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Homework for Feb.

18:

Double Insurance
Reinsurance
Policy

Cases for Double Insu:


1. Malayan Insurance vs. Philippine First Insurance (July 11, 2012)
2. Pacific Banking Corp. vs. CA and Oriental Assurance Corp. (Nov. 28, 1988)
3. Sps. Cha vs. CA (August 18, 1997)

Cases for Reinsurance:


1. Gibson vs. Revilla (July 30, 1979)
2. Fieldmen's Insurance vs. Asian Surety (July 31, 1970)
3. Avon Insurance vs. CA (August 27, 1997)

the effect that "loss if any under this policy is payable to the Pacific Banking
Corporation".
A fire broke out on the premises destroying the goods contained in the
building.
MALAYAN INSURANCE vs PHILIPPINE FIRST INSURANCEFACTS The bank sent a letter of demand to Oriental for indemnity.
The company wasn’t ready to give since it was awaiting the adjuster’s report.
Wyeth contracted a contract of carriage with Republic, a common carrier for The company then made an excuse that the insured had not filed any claim
the transport of its goods and product. Wyeth insured the goods with with it, nor submitted proof of loss which is a clear violation of Policy
Philippine First, while Republic insured the same goods with Malayan Condition No.11, as a result, determination of the liability of private
Insurance During transit, certain goods were lost due to hijacking of 10 respondent could not be made.
armed men. Philippine first paid the proceeds to Wyeth, subrogating the Pacific Banking filed in the trial court an action for a sum of money for
rights of Wyeth to Philippine first which filed a claim against Republic and P61,000.00 against Oriental Assurance.
Malayan as a 3rd party defendant. Republic and Malayan refused the claim of At the trial, petitioner presented communications of the insurance adjuster
Philippine first. Malayan contended that there was double insurance and that to Asian Surety revealing undeclared co-insurances with the following:
the first insurer, Philippine First, should bear all the loss. P30,000 with Wellington Insurance; P25,000 with Empire Surety and
P250,000 with Asian Surety undertaken by insured Paramount on the same
ISSUE: property covered by its policy with Oriental whereas the only co-insurances
W/N Malayan is liable? – YES declared in the subject policy are those of P30,000.00 with Malayan
W/N there is double insurance? - NO P50,000.00 with South Sea and P25.000.00 with Victory.
W/N Malayan is solidarity liable with Republic? - NO The defense of fraud, in the form of non-declaration of co-insurances which
was not pleaded in the answer, was also not pleaded in the Motion to
HELD: Dismiss.
Malayan is liable because of the insurance contract it executed with Republic The trial court denied the respondent’s motion. Oriental filed another motion
for the indemnity for the loss. The cause of the loss not within the purview of to include additional evidence of the co-insurance which could amount to
an excepted peril, having been determined in the lower courts is conclusive fraud.
upon the SC making Malayan liable for the indemnity. The trial court still made Oriental liable for P 61,000. The CA reversed the
There is double insurance when: trial court decision. Pacific Banking filed a motion for reconsideration of the
1] The person insured is the same said decision of the respondent Court of Appeals, but this was denied for lack
2] 2 or more insurers insuring separately of merit.
3] There is identity of subject matter
4] There is identity of interest insured Issues:
5] There is identity of the risk or peril insured against, in the case at bar 1. WON unrevealed co-insurances Violated policy conditions No. 3
though the 2 insurance policy, one by Philippine first and one by Malayan 2. WON the insured failed to file the required proof of loss prior to court
were issued over the same subject matter covering the same peril, it was action.
issued to 2different persons and to 2 different interest Philippine first insured
Wyeth over its own goods, Malayan insured republic over the latter’s Held: Yes. Petition dismissed.
insurable interest over the safety of the goods which could become the basis
for liability in case of loss or damage. Malayan is not solidarity liable with Ratio:
Republic because they have different sources from which their liability arose. 1. Policy Condition No. 3 explicitly provides:
Republic arose due to a contract of carriage, while Malayan is that of 3. The Insured shall give notice to the Company of any insurance already
contract. Solidarity exist only by express stipulation of the parties or those effected, or which may subsequently be effected, covering any of the
provided by law, none of which is applicable in the present case. property hereby insured, and unless such notice be given and the particulars
of such insurance or insurances be stated in or endorsed on this Policy by or
on behalf of the Company before the occurrence of any loss or damage, all
Pacific v CA G.R. No. L-41014 November 28, 1988 benefit under this policy shall be forfeited.
J. Paras The insured failed to reveal before the loss three other insurances. Had the
insurer known that there were many co-insurances, it could have hesitated
Facts: or plainly desisted from entering into such contract. Hence, the insured was
An open fire insurance policy, was issued to Paramount Shirt Manufacturing guilty of clear fraud.
by Oriental Assurance Corporation to indemnify P61,000.00, caused by fire to Concrete evidence of fraud or false declaration by the insured was furnished
the factory’s stocks, materials and supplies. by the petitioner itself when the facts alleged in the policy under clauses "Co-
The insured was a debtor of Pacific Banking in the amount of (P800,000.00) Insurances Declared" and "Other Insurance Clause" are materially different
and the goods described in the policy were held in trust by the insured for from the actual number of co-insurances taken over the subject property.
Pacific Banking under trust receipts. As the insurance policy against fire expressly required that notice should be
The policy was endorsed to Pacific Banking as mortgagee/ trustor of the given by the insured of other insurance upon the same property, the total
