d2015member

Fieldmens Insurance Co., Inc. v. Asian Surety & Insurance Co., Inc. and CA (1970) Makalintal, J. On various dates, Asian Surety and Fieldmens Insurance entered into 7 reinsurance treaties (agreements). In the treaty (agreement), Fieldmens is the reinsuring company. o Asian Surety undertakes to cede (to Fieldmens) a specified portion of the amount of insurance underwritten by Asian o This is only upon payment to Fieldmens of a proportionate share of the gross rate of the premium applicable with respect to each cession o And after deducting a commission. The 7 agreements were to take effect from certain specific dates, to be in force until cancelled by either party o Cancellation must be upon a 3-month notice by registered mail to the other party o The cancellation is to take effect as of the 31st of Dec of the year in which the notice was given (Sept 19, 1961) Fieldmens served notice to Asian of desire to be relieved from the agreement effective Dec 31. o Letter was received by Asian (Sept 25) o Asian did not reply. (Dec 7, 1961) Fieldmens sent another letter to Asian expressing regrets at some violations by Asian of the agreement (case didnt say what). Fieldmens also said again that it considers itself no longer at risk for any reinsurance given by Asian. By Feb 17, 1962 (the ffg year na to), Asian still had not replied and so Fieldmens sent another letter reminding Asian of its cancellation of reinsurance agreements. Fieldmens also requested Asian to submit its final accounting of all cessions made to Fieldmens when the reinsurance agreements were still in force. Turns out, a day before (bale Feb 16, 1962), a risk reinsured with Fieldmens, issued to GSIS, became a liability because the insured property burned down. o GSIS policy was issued July 1, 1961. So, it was supposed to expire on July 1, 1962. The day after the fire (bale Feb 17, 1962), Asian notified Fieldmens of the fire & loss. 9 days later (bale Feb 26, 1962), Asian sent its reply. It says: o The Dec 7, 1961 letter of Fieldmens terminating the agreements by Dec 31 is not in accordance with the terms since there was no 3-month notice. o But, because of the attitude expressed in the Dec 7 letter (attitude?), Asian is willing to waive the provision that the agreements may be cancelled on Dec 31st of any year, and will consider them cancelled at the end of 3 months from Dec 7, 1961 Fieldmens filed a petition for declaratory relief with CFI. It wants to have all the reinsurance contracts terminated as of Dec 31, 1961. Asian answered that: o It did not receive Fieldmens Sept 19 letter. o Even if it did, Fieldmens could not have terminated the reinsurance because the letter was merely an expression of desire to cancel and not a formal notice of cancellation. o Even if it was, the liability of Fieldmens with respect to policies or cessions issued prior to their cancellation continued to have full force and effect until the stated expiry dates of such policies. TC rendered judgment: 6 out of 7 agreements were cancelled as of Dec 31, 1961. CA affirmed.

Issue: W/N cancellation had the effect of terminating also the liability of Fieldmens as reinsurer with respect to policies or cessions issued prior to the termination of the principal reinsurance contracts Held: No. Ratio:

The cancellation as of Dec 31, 1961 is not an issue as it has not been challenged. Of the 6 reinsurance contracts, 2 contain provisions which expressly recognize the continuing effectivity of policies ceded under them for reinsurance NOTWITHSTANDING the cancellation of the contracts themselves. o Art. 10 of the Facultative Obligatory Reinsurance Treaty Fire (1 of the agreements) provides "that in the event of termination of this Agreement ..., the liability of the Fieldmen's under current cessions shall continue in full force and effect until their natural expiry ...;" o 4th par of Article VI of the Personal Accident Reinsurance Treaty (another agreement) states: On the termination of this Agreement from any cause whatever, the liability of the Reinsurer (Fieldmen's) under any current cession including any amounts due to be ceded under the terms of this Agreement and which are not cancelled in the ordinary course of business shall continue in full force until their expiry unless the Company (Asian) shall, prior to 31st Dec next following such notice, elect to withdraw the existing cessions .... Clearly with respect to these 2, there is no merit in Fieldmens claim that their cancellation carried with it the termination of all reinsurance cessions. Such cessions continued to be in force until their dates of expiration. Since it was under one of the agreements (the Facultative Obligatory Reinsurance Treaty-Fire) that the reinsurance corresponding to the GSIS policy had been made, Fieldmens cannot avoid liability.

The other 4 agreements however Petition for declaratory relief is moot. The agreements have been cancelled,

d2015member

Last Fieldmen argument: All cessions under the 6 reinsurance agreements should be declared rescinded because of certain violations by Asian (as stated in its Dec 7 letter) SC says: This action, however, is not for rescission but merely for declaratory relief. CA decision affirmed.