Republic v Del Monte G.R. No. 156956 October 9, 2006 C.J.

Panganiban

Facts:
Vilfran Liner lost in a case against Del Monte Motors. They were made to pay 11 million pesos for service contracts with Del
Monte, and such was sourced from the counterbond posted by Vilfran. CISCO issued the counterbond. CISCO opposed but
was rebuffed. The RTC released a motion for execution commanding the sheriff to levy the amount on the property of
CISCO. To completely satisfy the amount, the Insurance Commissioner was also commanded to withdraw the security
deposit filed by CISCO with the Commission according to Sec 203 of the Insurance Code.
Insurance Commissioner Malinis was ordered by the RTC to withdraw the security bond of CISCO for the payment of the
insurance indemnity won by Del Monte Motor against Vilfran Liner, the insured.
Malinis didn’t obey the order, so the respondent moved to cite him in contempt of Court. The RTC ruled against Malinis
because he didn’t have legal basis.

Issues:
1. Whether or not the security deposit held by the Insurance Commissioner pursuant to Section 203 of the Insurance Code
may be levied or garnished in favor of only one insured.
2. Whether or not the Insurance Commissioner has power to withhold the release of the security deposit.

Held: No. Yes. Petition granted.

Ratio:
1. Sec 203- No judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held
on deposit pursuant to the requirement of the Commissioner.
The court also claimed that the security deposit shall be (1) answerable for all the obligations of the depositing insurer under
its insurance contracts; (2) at all times free from any liens or encumbrance; and (3) exempt from levy by any claimant.
“To allow the garnishment of that deposit would impair the fund by decreasing it to less than the percentage of paid-up
capital that the law requires to be maintained. Further, this move would create, in favor of respondent, a preference of credit
over the other policy holders and beneficiaries.”
“Also, the securities are held as a contingency fund to answer for the claims against the insurance company by all its policy
holders and their beneficiaries. This step is taken in the event that the company becomes insolvent or otherwise unable to
satisfy the claims against it. Thus, a single claimant may not lay stake on the securities to the exclusion of all others. The
other parties may have their own claims against the insurance company under other insurance contracts it has entered into.”
2. The Insurance Code has vested the Office of the Insurance Commission with both regulatory and adjudicatory authority
over insurance matters.
Under Sec 414 of the Insurance Code, "The Commissioner may issue such rulings, instructions, circulars, orders and
decisions as he may deem necessary to secure the enforcement of the provisions of this Code.”
“The commissioner is authorized to (1) issue (or to refuse to issue) certificates of authority to persons or entities desiring to
engage in insurance business in the Philippines;16 (2) revoke or suspend these certificates of authority upon finding grounds
for the revocation or suspension; (3) impose upon insurance companies, their directors and/or officers and/or agents
appropriate penalties -- fines, suspension or removal from office -- for failing to comply with the Code or with any of the
commissioner's orders, instructions, regulations or rulings, or for otherwise conducting business in an unsafe or unsound
manner.”
Included here is the duty to hold security deposits under Secs 191 and 202 of the Code for the benefit of policy holders. Sec
192, on the other hand, states:
“the securities deposited as aforesaid shall be returned upon the company's making application therefor and proving to the
satisfaction of the Commissioner that it has no further liability under any of its policies in the Philippines.”
He has been given great discretion to regulate the business to protect the public. Also “An implied trust is created by the law
for the benefit of all claimants under subsisting insurance contracts issued by the insurance company.” He believed that the
security deposit was exempt from execution to protect the policy holders.

Pineda v Insular G.R. No. 105562 September 27, 1993 J. Davide Jr.

Facts:

PMSI obtained a group insurance policy for its sailors. 6 of the sailors, during the effectivity of the policy, perished while the
ship sank in Morocco. The families of the victims then wanted to claim the benefits of the insurance. Hence, under the advice
of Nuval, the president of PMSI, they executed a special power of attorney authorizing Capt. Nuval to, "follow up, ask,
demand, collect and receive" for their benefit the indemnities.
Insular drew against its account 6 checks, four for P200,00.00 each, one for P50,000.00 and another for P40,00.00, payable
to the order the families. The checks were given to PMSI. Nuval, the PMSI president, pocketed the amounts in his bank
account.
When the families went to insular to get the benefits, their request was denied because Insular claimed that the checks were
already given to PMSI.
The families filed a petition with the Insurance Commission. They won and Insular was ordered to pay them 500 a day until
the amount was furnished to them. The insurance Commission held that the special powers of attorney executed by
complainants do not contain in unequivocal and clear terms authority to Nuval to obtain and receive from respondent
company insurance proceeds arising from the death of the seaman-insured; also, that Insular Life did not convincingly
refuted the claim of Mrs. Alarcon that neither she nor her husband executed a special power of authority in favor of Capt.
Nuval and that it did not observe Sec 180(3), when it released the benefits due to the minor children of Ayo and Lontok,
when the said complainants did notpost a bond as required-
Insular Life appealed to the CA. CA modified the decision of the Insurance Commission, eliminating the award to the minor
children.
Hence, this petition by the beneficiary families.

Issues:
1. WON Insular Life should still be liable to the complainants when they relied on the special powers of attorney, which Capt.
Nuval presented as documents, when they released the checks to the latter.
2. WON Insular Life should be liable to the complainants when they released the check in favor of Ayo and Lontok, even if no
bond was posted as required.

Held: Yes to both. Petition granted.

