Loss and Notice of LossSections 83-87, ICParis-Manila Perfume v Phoenix Assurance, 49 Phil 753 (1926)EUNICEDOCTRINE:Loss, the immediate cause of which was the peril insured against, if the proximate cause thereof was NOT excepted in the contract (Insurance)

FACTS:May 22, 1924: A fire insurance policy was issued by Phoenix Assurance Company, Limited to Messrs. Paris-Manila Perfumery Co. (Peter Johnson, Prop.) for P13,000 . Also insured with other insurance companies for P1,200 and P5,000 respectivelyJuly 4, 1924: The Perfumery was burned unknown of the cause totalling a loss of P38.025.56Phoenix refused to pay nor to appoint an arbitrator stating that the policy did not cover any loss or damage occasioned by explosion and stating that the claim was fraudulentRTC: ordered Phoenix to pay P13,000Phoenix appealedThe insurance policy contains:Section 6: Unless otherwise expressly stated in the policy the insurance does not cover(h) Loss or damage occasioned by the explosion; but loss or damage by explosion of gas for illuminating or domestic purposes in a building in which gas is not generated and which does not form a part of any gas works, will be deemed to be loss by fire within the meaning of this policy.While Paris Perfume relies upon section 5 of the policy as a defense which states:(d) loss or damage occasioned directly or indirectly, approximately or remotely by or through or in consequence of:(1) earthquake, hurricane, volcanic eruption or other convulsion of nature and the company shall not be liable for loss or damage arising during or within a reasonable time after any of the said occurrences, unless it be proved by the insured to the satisfaction of the company that such loss or damage was not in any way occasioned by or through or in consequence of any of the said occurrences.

ISSUE: W/N Phoenix should be liable for the loss because there was no explosion which is an exemption from the policy

HELD: YES.It will be noted that section 5 excludes not only the damages which may immediately result from an earthquake, but also any damage which may follow the earthquake, and that section 6 excludes only the damages which are the direct result of the explosion itself, and that it does not except damages which occurred from the fire occuring after the explosion, even though the explosion may have been the primary cause of the fire. If it be a fact that the fire resulted from an explosion, that fact, if proven, would be a complete defense, the burden of the proof of that fact is upon the defendant, and upon that point, there is a failure of proof.(there is no competent evidence as to whether the explosion caused the fire or the fier caused the explosion)lower court also found that there was no fraud in the insurance, and that the value of the property destroyed by the fire was more than the amount of the insurance.Judgment of the lower court is therefore, AFFIRMED.

--------------------------------------------------------------------------------------------------------------Prats v Phoenix Assurance, 52 Phil 807 (1929)JEROMEPRATS & COMPANY, a registered partnership, plaintiff-appellant, vs.PHOENIX INSURANCE COMPANY, HARTFORD, CONNECTICUT, a corporation, defendant-appellee.

DOCTRINE: Sec. 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.FACTS:Francisco Prats, Elias Hanna and Isidro Bejar registered two mercantile partnerships in the Bureau of Commerce and Industry for the purpose of engaging in mercantile business. The articles of copartnership of these two entities were the same except in the firm names.Of the three individuals mentioned Elias Hanna and Isidro Bejar were Turkish subjects of unsavory reputation in insurance circle of Manila, while Francisco Prats was a Spanish subject who had had some success as a merchant and, prior to his connection with the two associates above mentioned, apparently enjoyed a fair reputation. Another individual, who figures in the case as an instrument of the three partners, is one Domingo Romero, who at that the time which we are here concerned, was an employee of the Bureau of Internal Revenue, with a salary of P150 per month. Ramon Prats, a son of Francisco Prats, was united in marriage to a daughter of Domingo Romero, with the result that social relations between Francisco Prats and Domingo Romero were close. Francisco Prats appear to have acted as manager for both Prats & Co. and Hanna, Bejar & Co.Prats, acting for Hanna, Bejar & Co., purchased a one-story building at 95 Plaza Gardenia, Manila; and soon thereafter he begun to assemble in this place the stock of merchandise which was the subject of insurance in this case. The building referred to was purchasd outright for the sum of P1,600. It was old and was scarcely more than a shed but had been used in times past for human habitation.By August 21, 1924, there had been assembled and stored by Prats in the place above described a stock of goods which, according to the documents exhibited by him, had a valuation of P211,329.72, on which he had taken out insurance to the extent of P410,000. At midnight of the day mentioned a fire occurred at 95 Plaza Gardenia, which destroyed the building and ruined its contents, the amount realized from the salvage of the stock being P11,731.93.(the scheme involved herein will be placed after the dispositive portion. Nilagay ko nalang in case magtanong si maam pero deins na kailangan basahin un)Plaintiff sued for collection. For answer, the defendant, Pheonix Insurance Co., admitted the insurance of the policy of insurance but, by way of special defense, alleged, among other things, that the fire in question had been set by the plaintiff, or with its connivance, and that the plaintiff had submitted under oath to the defendant a fraudulent claim of loss, in contravention of the express terms of the policy.ISSUE: WON plaintiff submitted a false claim? YESWON insurer is Liable. NORATIO:1st issue: Proof that plaintiff submitted a false claim: first, that the plaintiff had submitted a claim for jewelry lost in the fire as of a value of P12,800 when the true value of said jewelry was about P600; and, secondly, that the plaintiff had sought to recover from the insurance company the value of goods which had

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

The appealed decision will therefore be affirmed, and it is also ordered, with costs against the appellant.Summary nung schemeINSURANCE CONTRACT:-          In the month of June preceeding the fire, nine policies aggregating P160,000 were taken out by Prats in the name of Hanna, Bejar & Co. on merchandise stored at 95 Plaza Gardenia-          Later, prats procured a 200k policy from the agent of the defendant, the agent said told him that if Hanna or Bejar had any interest in the stock to be insured the policy could not be issued for the reason that, in such case, the defendant would not be able to obtain reinsurance for any part of the policy, owing to the bad reputation of Hanna and Bejar.-          Then, he kept procuring policies which later totaled to the extent of 410k. Also, at this time, Prats caused the first nine policies which had been taken out in the name of Hanna, Bejar & Co. to be indorsed to Prats & Co., thereby making this firm the sole insured firm with respect to this stock of merchandise.Origin of the stock:-          Prats and Co. allegedly improted 22 boxes of silk. However as found by the trial court, it was fictitious.Manipulation in storage: (short version nalang)-          forty-five cases of old stock of Hanna, Bejar & Co., at Legaspi, P. I., were shipped to Manila before the fire, but instead of being taken directly to 95 Plaza Gardenia, they were housed for a time in the back part of the lower floor of the Bazar Filipino in which Prats & Co. and Hanna, Bejar & Co. had their offices-          before the fire goods were removed from the bodega to the store of B. Abolafia, at Manila, where they were received without invoice.

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The East Furniture, Inc. vs. The Globe & Rutgers Fire Insurance Co. of New York - JON

Doctrine: An insurer is not liable for a loss caused by the willful act or through the connivance of the insured.

Facts:

The East Furniture, Inc. (TEFI), a duly registered partnership engaged in the sale of furniture, obtained fire insurance policies with certain insurance companies, namely: (1) the Globe & Rutgers Fire Insurance Co. of New York (Globe & Rutgers) [in the amount of P5000], (2) Commercial Union Assurance Company, Ltd. (Commercial Union) [in the amount of P5000], and (3) the Continental Insurance Co., of New York (The Continental) [in the amount of P10000] insuring against fire the articles existing in its establishment situated at Nos. 626 and 628 Rizal Avenue, Manila.

Condition 12 of each of the insurance policies provides that "if the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof, or if any fraudulent means or devices are used by the Insured or anyone acting on his behalf to obtain any benefit under this policy; or, if the loss or damage be occasioned by the wilful act, or with the connivance of the Insured, — all benefit under this policy shall be forfeited."

On 2 March 1929, a fire broke out in TEFI's establishment, as a result of which the insured articles therein found were destroyed by the fire. Within the period marked in the policies, TEFI presented to the insurance companies an inventory of the insured furniture which was destroyed by the fire, the value of which it alleged, before or at the time of the fire, amounted to P52,061.99 and out of which, the insured properties amounting to P5,000 more or less were saved.

The insurance companies refused the claim of TEFI. Therefore, TEFI filed claims against the insurance companies. (The three actions were tried jointly in a single RTC by agreement of the parties)

The insurance companies in their respective answers interposed a general denial and as special defenses alleged in substance (1) that the fire in question was of intentional origin; (2) that the claims of loss presented by TEFI were false and fraudulent; (3) that the furniture in question had been mortgaged by TEFI to the Manila Finance and Discount Corporation, so that at the time of the fire, TEFI was not the only party interested therein, contrary to the representations made in its claims of loss; and (4) that TEFI violated one of the conditions of the policies by refusing to furnish the defendants with a physical inventory of the contents of its store at the time of the fire.