properties insured, with the knowledge and consent of private respondent to absence of such notice nullifies the policy.
Petitioner points out that Condition No. 3 in the policy in relation to the 500K with the United Insurance Co., Inc. (United) without the written
"other insurance clause" supposedly to have been violated, cannot certainly consent of private respondents CKS.
defeat the right of the petitioner to recover the insurance as On the day that the lease contract was to expire, fire broke out inside the
mortgagee/assignee. Hence, they claimed that the purpose for which the leased premises.
endorsement or assignment was made was to protect the When CKS learned of the insurance earlier procured by the spouses (without
mortgagee/assignee against any untoward act or omission of the insured. It its consent), it wrote the United a demand letter asking that the proceeds of
would be absurd to hold that petitioner is barred from recovering the the insurance contract (between the Cha spouses and United) be paid
insurance on account of the alleged violation committed by the insured. directly to CKS, based on its lease contract with Cha spouses.
It is obvious that petitioner has missed all together the import of subject United refused to pay CKS. Hence, the latter filed a complaint against the
mortgage clause which specifically provides: spouses and United.
“Loss, if any, under this policy, shall be payable to the PACIFIC BANKING The RTC rendered a decision ordering United to pay CKS . the CA affirmed the
CORPORATION Manila mortgagee/trustor as its interest may appear, it being trial court decision. MR denied, hence this petition
hereby understood and agreed that this insurance as to the interest of the ISSUE: WON the aforequoted paragraph 18 of the lease contract entered into
mortgagee/trustor only herein, shall not be invalidated by any act or between CKS and the spouses is valid insofar as it provides that any fire
neglect—except fraud or misrepresentation, or arson—of the mortgagor or insurance policy obtained by the spouses is deemed assigned or transferred
owner/trustee of the property insured; provided, that in case the mortgagor to the CKS if said policy is obtained without the prior written of the latter.
or owner/ trustee neglects or refuses to pay any premium, the mortgagee/ HELD: NO; the provision is void, as against public policy
trustor shall, on demand pay the same.” It is basic in the law on contracts that the stipulations contained in a contract
The paragraph clearly states the exceptions to the general rule that insurance cannot be contrary to law, morals, good customs, public order or public
as to the interest of the mortgagee, cannot be invalidated; namely: fraud, or policy.
misrepresentation or arson. Concealment of the aforecited co-insurances can Sec. 18 of the Insurance Code provides:
easily be fraud, or in the very least, misrepresentation. Sec. 18. No contract or policy of insurance on property shall be enforceable
Undoubtedly, it is but fair and just that where the insured who is primarily except for the benefit of some person having an insurable interest in the
entitled to receive the proceeds of the policy has by its fraud and/or property insured.
misrepresentation, forfeited said right. A non-life insurance policy such as the fire insurance policy taken by
Petitioner further stressed that fraud which was not pleaded as a defense in petitioner-spouses over their merchandise is primarily a contract of
private respondent's answer or motion to dismiss, should be deemed to have indemnity. Insurable interest in the property insured must exist at the time
been waived. It will be noted that the fact of fraud was tried by express or at the insurance takes effect and at the time the loss occurs. The basis of such
least implied consent of the parties. Petitioner did not only object to the requirement of insurable interest in property insured is based on sound
introduction of evidence but on the contrary, presented the very evidence public policy: to prevent a person from taking out an insurance policy on
that proved its existence. property upon which he has no insurable interest and collecting the proceeds
2. Generally, the cause of action on the policy accrues when the loss occurs, of said policy in case of loss of the property. In such a case, the contract of
But when the policy provides that no action shall be brought unless the claim insurance is a mere wager which is void under Section 25 of the Insurance
is first presented extrajudicially in the manner provided in the policy, the Code, which provides:
cause of action will accrue from the time the insurer finally rejects the claim SECTION 25. Every stipulation in a policy of Insurance for the payment of
for payment loss, whether the person insured has or has not any interest in the property
In the case at bar, policy condition No. 11 specifically provides that the insured, or that the policy shall be received as proof of such interest, and
insured shall on the happening of any loss or damage give notice to the every policy executed by way of gaming or wagering, is void.
company and shall within fifteen (15) days after such loss or damage deliver In the present case, it cannot be denied that CKS has no insurable interest in
to the private respondent (a) a claim in writing giving particular account as to the goods and merchandise inside the leased premises under the provisions
the articles or goods destroyed and the amount of the loss or damage and (b) of Section 17 of the Insurance Code which provide.
particulars of all other insurances, if any. Section 17. The measure of an insurable interest in property is the extent to
Twenty-four days after the fire did petitioner merely wrote letters to private which the insured might be damnified by loss of injury thereof.”
respondent to serve as a notice of loss. It didn’t even furnish other United) cannot be compelled to pay the proceeds of the fire insurance policy
documents. Instead, petitioner shifted upon private respondent the burden to a person (CKS) who has no insurable interest in the property insured
of fishing out the necessary information to ascertain the particular account of The liability of the spouses to CKS for violating their lease contract in that Cha