Ratio:
1. The special powers of attorney "do not contain in unequivocal and clear terms authority to Capt. Nuval to obtain, receive,
receipt from respondent company insurance proceeds arising from the death of the seaman-insured.
Insular Life knew that a power of attorney in favor of Capt. Nuval for the collection and receipt of such proceeds was a
deviation from its practice with respect to group policies.
They gave the proceeds to the policyholder instead of the beneficiaries themselves. Even the Isnular rep admitted that he
gave the checks to the policyholder.
Insular Life recognized Capt. Nuval as the attorney-in-fact of the petitioners. However, it acted imprudently and negligently in
the premises by relying without question on the special power of attorney.
Strong vs. Repide- third persons deal with agents at their peril and are bound to inquire as to the extent of the power of the
agent with whom they contract.
Harry E. Keller Electric Co. vs. Rodriguez- The person dealing with an agent must also act with ordinary prudence and
reasonable diligence. Obviously, if he knows or has good reason to believe that the agent is exceeding his authority, he
cannot claim protection… the party dealing with him may not shut his eyes to the real state of the case, but should either
refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs.
Insular delivered the checks to a party not the agent of the beneficiaries.
2. Art. 225. The father and the mother shall jointly exercise legal guardianship over the property of their unemancipated
common child without the necessity of a court appointment. In case of disagreement, the father's decision shall prevail,
unless there is judicial order to the contrary.
Where the market value of the property or the annual income of the child exceeds P50,000, the parent concerned shall be
required to furnish a bond in such amount as the court may determine, but not less than ten per centum (10%) of the value of
the property or annual income, to guarantee the performance of the obligations prescribed for general guardians.
“If the market value of the property or the annual income of the child exceeds P50,000.00, a bond has to be posted by the
parents concerned to guarantee the performance of the obligations of a general guardian.”
On group insurance :
Group insurance is essentially a single insurance contract that provides coverage for many individuals, particularly for the
employees of one employer.
There is a master agreement issued to an employer. The employer acts as the collector of the dues and premiums.
Disbursement of insurance payments by the employer is also one of his duties.
They require an employee to pay a portion of the premium, which the employer deducts from wages while the remainder is
paid by the employer. This is known as a contributory plan as compared to a non-contributory plan where the premiums are
solely paid by the employer.
Although the employer may be the policyholder, the insurance is actually for the benefit of the employee. In a non-
contributory plan, the payment by the employer of the entire premium is a part of the total compensation paid for the services
of the employee.
The primary aim of group insurance is to provide the employer with a means of procuring insurance protection for his
employees at a low cost and thereby retain their loyalty and efficiency.

Cebu Shipyard v William G.R. No. 132607. May 5, 1999 J. Purisima

Facts:
Cebu Shipyard and Engineering Works, Inc. repaired marine vessels while the Prudential is in the non-life insurance
business. William Lines, Inc., the owner of M/V Manila City, a luxury passenger-cargo vessel, which caught fire and sank. At
the time of the incident, subject vessel was insured with Prudential for P45M for hull and machinery. CSEW was insured for
only Php 10 million for the shiprepairer’s liability policy. They entered into a contract where negligence was the only factor
that could make CSEW liable for damages. Moreover, liability of CSEW was limited to only Php 1million for damages. The
Hull Policy included an “Additional Perils (INCHMAREE)” Clause covering loss of or damage to the vessel through the
negligence of, among others, ship repairmen.
William brought Manila City to the dry dock of CSEW for repairs. The officers and cabin crew stayed at the ship while it was
being repaired. After the vessel was transferred to the docking quay, it caught fire and sank, resulting to its total loss.
William brought suit against CSEW alleging that it was through the latter’s negligence that the ship caught fire and sank.
Prudential was impleaded as co-plaintiff after it had paid the value of insured items. It was subrogated to 45 million, or the
value it claimed to indemnify.
The trial court brought judgment against CSEW 45 million for the ship indemnity, 65 million for loss of income, and more than
13 million in other damages. The CA affirmed the TC decision.
CSEW contended that the cause of the fire was due to William’s hotworks on the said portion of the ship which they didn’t
ask CSEW permission for.
Prudential, on the other hand, blamed the negligence of the CSEW workers in the instance when they didn’t mind rubber
insulation wire coming out of the air-conditioning unit that was already burning.
Hence this MFR.

Issue:
1. WON CSEW had “management and supervisory control“ of the ship at the time the fire broke out
2. WON the doctrine of res ipsa loquitur applies against the crew
3. WON Prudential has the right of subrogation against its own insured
4. WON the provisions limiting CSEW’s liability for negligence to a maximum of Php 1 million are valid

Held: Yes. Yes. Yes. No. Petition denied.

