San Miguel Brewery V. Law Union And Rock Insurance Co.

(1920)

FACTS:
In the contract of mortgage, the owner P.D. Dunn had agreed, at his own expense, to insure the mortgaged property
for its full value and to indorse the policies in such manner as to authorize the Brewery Company to receive the
proceeds in case of loss and to retain such part thereof as might be necessary to satisfy the remainder then due upon
the mortgage debt. Instead, however, of effecting the insurance himself Dunn authorized and requested the Brewery
Company to procure insurance on the property in the amount of P15,000 at Dunn's expense.

San Miguel insured the property only as mortgagee. Dunn sold the property to Henry Harding. The insurance was
not assigned by Dunn to Harding. When it was destroyed by fire, the two companies settled with San Miguel to the
extent of the mortgage credit.

RTC: Absolved the 2 companies from the difference. Henry Harding is not entitled to the difference between
the mortgage credit and the face value of the policies. Henry Harding appealed.

ISSUE:
1. W/N San Miguel has insurable interest as mortgagor only to the extent of the mortgage credit - YES
2. W/N Harding has insurable interest as owner - NO

RULING: affirmed

section 19 of the Insurance Act:

a change of interest in any part of a thing insured unaccompanied by a corresponding change of interest in the
insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the
insurance are vested in the same person

section 55:
the mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the
owner of both the policy and the thing insured.

Undoubtedly these policies of insurance might have been so framed as to have been "payable to the San Miguel
Brewery, mortgagee, as its interest may appear, remainder to whomsoever, during the continuance of the risk, may
become the owner of the interest insured." (Sec 54, Act No. 2427.) Such a clause would have proved an intention to
insure the entire interest in the property, not merely the insurable interest of the San Miguel Brewery, and would have
shown exactly to whom the money, in case of loss, should be paid. But the policies are not so written.

The blame for the situation thus created rests, however, with the Brewery rather than with the insurance companies,
and there is nothing in the record to indicate that the insurance companies were requested to write insurance upon the
insurable interest of the owner or intended to make themselves liable to that extent
If by inadvertence, accident, or mistake the terms of the contract were not fully set forth in the policy, the parties
are entitled to have it reformed. But to justify the reformation of a contract, the proof must be of the most satisfactory
character, and it must clearly appear that the contract failed to express the real agreement between the parties. In the
case now before us the proof is entirely insufficient to authorize reformation.
INSURANCE; INSURABLE INTEREST; EXTENT OF RECOVERY BY MORTGAGEE.·A brewery
company, as mortgagee of real property, procured a policy of insurance to be written thereon
payable to itself, in case of loss. The insurer was notified that the brewery was merely a
mortgagee, but no information was asked or given as to the personality of the owner. Held:
That the brewery company had an insurable interest but could recover on the policy only to the
extent of the credit secured by the mortgage.
ID.; SALE OF INSURED PROPERTY; SUSPENSION OF INSURANCE.·A purchaser of insured property
who does not take the precaution. to obtain a transfer of the policy of insurance cannot, in
case of loss, recover upon such contract, as the transfer of the property has the effect of
suspending the insurance until the purchaser becomes owner of the policy as well as of the
property insured.
ID.; MlSTAKE OF PARTIES IN EXPRESSION OF INTENTION; REFORMATION.·If during the
negotiations leading up to the writing of a policy of insurance the contracting parties agree
that the insurance shall be so written as to protect not only the interest of the applicant for the
policy, as mortgagee, but also the residuary interest of the owner, and the policy is, by
inadvertence, ignorance, or mistake, so written as to protect only the interest of the applicant,
the court has the power to reform the contract and give effect to it in the sense in which the
parties intended to be bound.
Filipino Merchants Insurance v CA G.R. No. 85141 November 28, 1989

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 toshow 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.