the articles destroyed by fire as well as the amount of loss. Since the required spouses obtained a fire insurance policy over their own merchandise,
claim by insured, together with the preliminary submittal of relevant without the consent of CKS, is a separate and distinct issue which we do not
documents had not been complied with, it follows that private respondent resolve in this case.
could not be deemed to have finally rejected petitioner's claim and therefore
there was no cause of action.
It appearing that insured has violated or failed to perform the conditions
under No. 3 and 11 of the contract, and such violation or want of IVOR ROBERT DAYTON GIBSON, petitioner, vs. HON. PEDRO A. REVILLA
performance has not been waived by the insurer, the insured cannot recover, IVOR ROBERT DAYTON GIBSON, petitioner, vs. HON. PEDRO A. REVILLA, in
much less the herein petitioner. his official capacity as Presiding Judge of Branch XIII, Court of First Instance
of Rizal, and LEPANTO CONSOLIDATED MINING COMPANY, respondents.
G.R. No. L-41432 July 30, 1979
Spouses CHA and UNITED v. CA and CKS
GR no. 124520 FACTS:
August 18, 1997 Lepanto Consolidated Mining Company filed a complaint against Malayan
Insurance Company, Inc. The civil suit thus instituted by Lepanto against
FACTS: Petitioner-spouses, as lessess, entered into a lease contract with Malayan was founded on the fact that Malayan issued a Marine Open Policy
private respondent CKS Development Corporation (CKS), as lessor. One of the covering all shipments of copper, gold, and silver concentrates in bulk from
stipulations of the one (1) year lease contract states: Poro, San Fernando, La Union to Tacoma, Washington or to other places in
18. x x x. The LESSEE shall not insure against fire the chattels, merchandise, the United States. Thereafter, Malayan obtained reinsurance abroad through
textiles, goods and effects placed at any stall or store or space in the leased Sedgwick, Collins & Co., Limited, a London insurance brokerage. The
premises without first obtaining the written consent and approval of the Memorandum of Insurance issued by Sedgwick to Malayan listed three
LESSOR. If the LESSEE obtain(s) the insurance thereof without the consent of groups of underwriters or reinsurers – Lloyds 62.808%, Companies (I.L.U.)
the LESSOR then the policy is deemed assigned and transferred to the 34.705%, Other companies 2.487%. At the top of the list of underwriting
LESSOR for its own benefit; x x x1chanroblesvirtuallawlibrary members of Lloyds is Syndicate No. 448, assuming 2.48% of the risk assumed
Notwithstanding the above stipulation in the lease contract, the spouses by the reinsurer, which syndicate number petitioner Ivor Robert Dayton
insured against loss by fire their merchandise inside the leased premises for Gibson claims to be himself. Petitioner then filed a motion to intervene as
defendant, which motion was denied by the lower court.
ISSUE: WON THE LOWER COURT COMMITTED, REVERSIBLE ERROR IN Fieldmen's Insurance vs. Asian Surety (1970)
REFUSING THE INTERVENTION OF THE PETITIONER IN THE SUIT BETWEEN FIELDMEN'S INSURANCE CO., INC.,vs. ASIAN SURETY & INSURANCE, CO.,
LEPANTO AND MALAYAN COMPANIES. INC. and CA (1970)
MAKALINTAL, J.:
HELD:
No. The respondent Judge committed no error of law in denying petitioner’s · On various dates the Asian Surety & Insurance and the Fieldmen's
Motion to Intervene and neither has he abused his discretion in his denial of insurance entered into 7 reinsurance agreements or treaties under the
petitioner’s Motion for Intervention. We agree with the holding of the general terms of which ASIAN, as the ceding company undertook to cede to
respondent court that since movant Ivor Robert Dayton Gibson appears to be FIELDMEN’S, as the reinsuring company, a specified portion of the amount of
only one of several re-insurers of the risks and liabilities assumed by Malayan insurance underwritten by ASIAN upon payment to FIELDMEN'S of a
Insurance Company, Inc., it is highly probable that other re-insurers may proportionate share of the gross rate of the premium applicable with respect
likewise intervene. If petitioner is allowed to intervene, We hold that there is to each cession after deducting a commission.
good and sufficient basis for the Court a quo to declare that the trial between o agreements were take effect from certain specific dates and were to be in
Lepanto and Malayan would be definitely disrupted and would certainly force until cancelled by either party upon previous notice of at least 3
unduly delay the proceedings between the parties especially at the stage months by registered mail to the other party, the cancellation to take effect
where Lepanto had already rested its case and that the issue would also be as of the 31st of December of the year in which notice was given.
compounded as more parties and more matters will have to be litigated. In · Sept and Dec 1961 à FIELDMEN’S sent letters to ASIAN expressing its
other words, the Court’s discretion is justified and reasonable. We also hold desire to cancel all agreements between them as of DEC 31, 1961 alleging
that respondent Judge committed no reversible error in further sustaining that ASIAN had already incurred numerous violations àASIAN received but
the fourth ground of Lepanto’s Opposition to the Motion to Intervene that did not reply
the rights, if any, of petitioner are not prejudiced by the present suit and will · Feb 1962 à FIELDMEN’S sent another letter to ASIAn repeating the fact
be fully protected in a separate action against him and his co-insurers by of cancellation and now requesting ASIAN to submit its final accounting of all
Malayan. Petitioner’s contention that he has to pay once Malayan is finally cessions made to the former for the preceding months when the reinsurance
adjudged to pay Lepanto because of the very nature of a contract of agreements were in force.
reinsurance and considering that the re-insurer is obliged to pay as may be
paid thereon (referring to the original policies), although this is subject to · Meanwhile one of the risks reinsured by FIELDMENS issued in favor of
other stipulations and conditions of the reinsurance contract, is without the GSIS became a liability when the insured property was burned on Feb
