#1 FILIPINO MERCHANTS INSURANCE CO., INC., petitioner, vs. COURT OF APPEALS and #2 G.R. No.
#2 G.R. No. L-14300 January 19, 1920 SAN MIGUEL BREWERY, ETC., plaintiff-
CHOA TIEK SENG, respondents. REGALADO, J.: G.R. No. 85141 November 28, 1989
Facts: This is an action brought by the consignee of the shipment of fishmeal vessel
loaded on board at the Port of Manila and seeks to recover from the defendant
insurance company the amount of P51,568.62 representing damages to said shipment
which has been insured by the defendant insurance company. A formal claim
statement was also presented by the plaintiff against the vessel but the defendant
Filipino Merchants Insurance Company refused to pay the claim. The RTC ruled in favor
of private respondent. The CA affirmed, hence, this petition.
Issue: WON private respondent has insurable interest in the case at bar
Ruling: Yes. The SC ruled that an "all risks policy" should be read literally as meaning all
risks whatsoever and covering all losses by an accidental cause of any kind. 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. 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. As to the issue of insurable interest, we
uphold the ruling of the respondent court that private respondent, as consignee of the
goods in transit under an invoice containing the terms under "C & F Manila," has
insurable interest in said goods. Section 13 of the Insurance Code defines insurable
interest in property 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. In principle, anyone has an insurable interest in property
who derives a benefit from its existence or would suffer loss from its destruction whether
he has or has not any title in, or lien upon or possession of the property y. 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. Herein private respondent, as
vendee/consignee of the goods in transit has such existing interest therein as may be
the subject of a valid contract of insurance. His interest over the goods is based on the
perfected contract of sale. 18The 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 be performed the conditions of the sale. 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. The SC denied the petition.
appellee, vs. LAW UNION AND ROCK INSURANCE CO., (LTD.) ET AL., defendants-
appellees. HENRY HARDING, defendant-appellant. STREET, J.:
Facts: On Jan. 12, 1918, Dunn mortgaged a parcel of land to SMB to secure a debt of 10T.
Mortgage contract stated that Dunn was to have the property insured at his own expense,
authorizing SMB to choose the insurers and to receive the proceeds thereof and retain so much of
the proceeds as would cover the mortgage debt. Dunn likewise authorized SMB to take out the
insurance policy for him. Brias, SMB’s general manager, approached Law Union for insurance to
the extent of 15T upon the property. In the application, Brias stated that SMB’s interest in the
property was merely that of a mortgagee. Law Union, not wanting to issue a policy for the entire
amount, issued one for P7,500 and procured another policy of equal amount from Filipinas Cia de
Seguros. Both policies were issued in the name of SMB only and contained no reference to any
other interests in the propty. Both policies required assignments to be approved and noted on the
policy. Premiums were paid by SMB and charged to Dunn. A year later, the policies were renewed.
In 1917, Dunn sold the property to Harding, but no assignment of the policies was made to the
latter. Property was destroyed by fire. SMB filed an action in court to recover on the
policies. Harding was made a defendant because by virtue of the sale, he became the owner of
the property, although the policies were issued in SMB’s name. SMB sought to recover the
proceeds to the extent of its mortgage credit with the balance to go to Harding. Insurance
Companies contended that they were not liable to Harding because their liability under the
policies was limited to the insurable interests of SMB only. SMB eventually reached a settlement with
the insurance companies and was paid the balance of it’s mortgage credit. Harding was left to
fend for himself. Trial court ruled against Harding. Hence the appeal.
Issue: Whether or not the insurance companies are liable to Harding for the balance of the
proceeds of the 2 policies.
Ruling: No. The Supreme Court ruled that under the Insurance Act, the measure of insurable interest
in the property is the extent to which the insured might be indemnified by the loss or injury
thereof. Also it is provided in the IA that the insurance shall be applied exclusively to the proper
interest of the person in whose name it is made. Undoubtedly, SMB as the mortgagee of the
property, had an insurable interest therein; but it could NOT, an any event, recover upon the two
policies an amount in excess of its mortgage credit.By virtue of the Insurance Act, neither Dunn nor
Harding could have recovered from the two policies. With respect to Harding, when he acquired
the property, no change or assignment of the policies had been undertaken. The policies might
have been worded differently so as to protect the owner, but this was not done.If during the
negotiation for the policies, the parties had agreed that even the owner’s interest would be
covered by the policies, and the policies had inadvertently been written in the form in which they
were eventually issued, the lower court would have been able to order that the contract be
reformed to give effect to them in the sense that the parties intended to be bound. However,
there is no clear and satisfactory proof that the policies failed to reflect the real agreement
between the parties that would justify the reformation of these two contracts. The SC denied the
petition.