With regard to the origin of fire, the evidence shows that it started at about 9.55 p. m. in the second floor of the building which was occupied by TEFI as office and workshop. That floor was constructed of wood, with a galvanized iron roof. Immediately after the fire was extinguished, Captain Lorenzo (Capt. Lorenzo), the deputy chief of the fire department, investigated its origin and found in the second floor three cans containing gasoline and kapok saturated with gasoline. For this reason, in Capt. Lorenzo’s official report of that fire, he stated the cause to be: "Suspected incendiary. Intentional. Preventable."

Filoteo Miranda (Miranda), the proprietor and manager of the East Furniture Store, while testifying as a witness for TEFI, made no attempt to deny the presence of three cans of gasoline and kapok saturated with gasoline.

It also appears from the record that in connection with the fire in question, Miranda caused one Eugenio Lim Pineda (Pineda) to be prosecuted for calumny, alleging that Pineda had imputed to Miranda the commission of a crime, namely, that Miranda had caused his store to be burned or ordered a certain person to set it on fire. However, Pineda was acquitted on the ground that it was proven that the imputation made by him against Miranda was true.

Pineda testified that about six months before the fire in question, Miranda intimated to him that he (Miranda) intended to burn the East Furniture Store because it was on the verge of bankruptcy. Pineda communicated this information to Attorney Eriberto de Silva, who in turn communicated it to his friend Aurelio Periquet, an insurance agent, and the latter thereupon caused one of the policies — issued by Smith, Bell & Co. — to be cancelled. Pineda further testified that he saw Garcia, the cashier of TEFI enter the back door of the building in question, and that ten minutes later the building burned.

Attorney Eriberto de Silva, testifying in these cases, corroborated the testimony of Pineda regarding the cancellation of the Smith-Bell policy.

It further appears from the record that at the time of the fire, TEFI was heavily indebted to the Manila Finance & Discount Corporation, to the Bank of the Philippine Islands, and to Attorney Alfonso E. Mendoza.

RTC: dismissed the complaints; in relation to first defense: “although much might be said against the manager of TEFI, it is not necessary to make a detailed analysis of the proofs with respect to

the fire, inasmuch as for the purposes of this decision a consideration of the second special defense is sufficient."; in relation to the second defense: claims presented by TEFI were notoriously fraudulent; in relation to the third and fourth defenses; it overruled the said special defenses. (Tefi appealed to the SC)

Issue: Whether TEFI may claim the insurance proceeds on its policies with the insurance companies

Held: No.

Based from the pieces of evidence, the fire in question was of intentional origin and was caused with the connivance of TEFI. Neither the interest of the justice nor public policy would be promoted by an omission of the courts to expose and condemn incendiarism once the same is established by competent evidence. It would tend to encourage rather than suppress that great public menace if the courts do not expose the crime to public condemnation when the evidence in a case like the present shows that it has really been committed.

Side Notes:Claims of loss were deemed fraudulent because:

(1)   Value claimed higher than the selling price.

(2)   Testimony of Capt. Lorenzo that it lasted only twelve minutes and caused no damage to the first floor of the building were most of the insured furniture was located. Capt. Lorenzo also testified that he found but few pieces of furniture in the second floor and that he believed none had been completely burned.

(3)   The inventory, which was offered in evidence contains 202 pieces of furniture, the cost price of which according to Guevara's, a furniture manufacturer which was commissioned by the insurance companies, appraisal is the total sum of P4,184.60. However, TEFI claimed that at the time of the fire there were 506 pieces of furniture in the building of the total value of P52,061.99. The fact that the insured (TEFI) only had approximately 202 pieces of furniture in the building at the time of the fire and sought to compel the insurance companies to pay for 506 pieces conclusively shows that its claim was not honestly conceived.

Dispositive Portion: The judgment appealed from is affirmed, with costs against the appellant. So ordered.

Separate Opinions

MALCOLM, HULL, and VICKERS, JJ., concurring:It has been established that TEFI’s claims of loss were false and fraudulent.

BUTTE, J., dissenting: (Avancena, Villa-Real and Abad Santos, concurs)The conclusion that the claim presented by TEFI to the insurance companies was fraudulent because it was excessive and the conclusion that the fire in question was of an intentional origin and caused with the connivance of TEFI seem to be entirely warranted by the resume of the evidence made in the foregoing opinion.There is no direct evidence whatever that the plaintiff and appellant set his building on fire to collect the insurance. Nor can I reconcile the suspicion that gasoline was put in the building in open cans to start the fire, with the finding that the same gasoline was found unconsumed after the conflagration.I feel disposed to give the benefit of the doubt to the insured. Suspicion of fraud is not enough — for, I daresay, there never was a fire where some circumstance could not be found that could be alleged as a ground for an inference of fraud.

--------------------------------------------------------------------------------------------------------------Country Bankers v Lianga Bay Multipurpose Cooperative, 374 SCRA 653 (2002)KARLA

Doctrine:

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

·    If a proof is made of a loss apparently within a contract of insurance, the burden is upon the insurer to prove that the loss arose from a cause of loss which is excepted or for which it is not liable, or from a cause which limits its liability.

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

Facts:

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

·       The respondent is a duly registered cooperative judicially declared insolvent and represented by the elected assignee, Cornelio Jamero.

·       It appears that sometime in 1989, the petitioner and the respondent entered into a contract of fire insurance. Under Fire Insurance Policy No. F-1397, the petitioner insured the respondent’s stocks-in-trade against fire loss, damage or liability during the period starting from June 20, 1989 at 4:00 p.m. to June 20, 1990 at 4:00 p.m., for the sum of Two Hundred Thousand Pesos (P200,000.00)

·       On July 1, 1989, at or about 12:40 a.m., the respondent’s building located at Barangay Diatagon, Lianga, Surigao del Sur was gutted by fire and reduced to ashes, resulting in the total loss of the respondent’s stocks-in-trade, pieces of furnitures and fixtures, equipments and records.

·       Due to the loss, the respondent filed an insurance claim with the petitioner under its Fire Insurance Policy No. F-1397

·       The petitioner, however, denied the insurance claim on the ground that, based on the submitted documents, the building was set on fire by two (2) NPA rebels who wanted to obtain canned goods, rice and medicines as provisions for their comrades in the forest,

and that such loss was an excepted risk under paragraph No. 6 of the policy conditions of Fire Insurance Policy No. F-1397, which provides:

This insurance does not cover any loss or damage occasioned by or through or in consequence, directly or indirectly, of any of the following occurrences, namely:

(d) Mutiny, riot, military or popular uprising, insurrection, rebellion, revolution, military or usurped power. [...]

·       Finding the denial of its claim unacceptable, the respondent then instituted in the trial court the complaint for recovery of “loss, damage or liability” against petitioner.

·        The petitioner answered the complaint and reiterated the ground it earlier cited to deny the insurance claim, that is, that the loss was due to NPA rebels, an excepted risk under the fire insurance policy.

·       RTC decided on December 26, 1991 in favor of the respondent, declaring that the defenses of petitioners are weak, ordering said defendant-Country Bankers to pay the plaintiff-Insolvent Cooperative, as follows:

1. To fully pay the insurance claim for the loss the insured-plaintiff sustained as a result of the fire under its Fire Insurance Policy No. F-1397 in its full face value of P200,000.00 with interest of 12% per annum from date of filing of the complaint until the same is fully paid;

2. To pay as and in the concept of actual or compensatory damages in the total sum of P50,000.00;

3. To pay as and in the concept of exemplary damages in the total sum of P50,000.00;

4. To pay in the concept of litigation expenses the sum of P5,000.00;

5. To pay by way of reimbursement the attorney’s fees in the sum of P10,000.00; and

6. To pay the costs of the suit.·    CA affirmedISSUES:1. Whether the CA failed to appreciate the evidence TO THE SPOT REPORT OF PFC. ARTURO JUARBAL (EXH. 3) AND THE SWORN STATEMENT OF JOSE LOMOCSO (EXH. 4) THAT THE RESPONDENT’S STOCK-IN-TRADE WAS BURNED BY THE NPA REBELS, HENCE AN EXCEPTED RISK UNDER THE FIRE INSURANCE POLICY.2. Whether the CA ERRED IN HOLDING PETITIONER LIABLE FOR 12% INTEREST PER ANNUM ON THE FACE VALUE OF THE POLICY FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID.