merit. The general rule in the law of reinsurance is that the re-insurer is 1962 à The next day ASIAN sent letter to FIELDMEN’S notifiying them of the
entitled to avail itself of every defense which the re-insured (which is loss and stating…
Malayan) might urge in an action by the person originally insured (which is o ... we beg to reiterate that your letter of December 7, 1961, terminating
Lepanto). As to the effect of the clause “to pay as may be paid thereon” said treaties by December 31, 1961, is not in accordance with the terms
contained in petitioner’s re-insurance contract, Arnould, on the Law of thereof, since there was no prior three months' notice. However, considering
Marine Insurance and Average, 13th Ed., Vol. 1, Section 327, p. 315, states the attitude express (sic) in your aforesaid letter of December 7, 1961, we are
the rule, this: “It has been decided that this clause does not preclude the willing to waive provision that said treaties may be cancelled on December
reinsurer from insisting upon proper proof that a loss strictly within the 31st of any year, and will consider them cancelled at the end of three (3)
terms of the original policy has taken place. “This clause does not enable the months from December 7, 1961, by which time we shall be able to render the
original underwriter to recover from his reinsurer to an extent beyond the final accounting you desire.
subscription of the latter. “Wherefore, in view of the foregoing, the petition · FIELDMEN’S filed a petition for declaratory relief with CFI Manila
is hereby dismissed. No costs.” Pacific Timber Export Corporation vs Court of alleging its first letter of notification on SEPT 19, 1961 was sufficient to meet
Appeals In 1963, Pacific Timber Export Corporation (PTEC) applied for a the 3 month period before cancellation and to obtain an order directing
temporary marine insurance from Workmen’s Insurance Company (WIC) in ASIAN to render final accounting of the transactions between them with
order for the latter to insure 1,250,000 board feet of logs to be exported to respect to said reinsurance treaties as of the cut-off date.
Japan. In March 1963, WIC issued a cover note to PTEC for the said logs. On · CFI DECISION à 6 of 7 agreements are cancelled as of DEC 1961 but
April 2, 1963, WIC issued two policies for the logs. However, the total board agreed with ASIAN that FIELDMEN’S is still liable for as long the previously
feet covered this time is only 1,195,498. On April 4, 1963, while the logs were contracted policies are still valid. It also ordered FIELDMEN'S to make an
in transit to Japan, bad weather prevailed and this caused the loss of 32 accounting with ASIAN within 30 days.
pieces of logs. WIC then asked an adjuster to investigate the loss. The · CA à Affirmed with modification à the order for accounting was
adjuster submitted that the logs lost were not covered by the two policies eliminated
issued on April 2, 1963 but said logs were included in the cover note earlier
issued. WIC however denied the insurance claim of PTEC as it averred that ISSUE: WON cancellation had the effect of terminating also the liability of
the cover note became null and void when the two policies were FIELDMEN'S as reinsurer with respect to policies or cessions issued prior to
subsequently issued. The Court of Appeals ruled that the cover note is void the termination of the principal reinsurance contracts or treaties?
for lack of valuable consideration as it appeared that no premium payment
therefor was made by PTEC. ISSUE: Whether or not a separate premium is · Only the cancelled agreements are being considered here à 2 of which
needed for cover notes. HELD: No. The Cover Note was not without contain provisions, which clearly and expressly recognize the continuing
consideration for which the Court of Appeals held the Cover Note as null and effectivity of policies ceded under them for reinsurance notwithstanding the
void, and denied recovery therefrom. The fact that no separate premium was cancellation of the contracts themselves.
paid on the Cover Note before the loss insured against occurred, does not o Article 10 of the Facultative Obligatory Reinsurance Treaty Fire provides
militate against the validity of PTEC’s contention, for no such premium could "that in the event of termination of this Agreement ..., the liability of the
have been paid, since by the nature of the Cover Note, it did not contain, as Fieldmen's under current cessions shall continue in full force and effect until
all Cover Notes do not contain particulars of the shipment that would serve their natural expiry ...;" and the 4th paragraph of Article VI of the Personal
as basis for the computation of the premiums. As a logical consequence, no Accident Reinsurance Treaty states:
separate premiums are intended or required to be paid on a Cover Note. At o 4. On the termination of this Agreement from any cause whatever, the
any rate, it is not disputed that PTEC paid in full all the premiums as called for liability of the REINSURER (Fieldmen's) under any current cession including
by the statement issued by WIC after the issuance of the two regular marine any amounts due to be ceded under the terms of this Agreement and which
insurance policies, thereby leaving no account unpaid by PTEC due on the are not cancelled in the ordinary course of business shall continue in full force
insurance coverage, which must be deemed to include the Cover Note. If the until their expiry unless the COMPANY (Asian) shall, prior to the thirty-first
Note is to be treated as a separate policy instead of integrating it to the December next following such notice, elect to withdraw the existing cessions
regular policies subsequently issued, the purpose and function of the Cover ....
Note would be set at naught or rendered meaningless, for it is in a real sense · It is therefore clear that FIELDMEN’S is still liable despite the
a contract, not a mere application for insurance which is a mere offer. cancellation àSuch cessions continued to be in force until their respective
dates of expiration à GSIS policy still valid and subsisting at time of
loss à FIELDMEN’S IS LIABLE

