University of the Philippines College of Law

Topic Insurance
Case No. July 31, 1970
Case Name Fieldmen’s Insurance Co. v Asian Surety & Insurance Co
Ponente MAKALINTAL, J.

RELEVANT FACTS

 Asian Surety & Insurance Co, Inc (Asian) and Fieldmen’s Insurance Co, Inc (Fieldmen’s) entered into 7
reinsurance agreements/ treaties
 Asian undertook to cede to Fieldmen’s a specified portion of the amount of insurance underwritten
by Asian upon payment to Fieldmen’s of a proportionate share of the gross rate of the premium
applicable with respect to each cession after deducting a commission
 September 19, 1961 – Fieldmen’s served notice to Asian of its desire to be relieved from participation in the
treaties effective Dec. 31, 1961.
 Asian admitted receiving this communication but did not reply
 Dec 7, 1961 - Fieldmen’s reiterated its intention to be relieved
 One of the risks reinsured with Fieldmen’s issued in favor of GSIS became a liability
 The insured property burned on Feb 16, 1962
 Feb 26, 1962 – Asian finally replied to the Dec 7 letter stating that Fieldmen’s termination is not in accordance
with the terms of the treaties as there was no prior three months’ notice. Asian is willing to terminate the
treaties three months from Dec. 7, 1961.
 Fieldmen’s thus filed for a petition declaratory relief with CFI Manila
 Sought declaration that all the reinsurance contracts entered into between them had terminated as
of December 31, 1961
 Asian in its answer denied receiving the Sept 19 letter and assuming that it did, could not have
terminated the reinsurance treaties as of December 31, 1961 because the letter was merely an
expression of FIELDMEN'S desire to cancel the treaties and not a formal notice of cancellation
 CFI – declared six of seven agreements cancelled as on Dec. 31, 1961.
 However, all cessions of reinsurance made by Asian prior to cancellation of the treaties continued in
full force and effect until expiry dates.
 CA affirmed

RATIO DECIDENDI

Issue
W/N THE CANCELLATION OF
THE REINSURANCE TREATIES
HAD THE EFFECT OF
TERMINATING FIELDMEN’S
LIABILITY AS REINSURER
WITH RESPECT TO POLICIES
OR CESSIONS ISSUED PRIOR
TO THE TERMINATION OF
THE PRINCIPAL
REINSURANCE CONTRACTS
OR TREATIES – YES WITH
Ratio
Two provisions of the reinsurance contracts are controlling:
1. Article 10 of the Facultative Obligatory Reinsurance Treaty Fire 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
2. Article VI, par 4 of the Personal Accident Reinsurance 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 the thirty-
 University of the Philippines College of Law

RESPECT TO TWO OF THE SIX first December next following such notice, elect to withdraw the existing
AGREEMENTS cessions”

Hence, insofar as the two agreements are concerned, the cancellation did not
carry the termination of Fieldmen’s liability.
 Given that the GSIS policy was under the Facultative Obligatory
Reinsurance Treaty-Fire, Fieldmen’s is liable.

With respect to the other four reinsurance contracts, the petition for
declaratory relief is moot.
 No useful purpose
 No claim or liability in favor of he insured has arisen under any of the
reinsurance cessions made prior to the cancellation

RULING

WHEREFORE, the decision appealed from is affirmed insofar as it refers to the Facultative-Obligatory,
Reinsurance Treaty and the Personal Accident Reinsurance Treaty are concerned, and modified with respect to
the others by declaring the issues concerning them as moot and academic. No pronouncement as to costs.