3. Whether THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THE PETITIONER LIABLE FOR ACTUAL AND EXEMPLARY DAMAGES, LITIGATION EXPENSES, ATTORNEYS FEES AND COST OF SUIT.HELD.1. NO. A party is bound by his own affirmative allegations. This is a well-known postulate echoed in Section 1 of Rule 131 of the Revised Rules of Court. Each party must prove his own affirmative allegations by the amount of evidence required by law which in civil cases, as in this case, is preponderance of evidence, to obtain a favorable judgment.

In the instant case, the petitioner does not dispute that the respondent’s stocks-in-trade were insured against fire loss, damage or liability under Fire Insurance Policy No. F- 1397 and that the respondent lost its stocks-in-trade in a fire that occurred on July 1, 1989, within the duration of said fire insurance. The petitioner, however, posits the view that the cause of the loss was an excepted risk under the terms of the fire insurance policy.

Since the petitioner in this case is defending on the ground of non-coverage and relying upon an exemption or exception clause in the fire insurance policy, it has the burden of proving the facts upon which such excepted risk is based, by a preponderance of evidence. But petitioner failed to do so.2. YES. The insurance claim in this case is evidently not a forbearance of money, goods or credit, and thus the interest rate should be as it is hereby fixed at six percent (6%) computed from the date of filing of the complaint.

We find no justification for the award of actual damages of Fifty Thousand Pesos (P50,000.00). Well-entrenched is the doctrine that actual, compensatory and consequential damages must be proved, and cannot be presumed. That part of the dispositive portion of the Decision of the trial court ordering the petitioner to pay actual damages of Fifty Thousand Pesos (P50,000.00) has no basis at all. The justification, if any, for such an award of actual damages does not appear in the body of the decision of the trial court. Neither is there any testimonial and documentary evidence on the alleged actual damages of Fifty Thousand Pesos (P50,000.00) to warrant such an award. Thus, the same must be deleted.3. YES. Concerning the award of exemplary damages for Fifty Thousand Pesos (P50,000.00), we likewise find no legal and valid basis for granting the same. Article 2229 of the New Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. Exemplary damages are imposed not to enrich one party or impoverish another but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. They are designed to permit the courts to mould behavior that has socially deleterious consequences, and its imposition is required by public policy to suppress the wanton acts of an offender. However, it cannot be recovered as a matter of right. It is based entirely on the discretion of the court. We find no cogent and valid reason to award the same in the case at bar.

--------------------------------------------------------------------------------------------------------------Heirs of Coscolluela v Rico General, 179 SCRA 511 (1989)KIKOY

G.R. No. 84628 November 16, 1989

HEIRS OF ILDEFONSO COSCOLLUELA, SR., INC., petitioner, vs.RICO GENERAL INSURANCE CORPORATION, COURT OF APPEALS (11th Division), and HON. ENRIQUE T. JOCSON, Judge, Regional Trial Court of Negros Occidental Branch, respondents.Doctrine:

A policy of insurance with a narration of exceptions tending to work a forfeiture of the policy shall be interpreted liberally in favor of the insured and strictly against the insurance company or the party for whose benefit they are inserted.Where the insurer denies liability for a loss alleged to be due to a risk not insured against, but fails to establish the truth of such fact by concrete proofs, the Court rules that the insurer is liable under the terms and conditions of the policy by which it has bound itself. In this case, the dismissal order without hearing and reception of evidence to prove that the firing incident was indeed a result of a civil commotion, rebellion or insurrection constitutes reversible error on the part of the trial court.Facts:-          Petitioner, Heirs of Ildefonso Coscoluella, Inc. is a domestic corporation and the registered owner of an Isuzu KBD Pick-up truck. The vehicle was insured with the private respondent Rico General Insurance Corporation for a consideration of P100,000.00 excluding third party liability under Commercial Vehicle Policy No. CV-122415 per Renewal Certificate No. 02189. The premiums and other expenses for insurance paid covered the period from October 1, 1986 to October 1, 1987.-          On August 28, 1987 and within the period covered by the insurance, the insured vehicle was severely damaged and rendered unserviceable when fired upon by a group of unidentified armed persons,  In the same incident, four persons died.-          Petitioner filed its claim of P80,000.00 for the repair of the vehicle but private respondent refused to grant it. As a consequence, the petitioner was prompted to file a complaint  to recover the claim of P80,000.00 plus interest and attorney's fees.-          The private respondent filed a motion to dismiss alleging that the complaint lacks a cause of action because the firing by armed men is a risk excepted under the following provisions in the insurance policy: “The Company shall not be liable under any Section of the Policy in respect of: ……..  warlike operations (whether war be declared or not), civil commotion, mutiny, rebellion, insurrection, military or usurped power, or by any direct or indirect consequences of any of the said occurrences and in the event of any claim hereunder, the insured shall prove that the accident, loss or damage or liability arose independently of, and was in no way connected with, or occasioned by, or contributed to, any of the said occurrences, or any consequence thereof, and in default of such proof, the Company shall not be liable to make any payment in respect of such claim”-          The private respondent alleged that the firing was "an indirect consequence of rebellion, insurrection or civil commotion." The petitioner opposed the motion, saying that the quoted provision does not apply in the absence of an official governmental proclamation of any of the above-enumerated conditions.-          TC -  dismissal of the complaint for lack of cause of action stating that the damage arose from a civil commotion or was a direct result thereof. -          CA - affirmedIssue/s: Was there a cause of action despite the existence of the quoted provision in the policy? - Yes

Held:-          The facts as alleged clearly define the existence of a right of the petitioner to a just claim against the insurer for the payment of the indemnity for a loss due to an event against which the petitioner's vehicle was insured. The insurance contract mentioned therein manifests a right to pursue a claim and a duty on the part of the insurer or private respondent to compensate the insured in case of a risk insured against. The refusal of the insurer to satisfy the claim and the consequent loss to the petitioner in incurring the cost of acquiring legal assistance on the matter constitutes a violation or an injury brought to the petitioner.-          The private respondent's invocation of the exceptions clause in the insurance policy as the basis for its non-liability and the consequent dismissal of the complaint is without merit. We also reiterate the established rule that when the terms of an insurance contract contain limitations on liability, the court "should construe them in such a way as to preclude the insurer from non-compliance with his obligations." (Taurus Taxi Co. Inc. v. Capital Insurance and Surety Company, Inc., 24 SCRA 454 [l968]) A policy of insurance with a narration of exceptions tending to work a forfeiture of the policy shall be interpreted liberally in favor of the insured and strictly against the insurance company or the party for whose benefit they are inserted.-          The facts alleged in the complaint do not give a complete scenario of the real nature of the firing incident. Hence, it was incumbent upon the trial judge to have made a deeper scrutiny into the circumstances of the case by receiving evidence instead of summarily disposing of the case. Contrary to what the respondent appellate court says, this case does not present a pure question of law but demands a factual determination of whether the incident was a result of events falling under the exceptions to the liability of private respondent contained in the policy of insurance.-          We agree with the petitioner's claim that the burden of proof to show that the insured is not liable because of an excepted risk is on the private respondent. The Rules of Court in its Section 1, Rule 131 provides that "each party must prove his affirmative allegations."-          Where the insurer denies liability for a loss alleged to be due to a risk not insured against, but fails to establish the truth of such fact by concrete proofs, the Court rules that the insurer is liable under the terms and conditions of the policy by which it has bound itself. In this case, the dismissal order without hearing and reception of evidence to prove that the firing incident was indeed a result of a civil commotion, rebellion or insurrection constitutes reversible error on the part of the trial court.Dispositive: WHEREFORE, considering the foregoing, the petition is hereby GRANTED. The decision of the respondent Court of Appeals affirming the dismissal order by the Regional Trial Court is hereby REVERSED and SET ASIDE. Let the case be remanded to the lower court for trial on the merits.

--------------------------------------------------------------------------------------------------------------FGU Insurance v CA, 454 SCRA 339 (2005)KLAIRE

DOCTRINEA basic rule in insurance is that the carelessness and negligence of the insured or his agents does not constitute a good defense on the part of the insurer. This rule however presupposes that the loss has occurred due to causes which could not

have been prevented by the insured, despite the exercise of due diligence. However, when evidence shows that the insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated.

FACTSAnco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business.  It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers.  Since the D/B Lucio had no engine of its own, it had to be towed by a tugboat for it to move from one place to another. On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO cargoes heading to Estancia IloIlo and San Jose Antique

When the barge and tugboat arrived at San Jose, Antique, the clouds over the area were dark and the waves were already big.  SMC’s District Sales Supervisor, Fernando Macabuag, requested ANCO’s representative to transfer the barge to a safer place because the vessel might not be able to withstand the big waves. ANCO’s representative did not heed the request because he was confident that the barge could withstand the waves. Only Ten Thousand Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator. At about ten to eleven o’clock in the evening of the following day, the crew of D/B Lucio abandoned the vessel because the barge’s rope attached to the wharf was cut off by the big waves.  At around midnight, the barge run aground and was broken and the cargoes of beer in the barge were swept away.