· No need to go into other arguments (did not mention what they are)
because the cancellation of the agreements made them moot
· SC NOTES à ASIAN only claims continued liability of FIELDMEN’s as to
the 2 agreements that had the provision cited above (as compared to the
other 4 cancelled agreements wherein FIELDMEN’S liability had terminated
with the contracts)
· FIELDMEN'S insists on its alternative prayer that all cessions under the
six reinsurance agreements be declared rescinded by reason of certain
violations thereof, as stated by FIELDMEN'S in its letter of December 7,
1961 à Court reminds them that this action is for declaratory relief and not
one for rescission and no grounds found by lower courts that can justify
rescission anyway.

Avon Insurance PLC., et al. v. CA (G.R. No. 97642)

Facts:
Respondent Yupangco Cotton Mills engaged to secure with Worldwide
Security and Insurance Co. several of its properties which were then covered
by reinsurance treaties between Worldwide Security and several foreign
reinsurance companies, including herein petitioners. These reinsurance
agreements had been made through an international broker acting for
Worldwide Security. While the policies are in effect, Yupangco’s properties
were razed in fire giving rise to their indemnification. Worldwide
acknowledged a remaining balance and assigned to Yupangco all reinsurance
proceeds still collectible from all the reinsurance companies. Thus, as
assignee and original insured, Yupangco instituted a collection suit against
petitioners. Petitioners averred that they are foreign corporations not doing
business in the Philippines therefore cannot be subject to the jurisdiction of
its courts. CA found for Yupangco.
Issue:
Whether or not petitioners are foreign corporations doing business in the
Philippines.