Ratio:
1. The that factual findings by the CA are conclusive on the parties and are not reviewable by this Court. They are entitled to
great weight and respect when the CA affirmed the factual findings arrived at by the trial court.
The CA and the Cebu RTC are agreed that the fire which caused the total loss of subject M/V Manila City was due to the
negligence of the employees and workers of CSEW.
Furthermore, in petitions for review on certiorari, only questions of law may be put into issue. Questions of fact cannot be
entertained.
2. For the doctrine of res ipsa loquitur to apply to a given situation, the following conditions must concur: (1) the accident was
of a kind which does not ordinarily occur unless someone is negligent; and (2) that the instrumentality or agency which
caused the injury was under the exclusive control of the person charged with negligence.
The facts and evidence reveal the presence of these conditions. First, the fire would not have happened in the ordinary
course of things if reasonable care and diligence had been exercised.
Second, the agency charged with negligence, as found by the trial court and the CA and as shown by the records, is CSEW,
which had control over subject vessel when it was docked for annual repairs.
What is more, in the present case the trial court found direct evidence to prove that the workers didn’t exercise due diligence
in the care of subject vessel. The direct evidence substantiates the conclusion that CSEW was really negligent even without
applying such doctrine.
3. Petitioner contends that Prudential is not entitled to be subrogated to the rights of William Lines, Inc., theorizing that (1) the
fire which gutted M/V Manila City was an excluded risk and (2) it is a co-assured under the Marine Hull Insurance Policy. This
was wrong. The one who caused the fire has already been adjudicated by the courts as CSEW.
Upon proof of payment by Prudential to William Lines, Inc., the former was subrogated to the right of the latter to
indemnification from CSEW. As aptly ruled by the Court of Appeals, the law says:
Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the
rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
When Prudential paid the latter the total amount covered by its insurance policy, it was subrogated to the right of the latter to
recover the insured loss from the liable party, CSEW.
Petitioner theorizes further that there can be no right of subrogation as it is deemed a co-assured under the subject
insurance policy with reliance on Clause 20 of the Work Order which states:
20. The insurance on the vessel should be maintained by the customer and/or owner of the vessel during the period the
contract is in effect.
Clause 20 of the Work Order in question is clear in the sense that it requires William Lines to maintain insurance on the
vessel during the period of dry-docking or repair. However, the fact that CSEW benefits from the said stipulation does not
automatically make it as a co-assured of William Lines. The intention of the parties to make each other a co-assured under
an insurance policy is to be read from the insurance contract or policy itself and not from any other contract or agreement
because the insurance policy denominates the beneficiaries of the insurance. The hull and machinery insurance procured by
William Lines, Inc. from Prudential named only “William Lines, Inc.” as the assured. There was no manifestation of any
intention of William Lines, Inc. to constitute CSEW as a co-assured under subject policy. The claim of CSEW that it is a co-
assured is unfounded.
Then too, in the Additional Perils Clause of the same Marine Insurance Policy, it is provided that this insurance also covers
loss of or damage to vessel directly caused by the negligence of charterers and repairers who are not assured.
As correctly pointed out by respondent Prudential, if CSEW were deemed a co-assured under the policy, it would nullify any
claim of William Lines, Inc. from Prudential for any loss or damage caused by the negligence of CSEW. Certainly, no
shipowner would agree to make a shiprepairer a co-assured under such insurance policy; otherwise, any claim for loss or
damage under the policy would be invalidated.
4. Although in this jurisdiction, contracts of adhesion have been consistently upheld as valid per se; as binding as an ordinary
contract, the Court recognizes instances when reliance on such contracts cannot be favored especially where the facts and
circumstances warrant that subject stipulations be disregarded. Thus, in ruling on the validity and applicability of the
stipulation limiting the liability of CSEW for negligence to P1M only, the facts and circumstances vis-a-vis the nature of the
provision sought to be enforced should be considered, bearing in mind the principles of equity and fair play.
It is worthy to note that M/V Manila City was insured with Prudential for P45M. Upon thorough investigation by its hull
surveyor, M/V Manila City was found to be beyond economical salvage and repair. The evaluation of the average adjuster
also reported a constructive total loss. The said claim of William Lines, Inc., was then found to be valid and compensable
such that Prudential paid the latter the total value of its insurance claim. Furthermore, it was ascertained that the replacement
cost of the vessel, amounts to P55M.
Considering the circumstances, it would unfair to limit the liability of petitioner to One Million Pesos only. To allow CSEW to
limit its liability to P1M notwithstanding the fact that the total loss suffered by the assured and paid for by Prudential
amounted to P45M would sanction the exercise of a degree of diligence short of what is ordinarily required because, then, it
would not be difficult for petitioner to escape liability by the simple expedient of paying an amount very much lower than the
actual damage suffered by William.

New Life v CA G.R. No. 94071 March 31, 1992 J. Regalado

Facts:
Julian Sy, owner of New Life, insured his building in 3 different insurance agencies for 350,000, 1,000,000, and 200,000. When
his building and the goods inside burned down, he claimed for insurance indemnities, but these were rejected by the three
companies for violation of policy conditions.
Sy filed for 3 different suits in the trial court, where he won all suits against the insurance companies. The court of appeals
reversed the decision of the trial court.

Issue: Did the petitioner violate conditions 3 and 27 of the three insurance policies, thereby foreiting collection of indemnities?

Held: Yes.

Ratio:
Condition 3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may
subsequently be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or
inventories only hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated
therein or endorsed on 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 loss or damage not more than P200,000.00.
Sy never disclosed co-insurance in the contracts he entered into with the three corporations. The insured is specifically
required to disclose the insurance that he had contracted with other companies. Sy also contended that the insurance agents
knew of the co-insurance. However, the theory of imputed knowledge, that the knowledge of the agent is presumed to be
known by the principal, is not enough.
When the words of the document are readily understandable by an ordinary reader, there is no need for construction anymore.
The conformity of the insured to the terms of the policy is implied with his failure to disagree with the terms of the contract.
Since Sy, was a businessman, it was incumbent upon him to read the contracts.
Pioneer Insurance and Surety Corporation vs. Yap- The obvious purpose of the aforesaid requirement in the policy is to
prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing
the situation in which a fire would be profitable to the insured.
“Also, policy condition 15 was used. It stated: 15.. . . if any false declaration be made or used in support thereof, . . . all benefits
under this Policy shall be forfeited . . .”
As for condition number 27, the stipulation read:
27. Action or suit clause. — If a claim be made and rejected and an action or suit be not commenced either in the Insurance
Commission or any court of competent jurisdiction of notice of such rejection, or in case of arbitration taking place as provided
herein, within twelve (12) months after due notice of the award made by the arbitrator or arbitrators or umpire, then the claim
shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder.
This is regarding Sy’s claim for one of the companies. Recovery was filed in court by petitioners only on January 31, 1984, or
after more than one (1) year had elapsed from petitioners' receipt of the insurers' letter of denial on November 29, 1982. This
made it void.