As a result, ANCO failed to deliver to SMC’s consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.  SMC’s claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).

SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO. ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded on the vessel belonging to ANCO.  It claimed however that it had an agreement with SMC that ANCO would not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were loaded, they should not be held liable.  ANCO further asserted that there was an agreement between them and SMC to insure the cargoes in order to recover indemnity in case of loss.  Pursuant to that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.

FGU admitted the existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy.  According to FGU, it is only liable under the

policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following:a)       total loss of the entire shipment;b)       loss of any case as a result of the sinking of the vessel; orc)       loss as a result of the vessel being on fire.Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or destruction.

ISSUE: Whether or not there is a certain degree of negligence on the part of the insured or his agents that will deprive him the right to recover under the insurance contract?

HELD

Yes. However, to what extent such negligence must go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case.  When evidence show that the insured’s negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were blatantly negligent. ANCO’s representatives had failed to exercise extraordinary diligence required of common carriers in the shipment of SMC’s cargoes.  Such blatant negligence being the proximate cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)

Xxx There was blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather.  Negligence was likewise exhibited by the defendants-appellants’ representative who did not heed Macabuag’s request that the barge be moved to a more secure place.  The prudent thing to do, as was done by the other sea vessels at San Jose, Antique during the time in question, was to transfer the vessel to a safer wharf.  The negligence of the defendants-appellants is proved by the fact that on 01 October 1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.xxx

--------------------------------------------------------------------------------------------------------------Sections 88-92, ICMalayan Insurance v Cruz Arnaldo, 154 SCRA 683 (1987)NIKKIDOCTRINE:FACTS:ISSUE:HELD:--------------------------------------------------------------------------------------------------------------Yu Ban Chan v Fieldmen’s Insurance, 14 SCRA 491 (1965)RIKKIDOCTRINE:FACTS:

ISSUE:HELD:--------------------------------------------------------------------------------------------------------------Go Lu v Yorkshire Insurance, 43 Phil 633 (1930)TRICIA

--------------------------------------------------------------------------------------------------------------Pacific Banking v CA, 168 SCRA 1 (1988)YSADOCTRINE: Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment.

FACTS (lifted from digest of Klaire):On October 21,1963, Fire Policy No. F-3770, an open policy, was issued to the Paramount Shirt Manufacturing Co., by which private respondent Oriental Assurance Corporation bound itself to indemnify Paramount for any loss or damage, not exceeding P61,000.00, to its property.

Paramount was at the time of the issuance of the policy, a debtor of Pacific Bank and the goods described in the policy were held in trust by Paramount for the Pacific Bank under trust receipts. Said policy was duly endorsed to Pacific Bank as mortgagee/ trustor of the properties insured, with the knowledge and consent of Oriental Assurance to the effect that "loss if any under this policy is payable to the Pacific Banking Corporation".

While the policy was in full force and effect, a fire broke out on the subject premises destroying the goods contained in its ground and second floors.

Counsel for the Pacific Bank sent a letter of demand to Oriental for indemnity due to the loss of property by fire under the endorsement of said policy. Oriental informed counsel for the Pacific that it was not yet ready to accede to the latter's demand as the former is awaiting the final report of the insurance adjuster, H.H. Bayne Adjustment Company.

On March 25, 1964, the said insurance adjuster notified counsel for Pacific Bank that Paramount under the policy had not filed any claim with it, nor submitted proof of loss which is a clear violation of Policy Condition No.11, and for which reason, determination of the liability of Oriental could not be had.

For failure of the insurance company to pay the loss as demanded,  Pacific Bank on April 28, 1 964, filed in the court a quo an action for a sum of money against Oriental Assurance Corporation, in the principal sum of P61,000.00 issued in favor of Paramount Shirt Manufacturing Co.

Oriental Assurance raised the following defenses in its answer to wit: (a) lack of formal claim by insured over the loss and (b) premature filing of the suit as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof, either to the private respondent or its adjuster H.H. Bayne Adjustment Co., both in violation of Policy Condition No.11

RTC: Ordered Oriental to pay Pacific Bank. CA: Reversed.

ISSUE: WON the action was prematurely filed as neither plaintiff nor insured had submitted any proof of loss on the basis of which defendant would determine its liability and the amount thereof.

HELD: YES. Generally, the cause of action on the policy accrues when the loss occurs, But when the policy provides that no action shall be brought unless the claim is first presented

extrajudicially in the manner provided in the policy, the cause of action will accrue from the time the insurer finally rejects the claim for payment.

In the case at bar, policy condition No. 11 specifically provides that the insured shall on the happening of any loss or damage give notice to the company and shall within fifteen (15) days after such loss or damage deliver to the private respondent (a) a claim in writing giving particular account as to the articles or goods destroyed and the amount of the loss or damage and (b) particulars of all other insurances, if any. Likewise, insured was required "at his own expense to produce, procure and give to the company all such further particulars, plans, specifications, books, vouchers, invoices, duplicates or copies thereof, documents, proofs and information with respect to the claim".

The evidence adduced shows that twenty-four (24) days after the fire, petitioner merely wrote letters to private respondent to serve as a notice of loss, thereafter, the former did not furnish the latter whatever pertinent documents were necessary to prove and estimate its loss. Instead, petitioner shifted upon private respondent the burden of fishing out the necessary information to ascertain the particular account of the articles destroyed by fire as well as the amount of loss. It is noteworthy that private respondent and its adjuster notified petitioner that insured had not yet filed a written claim nor submitted the supporting documents in compliance with the requirements set forth in the policy. Despite the notice, the latter remained unheedful. Since the required claim by insured, together with the preliminary submittal of relevant documents had not been complied with, it follows that private respondent could not be deemed to have finally rejected petitioner's claim and therefore the latter's cause of action had not yet arisen. Compliance with condition No. 11 is a requirement sine qua non to the right to maintain an action as prior thereto no violation of petitioner's right can be attributable to private respondent. This is so, as before such final rejection, there was no real necessity for bringing suit. Petitioner should have endeavored to file the formal claim and procure all the documents, papers, inventory needed by private respondent or its adjuster to ascertain the amount of loss and after compliance await the final rejection of its claim. Indeed, the law does not encourage unnecessary litigation.

Verily, petitioner prematurely filed the case and dismissal thereof was warranted under the circumstances. PETITION DISMISSED. --------------------------------------------------------------------------------------------------------------Pacific Timber v CA, 112 SCRA 199 (1982)JEZDOCTRINE:FACTS:ISSUE:HELD:--------------------------------------------------------------------------------------------------------------Phil. Charter Ins. v ChemoilLighterage, 462 (SCRA 77 (2005)AIYUDOCTRINE:FACTS:

Chemoil Lighterage Corporation  - domestic corporation engaged in the transport of goods

January 24, 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT “TACHIBANA” which was valued at US$90,201.57 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines.

The consignee was Plastic Group Phils., Inc. (PGP) in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks.

The ocean tanker MT “TACHIBANA” unloaded the cargo to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGP’s storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the loss it sustained.

Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken were discolored.

Inspection of cargo tanks showed:o manhole covers of ballast tanks’ ceilings loosely

secured and that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress.

Insurer paid PGP the full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the Chemoil the full payment for the latter’s services.

July 15, 1991 – insurer filed an action for damages was before RTC Manila against Chemoil.

o Chemoil filed an answer in which it admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo.