Ruling: NO.
To qualify the petitioners’ business of reinsurance within the Philippine
forum, resort must be made to the established principles in determining
what is meant by “doing business in the Philippines.” The term ordinarily
implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the
exercise of the functions normally incident to and in progressive prosecution
of the purpose and object of its organization.
As it is, private respondent has made no allegation or demonstration of the
existence of petitioners’ domestic agent, but avers simply that they are doing
business not only abroad but in the Philippines as well. It does not appear at
all that the petitioners had performed any act which would give the general
public the impression that it had been engaging, or intends to engage in its
ordinary and usual business undertakings in the country. The reinsurance
treaties between the petitioners and Worldwide Surety and Insurance were
made through an international insurance broker, and not through any entity
or means remotely connected with the Philippines. Moreover, there is
authority to the effect that a reinsurance company is not doing business in a
certain state merely because the property or lives which are insured by the
original insurer company are located in that state. The reason for this is that
a contract of reinsurance is generally a separate and distinct arrangement
from the original contract of insurance, whose contracted risk is insured in
the reinsurance agreement. Hence, the original insured has generally no
interest in the contract of reinsurance.
Indeed, if a foreign corporation does not do business here, there would be no
reason for it to be subject to the State’s regulation. As we observed, in so far
as the State is concerned, such foreign corporation has no legal existence.
Therefore, to subject such corporation to the courts’ jurisdiction would
violate the essence of sovereignty.