Prats & Company vs.

Phoenix Insurance Company

FACTS: Prats & Co., a mercantile partnership instituted an action in the RTC of the City of Manila
for recovery from the Phoenix Insurance Co. the sum of P117,800.60 with interest, by reason of a
loss alleged to have been sustained by the plaintiff from a fire for said loss was covered by
insurance issued by the defendant company. Phoenix Insurance admitted the insurance of the
insurance but by way of special defense, alleged that the fire in question had been set by the
plaintiff, or with its connivance, and the plaintiff had submitted under oath to the defendant a
fraudulent claim of loss in contravention of the express terms of the policy. The trial court
absolved the defendant from the complaint with respect to the obligation created by the policy
but ordered the defendant to pay to the plaintiff the sum of P11, 731.93 with interest from the
filing of the complaint, upon account of moneys received from salvage sales, conducted by the
defendant, of remnants of the insured stock.
ISSUE: Whether or not the petitioner caused the fire to be set or connived therein and submitted
fraudulent proof as the trial judge found.
RULING: YES. The proof submitted by the defendant tends to show that obscure manipulations
were used by the plaintiff in the storing of merchandise at 95 Plaza Gardenia and in the removal
of part of the contents of the bodega before the fire. It appears that cases of old stock were
shipped to Manila before the fire but instead of being taken directly to the bodega they were
housed for a time in the back part of the lower floor where the petitioner had office. Also, the
manipulation of one of their people to attend to the alarm box not to allow others to touch it and
reasoned out that he already have done it, when in fact the fire chief noticed that it was never
touched and he himself turned on the alarm. The finding of the trial court in the effect that
plaintiff had submitted false proof in the support of his claim is also well founded. First, the
plaintiff had submitted a claim for jewelry lost in the fire as of a value of P 12,800 when the true
value of the said jewelry was about P 600; and secondly, that the plaintiff had sought to recover
from the insurance company the value of the goods which had been surreptitiously withdrawn by
it from the bodega prior to the fire. As a conclusion, not only that the plaintiff caused the fire to
be set, or connive therein, but also that it submitted fraudulent proof.
Malayan Insurance Co., Inc. V. Arnaldo (1987)
Lessons Applicable: Authority to Receive Payment/Effect of Payment (Insurance)
Laws Applicable: Article 64, Article 65, Section 77, Section 306 of the Insurance Code
FACTS:

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

October 15,1981: MICO allegedly cancelled the policy for non-payment, of the premium
and sent the corresponding notice to Pinca

December 24, 1981: payment of the premium for Pinca was received by Domingo Adora,
agent of MICO

January 15, 1982: Adora remitted this payment to MICO,together with other payments

January 18, 1982: Pinca's property was completely burned

February 5, 1982: Pinca's payment was returned by MICO to Adora on the ground that her
policy had been cancelled earlier but Adora refused to accept it and instead demanded for
payment

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

Insurance Commission: favored Pinca

MICO appealed
ISSUE: W/N MICO should be liable because its agent Adora was authorized to receive it
HELD: YES. petition is DENIED

SEC. 77. An insurer is entitled to payment of the premium as soon as the thing is
exposed to the peril insured against. Notwithstanding any agreement to the contrary, no
policy or contract of insurance issued by an insurance company is valid and binding unless
and until the premium thereof has been paid, except in the case of a life or an industrial life
policy whenever the grace period provision applies.
SEC. 306. xxx xxx xxx

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

Payment to an agent having authority to receive or collect payment is equivalent to

payment to the principal himself; such payment is complete when the money delivered is into
the agent's hands and is a discharge of the indebtedness owing to the principal.

SEC. 64. No policy of insurance other than life shall be cancelled by the insurer except
upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless
it is based on the occurrence, after the effective date of the policy, of one or more of the
following:
(a) non-payment of premium;
(b) conviction of a crime arising out of acts increasing the hazard insured against;
(c) discovery of fraud or material misrepresentation;
(d) discovery of willful, or reckless acts or commissions increasing the hazard insured against;
(e) physical changes in the property insured which result in the property becoming
uninsurable;or
(f)
a determination by the Commissioner that the continuation of the policy would violate or
would place the insurer in violation of this Code.
As for the method of cancellation, Section 65 provides as follows:

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

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

(1) There must be prior notice of cancellation to the insured;
(2) The notice must be based on the occurrence, after the effective date of the policy, of one or
more of the grounds mentioned;
(3) The notice must be (a) in writing, (b) mailed, or delivered to the named insured, (c) at the
address shown in the policy;
(4) It must state (a) which of the grounds mentioned in Section 64 is relied upon and (b) that
upon written request of the insured, the insurer will furnish the facts on which the cancellation is
based.

All MICO's offers to show that the cancellation was communicated to the insured is its
employee's testimony that the said cancellation was sent "by mail through our mailing
section." without more

It stands to reason that if Pinca had really received the said notice, she would not have
made payment on the original policy on December 24, 1981. Instead, she would have asked
for a new insurance, effective on that date and until one year later, and so taken advantage
of the extended period.

