Oriental Assurance Corporation vs. Court of Appeals (Insurance Law)

 

Oriental Assurance Corporation vs. Court of Appeals

(Insurance Law)

200 SCRA 459 (G.R. No. 94052)

August 9, 1991

 

Petitioners:	Oriental Assurance Corporation
Respondents:	Court of Appeals and Panama Saw Mill Co., Inc.

 

J. Melencio - