agent having authority to receive or collect payment is equivalent to payment to the
principal himself; such payment is complete when the money delivered is into the agent’s hands and is a
discharge of the indebtedness owing to the principal.

SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice
thereof to the insured, and no notice of cancellation shall be effective unless it is based on the
occurrence, after the effective date of the policy, of one or more of the following:

(a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;

(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;

(e) physical changes in the property insured which result in the property becoming uninsurable;or

(f) a determination by the Commissioner that the continuation of the policy would violate or would
place the insurer

in violation of this Code.

As for the method of cancellation, Section 65 provides as follows:

SEC. 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or
delivered to the named insured at the address shown in the policy, and shall state (a) which of the
grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named
insured, the insurer will furnish the facts on which the cancellation is based.

 A valid cancellation must, therefore, require concurrence of the following conditions:

(1) There must be prior notice of cancellation to the insured;

(2) The notice must be based on the occurrence, after the effective date of the policy, of one or more of
the grounds mentioned;

(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the address
shown in the policy;

(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that upon
written request of the insured, the insurer will furnish the facts on which the cancellation is based.

All MICO’s offers to show that the cancellation was communicated to the insured is its employee’s
testimony that the said cancellation was sent “by mail through our mailing section.” without more, it
stands to reason that if Pinca had really received the said notice, she would not have made payment on
the original policy on December 24, 1981. Instead, she would have asked for a new insurance, effective
on that date and until one year later, and so taken advantage of the extended period. Incidentally,
Adora had not been informed of the cancellation either and saw no reason not to accept the said
payment. Although Pinca’s payment was remitted to MICO’s by its agent on January 15, 1982, MICO
sought to return it to Adora only on February 5, 1982, after it presumably had learned of the occurrence
of the loss insured against on January 18, 1982 make the motives of MICO highly suspicious.

Vda. De Gabriel vs CA

FACTS: Marcelino Gabriel, the insured, was employed by Emerald Construction & Development
Corporation (ECDC) at its construction project in Iraq. He was covered by a personal accident insurance
in the amount ofP100,000.00 under a group policy procured from Fortune Insurance & Surety Company
Inc. by ECDC for its overseas workers.
The insured risk was for "bodily injury caused by violent accidental external and visible means which
injury would solely and independently of any other cause" result in death or disability.

On 22 May 1982, within the life of the policy, Gabriel died in Iraq. A year later, or on 12 July 1983, ECDC
reported Gabriel's death to Fortune by telephone. Among the documents thereafter submitted to
Fortune were a copy of the death certificate 5 issued by the Ministry of Health of the Republic of Iraq —
which stated "REASON OF DEATH: UNDER EXAMINATION NOW — NOT YET KNOWN " and an autopsy
report of the National Bureau of Investigation (NBI) to the effect that "due to advanced state of
postmortem decomposition, cause of death could not be determined." Fortune referred the insurance
claim to Mission Adjustment Service, Inc. Following a series of communications between Jacqueline
Jimenez vda. de Gabriel and Fortune, the latter, on 22 September 1983, ultimately denied the claim of
ECDC on the ground of prescription.

Vda. De Gabriel went to the Regional Trial Court of Manila. In her complaint against ECDC and Fortune,
she averred that her husband died of electrocution while in the performance of his work and prayed for
the recovery of P100,000.00 for insurance indemnification and of various other sums by way of actual,
moral, and exemplary damages, plus attorney's fees and costs of suit.

Fortune filed its answer, which was not verified, admitting the genuineness and due execution of the
insurance policy; it alleged, however, that since both the death certificate issued by the Iraqi Ministry of
Health and the autopsy report of the NBI failed to disclose the cause of Gabriel's death, it denied liability
under the policy.

In addition, Fortune raised the defense of "prescription," invoking Section 384 10 of the Insurance Code.
Later, Fortune filed an amended answer, still unverified, reiterating its original defenses but, this time,
additionally putting up a counterclaim and a crossclaim.

The trial court dismissed the case against ECDC for the failure of Vda. de Gabriel to take steps to cause
the service of the fourth alias summons on ECDC. The dismissal was without prejudice. The case
proceeded against Fortune alone. On 28 May 1987, the trial court rendered its decision in favor (partly)
of Vda. De Gabriel's claim.

In arriving at its conclusion, the trial court held that Fortune was deemed to have waived the defense,
i.e., that the cause of Gabriel's death was not covered by the policy, when the latter failed to impugn by
evidence Vda. de Gabriel's averment on the matter.

With regard to the defense of prescription, the court considered the complaint to have been timely
filed or within 1 year from Fortune's denial of the claim. Vda. de Gabriel and Fortune both appealed to
the Court of Appeals. The Court of Appeals, on 18 September 1991, reversed the decision of the lower
court. The appellate court held that Vda. de Gabriel had failed to substantiate her allegation that her
husband's death was caused by a risk insured against.

The motion for reconsideration was denied. Vda. de Gabriel filed the petition for review on certiorari.

Issue [1]: Whether prescription was properly invoked by Fortune in this case.

Held [1]: YES. On the issue of "prescription," Fortune correctly invoked Section 384 of the Insurance
Code
which provides that "Any person having any claim upon the policy issued pursuant to this chapter shall,

without any unnecessary delay, present to the insurance company concerned a written notice of claim
setting

forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician.
Notice

of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed

waived. Action or suit for recovery of damage due to loss or injury must be brought, in proper cases,
with the

Commissioner or the Courts within one year from denial of the claim, otherwise, the claimant's right of
action

shall prescribe." The notice of death was given to Fortune, concededly, more than a year after the death
of

Vda. de Gabriel's husband. Fortune, in invoking prescription, was not referring to the one-year period
from

the denial of the claim within which to file an action against an insurer but obviously to the written
notice of

claim that had to be submitted within six months from the time of the accident. On the other hand,
there is

absolutely no basis in fact and in law to hold that the insurance company was deemed to have waived --
by

failing to have its answers (to the Request for Admission) duly verified -- the defense, that the death of
Vda.

de Gabriel's husband was not caused by violent accidental external and visible means' as contemplated
in the

insurance policy. The Death Certificate and the Autopsy Report, more than controverted the allegation
of Vda.

de Gabriel as to the cause of death of her husband.

Issue [2]: Whether Vda. De Gabriel is required to present proof that the insured’s demise was from an
accidental death, unlike in ordinary life insurance where the insured's death, regardless of the cause
thereof, would normally be compensable.

Held [2]: YES. The insurance policy expressly provided that to be compensable, the injury or death
should be caused by "violent accidental external and visible means."

In attempting to prove the cause of her husband's death, all that Vda. de Gabriel could submit were a
letter sent to her by her husband's co-worker, stating that Gabriel died when he tried to haul water out
of a tank while its submerged motor was still functioning, and Vda. de Gabriel's sinumpaang salaysay
which merely confirmed the receipt and stated contents of the letter.

Said the appellate court in this regard: "It must be noted that the only evidence presented by her to
prove the circumstances surrounding her husband's death were her purported affidavit and the letter
allegedly written by the deceased co-worker in Iraq. The said affidavit however suffers from procedural
infirmity as it was noteven testified to or identified by the affiant (Vda. De Gabriel) herself. This self-
serving affidavit therefore is a mere hearsay under the rules.

In like manner, the letter allegedly written by the deceased's co-worker which was never identified to in
court by the supposed author, suffers from the same defect as the affidavit of the plaintiff-appellant."
Not one of the other documents submitted, to wit, the POEA decision, dated 06 June 1984, the death
certificate issued by the Ministry of Health of Iraq and the NBI autopsy report, could give anyprobative
value to Vda. de Gabriel's claim.

The POEA decision did not make any categorical holding on the specific cause of Gabriel's death.
Neither did the death certificate issued by the health authorities in Iraq nor the NBI autopsy report
provide any clue on the cause of death. All that appeared to be clear was the fact of Gabriel's demise on
22 May 1982 in Iraq.

Evidence, in fine, is utterly wanting to establish that the insured suffered from an accidental death, the
risk covered by the policy. In an accident insurance, the insured "s beneficiary has the burden of proof in
demonstrating that the cause of death is due to the covered peril.

Once the fact is established, the burden then shifts to the insurer to show any excepted peril that may
have been stipulated by the parties. An "accident insurance" is not thus to be likened to an ordinary life
insurance where the insured's death, regardless of the cause thereof, would normally be compensable.

The latter is akin in property insurance to an "all risk" coverage where the insured, on the aspect of
burden of proof, has merely to show the condition of the property insured when the policy attaches and
the fact of loss or damage during the period of the policy and where, thereafter, the burden would be
on the insurer to show any "excluded peril."

When, however, the insured risk is specified, it lies with the claimant of the insurance proceeds to
initially prove that the loss is caused by the covered peril.

BPI vs LAINGO

FACTS: FACTS: On 20 July 1999, Rheozel Laingo (Rheozel), the son of respondent Yolanda Laingo
(Laingo), opened a "Platinum 2-in-1 Savings and Insurance" account with petitioner Bank of the
Philippine Islands (BPI) in its Claveria, Davao City branch.

The Platinum 2-in-1 Savings and Insurance account is a savings account where depositors are
automatically covered by an insurance policy against disability or death issued by petitioner FGU
Insurance Corporation (FGU Insurance), now known as BPI/MS Insurance Corporation.

BPI issued Passbook No. 50298 to Rheozel corresponding to Savings Account No. 2233-0251-11. A
Personal Accident Insurance Coverage Certificate No. 043549 was also issued by FGU Insurance in the
name of Rheozel with Laingo as his named beneficiary.
 On 25 September 2000, Rheozel died due to a vehicular accident. Laingo instructed the family's
personal secretary, Alice Torbanos (Alice) to go to BPI, Claveria, Davao City branch and inquire about the
savings account of Rheozel. Due to Laingo's credit standing and relationship with BPI, BPI
accommodated Laingo who was allowed to withdraw P995,000 from the account of Rheozel. A certain
Ms. Laura Cabico, an employee of BPI, went to Rheozel's wake at the Cosmopolitan Funeral Parlor to
verify some information from Alice and brought with her a number of documents for Laingo to sign for
the withdrawal of the P995,000.

More than two years later or on 21 January 2003, Rheozel's sister, Rhealyn Laingo-Concepcion, while
arranging Rheozel's personal things in his room at their residence in Ecoland, Davao City, found the
Personal Accident Insurance Coverage Certificate No. 043549 issued by FGU Insurance. Rhealyn
immediately conveyed the information to Laingo. Laingo sent two letters dated 11 September 2003 and
7 November 2003 to BPI and FGU Insurance requesting them to process her claim as beneficiary of
Rheozel's insurance policy.

FGU Insurance sent a reply-letter to Laingo denying her claim for failure of claiming within three
calendar months from the death of Rheozel as required under Paragraph 15 of the Personal Accident
Certificate of Insurance.

The trial court decided the case in favor of respondents. CA reversed the decision of the Trial Court.

ISSUE: Whether or not Laingo, as named beneficiary who had no knowledge of the existence of the
insurance contract, is bound by the three calendar month deadline for filing a written notice of claim
upon the death of the insured.

HELD: NO REASON: Petitioners contend that the words or language used in the insurance contract,
particularly under paragraph 15, is clear and plain or readily understandable by any reader which leaves
no room for construction. Petitioners also maintain that ignorance about the insurance policy does not
exempt respondent from abiding by the deadline and petitioners cannot be faulted for respondent's
failure to comply.

Respondent, on the other hand, insists that the insurance contract is ambiguous since there is no
provision indicating how the beneficiary is t o be informed of the three calendar month claim
period. Since petitioners did not notify her of the insurance coverage of her son where she was
named as beneficiary in case of his death, then her lack of knowledge made it impossible for her to
fulfill the condition set forth in the insurance contract.

In the present case, the source of controversy stems from the alleged noncompliance with the
written notice of insurance claim to FGU Insurance within three calendar months from the death
of the insured as s pecified in the insurance contract. Laingo contends that as the named
beneficiary entitled to the benefits of the insurance claim she had no knowledge that Rheozel was
covered by an insurance policy against disability or death issued by FGU Insurance that was
attached to Rheozel's savings account with BPI. Laingo argues that she dealt with BPI after her
son's death, when she was allowed to withdraw funds from his savings account in the amount of
P995,000. However, BPI did not notify her of the attached insu rance policy. Thus, Laingo attributes
responsibility to BPI and FGU Insurance for her failure to file the notice of insurance claim within
three months from her son's death.
As the main proponent of the 2in1 deposit account, BPI tied up with its affiliate, FGU Insurance,
as its partner. Any customer interested to open a deposit account under this 2in1 product, after
submitting all the required documents to BPI and obtaining BPI's approval, will automatically be
given insurance coverage. Thus, BPI acted feature of its own marketed product. as agent of FGU
Insurance with respect to the insurance Articles 1884 and 1887 of the Civil Code state: through
Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the
damages which, his nonperformance, the principal may suffer. He must also finish the business
already begun on the death of the principal, should delay entail any danger. Art. 1887. In the
execution of the agency, the agent shall act in accordance with the instructions of the principal.
In default, thereof, he shall do all that a good father of a family would do, as required by the
nature of the business.

The provision is clear that an agent is bound to carry out the agency. The relationship existing
between prin cipal and agent is a fiduciary one, demanding conditions of trust and confidence. It is
the duty of the agent to act in good faith for the advancement of the interests of the principal. In
this case, BPI had the obligation to carry out the agency by inform ing the beneficiary, who
appeared before BPI to withdraw funds of the insured who was BPI's depositor, not only of the
existence of the insurance contract but also the accompanying terms and conditions of the
insurance policy in order for the beneficiary t o be able to properly and timely claim the benefit.

FGU vs CA

FACTS: Anco Enterprises Company (ANCO) is a partnership between Ang Gui and Co To engaged in the
shipping business. It operates the M/T ANCO tugboat and the D/B Lucio barge (has no engine and must
be towed by the tugboat) as a common carrier.

San Miguel Corp. (SMC) shipped beverages via D/B Lucio towed by M/T ANCO. When the ships arrived at
Antique, M/T ANCO immediately left D/B Lucio despite an impending storm. All the other vessels were
transferred to a safer place except D/B Lucio. SMC requested for its transfer but the crewmen of the said
vessel did not heed the same as they were confident that the vessel can withstand the storm. However,
it did not. The storm destroyed the vessel and led to ANCO’s failure to deliver about P1.35M worth of
beverages.

SMC filed complaint for breach of contract of carriage against ANCO. The latter, on the other hand, filed
a Third-Party complaint against its insurer under a marine insurance policy (P858k), FGU.

For the defenses, ANCO alleged that the loss was due to a fortuitous event. For FGU, it alleged that the
cause of loss was not an insured risk, and that ANCO failed to exercise the requisite diligence in
preventing the loss or destruction of the cargoes.
The RTC found ANCO liable to SMC on account of its negligence. Whereas, it ordered FGU to shoulder
53% of the amount of the lost cargoes in accordance with its insurance policy with the former. The SC
sustained the award of damages to SMC, but exonerated FGU from liability, i.e. third-party complaint
dismissed.

ISSUE: Could FGU be held liable under the insurance policy to reimburse ANCO for the loss of the
cargoes despite the findings of the CA that such loss was occasioned by the blatant negligence of the
latter’s employees?

HELD: NO.

While, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents
constitute no defense on the part of the insurer (as ordinary negligence of the insured and his agents
has long been held as a part of the risk which the insurer takes upon himself). This rule presupposes that
the loss has occurred due to causes which could not have been prevented by the insured, despite the
exercise of due diligence. When evidence show that the insured’s negligence or recklessness is so gross
as to be sufficient to constitute a willful act, the insurer must be exonerated.

In this case, the Court agreed with the the findings of the lower courts that under the circumstances, the
employees and crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent.

BATACLAN vs. MEDINA

FACTS: On September 13, 1952 shortly after midnight, bus No. 30 of the Medina Transportation,
operated by defendant Mariano Medina, left the town of Amadeo, Cavite on its way to Pasay City,
driven by Conrado Saylon. At about 2:00 a.m. while the bus was running within the jurisdiction of Imus,
Cavite, one of the front tires burst and the vehicle began to zigzag until it fell into a canal or ditch on the
right side of the road and turned turtle.

Some of the passengers managed to leave the bus the best way they could, others had to be helped or
pulled out, while the three (3) passengers beside the driver, Juan Bataclan, Felipe Lara, Visaya (a person
whom they called Visaya) and Natalia Villanueva.

After half an hour, came about ten (10) men, one of them carrying a lighted torch made of bamboo with
a wick on one end, evidently fueled with petroleum. The men presumably approached the overturned
bus, and almost immediately, a fierce fire started, burning all but consuming the bus, including the four
passengers trapped inside it. It would appear that as the bus overturned, gasoline began to leak and
escape from the gasoline tank on the side of the chassis, spreading over and permeating the body of the
bus and the ground and under and around it, and that the lighted torch brought by one of the men who
answered the call for help set it on fire.
That same day, the charred bodies of the four (4) doomed passengers inside the bus were removed and
duly identified, especially that of Juan Bataclan. By reason of death, his widow, Salud Villanueva, in her
name and in behalf of her children, brought the present suit to recover from Mariano Medina
compensatory, moral, and exemplary damages and attorneys fees in the total amount of P87,150. After
trial, the Court of First Instance of Cavite awarded P1,000 to the plaintiffs, plus P600 as attorneys fee,
plus P100, the value of the merchandise being carried by Bataclan to Pasay City for sale and which was
lost in the fire.

The plaintiffs and the defendants appealed the decision to the Court of Appeals, but the latter court
endorsed the appeal to the Supreme Court because of the value involved in the claim of the complaint.

ISSUE: Whether the overturning of the bus was the proximate cause of Bataclan et. als death or the fire
that burned the bus.

HELD: The proximate cause of death of Bataclan et. al was the overturning of the bus. This is for the
reason that when the vehicle turned not only on its side but completely on its back, the leaking of the
gasoline from the tank was not unnatural or unexpected.

The coming of the men with a lighted torch was in response to the call for help, made not only by the
passengers, but most probably, by the driver and the conductor themselves, and that because it was
very dark, the rescuers had to carry a light with them.

Coming as they did from a rural area where lanterns and flashlights were not available, they had to use a
torch, the most handy and available. And what was more natural than that said rescuers should
innocently approach the overturned vehicle to extend the aid and effect the rescue requested from
them.

Per Volume 38, pages 695-696 of American Jurisprudence, proximate cause is that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would have not occurred. And more approximately, the proximate legal cause
is that acting first and producing the injury, either immediately or by setting other events in motion, all
constituting a natural and continuous chain of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately effecting the injury, as a natural and
probable result of the cause which first acted, under such circumstances that the person responsible for
the first event should, as an ordinarily prudent and intelligent person, have reasonable ground to expect
at the moment of his act or default that an injury to some person might probably result therefrom.

What is more, the burning of the bus can also in part be attributed to the negligence of the Medina
Transport, through its driver and its conductor. According to a witness account, the driver and the
conductor were on the road walking back and forth. They, or at least, the driver should and must have
known that in the position in which the overturned bus was, gasoline could and must have leaked from
the gasoline tank and soaked the area in and around the bus, this aside from the fact that gasoline,
when spilled, especially over a large area, can be smelt and directed even from a distance, and yet
neither the driver nor the conductor would appear to have cautioned or taken steps to warn the
rescuers not to bring the lighted torch too near the bus. The said negligence on the part of the agents of
the carrier come under the codal provisions abovementioned, particularly Articles 1733, 1755, 1756,
1759 and 1763 of the New Civil Code. This provides for the responsibility of a common carrier to its
passengers and their goods.

In other words, the coming of the men with the torch was to be expected and was a natural sequence of
the overturning of the bus, the trapping of some of its passengers and the call for outside help.

GEAGONIA vs. CA

FACTS: Armando Geagonia is the owner of Norman's Mart located in the public market of San Francisco,
Agusan del Sur. On 22 December 1989, he obtained from Country Bankers Insurance Corporation fire
insurance policy No. F-14622 2 for P100,000.00. The period of the policy was from 22 December 1989 to
22 December 1990 and covered the following: "Stock-in-trade consisting principally of dry goods such as
RTW's for men and women wear and other usual to assured's business."

Geagonia declared in the policy under the subheading entitled CO-INSURANCE that Mercantile
Insurance Co., Inc. was the co-insurer for P50,000.00. From 1989 to 1990, Geagonia had in his inventory
stocks amounting to P392,130.50, itemized as follows:

Zenco Sales, Inc., P55,698.00; F. Legaspi Gen. Merchandise, 86,432.50; and Cebu Tesing Textiles,
250,000.00 (on credit); totalling P392,130.50.

The policy contained the following condition, that "the insured shall give notice to the Company of any
insurance or insurances already effected, or which may subsequently be effected, covering any of the
property or properties consisting of stocks in trade, goods in process and/or inventories only hereby
insured, and unless notice be given and the particulars of such insurance or insurances be stated therein
or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company
before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited,
provided however, that this condition shall not apply when the total insurance or insurances in force at
the time of the loss or damage is not more than P200,000.00."

On 27 May 1990, fire of accidental origin broke out at around 7:30 p.m. at the public market of San
Francisco, Agusan del Sur. Geagonia's insured stocks-in-trade were completely destroyed prompting him
to file with Country Bankers a claim under the policy. On 28 December 1990, Country Bankers denied
the claim because it found that at the time of the loss Geagonia's stocks-in-trade were likewise covered
by fire insurance policies GA-28146 and GA-28144, for P100,000.00 each, issued by the Cebu Branch of
the Philippines First Insurance Co., Inc. (PFIC).

These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)"
with a mortgage clause reading ""MORTGAGEE: Loss, if any, shall be payable to Messrs. Cebu Tesing
Textiles, Cebu City as their interest may appear subject to the terms of this policy.

CO-INSURANCE DECLARED: P100,000. — Phils. First CEB/F-24758" The basis of Country Bankers' denial
was Geagonia's alleged violation of Condition 3 of the policy. Geagonia then filed a complaint against
Country Bankers with the Insurance Commission (Case 3340) for the recovery of P100,000.00 under fire
insurance policy F-14622 and for attorney's fees and costs of litigation. He attached his letter of 18
January 1991 which asked for the reconsideration of the denial. He admitted in the said letter that at the
time he obtained Country Bankers's fire insurance policy he knew that the two policies issued by the
PFIC were already in existence; however, he had no knowledge of the provision in Country Bankers'
policy requiring him to inform it of the prior policies; this requirement was not mentioned to him by
Country Bankers' agent; and had it been so mentioned, he would not have withheld such information.
He further asserted that the total of the amounts claimed under the three policies was below the actual
value of his stocks at the time of loss, which was P1,000,000.00.

In its decision of 21 June 1993, the Insurance Commission found that Geagonia did not violate Condition
3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC;
that it was Cebu Tesing Textiles which procured the PFIC policies without informing him or securing his
consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These
findings were based on Geagonia's testimony that he came to know of the PFIC policies only when he
filed his claim with Country Bankers and that Cebu Tesing Textile obtained them and paid for their
premiums without informing him thereof.

The Insurance Commission ordered Country Bankers to pay Geagibua the sum of P100,000.00 with legal
interest from the time the complaint was filed until fully satisfied plus the amount of P10,000.00 as
attorney's fees. With costs. Its motion for the reconsideration of the decision having been denied by the
Insurance Commission in its resolution of 20 August 1993, Country Bankers appealed to the Court of
Appeals by way of a petition for review (CA-GR SP 31916). In its decision of 29 December 1993, the
Court of Appeals reversed the decision of the Insurance Commission because it found that Geagonia
knew of the existence of the two other policies issued by the PFIC. His motion to reconsider the adverse
decision having been denied, Geagonia filed the petition for review on certiorari.