RTC in favor of insurer CA reversed RTC

ISSUE: WON notice of claim was filed within the required periodHELD:--------------------------------------------------------------------------------------------------------------Double InsuranceSections 93-94, IC

Geagonia v CA, 241 SCRA 152 (1995)DJ

DOCTRINE:A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. As earlier stated, the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate. Since the two policies of the PFIC do not cover the same interest as that covered by the policy of the private respondent, no double insurance exists. The non-disclosure then of the former policies was not fatal to the petitioner's right to recover on the private respondent's policy.FACTS:-          Petitioner is the owner of Norman’s Mart located in the public market of San Francisco, Agusan Del Sur. He obtained from Country Bankers Insurance Co. (CBIC) a fire insurance policy for P100K. The 1-year policy covered the following: : "Stock-in-trade consisting principally of dry goods such as RTW's for men and women wear and other usual to assured's business."-          Petitioner declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50K.-          The fire insurance policy contained the following condition:“3. The insured shall give notice to the Company of any insurance or insurances already affected, or which may subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00.”-          Fire broke out and petitioner’s insured stock-in-trade were completely by fire. He then filed a claim against CBIC which was subsequently DENIED because Geagonia's stocks-in-trade were likewise covered by fire insurance policies GA-28146 and GA-28144, for P100K each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (PFIC). These policies indicate that the insured was "Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)" with a mortgage clause reading ""MORTGAGEE: Loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy. CO-INSURANCE DECLARED: P100,000. — Phils. First CEB/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 the private respondent in the Insurance Commission for the recovery of P100K under fire insurance policy and damages. He claimed that he knew the existence of the other two policies. However, he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies and this requirement was not mentioned to him by the private respondent's agent.  -          The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained

from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on Geagonia's testimony that he came to know of the PFIC policies only when he filed his claim with Country Bankers and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof.  The Insurance Commission then ordered the respondent company to pay complainant the sum of P100K with interest and attorney’s fees.-          CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC.ISSUE/S:-          W/N the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact, violating Condition 3 of the policy?-          W/N there is double insurance in the case at bar so as to deny Geagonia from recovering on the insurance policy?RULING:1.    YES. Petitioner knew of the prior policies issued by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission madeante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original.2.    NONE. Condition 3 of the private respondent's Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that "[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy." Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or "other insurance" clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid the policy. However, in order to constitute a violation, the other insurance must be upon same subject matter, the same interest therein, and the same risk.As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable interest therein and both interests may be one policy, or each may take out a separate policy covering his interest, either at the same or at separate times. The mortgagor's insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee.A mortgagor may, however, take out insurance for the benefit of the mortgagee, which is the usual practice. The mortgagee may be made the beneficial payee in several ways. He may become the assignee of the policy with the consent of the

insurer; or the mere pledgee without such consent; or the original policy may contain a mortgage clause; or a rider making the policy payable to the mortgagee "as his interest may appear" may be attached; or a "standard mortgage clause," containing a collateral independent contract between the mortgagee and insurer, may be attached; or the policy, though by its terms payable absolutely to the mortgagor, may have been procured by a mortgagor under a contract duty to insure for the mortgagee's benefit, in which case the mortgagee acquires an equitable lien upon the proceeds.In the policy obtained by the mortgagor with loss payable clause in favor of the mortgagee as his interest may appear, the mortgagee is only a beneficiary under the contract, and recognized as such by the insurer but not made a party to the contract himself. Hence, any act of the mortgagor which defeats his right will also defeat the right of the mortgagee. This kind of policy covers only such interest as the mortgagee has at the issuing of the policy.On the other hand, a mortgagee may also procure a policy as a contracting party in accordance with the terms of an agreement by which the mortgagor is to pay the premiums upon such insurance. It has been noted, however, that although the mortgagee is himself the insured, as where he applies for a policy, fully informs the authorized agent of his interest, pays the premiums, and obtains on the assurance that it insures him, the policy is in fact in the form used to insure a mortgagor with loss payable clause.The fire insurance policies issued by the PFIC name Geagonia as the assured and contain a mortgage clause which reads:"Loss, if any, shall be payable to MESSRS. TESING TEXTILES, Cebu City as their interest may appear subject to the terms of the policy."This is clearly a simple loss payable clause, not a standard mortgage clause.The Court concludes that (a) the prohibition in Condition 3 of the subject policy applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. The first conclusion is supported by the portion of the condition referring to other insurance "covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured," and the portion regarding the insured's declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50K. A double insurance exists where the same person is insured by several insurers separately in respect of the same subject and interest. Since the insurable interests of a mortgagor and a mortgagee on the mortgaged property are distinct and separate; the two policies of the PFIC do not cover the same interest as that covered by the policy of Country Bankers, no double insurance exists. The non-disclosure then of the former policies was not fatal to Geagonia's right to recover on Country Bankers' policy.PETITION GRANTED.

--------------------------------------------------------------------------------------------------------------Sta. Ana v Commercial Union Insurance, 55 Phil 329EUNICEDOCTRINE:Additional insurance obtained by the insured is commonly known as the additional or “other insurance” clause and is intended to prevent an increase in the moral hazard. It is valid and reasonable, and in the absence of consent, waiver or estoppel on the part of the insurer, a breach thereof will prevent a recovery on the policy.

FACTS:In 1923, Sta. Ana built his house in Pasig and insured it against fire for (1) P3,000 to Phoenix Assurance Company and (2) P6,000 to Guardian Assurance Company, Limited, for a period of one year.In November 1925, Santa Ana mortgaged this house to Garcia for P5,000, for a period of two years, the contract being drawn up as a retro sale for the sum of P5,000. The 2 policies were endorsed to Garcia.In December 1925, Santa Ana reinsured said house with the defendant companies, the Globe and Rutgers Fire Insurance Company of New York, and the Commercial Union Assurance Company Limited of London, through their common agent duly authorized to represent them in the Philippine Islands, the Pacific Commercial Company which was to be effective for one year.On September 20, 1926, Santa Ana took out another insurance policy on the house in question for P6,000 in the "Filipinas, Compania de Seguros, which issued the one-year policy upon receiving from Sta. Ana premium thereon.Twelve hours before the expiration of the policies issued by the Phoenix Assurance Company and the Guardian Assurance Company, Limited for P3,000 and P6,000 respectively, the entire house was burned. Santa Ana gave notice in due time of the loss to each and every one of the companies in which he had insured the house and demanded payment of the respective policies.The insurance companies refused payment on the ground that the claim of P21,000 filed by him was fraudulent, being in excess of the real value of the insured property; that none of said companies had been informed of the existence of the other policies in the other companies, and that the fire was intentional.Sta. Ana filed civil cases in RTC against The Commercial Union Assurance Company, Limited; the Globe and Rutgers Fire Insurance Company of New York; and the Phoenix Assurance Company, Limited, the Guardian Assurance Company, Limited, and the "Filipinas, Compania de Seguros”. All the defendants are absolved in their alleged liabilities by the RTC. Hence this petition.ISSUE:W/N the insured can claim against the insurance companies?HELD: NO.Without deciding whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, the SC held that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. Since the policy is null and void, plaintiff cannot recover from the defendants insurance companies.

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

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Emilio Gonzalez La O v Yek Tong Lin (1930)JEROMEDOCTRINE: The action by the insurance company of taking the premiums of the insured notwithstanding knowledge of violations of the provisions of the policies amounted to waiver of the right to annul the contract of insurance. Here, the policy provides that any other insurance upon the thing insured must be declared. The insured failed to comply. However, the insurer is already estopped.FACTS:>  Gonzales was issued 2 fire insurance policies by Yek for 100T covering his leaf tobacco prducts.>  They were stored in Gonzales’ building on Soler St., which on Jan. 11, 1928, burned down.>  Art. 3 of the Insurance policies provided that: “Any insurance in force upon all or part of the things unsured must be declared in writing by the insured and he (insured) should cause the company to insert or mention it in the policy. Without such requisite, such policy will be regarded as null and void and the insured will be deprived of all rights of indemnity in case of loss.”>  Notwithstanding said provision, Gonzales entered into other insurance contracts.  When he sought to claim from Yek after the fire, the latter denied any liability on the ground of violation of Art. 3 of the said policies.>  Gonzales however proved that the insurer knew of the other insurance policies obtained by him long efore the fire, and the insurer did NOT rescind the insurance polices in question but demanded and collected from the insured the premiums.Issue: Whether or not Yek is still entitled to annul the contract.Held: NO.ART. 3.  Any insurance in force upon all or part of the things insured must be declared in writing by the insured and he should cause the company to insert or mention it in the policy, and without such requisite said policy will be regarded as null and void, and the assured deprived of all rights of indemnity in case of loss.The following clause has been inserted with a typewriter in the policies: "Subject to clauses G and A and other insurances with a special short period attached to this policy." And attached to said policies issued by the defendant there is a sheet of "Other insurances" with the amount and the assurance companies in blank, which, according to the appellee, constitutes a notification that there were other insurances existing at the time.In the case of Benedict vs. Ocean Insurance Co. (31 N.Y., 391-393), the construction of the clause, "privilege for $4,500 additional insurance," was discussed. One of the printed clauses of the policy reads as follows:If said assured, or his assigns, shall hereafter make any other insurance upon the same property, and shall not, with all reasonable diligence, give notice to this corporation, and have the same indorsed on this instrument, or otherwise acknowledged by them, in writing, this policy shall cease and be of no further effect.The Supreme Court of New York held that the words "Privilege for $4,500 additional insurance" made it unnecessary for the assured to inform the insurer of any other policy up to that amount.