Sun v CA G.R. No. 92383 July 17, 1992 J. Cruz

Facts:
Lim accidentally killed himself with his gun after removing the magazine, showing off, pointing the gun at his secretary, and
pointing the gun at his temple. The widow, the beneficiary, sued the petitioner and won 200,000 as indemnity with additional
amounts for other damages and attorney’s fees. This was sustained in the Court of Appeals then sent to the Supreme court by
the insurance company.

Issue:
1. Was Lim’s widow eligible to receive the benefits?
2. Were the other damages valid?
Held:
1. Yes 2. No
Ratio: 1. There was an accident.
De la Cruz v. Capital Insurance says that "there is no accident when a deliberate act is performed unless some additional,
unexpected, independent and unforeseen happening occurs which produces or brings about their injury or death." This was
true when he fired the gun.
Under the insurance contract, the company wasn’t liable for bodily injury caused by attempted suicide or by one needlessly
exposing himself to danger except to save another’s life.
Lim wasn’t thought to needlessly expose himself to danger due to the witness testimony that he took steps to ensure that the
gun wasn’t loaded. He even assured his secretary that the gun was loaded.
There is nothing in the policy that relieves the insurer of the responsibility to pay the indemnity agreed upon if the insured is
shown to have contributed to his own accident.
2. “In order that a person may be made liable to the payment of moral damages, the law requires that his act be wrongful. The
adverse result of an action does not per se make the act wrongful and subject the act or to the payment of moral damages.
The law could not have meant to impose a penalty on the right to litigate; such right is so precious that moral damages may not
be charged on those who may exercise it erroneously. For these the law taxes costs.”
If a party wins, he cannot, as a rule, recover attorney's fees and litigation expenses, since it is not the fact of winning alone that
entitles him to recover such damages of the exceptional circumstances enumerated in Art. 2208. Otherwise, every time a
defendant wins, automatically the plaintiff must pay attorney's fees thereby putting a premium on the right to litigate which
should not be so. For those expenses, the law deems the award of costs as sufficient.”

Tai Tong v Insurance G.R. No. L-55397 February 29, 1988 J. Gancayco

Facts:
Azucena Palomo obtained a loan from Tai Tong Chuache Inc. in the amount of P100,000.00. To secure the payment of the
loan, a mortgage was executed over the land and the building in favor of Tai Tong Chuache & Co. Arsenio Chua,
representative of Thai Tong Chuache & Co. insured the latter's interest with Travellers Multi-Indemnity Corporation for
P100,000.00 (P70,000.00 for the building and P30,000.00 for the contents thereof)
Pedro Palomo secured a Fire Insurance Policy covering the building for P50,000.00 with respondent Zenith Insurance
Corporation. On July 16, 1975, another Fire Insurance was procured from respondent Philippine British Assurance Company,
covering the same building for P50,000.00 and the contents thereof for P70,000.00.
The building and the contents were totally razed by fire.
Based on the computation of the loss, including the Travellers Multi- Indemnity, respondents, Zenith Insurance, Phil. British
Assurance and S.S.S. Accredited Group of Insurers, paid their corresponding shares of the loss. Complainants were paid the
following: P41,546.79 by Philippine British Assurance Co., P11,877.14 by Zenith Insurance Corporation, and P5,936.57 by
S.S.S. Group of Accredited Insurers Demand was made from respondent Travellers Multi-Indemnity for its share in the loss but
the same was refused. Hence, complainants demanded from the other three (3) respondents the balance of each share in the
loss in the amount of P30,894.31 (P5,732.79-Zenith Insurance: P22,294.62, Phil. British: and P2,866.90, SSS Accredited) but
the same was refused, hence, this action.
In their answers, Philippine British Assurance and Zenith Insurance Corporation denied liability on the ground that the claim of
the complainants had already been waived, extinguished or paid. Both companies set up counterclaim in the total amount of P
91,546.79.
SSS Accredited Group of Insurers informed the Commission that the claim of complainants for the balance had been paid in
the amount in full.
Travellers Insurance, on its part, admitted the issuance of a Policy and alleged defenses that Fire Policy, covering the furniture
and building of complainants was secured by a certain Arsenio Chua and that the premium due on the fire policy was paid by
Arsenio Chua.
Tai Tong Chuache & Co. also filed a complaint in intervention claiming the proceeds of the fire Insurance Policy issued by
respondent Travellers Multi-Indemnity.
As adverted to above respondent Insurance Commission dismissed spouses Palomos' complaint on the ground that the
insurance policy subject of the complaint was taken out by Tai Tong Chuache & Company, for its own interest only as
mortgagee of the insured property and thus complainant as mortgagors of the insured property have no right of action against
the respondent. It likewise dismissed petitioner's complaint in intervention in the following words:
From the above decision, only intervenor Tai Tong Chuache filed a motion for reconsideration but it was likewise denied hence,
the present petition.

Issue: WON Tai Tong had insurable interest

Held: Yes. Petition granted.