Issue [1]: Whether the non-disclosure of other insurance policies violate condition 3 of the policy, so as
to deny Geagonia from recovering on the policy.

HELD: [1]: Condition 3 of Country Bankers's Policy F-14622 is a condition which is not proscribed by law.
Its incorporation in the policy is allowed by Section 75 of the Insurance Code, Such a condition is a
provision which invariably appears in fire insurance policies and is intended to prevent an increase in the
moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld
as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy.

However, in order to constitute a violation, the other insurance must be upon the same subject matter,
the same interest therein, and the same risk. The fire insurance policies issued by the PFIC name
Geagonia as the assured and contain a mortgage clause which reads: "Loss, if any, shall be payable to
MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of the policy."

This is clearly a simple loss payable clause, not astandard mortgage clause. The Court concludes that (a)
the prohibition in Condition 3 of the subject policy applies only to double insurance, and (b) the nullity
of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first
conclusion is supported by the portion of the condition referring to other insurance "covering any of the
property or properties consisting of stocks in trade, goods in process and/or inventories only hereby
insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the
co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00.
A double insurance exists where the same person is insured by several insurers separately in respect of
the same subject and interest. Since the insurable interests of a mortgagor and a mortgagee on the
mortgaged property are distinct and separate; the two policies of the PFIC do not cover the same
interest as that covered by the policy of Country Bankers, no double insurance exists. The non-disclosure
then of the former policies was not fatal to Geagonia's right to recover on Country Bankers' policy.

Issue [2]: Whether the violation of Condition 3 of the policy renders the policy void.

Held [2]: Unlike the "other insurance" clauses involved in General Insurance and Surety Corp. vs. Ng
Hua, 106 Phil. 1117 [1960], or in Pioneer Insurance & Surety Corp. vs. Yap, 61 SCRA 426 [1974] which
reads "The insured shall give notice to the company of any insurance or insurances already effected, or
which may subsequently be effected covering any of the property hereby insured, and unless such
notice be given and the particulars of such insurance or insurances be stated in or endorsed on this
Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under
this Policy shall be forfeited"; or in the 1930 case of Santa Ana vs. Commercial Union Assurance Co., 55
Phil. 329, 334 [1930], which provided "that any outstanding insurance upon the whole or a portion of
the objects thereby assured must be declared by the insured in writing and he must cause the company
to add or insert it in the policy, without which such policy shall be null and void, and the insured will not
be entitled to indemnity in case of loss,"

Condition 3 in Country Bankers' policy F-14622 does not absolutely declare void any violation thereof. It
expressly provides that the condition "shall not apply when the total insurance or insurances in force at
the time of the loss or damage is not more than P200,000.00." By stating within Condition 3 itself that
such condition shall not apply if the total insurance in force at the time of loss does not exceed
P200,000.00, Country Bankers was amenable to assume a co-insurer's liability up to a loss not exceeding
P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the
incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the
perpetration of fraud.

When a property owner obtains insurance policies from two or more insurers in a total amount that
exceeds the property's value, the insured may have an inducement to destroy the property for the
purpose of collecting the insurance. The public as well as the insurer is interested in preventing a
situation in which a fire would be profitable to the insured.

PIONEER vs. YAP

FACTS: Yap took out a Fire Insurance Policy with Pioneer for her two-storey store building. The policy
requires Yap to give Pioneer notice of co-insurers covering the same subject matter under the condition
that failure to give such notice shall lead to the forfeiture of the proceeds under the policy. At the time
of issuance of policy Yap had a P20k fire insurance with Great American Insurance Co., this was noted in
the policy with Pioneer as co-insurance. A subsequent endorsement on the policy indicated Northwest
Insurance as a co-insurer. Yap furthermore took out another insurance from Federal Insurance Co. Inc. A
fire then broke on Yap’s store. She filed a claim with Pioneer but the latter denied on ground of breach
of condition on the policy.