In the case cited the same goods insured by the defendant company were reinsured to the amount of $4,500 in accordance with the clause "privilege for $4,500 additional insurance;" but in the instant case it may be said that the tobacco insured in the other companies was different from that insured with the defendant, since the number of bales of tobacco in the warehouse greatly exceeded that insured with the defendant and the other companies put together. And according to the doctrine enunciated in 26 Corpus Juris, 188, "to be insurance of the sort prohibited the prior policy must have been insurance upon the same subject matter, and upon the same interest thereinFurthermore, the appellant cannot invoke the violation of article 3 of the conditions of the insurance policies for the first time on appeal, having failed to do so in its answer; besides, as the appellee correctly contends in his brief, Guillermo Cu Unjieng, who was then president and majority shareholder of the appellant company, the Yek Tong Lin Fire & Marine Insurance Co., knew that there were other insurances, at least from the attempt to raise the insurance premium on the warehouse and the appellee's tobacco deposited therein to 1 per centum, and it was later reduced upon petition of the appellant itself and other assurance companies to 0.75 per centum presented to the association of assurance companies in the year 1927, and notwithstanding this, said appellant did not rescind the insurance policies in question, but demanded and collected from the appellee the increased premium.That the defendant had knowledge of the existence of other policies obtained by the plaintiff from other insurance companies, is specifically shown by the defendant's answer wherein it alleges, by way of special defense, the fact that there exist other policies issued by the companies mentioned therein. If, with the knowledge of existence of other insurances which the defendant deemed violations of the contract, it has preferred to continue the policy, its action amounts to a waiver of the annulment of the contract, in accordance with the following doctrine in 19 Cyc., 791, 792:.FAILURE TO ASSERT FORFEITURE — IN GENERAL. — While the weight of authority is that a policy conditioned to become void upon a breach of a warranty is void ipso facto upon such a breach without formal proceedings on the part of the insurer, yet it is true that such conditions are inserted for the benefit of the insurer and may be waived, and that the insurer may elect to continue the policy despite the breach. If it does the policy is revived and restored. Its failure to assert a forfeiture therefore is at least evidence tending to show a waiver thereof. Many authorities go further, however, and hold that the failure to assert a forfeiture after knowledge of a ground thereof will amount of itself to waiver. . . .DISPOSITIVE: AFFIRM LOWER COURT.

--------------------------------------------------------------------------------------------------------------General Insurance and Surety Corporation vs. Ng Hua - JON

Doctrine:

Co-insurance exists when:(1)   A condition of the policy requires the insured to bear ratable proportion of the loss when the value of the insured property exceeds the face value of the policy.(2)   Several insurers insure the same property against the same risk/hazard.

Facts:

On 15 April 1952, Ng Hua obtained a fire insurance policy (Policy No. 471) with the General Insurance and Surety Corporation (GISC) insuring against fire, for one year, the stock in trade of the Central Pomade Factory owned by Ng Hua.

Policy No. 471 contains a stipulation on the back thereof, to wit:“The insured shall give notice to the company of any insurance or insurances already affected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under the policy shall be forfeited.”

Moreover, the face of Policy No. 471 bore the annotation: "Co-Insurance Declared — NIL".

However, at the time of the application of Policy No. 471, Ng Hua had already obtained a fire insurance on the same goods, for the same period of time, in the amount of P20,000.00 from General Indemnity Co (General Indemnity).

On 16 April 1952, the said factory burned, resulting in destruction by fire of the insured properties. Ng Hua claimed indemnity from GISC. However, GISC refused to pay for various reasons, namely (a) the action was not filed in time; (b) violation of warranty; (c) submission of fraudulent claim; and (d) failure to pay the premium.

RTC: ordered GISC to pay Ng Hua.

CA: affirmed; there was no violation of the other insurance clause since “co-insurance only exists when a condition of the policy requires the insured to bear ratable proportion of the loss when the value of the insured property exceeds the face value of the policy."

Issue/s:(1)   Whether there was double insurance / co-insurance.(2)   Whether Ng Hua may claim the insurance proceeds on Policy No. 471 from GISC

Held:

(1)   Yes.

Undoubtedly, co-insurance exists under the condition described by CA. However, it is not the only situation where co-insurance exists. Other insurers of the same property against the same hazard are sometimes referred as co-insurers and the ensuing combination as co-insurance.  Considering the terms of the policy which required the insured to declare other insurances, the statement in question must be deemed to be a warranty binding on both insurer and insured, that there were no other insurance on the property.

(2)   No.

The annotation (stipulation at the back of the policy) must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. (Sec. 69. Insurance Act) Such misrepresentation is fatal in the light of our views in Santa Ana vs. Commercial Union Assurance Company, Ltd., 55 Phil., 329. The materiality of non-disclosure of other insurance policies is not open to doubt.

Furthermore, even if the annotations were overlooked, GISC would still be free from liability because there is no question that the policy issued by General Indemnity had not been stated in nor endorsed on Policy No. 471 and failure of which would forfeit all the benefits under the policy.

Dispositive Portion: Wherefore, the judgment under review will be revoked, and the defendant insurer (herein petitioner) acquitted from all the liability under the policy. Costs against respondent. So ordered.

--------------------------------------------------------------------------------------------------------------Union Manufacturing & Republic Bank v Philippine Guaranty, 47 SCRA 271 (1972)KARLADOCTRINE:

Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).FACTS:On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic Bank in the total sum of ₱ 415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage on certain properties.The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for ₱ 500,000.00 over the properties of the UMC, as described in defendant’s cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said cover note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendant’s Fire Insurance Policy Form.On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H.H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground: “Policy Condition No. 3 and/or the ‘Other Insurance Clause’ of the policy was violated because you did not give notice to us of the other insurance which you had taken from New India for ₱ 80,000.00. Sincere Insurance for ₱ 25,000.00 and Manila Insurance for ₱ 200,000.00 with the result that these insurances of which we became aware of only after the fire, were not endorsed on our policy.ISSUE:Whether Republic Bank can recover.HELD:NO. Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out the contracts actually made.While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense.The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. The materiality of non-disclosure of other insurance policies is not open to doubt.The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties.

--------------------------------------------------------------------------------------------------------------ReinsuranceSections 95-98, ICPioneer Insurance v CA, 175 SCRA 668 (1989)KIKOY

PIONEER INSURANCE & SURETY CORPORATION, petitioner, vs.THE HON. COURT OF APPEALS, BORDER MACHINERY & HEAVY EQUIPMENT, INC., (BORMAHECO), CONSTANCIO M. MAGLANA and JACOB S. LIM, respondents.G.R. No. 84157 July 28, 1989JACOB S. LIM, petitioner, vs.COURT OF APPEALS, PIONEER INSURANCE AND SURETY CORPORATION, BORDER MACHINERY and HEAVY EQUIPMENT CO., INC,, FRANCISCO and MODESTO CERVANTES and CONSTANCIO MAGLANA,respondents.Doctrine: In general a reinsurer, on payment of a loss acquires the same rights by subrogation as are acquired in similar cases where the original insurer pays a loss (Universal Ins. Co. v. Old Time Molasses Co. C.C.A. La., 46 F 2nd 925). The rules of practice in actions on original insurance policies are in general applicable to actions or contracts of reinsurance. (I.E. 2207)Facts:

-          Jacob Lim, Bormaheco, Cervantes, and Maglana bought aircrafts from Japan Domestic Airlines

(JDA).-          Petitioner pioneer became the surety in the said deal via (2) separate indemnity agreements (Exhibits D-1 and D-2) in favor of Pioneer, one signed by Maglana and the other jointly signed by Lim for SAL, Bormaheco and the Cervanteses. The indemnity agreements stipulated that the indemnitors principally agree and bind themselves jointly and severally to indemnify and hold and save harmless Pioneer from and against any/all damages, losses, costs, damages, taxes, penalties, charges and expenses of whatever kind and nature which Pioneer may incur in consequence of having become surety upon the bond/note and to pay, reimburse and make good to Pioneer, its successors and assigns, all sums and amounts of money which it or its representatives should or may pay or cause to be paid or become liable to pay on them of whatever kind and nature.

-          On June 10, 1965, Lim doing business under the name and style of SAL executed in favor of Pioneer as deed of chattel mortgage as security for the latter's suretyship in favor of the former. It was stipulated therein that Lim transfer and convey to the surety the two aircrafts.

-          Jacob lim et al failed to pay their obligations from the said deal.

-          Pioneer had reinsured its risk of liability under the surety bond in favor of JDA and subsequently collected the proceeds of such reinsurance in the sum of P295,000.00.