#3 Spouses NILO CHA and STELLA UY CHA, and UNITED INSURANCE CO.,
INC., petitioners, vs. COURT OF APPEALS and CKS DEVELOPMENT
CORPORATION, respondents. [G.R. No. 124520. August 18, 1997] PADILLA, J.:
Facts:
1. Petitioner-spouses Nilo Cha and Stella Uy-Cha, as lessees, entered into a lease
contract with private respondent CKS Development Corporation
2. One of the stipulations of the one (1) year lease contract states:
18. x x x. The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods
and effects placed at any stall or store or space in the leased premises without first
obtaining the written consent and approval of the LESSOR. If the LESSEE obtain(s) the
insurance thereof without the consent of the LESSOR then the policy is deemed assigned
and transferred to the LESSOR for its own benefit; x x x[1]
3. Notwithstanding the above stipulation in the lease contract, the Cha spouses insured
against loss by fire their merchandise inside the leased premises for Five Hundred
Thousand (P500,000.00) with the United Insurance Co., Inc. (hereinafter United) without
the written consent of private respondents CKS.
4. On the day that the lease contract was to expire, fire broke out inside the leased
premises.
5. When CKS learned of the insurance earlier procured by the Cha spouses (without its
consent), it wrote the insurer (United) a demand letter asking that the proceeds of the
insurance contract (between the Cha spouses and United) be paid directly to CKS,
based on its lease contract with Cha spouses.
6. United refused to pay CKS. Hence, the latter filed a complaint against the Cha
spouses and United.
7. the Regional Trial Court, Manila, rendered a decision * ordering therein defendant
United to pay CKS the amount of P335,063.11 and defendant Cha spouses to
pay P50,000.00 as exemplary damages, P20,000.00 as attorneys fees and costs of suit.
8. On appeal, respondent Court of Appeals affirmed the trial court decision, deleting
however the awards for exemplary damages and attorneys fees.
Issue: whether or not the aforequoted paragraph 18 of the lease contract entered into
between CKS and the Cha spouses is valid insofar as it provides that any fire insurance
policy obtained by the lessee (Cha spouses) over their merchandise inside the leased
premises is deemed assigned or transferred to the lessor (CKS) if said policy is obtained
without the prior written of the latter.
Ruling:
No. The C ruled that in the law on contracts stipulations contained cannot be
contrary to law, morals, good customs, public order or public policy.
Sec. 18 of the Insurance Code provides:
Sec. 18. No contract or policy of insurance on property shall be enforceable
except for the benefit of some person having an insurable interest in the
property insured.
A non-life insurance policy such as the fire insurance policy taken by petitioner-
spouses over their merchandise is primarily a contract of indemnity. Insurable interest in
the property insured must exist at the time the insurance takes effect and at the time
the loss occurs.[4] The basis of such requirement of insurable interest in property insured
is based on sound public policy: to prevent a person from taking out an insurance policy
on property upon which he has no insurable interest and collecting the proceeds of said
policy in case of loss of the property.In such a case, the contract of insurance is a mere
wager which is void under Section 25 of the Insurance Code. In the present case, it
cannot be denied that CKS has no insurable interest in the goods and merchandise
inside the leased premises under the provisions of Section 17 of the Insurance Code.
Therefore, respondent CKS cannot, under the Insurance Code a special law be validly
a beneficiary of the fire insurance policy taken by the petitioner-spouses over their
merchandise.This insurable interest over said merchandise remains with the insured, the
Cha spouses. The automatic assignment of the policy to CKS under the provision of the
lease contract previously quoted is void for being contrary to law and/or public
policy. The proceeds of the fire insurance policy thus rightfully belong to the spouses Nilo
Cha and Stella Uy-Cha (herein co-petitioners). The insurer (United) cannot be
compelled to pay the proceeds of the fire insurance policy to a person (CKS) who has
no insurable interest in the property insured. The liability of the Cha spouses to CKS for
violating their lease contract in that Cha spouses obtained a fire insurance policy over
their own merchandise, without the consent of CKS, is a separate and distinct issue
which we do not resolve in this case.The SC dismissed the petition.