Gulf Resorts vs. Philippine Charter Insurance Corp.

(G.R. No. 156167, 16 May 2005)

Type of Appeal/Action: Petition for certiorari under Rule 45 by petitioner Gulf Resorts Inc.
against respondent Philippine Charter Insurance Corp and Court of Appeals. The respondent and
petitioner contend each others interpretation of the respondents liability to pay indemnity on
the loss and damage incurred by the petitioner due to the earthquake, as per the insurance
contract.
Doctrine (Commercial Law Insurance, Interpretation of Insurance Contracts) Provisions in
the insurance policy should be examined and interpreted in consonance with each other, and
should not be construed piecemeal. All parts of the insurance contract reflect the true intent of
the parties. Since insurance contracts are contracts of adhesion, any ambiguity is resolved against
the insurer (who prepared the contract) and construed liberally in the insureds favor.
(Civil Law Obligation and Contracts, Contracts of Adhesion) Contracts of adhesion are
contracts where one party prepares the stipulations in the contract while the other party merely
affixes his/her signature thereto.
Issue W/N the insurance policy issued by American Home Assurance Company (AHAC-AIU)
to Gulf Resorts coverage is not limited only to the two swimming pools of Gulf Resorts Playa
Resort?
Facts Petitioner Gulf Resorts owned Playa Resorts at Agoo, La Union, and it entered into an
insurance contract with the respondent American Home Assurance Company which insured
Plaza Resorts properties against loss or damage due to earthquakes. On 16 July 1990, an
earthquake struck Central Luzon and Northern Luzon and the properties in Playa Resort were
damaged including the two (2) swimming pools. On 11 August 1990, Gulf Resorts filed its
formal demand for settlement of the damage to all of its properties in the Agoo Playa Resort, but
on 23 August 1990, American Home Assurance Company denied Gulf Resorts claim on the
ground that its insurance policy only covered the two swimming pools of Playa Resort against
earthquake shock, and not the other properties damaged by the said earthquake. Gulf Resorts
contended that pursuant to this rider, no qualifications were placed on the scope of the
earthquake shock coverage, and thus, the policy extended earthquake shock coverage to its
properties.
On 24 January 1991, Gulf Resorts filed a complaint with the RTC Pasig where it asked for
payment for P5, 427,779.00 as amount of the lost/damaged properties, attorney fees, lost income,
etc. However, on 21 February 1994, the said RTC ruled in favor of American Home Assurance
Company, where it ruled that the insurance coverage against earthquake is limited only to the
two swimming pools of Gulf Resorts Playa Resort and does not extend against the other
properties damaged by the earthquake. Gulf Resort filed a motion for the trial court to reconsider
its decision, but to no avail.
Gulf Resorts filed an appeal with the Court of Appeals, but the Court of Appeals affirmed the
trial courts decision.
Archibald Jose T. Manansala
Summer Term, 2016-2017
CEU School of Law and Jurisprudence

Gulf Resorts vs. Philippine Charter Insurance Corp.

(G.R. No. 156167, 16 May 2005)
Held The Supreme Court held that the insurance policy issued to Gulf Resorts is only limited
to the two swimming pools and the other properties of Playa Resort are not covered by the
property insurance issued by American Home Assurance Company (AHAC-AIU). The Court
held that there is no ambiguity in the insurance contract and the earthquake shock rider, as Gulf
Resorts stated that the swimming pools are the only items covered by the insurance against loss
due to earthquakes. The Court stated that provisions in the insurance policy should be examined
and interpreted in consonance with each other, and should not be construed piecemeal. All parts
of the insurance contract reflect the true intent of the parties.
The Supreme Court also defined contracts of adhesion as contracts where one party prepares the
stipulations in the contract while the other party merely affixes his/her signature thereto, citing
the case of Philippine National Bank vs. Court of Appeals (196 SCRA 536). Any ambiguity is
resolved against the insurer (who prepared the contract) and construed liberally in the insureds
favor.
However, since the policy and its riders are clear about the insurance coverage against
earthquake shock, the Gulf Resorts cannot use the doctrine of contract of adhesion and liberal
interpretation of insurance contract in the insureds favor in case of ambiguity.

Archibald Jose T. Manansala

Summer Term, 2016-2017
CEU School of Law and Jurisprudence