-          Aside from being able to collect from JDA, Pioneer had the aircrafts foreclosed due to the chattel mortgage executed by Jacob Lim.Issue/s: Was there unjust enrichment on the part of Pioneer? - YesHeld:

-          Plaintiff Pioneer's contention that it is representing the reinsurer to recover the amount from defendants, hence, it instituted the action is utterly devoid of merit. Plaintiff did not even present any evidence that it is the attorney-in-fact of the reinsurance company, authorized to institute an action for and in behalf of the latter.

-          It appearing that Pioneer reinsured its risk of liability under the surety bond it had executed in favor of JDA, collected the proceeds of such reinsurance in the sum of P295,000, and paid with the said amount the bulk of its alleged liability to JDA under the said surety bond, it is plain that on this score it no longer has any right to collect to the extent of the said amount.

-          In the first place, there is not the slightest indication in the complaint that Pioneer is suing as attorney-in- fact of the reinsurers for any amount. Lastly, and most important of all, Pioneer has no right to institute and maintain in its own name an action for the benefit of the reinsurers. It is well-settled that an action brought by an attorney-in-fact in his own name instead of that of the principal will not prosper, and this is so even where the name of the principal is disclosed in the complaint.

-          The total amount paid by Pioneer to JDA is P299,666.29. Since Pioneer has collected P295,000.00 from the reinsurers, the uninsured portion of what it paid to JDA is the difference between the two amounts, or P3,666.28. This is the amount for which Pioneer may sue defendants, assuming that the indemnity agreement is still valid and effective. But since the amount realized from the sale of the mortgaged chattels are P35,000.00 for one of the airplanes and P2,050.00 for a spare engine, or a total of P37,050.00, Pioneer is still overpaid by P33,383.72. Therefore, Pioneer has no more claim against defendants.

-          The payment to the petitioner made by the reinsurers was not disputed in the appellate court. Considering this admitted payment, the only issue that cropped up was the effect of payment made by the reinsurers to the petitioner. Therefore, the petitioner's argument that the respondents had no interest in the reinsurance contract as this is strictly between the petitioner as insured and the reinsuring company pursuant to Section 91 (should be Section 98) of the Insurance Code has no basis.

-          In general a reinsurer, on payment of a loss acquires the same rights by subrogation as are acquired in similar cases where the original insurer pays a loss (Universal Ins. Co. v. Old Time Molasses Co. C.C.A. La., 46 F 2nd 925).

-          The rules of practice in actions on original insurance policies are in general applicable to actions or contracts of reinsurance. (Delaware, Ins. Co. v. Pennsylvania Fire Ins. Co., 55 S.E. 330,126 GA. 380, 7 Ann. Con. 1134).

-          Hence the applicable law is Article 2207 of the new Civil Code, to wit:Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

-          Interpreting the aforesaid provision, we ruled in the case of Phil. Air Lines, Inc. v. Heald Lumber Co. (101 Phil. 1031 [1957]) which we subsequently applied in Manila Mahogany Manufacturing Corporation v. Court of Appeals(154 SCRA 650 [1987]):Note that if a property is insured and the owner receives the indemnity from the insurer, it is provided in said article that the insurer is deemed subrogated to the rights of the insured against the wrongdoer and if the amount paid by the insurer does not fully cover the loss, then the aggrieved party is the one entitled to recover the deficiency. Evidently, under this legal provision, the real party in interest with regard to the portion of the indemnity paid is the insurer and not the insured. (Emphasis supplied).Dispositive: WHEREFORE, the instant petitions are DISMISSED. The questioned decision of the Court of Appeals is AFFIRMED.

--------------------------------------------------------------------------------------------------------------Gibson v Revilla, 92 SCRA 219 (1979)KLAIREDOCTRINE:

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

Two were shipments involved in the case which both encountered accidents during their sea voyage due to bad weather. Lepanto notified Malayan and another insurer, Commercial Union in London in November and December, 1971 of the accidents. Formal claims under the open policy were also filed by Lepanto with Malayan in March and July, 1972 upon the conclusion of the voyages and the determination of the shortweight.

The claims were denied by Malayan tentatively at first claiming that it needed time to determine whether or not the marine accidents resulted from the inherent vice or nature of the cargo and finally Malayan rejected Lepanto's insurance claim for the reason that the cargoes were inherently vicious on loading and such condition caused the listing of the vessel.

The civil suit thus instituted by Lepanto against Malayan was founded on the fact that on Sept. 9, 1971, Malayan issued Marine Open Policy covering an shipments of copper, gold and silver concentrates in bulk from Poro, San Fernando, La Union to Tacoma, Washington or to other places in the United States which Lepanto may make on and after August 1, 1971 and until the cancellation of the policy upon thirty (30) days' written notice. Thereafter, Malayan obtained reinsurance abroad through Sedgwick, Collins & Co., Limited, a London insurance brokerage. The Memorandum of Insurance issued by Sedgwick to Malayan on September 24, 1971 listed three groups of underwriters or re-insurers and their reinsurance interests

are as follows: Lloyds 62.808%, Companies (I.L.U.) 34.705%, and Other Companies 2.487%. At the top of the list of underwriting members of Lloyds is Syndicate No. 448, assuming 2.48% of the risk assumed by the reinsurer, which syndicate number petitioner Ivor Robert Dayton Gibson claims to be himself.

On June 25, 1975, petitioner Ivor Robert Dayton Gibson filed a motion to intervene as defendant. CFI denied the motion.

ISSUE: Whether the lower court committed reversible error in refusing the intervention of petitioner Ivor Robert Dayton Gibson in the suit between Lepanto and Malayan.

HELD:No.The questioned Order of the respondent Court was based strictly and squarely on Section 2(b) of Rule 12 which specifically directs the Court in allowing or disallowing a motion for intervention in the exercise of discretion to consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties and whether or not the intervenor's rights may be fully protected in a separate proceeding. The Court a quo has specifically and correctly complied with the Rule's mandate. It reasonably ordered that to allow such intervention will unduly delay the proceedings and that Gibson’s rights may be fully protected in a separate proceeding.

Since movant Ivor Robert Dayton Gibson appears to be only one of several re-insurers of the risks and liabilities assumed by Malayan Insurance Company, Inc., it is highly probable that other re- insurers may likewise intervene. The record shows that aside from the petitioner there are sixty-three (63) other syndicate members of Lloyds, the twenty-six (26) companies in the " I.L.U. " group holding a 34.705 % reinsurance interest and the two (2) "Other Companies" holding the balance of the reinsurances, as listed in Annex "A", Sur-Rejoinder to Lepanto's Rejoinder, pp. 136-138, Records. The high probability that these other re-insurers like the petitioner herein may likewise intervene if the latter's motion is granted is not an arbitrary assumption of the Court.

--------------------------------------------------------------------------------------------------------------Artex Development v Wellington Insurance, 81 SCRA 352 (1973)NIKKI

Title:Artex Development Co VS Wellington InsuranceTopic: ReinsuranceFACTS:-Wellington insurance insured for P24,346,509 the building stocks andmachinery of plaintiff Artex against loss or damage by fire or lightning uponaugust 2, 1963 with an additional sum of P833,034.

-Another insurance against business interruption (use and occupancy)forP5,200,000.

-On September 22, 1963 the building, and machineries were burned and a

notice of loss and damage was given to Wellington.

-Insurance adjusters computed the loss for the fire as P10,106,544.40 andWellington paid only 6,481,870.07, leaving a balance of 3,624,683.43-The computed business interruption loss was P3M but Wellington paid onlyP1,864,134.08 leaving a balance of P1,748,460 (computation based on case)

-Artex through counsel Norberto Quisumbing made a manifestation that onlyabout P397,ooo is the remaining balance and liability which was the subjectof reinsurance with Alexander and Alexander Inc, of New York, Artexacknowledging here the receipt of P3,600,000 as FINAL and FULLSETTLEMENT of all claims against Welllington

-Artex further prays to the court to affirm the lower court’s decision of liquidation and prayed for modification of the amount of liability to be fixed toP397,813.00 plus 12% interest per annum thereof for the late payment untilapril 10, 1969 and attorney’s fees of 15% of the recovery, expenses of litigation, no writ of execution however to be made within 3years from july10, 1969 per collateral agreement of the parties.

-Wellington in its brief raises the issue that Artex deemed to have agreed tolook SOLELY to the reinsurers for indemnity in case of loss since their paid upcapital stock is only P500,000 and that they have to secure such reinsurancecoverage the over P24M fire insurance coverage of the policy issued byWellington to Artex.

Issue:WON reinsurance contract of the parties makes the insured to look SOLELY tothe reinsurers for indemnity in case of loss

Ruling:NO, the insured who is not directly a party or privy to the reinsurance contractbetween Wellington and Alexander and Alexander Inc., cannot demand enforcement of such insurance contracts.