Ratio:
Respondent advanced an affirmative defense of lack of insurable interest on the part of the petitioner that before the
occurrence of the peril insured against, the Palomos had already paid their credit due the petitioner. However, they were never
able to prove that Tai had a lack of insurable interest. Hence, the decision must be adverse against them.
However respondent Insurance Commission absolved respondent insurance company from liability on the basis of the
certification issued by the then Court of First Instance of Davao, Branch II, that in a certain civil action against the Palomos,
Arsenio Lopez Chua stands as the complainant and not Tai Tong Chuache.
From said evidence respondent commission inferred that the credit extended by petitioner to the Palomos secured by the
insured property must have been paid. These findings was based upon a mere inference.
The record of the case shows that the petitioner to support its claim for the insurance proceeds offered as evidence the
contract of mortgage which has not been cancelled nor released. It has been held in a long line of cases that when the creditor
is in possession of the document of credit, he need not prove non-payment for it is presumed. The validity of the insurance
policy taken by petitioner was not assailed by private respondent. Moreover, petitioner's claim that the loan extended to the
Palomos has not yet been paid was corroborated by Azucena Palomo who testified that they are still indebted to herein
petitioner.
Public respondent argues however, that if the civil case really stemmed from the loan granted to Azucena Palomo by petitioner
the same should have been brought by Tai Tong Chuache or by its representative in its own behalf. From the above premise,
respondent concluded that the obligation secured by the insured property must have been paid. However, it should be borne in
mind that petitioner being a partnership may sue and be sued in its name or by its duly authorized representative. Petitioner's
declaration that Arsenio Lopez Chua acts as the managing partner of the partnership was corroborated by respondent
insurance company. Thus Chua as the managing partner of the partnership may execute all acts of administration including
the right to sue debtors of the partnership in case of their failure to pay their obligations when it became due and demandable.
Public respondent's allegation that the civil case flied by Arsenio Chua was in his capacity as personal creditor of spouses
Palomo has no basis. The policy, then had legal force and effect.

Gaisano v Insurance G.R. No. 147839 June 8, 2006

J. Martinez

Facts:
IMC and Levi Strauss (Phils.) Inc. (LSPI) separately obtained from respondent fire insurance policies with book debt
endorsements. The insurance policies provide for coverage on "book debts in connection with ready-made clothing materials
which have been sold or delivered to various customers and dealers of the Insured anywhere in the Philippines."
The policies defined book debts as the "unpaid account still appearing in the Book of Account of the Insured 45 days after th e
time of the loss covered under this Policy." The policies also provide for the following conditions:
1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise sold and delivered by
the Insured which are outstanding at the date of loss for a period in excess of six (6) months from the date of the covering
invoice or actual delivery of the merchandise whichever shall first occur.
2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every calendar month all
amount shown in their books of accounts as unpaid and thus become receivable item from their customers and dealers.
Gaisano is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore Complex in
Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the fire were stocks
of ready-made clothing materials sold and delivered by IMC and LSPI.
Insurance of America filed a complaint for damages against Gaisano. It alleges that IMC and LSPI were paid for their claims
and that the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was
P2,119,205.00 while with LSPI it was P535,613.00.
The RTC rendered its decision dismissing Insurance's complaint. It held that the fire was purely accidental; that the cause of
the fire was not attributable to the negligence of the petitioner. Also, it said that IMC and LSPI retained ownership of the
delivered goods and must bear the loss.
The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay Insurance the P 2 million and
the P 500,000 the latter paid to IMC and Levi Strauss.
Hence this petition.

Issues:
1. WON the CA erred in construing a fire insurance policy on book debts as one covering the unpaid accounts of IMC and LSPI
since such insurance applies to loss of the ready-made clothing materials sold and delivered to petitioner
2. WON IMC bears the risk of loss because it expressly reserved ownership of the goods by stipulating in the sales invoices
that "[i]t is further agreed that merely for purpose of securing the payment of the purchase price the above described
merchandise remains the property of the vendor until the purchase price thereof is fully paid."
3. WON petitioner is liable for the unpaid accounts
4. WON it has been established that petitioner has outstanding accounts with IMC and LSPI.

Held: No. Yes. Yes. Yes but account with LSPI unsubstantiated. Petition partly granted.

Ratio:
1. Nowhere is it provided in the questioned insurance policies that the subject of the insurance is the goods sold and delivered
to the customers and dealers of the insured.
Thus, what were insured against were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the
loss through fire, and not the loss or destruction of the goods delivered.
2. The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the ownership therein is transferred to the
buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer's risk whether actual delivery has
been made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the
ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the
contract, the goods are at the buyer's risk from the time of such delivery
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the risk of loss is borne by the buyer.
Petitioner bears the risk of loss of the goods delivered.
IMC and LSPI had an insurable interest until full payment of the value of the delivered goods. Unlike the civil law concept of res
perit domino, where ownership is the basis for consideration of who bears the risk of loss, in property insurance, one's interest
is not determined by concept of title, but whether insured has substantial economic interest in the property.
Section 13 of our Insurance Code defines insurable interest as "every interest in property, whether real or personal, or any
relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured."
Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing interest; (b)
an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that out of which the
expectancy arises.
Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss from its destruction.
Indeed, a vendor or seller retains an insurable interest in the property sold so long as he has any interest therein, in other
words, so long as he would suffer by its destruction, as where he has a vendor's lien. In this case, the insurable interest of IMC
and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after the time of the loss covered by the
policies.
3. Petitioner's argument that it is not liable because the fire is a fortuitous event under Article 117432 of the Civil Code is
misplaced. As held earlier, petitioner bears the loss under Article 1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire but for petitioner's accounts with
IMC and LSPI that remained unpaid 45 days after the fire. Accordingly, petitioner's obligation is for the payment of money. As
correctly stated by the CA, where the obligation consists in the payment of money, the failure of the debtor to make the
payment even by reason of a fortuitous event shall not relieve him of his liability. The rationale for this is that the rule that an
obligor should be held exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation
consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of fortuitous event. It
does not apply when the obligation is pecuniary in nature.
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss or destruction of anything of the
same kind does not extinguish the obligation." This rule is based on the principle that the genus of a thing can never perish. An
obligation to pay money is generic; therefore, it is not excused by fortuitous loss of any specific property of the debtor.
4. With respect to IMC, the respondent has adequately established its claim. The P 3 m claim has been proven. The
subrogation receipt, by itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured,
but also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance
company of the insurance claim Respondent's action against petitioner is squarely sanctioned by Article 2207 of the Civil Code
which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury
or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has violated the contract.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. There was no evidence that
respondent has been subrogated to any right which LSPI may have against petitioner. Failure to substantiate the claim of
subrogation is fatal to petitioner's case for recovery of P535,613.00.

Filipino Merchants Insurance v CA G.R. No. 85141 November 28, 1989 J. Regalado

Facts:
Choa insured 600 tons of fishmeal for the sum of P267,653.59 from Bangkok, Thailand to Manila against all risks under
warehouse to warehouse terms. What was imported in the SS Bougainville was 59.940 metric tons at $395.42 a ton. The cargo
was unloaded from the ship and 227 bags were found to be in bad condition by the arrastre.
Choa made a formal claim against the defendant Filipino Merchants Insurance Company for P51,568.62 He also presented a
claim against the ship, but the defendant Filipino Merchants Insurance Company refused to pay the claim. The plaintiff brought
an action against the company and presented a third party complaint against the vessel and the arrastre contractor.
The court below, after trial on the merits, rendered judgment in favor of private respondent, for the sum of P51,568.62 with
interest at legal rate.
The common carrier, Compagnie, was ordered to pay as a joint debtor.
On appeal, the respondent court affirmed the decision of the lower court insofar as the award on the complaint is concerned
and modified the same with regard to the adjudication of the third-party complaint. A motion for reconsideration of the aforesaid
decision was denied. The AC made Filipino Merchants pay but absolved the common carrier, Compagnie. Hence this petition.

Issues:
1. WON the "all risks" clause of the marine insurance policy held the petitioner liable to the private respondent for the partial
loss of the cargo, notwithstanding the clear absence of proof of some fortuitous event, casualty, or accidental cause to which
the loss is attributable.
2. WON The Court of Appeals erred in not holding that the private respondent had no insurable interest in the subject
cargo, hence, the marine insurance policy taken out by private respondent is null and void.

Held: No. No. Petition denied.

Ratio:
1. The "all risks clause" of the Institute Cargo Clauses read as follows:
“5. This insurance is against all risks of loss or damage to the subject-matter insured but shall in no case be deemed to extend
to cover loss, damage, or expense proximately caused by delay or inherent vice or nature of the subject-matter insured. Claims
recoverable hereunder shall be payable irrespective of percentage.“
An "all risks policy" should be read literally as meaning all risks whatsoever and covering all losses by an accidental cause of
any kind. “Accident” is construed by the courts in their ordinary and common acceptance.
The very nature of the term "all risks" must be given a broad and comprehensive meaning as covering any loss other than a
willful and fraudulent act of the insured. This is pursuant to the very purpose of an "all risks" insurance to give protection to the
insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property.
Institute Cargo Clauses extends to all damages/losses suffered by the insured cargo except (a) loss or damage or expense
proximately caused by delay, and (b) loss or damage or expense proximately caused by the inherent vice or nature of the
subject matter insured.
Generally, the burden of proof is upon the insured to show that a loss arose from a covered peril, but under an "all risks" policy
the burden is not on the insured to prove the precise cause of loss or damage for which it seeks compensation. The insured
under an "all risks insurance policy" has the initial burden of proving that the cargo was in good condition when the policy
attached and that the cargo was damaged when unloaded from the vessel. The burden then shifts to the insurer to show the
exception to the coverage. This creates a special type of insurance which extends coverage to risks not usually contemplated
and avoids putting upon the insured the burden of establishing that the loss was due to the peril falling within the policy's
coverage; the insurer can avoid coverage upon demonstrating that a specific provision expressly excludes the loss from
coverage.
Under an 'all risks' policy, it was sufficient to show that there was damage occasioned by some accidental cause of any kind,
and there is no necessity to point to any particular cause.
2. Section 13 of the Insurance Code- anyone has an insurable interest in property who derives a benefit from its existence or
would suffer loss from its destruction
Insurable interest in property may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; or
(c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.
Choa, as vendee/consignee of the goods in transit, has such existing interest as may be the subject of a valid contract of
insurance. His interest over the goods is based on the perfected contract of sale. The perfected contract of sale between him
and the shipper of the goods operates to vest in him an equitable title even before delivery or before conditions have been
performed.
Further, Article 1523 of the Civil Code provides that where, in pursuance of a contract of sale, the seller is authorized or
required to send the goods to the buyer, delivery of the goods to a carrier, for the purpose of transmission to the buyer is
deemed to be a delivery of the goods to the buyer. The Court has heretofore ruled that the delivery of the goods on board the
carrying vessels partake of the nature of actual delivery since, from that time, the foreign buyers assumed the risks of loss of
the goods and paid the insurance premium covering them.

Constantino vs. Asia Life Insurance Co. [GR# L-1669 August 31, 1950] Peralta vs. Asia Life Insurance Co. [GR# L-1670
August 31, 1950]

Facts: FIRST CASE: Respondent Corporation was paid P 176.04 as annual premium by Arcadio Constantino in exchange for
policy no. 93212 on 1941 for P 3,000 which lasted for 20 years. Petitioner Paz Constantino was made beneficiary. However
after the first payment, no further premiums were made. Thereafter the insured died on 1944. Later, due to the war (Japanese
occupation) Respondent Corporation had to close down its branch in the country.

SECOND CASE: Similarly, Respondent Corporation issued on 1938 another insurance policy no. 78145 for Spouses Ruiz and
Peralta also for P 3,000, lasting for 20 years. Regular payments were made however due also to the war, it became impossible
to transact further payments. The insured nevertheless was able to borrow P 234 from the policy. Ruiz died on 1945. Peralta
was the beneficiary.

In both cases the plaintiffs demanded payment but was refused due to Respondent Corporation’s refusal on the ground of non-
payment of the premiums. The lower court favored Respondent.