Insurance; An „all risks‰ policy covers all losses other than those caused by the wilful and
fraudulent act of insured.·The very nature of the term „all risks‰ must be given a broad and
comprehensive meaning as covering any loss other than a wilful 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. An „all risks‰ policy has been evolved to grant greater
protection than that afforded by the „perils clause,‰ in order to assure that no loss can
happen through the incidence of a cause neither insured against nor creating liability in the
ship; it is written against all losses, that is, attributable to external causes.
Same; Same; Insurer has burden of proof to show that loss is caused by an excepted
risk.·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;
thereafter, the burden then shifts to the insurer to show the exception to the coverage. As we
held in Paris-Manila Perfumery Co. vs. Phoenix Assurance Co., Ltd. the basic rule is that the
insurance company has the burden of proving that the loss is caused by the risks excepted and
for want of such proof, the company is liable.
Same; Insurable Interest; Perfected contract of sale even without delivery vests in the vendee,
an equitable title, an existing interest over the goods sufficient to be subject of
insurance.·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. 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 he performed the conditions of the sale. The contract of shipment,
whether under F.O.B., C.I.F., or C. & F. as in this case, is immaterial in the determination of
whether the vendee has an insurable interest or not in the goods in transit. The perfected
contract of sale even without delivery vests in the vendee an equitable title, an existing
interest over the goods sufficient to be the subject of insurance.
Same; Marine Insurance; Obligations and Contracts; Delivery; Delivery of goods on board the
carrying vessels partake of the nature of actual delivery.·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, whether named by the buyer or
not, for, the purpose of transmission to the buyer is deemed to be a delivery of the goods to
the buyer, the exceptions to said rule not obtaining in the present case. 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.
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.:]

TOPIC: Insurable Interest - Effect when no insurable interest exists – Sec. 18, IC
FACTS:
Sps Cha are the lessees in the lease agreement with CKS Development Corp., lessor.
1 year contract states that “18. 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”
Sps Cha insured against loss by fire their merchandise inside the leased premises with the United Insurance
Co. (united) without the consent of CKS.
The same day the lease contract was to expire a fire broke out inside the leased premises
CKS knew of the insurance
CKS wrote a letter to United asking for the proceeds of the insurance.
United refused to pay CKS
ISSUE: W/N paragraph 18 is valid giving CKS the right to the insurance proceeds.
HELD: NO
1. law on contracts provided that the stipulations contained in a contract cannot be contrary to law,
morals, good customs, public order or public policy
“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.”
2. non-life insurance policy such as the fire insurance policy taken by petitioner-spouses over their
merchandise is primarily a contract of indemnity
a. Insurable interest in the property insured must exist at the time the insurance takes
effect and at the time the loss occurs
i. 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.
b. a contract of insurance that is a mere wager which is void under Section 25
“SECTION 25. Every stipulation in a policy of Insurance for the payment of loss, whether the person
insured has or has not any interest in the property insured, or that the policy shall be received as proof
of such interest, and every policy executed by way of gaming or wagering, is void.”
3. CKS has no insurable interest in the goods and merchandise inside the leased premises under the
provisions of Section 17 of the Insurance Code.
“Section 17. The measure of an insurable interest in property is the extent to which the insured might be
damnified by loss of injury thereof."
a. CKS cannot be a beneficiary of the fire insurance policy, insurable interest over said
merchandise remains with the insured, the Cha spouses

Contracts; Stipulations contained in a contract cannot be contrary to law, morals, good

customs, public order or public policy. ·The core issue to be resolved in this case is 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 consent of the latter. It is,
of course, basic in the law on contracts that the stipulations contained in a contract cannot be
contrary to law, morals, good customs, public order or public policy.
Same; Insurance; 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.·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
petitionerspouses 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. 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.
Same; Same; Leases; The lessor cannot be validly a beneficiary of a fire insurance policy taken
by a lessee over his merchandise, and the provision in the lease contract providing for such
automatic assignment is void for being contrary to law and/or public policy· the insurer cannot
be compelled to pay the proceeds of the policy to a person who has no insurable interest in the
property insured.· 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.