The Contracts take effect only between the parties, their assigns and heirs asprovide by Art 1311 of our civil code. Further it provides that a contract withstipulations pour autrui or in favor of a third person not a party to the contract, the parties must have CLEARLY and DELIBERATELY conferred favor upon a

third person  

-The SC also stated that assuming that Artex directly sue the reinsurers forpayment this does not in any way affect or cancel out Wellington’s directcontractual liability to Artex.

The SC dispose the case by affirming the prayer of Artex--------------------------------------------------------------------------------------------------------------Guingon v Del Monte, 20 SCRA 1063 (1967)RIKKI

FACTS: Julio Aguilar owned and operated several jeepneys in the City of Manila

among which was one with plate number PUJ-206-Manila, 1961. He entered into a contract with the Capital Insurance & Surety Co., Inc. insuring the operation of his jeepneys against accidents with third-party liability. As a consequence thereof an insurance policy was executed by the Capital Insurance & Surety Co., Inc., the pertinent provisions of which in so far as this case is concerned contains the following:

Section II —LIABILITY TO THE PUBLIC1. The Company, will, subject to the limits of liability, indemnify the Insured in the event of accident caused by or arising out of the use of the Motor Vehicle/s or in connection with the loading or unloading of the Motor Vehicle/s, against all sums including claimant's costs and expenses which the Insured shall become legally liable to pay in respect of:a. death of or bodily injury to any personb. damage to propertyDuring the effectivity of such insurance policy on February 20, 1961 Iluminado del Monte, one of the drivers of the jeepneys operated by Aguilar, while driving along the intersection of Juan Luna and Moro streets, City of Manila, bumped with the jeepney abovementioned one Gervacio Guingon who had just alighted from another jeepney and as a consequence the latter died some days thereafter.A corresponding information for homicide thru reckless imprudence was filed against Iluminado del Monte, who pleaded guilty. A penalty of four months imprisonment was imposed on him.As a corollary to such action, the heirs of Gervacio Guingon filed an action for damages praying that the sum of P82,771.80 be paid to them jointly and severally by the defendants, driver Iluminado del Monte, owner and operator Julio Aguilar, and the Capital Insurance & Surety Co., Inc. For failure to answer the complaint, Del Monte and Aguilar were declared in default. Capital Insurance & Surety Co., Inc. answered, alleging that the plaintiff has no cause of action against it. During the trial the following facts were stipulated:COURT: The Court wants to find if there is a stipulation in the policy whereby the insured is insured against liability to third persons who are not passengers of jeeps.ALMARIO: As far as I know, in my honest belief, there is no particularization as to the passengers, whether the passengers of the jeep insured or a passenger of another jeep or whether it is a pedestrian. With those, we can submit the stipulation.SIMBULAN: I admit that. (T.s.n., p. 21, Jan. 23, 1962; p. 65 Rec. on Appeal)On August 27, 1962, the Court of First Instance of Manila rendered its judgment with the following dispositive portion:WHEREFORE, judgment is rendered sentencing Iluminado del Monte and Julio Aguilar jointly and severally to pay plaintiffs the sum of P8,572.95 as damages for the death of their father, plus P1,000.00 for attorney's fees plus costs.

The defendant Capital Insurance and Surety Co., Inc. is hereby sentenced to pay the plaintiffs the sum of Five Thousand (P5,000.00) Pesos plus Five Hundred (P500.00) Pesos as attorney's fees and costs. These sums of P5,000.00 and P500.00 adjudged against Capital Insurance and Surety Co., Inc. shall be applied in partial satisfaction of the judgment rendered against Iluminado del Monte and Julio Aguilar in this case.SO ORDERED.

The case was appealed to the Court of Appeals which appellate court on September 30, 1963 certified the case to Us because the appeal raises purely questions of law.

THE ISSUES: (1) As the company agreed to indemnify the insured Julio Aguilar, is it only the insured to whom it is liable? (2) Must Julio Aguilar first show himself to be entitled to indemnity before the insurance company may be held liable for the same? (3) Plaintiffs not being parties to the insurance contract, do they have a cause of action against the company; and (4) Does the fact that the insured is liable to the plaintiffs necessarily mean that the insurer is liable to the insured?

In the discussion of the points thus raised, what is paramount is the interpretation of the insurance contract with the aim in view of attaining the objectives for which the insurance was taken. The Rules of Court provide that parties may be joined either as plaintiffs or defendants, as the right to relief in respect to or arising out of the same transactions is alleged to exist (Sec. 6, Rule 3). The policy, on the other hand, contains a clause stating:

E. Action Against Company

No action shall lie against the Company unless, as a condition precedent thereto, the Insured shall have fully complied with all of the terms of this Policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by judgment against the Insured after actual trial or by written agreement of the Insured, the claimant, and the Company.Any person or organization or the legal representative thereof who has secured such judgment or written agreement shall thereafter be entitled to recover under this policy to the extent of the insurance afforded by the Policy. Nothing contained in this policy shall give any person or organization any right to join the Company as a co-defendant in any action against the Insured to determine the Insured's liability.

Bankruptcy or insolvency of the Insured or of the Insured's estate shall not relieve the Company of any of its obligations hereunder.Appellant contends that the "no action" clause in the policy closes the avenue to any third party which may be injured in an accident wherein the jeepney of the insured might have been the cause of the injury of third persons, alleging

the freedom of contracts. Will the mere fact that such clause was agreed upon by the parties in an insurance policy prevail over the Rules of Court which authorizes the joining of parties plaintiffs or defendants?The foregoing issues raise two principal: questions: (1) Can plaintiffs sue the insurer at all? (2) If so, can plaintiffs sue the insurer jointly with the insured?The policy in the present case, as aforequoted, is one whereby the insurer agreed to indemnify the insured "against all sums . . . which the Insured shall become legally liable to pay in respect of: a. death of or bodily injury to any person . . . ." Clearly, therefore, it is one for indemnity against liability;1 from the fact then that the insured is liable to the third person, such third person is entitled to sue the insurer.1äwphï1.ñëtThe right of the person injured to sue the insurer of the party at fault (insured), depends on whether the contract of insurance is intended to benefit third persons also or only the insured. And the test applied has been this: Where the contract provides for indemnity against liability to third persons, then third persons to whom the insured is liable, can sue the insurer. Where the contract is for indemnity against actual loss or payment, then third persons cannot proceed against the insurer, the contract being solely to reimburse the insured for liability actually discharged by him thru payment to third persons, said third persons' recourse being thus limited to the insured alone.2

The next question is on the right of the third person to sue the insurer jointly with the insured. The policy requires, as afore-stated, that suit and final judgment be first obtained against the insured; that only "thereafter" can the person injured recover on the policy; it expressly disallows suing the insurer as a co-defendant of the insured in a suit to determine the latter's liability. As adverted to before, the query is which procedure to follow — that of the insurance policy or the Rules of Court.The "no action" clause in the policy of insurance cannot prevail over the Rules of Court provision aimed at avoiding multiplicity of suits. In a case squarely on the point, American Automobile Ins. Co. vs. Struwe, 218 SW 534 (Texas CCA), it was held that a "no action" clause in a policy of insurance cannot override procedural rules aimed at avoidance of multiplicity of suits. We quote:Appellants filed a plea in abatement on the grounds that the suit had been prematurely brought against the insurance company, and that it had been improperly joined with Zunker, as said insurance company, under the terms of the policy, was only liable after judgment had been awarded against Zunker. . . .* * * That plea was properly overruled, because under the laws of Texas a dual suit will always be avoided whenever all parties can have a fair trial when joined in one suit. Appellee, had he so desired, could have prosecuted his claim to judgment as against Zunker and then have sued on that judgment against the insurance company, but the law does not make it imperative that he should do so, but would permit him to dispose of the whole matter in one suit.The rule has often been announced in Texas that when two causes of action are connected with each other, or grow out of the same transaction, they may be properly joined, and in such suit all parties against whom the plaintiff asserts a common or an alternative liability may be joined as defendants. . . .

Even if appellants had presented any plea in abatement as to joinder of damages arising from a tort with those arising from a contract, it could not, under the facts of this case, be sustained, for the rule is that a suit may include an action for breach of contract and one for tort, provided they are connected with each other or grew out of the same transaction.Similarly, in the instant suit, Sec. 5 of Rule 2 on "Joinder of causes of action" and Sec. 6 of Rule 3 on "Permissive joinder of parties" cannot be superseded, at least with respect to third persons not a party to the contract, as herein, by a "no action" clause in the contract of insurance.Wherefore, the judgment appealed from is affirmed in toto. Costs against appellant. So ordered.--------------------------------------------------------------------------------------------------------------