Issues:
(1) Whether or not the beneficiaries are entitled to recover the amount insured despite non-payment caused by the Japanese
occupation.

(2) Whether or not the periodic payments of the premiums, those after the first, is not an obligation of the insured so that it is
not a debt enforceable by the action of the insurer.

Held:
(1) The beneficiaries are not entitled to recover for non-payment despite the presence of war.

Contracts of insurance are contracts of indemnity within the terms and condition found therein. An insurance company for
certain considerations guarantee the insured against loss or damage as may be stipulated, and when called to pay, the insurer
may insist on the fulfillment of said stipulations. Failure of the insured to do so disqualifies recovery for the loss. Thus the terms
of the policy determines the insurer’s liability. Compliance to the terms of the policy is a must as it is a condition precedent to
the right of recovery. Therefore, from the terms of the policy it is clear that non-payment of premium produces avoidance
(forfeiture of the policy).
Moreover, since act 2427, Philippine law on insurance and the Civil Code) are mostly based from the Civil Code of California,
An intention to supplement our laws with the prevailing principles of the US arises. Thus, Prof. Vance of Yaled declares that the
United States Rule must be followed, where “the contract is not merely suspended but is abrogated by reason of non-payment
of premiums since the time of payments is peculiar to the essence of the contract.” Further it would be unjust to permit the
insurer to retain the reserve value of the policy or the excess of premiums paid over the actual risk when the policy was still
effective as held in the Statham Case which was more logical and juridically sound. In said case it was hold that promptness of
payment is essential in the business of life insurance since all calculations of the company is based on the hypothesis of
prompt payments. Forfeiture for non-payment is necessary to protect said business from embarrassment otherwise confusion
would abound. And that delinquency cannot be tolerated nor redeemed except at the option of the company. Lastly parties
contracted both for peace and war times since the policies contained also wartime days. It follows that the parties
contemplated uninterrupted operation of the contract even if armed conflict ensues.

(2) The annual premium is not a debt, nor is it an obligation which the insurer can maintain an action against the insured; nor
its settlement governed by the rules on payment of debts.

A contract of insurance is sui generis. This means though the insured may hold the insurer to the contract by the fulfillment of
the condition, the latter has no power or right to compel the insured to maintain the contract relation longer than the insured
may desire. It is optional upon the insured.

Ty v. Filipinas Compañia de Seguros - Insurance Policy

17 SCRA 364

Facts:

> Ty was employed as a mechanic operator by Braodway Cotton Factory at Grace Park, Caloocan.
> In 1953, he took personal accident policies from 7 insurance companies (6 defendants), on different dates, effective for 12
mos.
> On Dec. 24. 1953, a fire broke out in the factory were Ty was working. A hevy object fell on his hand when he was trying to
put out the fire.
> From Dec. 1953 to Feb. 6, 1954 Ty received treatment at the Nat’l Orthopedic Hospital for six listed injuries. The attending
surgeon certified that these injuries would cause the temporary total disability of Ty’s left hand.
> Insurance companies refused to pay Ty’s claim for compensation under the policies by reason of said disability of his left
hand. Ty filed a complaint in the municipal court who decided in his favor.
> CFI reversed on the ground that under the uniform terms of the policies, partial disability due to loss of either hand of the
insured, to be compensable must be the result of amputation.

Issue:
Whether or not Ty should be indemnified under his accident policies.

Held.
NO.
SC already ruled in the case of Ty v. FNSI that were the insurance policies define partial disability as loss of either hand by
amputation through the bones of the wrist, the insured cannot recover under said policies for temporary disability of his left
hand caused by the fractures of some fingers. The provision is clear enough to inform the party entering into that contract that
the loss to be considered a disability entitled to indemnity, must be severance or amputation of the affected member of the
body of the insured.

Del Rosario v Equitable G.R. No. L-16215 June 29, 1963

J. Paredes

Facts:
Equitable’s insurance policy covered indemnities for bodily injuries and deaths, however, it never specificed an amount to be
given in case of a person’s death by drowning. It specified amounts from 1,000 to 3,000 for other causes of death, however.
Francisico del Rosario died from drowning after jumping from a sinking ship. The insurer, Equitable, agreed to pay Php 1,000
as the claim for an accident. His attorney, howvever, contended that he amount should be greater under section 2, Php 1500.
The issue was resolved in the Insurance Commison, where it was held that Section 1, under the provisions applied. (Php 1,000
as indemnity) The lawyer still didin’t agree and instituted a suit. The trail court held that the company had the discretion to pay
from Php 1,000 to 3,000 for death by drowning since there was no fixed amount for this type of death. The amended decision
ordered the company to pay Php 2,000

Issue: What should the amount be?

Held: Judgment affirmed. Still 2,000.

Ratio:
The interpretation of obscure stipulations in a contract should not favor the party who cause the obscurity.
“Ambigious terms in a policy are to be construed strictly against, the insurer, and liberally in favor of the insured for the
payment of indemnity where forfeiture is involved. The company takes great care in the wording and has legal advisers who
create the contracts to the benefit of the company.
Trial court ruling are well considered because they are supported by doctrines on insurance resolving cases against the party
who caused the ambiguity in the wording of the contract’s terms. This was also due to the fact that the insured didn’t have
much of a say in formulating the contract.

Misamis v Capital Insurance GR L-21380 May 20, 1966

Facts:
Misamis Lumber Company insured its Ford Falcon to Capital Insurance for P 14,000. One day, the car’s crank and flywheel
broke when it passed over a water hole in Aurora Boulevard. Misamis sent it to be repaired at the cost of 302 pesos. However,
Capital did not want to pay the entire amount because the repair limit in the contract stipulated up to 150 pesos only. Misamis
filed suit.
The lower court ruled against the insurance corporation because the company did not show that the cost was excessive. Also ,
the court ruled that absolving the company of the excess amount would make the contract one sided.