Yap filed a complaint for recovery of the face value of the insurance proceeds with the CFI.
The CFI ruled in favor of Yap. The CA affirmed. The SC reversed.

ISSUE: 1. Should Pioneer be absolved from liability on Fire Insurance on account of any violation by Yap
of the co-insurance clause therein?

HELD – YES.

Yap’s argument: The Great American Insurance policy was substituted by the Federal Insurance policy
for the same amount, and because it was a mere case of substitution, there was no necessity for its
endorsement on policy with Pioneer.

The SC held that there is no evidence to establish and prove such a substitution. CA’s finding to the
effect that the policy issued by Federal was a substitution of the policy issued by Great American was
unsubstantiated, contrary to stipulation and admission of Yap, and is grounded entirely on speculation,
surmises or conjectures, hence, not binding on the Supreme Court.

By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto
avoid the contract. It required no affirmative act of election on the part of the company to make
operative the clause avoiding the contract, wherever the specified conditions should occur. Its
obligations ceased, unless, being informed of the fact, it consented to the additional insurance.

A clause in a policy to the effect that the procurement of additional insurance without the consent of
the insurer renders the policy void is a valid provision. Upon violation, the insurer may terminate the
contract at any time, at its option, by giving notice and refunding a ratable portion of the premium.
(Milwaukee Mechanids’ Lumber Co. vs. Gibson)

The purpose of said Other Insurance Clauses in the insurance policies was to reduce moral hazard, that
is, to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer,
is interested in preventing the situation in which a fire would be profitable to the insured.

These conditions partake the nature, and must be deemed to be a warranty. (General Insurance &
Surety Corporation vs. Ng Hua)

Santa Ana vs. Commercial Union (1930)

Facts:
In 1923, Sta. Ana built his house in Pasig and insured it against fire for (1) P3,000 to Phoenix Assurance
Company and (2) P6,000 to Guardian Assurance Company, Limited, for a period of one year.

In November 1925, Santa Ana mortgaged this house to Garcia for P5,000, for a period of two years, the
contract being drawn up as a retro sale for the sum of P5,000. The 2 policies were endorsed to Garcia.

In December 1925, Santa Ana reinsured said house with the defendant companies, the Globe and
Rutgers Fire Insurance Company of New York,
and the Commercial Union Assurance Company Limited of London, through their common agent duly
authorized to represent them in the Philippine Islands, the Pacific Commercial Company which was to be
effective for one year.

On September 20, 1926, Santa Ana took out another insurance policy on the house in question for
P6,000 in the "Filipinas, Compania de Seguros, which issued the one-year policy upon receiving from Sta.
Ana premium thereon.

Twelve hours before the expiration of the policies issued by the Phoenix Assurance Company and the
Guardian Assurance Company, Limited for P3,000 and P6,000 respectively, the entire house was burned.

Santa Ana gave notice in due time of the loss to each and every one
of the companies in which he had insured the house and demanded payment of the respective policies.

The insurance companies refused payment on the ground that the claim of P21,000 filed by him was
fraudulent, being in excess of the real value of the insured property; that none of said companies had
been informed of the existence of the other policies in the other companies, and that the fire was
intentional.

Sta. Ana filed civil cases in RTC against The Commercial Union AssuranceCompany, Limited in case No.

31263; the Globe and Rutgers Fire Insurance Company of New York in case No. 31264; and the Phoenix
Assurance Company, Limited, the Guardian Assurance Company, Limited, and the "Filipinas, Compania
de Seguros", incase No. 31322. All the defendants are absolved in their alleged liabilities by the RTC.
Hence this petition.

ISSUE:Can the insured claim against the insurance companies?

HELD: NO.

Without deciding whether notice of other insurance upon the same property must be given in writing,

or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether
oral or written, the SC held that in the absolute absence of such notice when it is one of the conditions
specified in the fire insurance policy, the policy is null and void. Since the policy is null and void, plaintiff
cannot recover from the defendants insurance companies.

The SC upheld the finding of the trial court that the policies provide that no other insurance should be
admitted upon the property thereby assured without the consent of said companies duly given by
endorsement.