Incidentally, Adora had not been informed of the cancellation either and saw no reason not
to accept the said payment

Although Pinca's payment was remitted to MICO's by its agent on January 15, 1982, MICO
sought to return it to Adora only on February 5, 1982, after it presumably had learned of the

occurrence of the loss insured against on January 18, 1982 make the motives of MICO highly
suspicious
Pioneer v Yap G.R. No. L-36232 December 19, 1974
Facts:
Respondent Oliva Yap was the owner of a store in a two-storey building where she sold
shopping bags and footwear. Chua Soon Poon, her son-in-law, was in charge of the store.
Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value of
P25,000.00 covering her stocks,office furniture, fixtures and fittings.
Among the conditions in the policy executed by the parties are the following:
unless such notice be given and the particulars of such insurance or insurances be stated
in, or endorsed on this Policy by or on behalf of the Company before the occurrence of any
loss or damage, all benefits under this Policy shall be forfeited Any false declaration or
breach or this condition will render this policy null and void.
Another insurance policy for P20,000.00 issued by Great American covering the same
properties. The endorsement recognized co-insurance by Northwest for the same value.
Oliva Yap took out another fire insurance policy for P20,000.00 covering the same
properties from the Federal Insurance Company, Inc., which was procured without notice
to and the written consent of Pioneer.
A fire broke out in the building, and the store was burned. Yap filed an insurance claim, but
the same was denied for a breach.
Oliva Yap filed a case for payment of the face value of her fire insurance policy. The
insurance company refused to pay because she never informed Pioneer of another insurer.
The trial court decided in favor of Yap. The CA affirmed.
Issue: Whether or not petitioner should be absolved from liability on the Pioneeer policy on
account of any violation of the co-insurance clause
Held: No. Petition dismissed.
Ratio:
There was a violation. The insurance policy for P20,000.00 issued by the Great American, ceased
to be recognized by them as a co-insurance policy.
The endorsement shows the clear intention of the parties to recognize on the date the
endorsement was made, the existence of only one co-insurance, the Northwest one. The finding
of the Court of Appeals that the Great American Insurance policy was substituted by the Federal
Insurance policy is indeed contrary to said stipulation.
Other insurance without the consent of Pioneer would avoid the contract. It required no
affirmative act of election on the part of the company to make operative the clause avoiding the
contract, wherever the specified conditions should occur. Its obligations ceased, unless, being
informed of the fact, it consented to the additional insurance.
The validity of a clause in a fire insurance policy to the effect that the procurement of additional
insurance without the consent of the insurer renders the policy void is in American jurisprudence.
Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and practically all of the
states is to the effect that a clause in a policy to the effect that the procurement of additional
insurance without the consent of the insurer renders the policy void is a valid provision.
In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua- The annotation then,
must be deemed to be a warranty that the property was not insured by any other policy. Violation
thereof entitled the insurer to rescind. Furthermore, even if the annotations were overlooked the
defendant insurer would still be free from liability because there is no question that the policy
issued by General Indemnity has not been stated in nor endorsed on Policy No. 471 of defendant.
The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and
thus avert the perpetration of fraud where a fire would be profitable to the insured.
Philamlife vs. Auditor General [GR. 19255 January 18, 1968]
Facts:
On January 1950, Philippine American Life Insurance Co.(PHILAM) and,
corporation, American
InternationalReinsurance Co.(AIRCO)
entered

foreign
into

a reinsurance treaty where PHILAM agreed to reinsure with AIRCO the excess of life
insurance on the lives of persons written by PHILAM. In their agreement it is also
stipulated that even though PHILAM is already on a risk for its maximum retention under
policies previously issued, when new policies are applied for and issued they can cede
automatically any amount, within the limits specified.
No question ever arose with respect to the remittances made by Philamlife to Airco before
July 16, 1959, the date of approval of the Margin Law.
Subsequently, the Central Bank of the Philippines collected the sum of P268,747.48 as
foreign exchange margin on Philamlife remittances to Airco made subsequent to July 16,
1959.
PHILAM then filed with the CB a claim for refund for the same amount arguing that
the reinsurance premiums remitted were paid on January 1950 and is therefore exempt
from the 25% foreign exchange margin fee. The Acting legal counsel of the Monetary
board resolved that reinsurance contracts entered into and approved by the Central Bank
before July 17, 1959 are exempt from the payment of the 25% foreign exchange margin,
even if remittances thereof are made after July 17, 1959.
Still the Auditor of the CB denied PHILAMs claim for refund and reconsideration was
denied, hence the petition.
Issue: Whether PHILAMs claim was covered by the exemption
Held:
The Court held in the negative stating that for an exemption to come into play, there must
be a reinsurance policy or, as in thereinsurance treaty provided, a "reinsurance cession"
which may be automatic or facultative.
To distinguish, a reinsurance policy is a contract of indemnity one insurer makes with
another to protect the first insurer from a risk it has already assumed. On the other hand,
a reinsurance treaty is merely an agreement between two insurance companies whereby
one agrees to surrender and the other to accept reinsurancebusiness pursuant to
provisions specified in the treaty. Treaties are contracts for insurance; reinsurance policies
or cessions are contracts of insurance.
Although the reinsurance treaty precedes the Margin Law by over nine years nothing in
that treaty obligates PHILAM to remit to AIRCO a fixed, certain, and obligatory sum by way
of reinsurancepremiums. All that the reinsurance treaty provides on this point is that
PHILAM "agrees to reinsure." The treaty speaks of a probability; not a reality.
PHILAMs obligation to remit reinsurance premiums becomes fixed and definite upon the
execution of the reinsurance cession. Because, for every life insurance policy surrendered
to AIRCO, PHILAM agrees to pay premium. It is only after a reinsurancecession is made
that payment of reinsurance premium may be exacted, as it is only after PHILAM seeks to
remit that reinsurancepremium that the obligation to pay the margin fee arises.