Issue: Is the insurance company liable for more than the amount in the repair limit?

Held: No. Insurance company only ordered to pay 150 pesos.

Ratio:
Paragraph 4, subpar a. of the insurance contract is clear and specific. It authorizes up to 150 pesos only as a repair limit.
The lower court did not heed the express stipulation in the agreement. The policy specifically noted the mechanics for repair in
par. 2 and the limits of the liability in par 4. The company didn’t notify the insurance provider before it did the repairs. Also,
even if the contract is onerous, this doesn’t justify its abrogation.

Philam v Arnaldo G.R. No. 76452 July 26, 1994

J. Quiason

Facts:
One Ramon Paterno complained about the unfair practices committed by the company against its agents, employees and
consumers. The Commissioner called for a hearing where Paterno was required to specify which acts were illegal. Paterno
then specified that the fees and charges stated in the Contract of Agency between Philam and its agents be declared void.
Philam, on the other hand, averred that there Paterno must submit a verified formal complaint and that his letter didn’t contain
information Philam was seeking from him. Philam then questioned the Insurance Commission’s jurisdiction over the matter and
submitted a motion to quash. The commissioner denied this. Hence this petition.

Issue: Whether or not the resolution of the legality of the Contract of Agency falls within the jurisdiction of the Insurance
Commissioner.

Held: No. Petition granted.

Ratio:
According to the Insurance code, the Insurance Commissioner was authorized to suspend, directors, officers, and agents of
insurance companies. In general, he was tasked to regulate the insurance business, which includes:
(2) The term "doing an insurance business" or "transacting an insurance business," within the meaning of this Code, shall
include
(a) making or proposing to make, as insurer, any insurance contract;
(b) making, or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other
legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do
any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.
(Insurance Code, Sec. 2[2])
The contract of agency between Philamlife and its agents wasn’t included with the Commissoner’s power to regulate the
business. Hence, the Insurance commissioner wasn’t vested with jurisidiction under the rule “expresio unius est exclusion
alterius”.
The respondent contended that the commissioner had the quasi-judicial power to adjudicate under Section 416 of the Code. It
stated:
The Commissioner shall have the power to adjudicate claims and complaints involving any loss, damage or liability for which
an insurer may be answerable under any kind of policy or contract of insurance, or for which such insurer may be liable under a
contract of suretyship, or for which a reinsurer may be used under any contract or reinsurance it may have entered into, or for
which a mutual benefit association may be held liable under the membership certificates it has issued to its members, where
the amount of any such loss, damage or liability, excluding interest, costs and attorney's fees, being claimed or sued upon any
kind of insurance, bond, reinsurance contract, or membership certificate does not exceed in any single claim one hundred
thousand pesos.
This was, however, regarding complaints filed by the insured against the Insurance company.
 Also, the insurance code only discusses the licensing requirements for agents and brokers. The Insurance Code does not
have provisions governing the relations between insurance companies and their agents.
Investment Planning Corporation of the Philippines v. Social Security Commission- “that an insurance company may have two
classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and work under the control
and supervision of the company; and (2) registered representatives, who work on commission basis.”
The agents under the 2nd sentence are governed by the Civil Code laws on agency. This means that the regular courts have
jurisdiction over this category.

AMERICAN HOME ASSURANCE v. CA

G.R. No. 138941, 8 Oct. 2001

INSURANCE LAW: Liberality is the rule of construction in insurance contracts.

FACTS:

Tantuco Enterprises, Inc. is a coconut oil milling and refining company. It owned two mills (the first oil mill and a new one), both
located at its factory compound at Iyam, Lucena City. The two oil mills are separately covered by fire insurance policies issued
by American Home Assurance Co.

On Sept. 30, 1991, a fire broke out and gutted and consumed the new oil mill. American Home rejected the claim for the
insurance proceeds on the ground that no policy was issued by it covering the burned oil mill. It stated that the new oil mill was
under Building No. 15 while the insurance coverage extended only to the oil mill under Building No. 5.

ISSUE:
Whether or not the new oil mill is covered by the fire insurance policy

HELD:

In construing the words used descriptive of a building insured, the greatest liberality is shown by the courts in giving effect to
the insurance. In view of the custom of insurance agents to examine buildings before writing policies upon them, and since a
mistake as to the identity and character of the building is extremely unlikely, the courts are inclined to consider the policy of
insurance covers any building which the parties manifestly intended to insure, however inaccurate the description may be.

Notwithstanding, therefore, the misdescription in the policy, it is beyond dispute, to our mind, that what the parties manifestly
intended to insure was the new oil mill.

If the parties really intended to protect the first oil mill, then there is no need to specify it as new. Indeed, it would be absurd to
assume that the respondent would protect its first oil mill for different amounts and leave uncovered its second one.

Geagonia v CA G.R. No. 114427 February 6, 1995

Facts:

Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year policy and
covered thestock trading of dry goods.
The policy noted the requirement that
"3. The insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently
be effected, covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only
hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed
in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss
or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when
the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."
The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s
stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's
denial was the petitioner'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 P100,000.00
under fire insurance policy and damages. He claimed that he knew the existence of the other two policies. But, he said that 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.
The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 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.

Issues:
1. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby violated
Condition 3 of the policy.
2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

Ratio:
1. The court agreed with the CA that the 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 made ante litem motam. It was, indeed, incredible that
he did not know about the prior policies since these policies were not new or original.
2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should
be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom
they are intended to operate.
With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously
analyzed. Such analysis leads us to conclude that (a) the prohibition 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.
Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of
loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not
exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation
of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a
property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the
insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the
insurer is interested in preventing a situation in which a fire would be profitable to the insured.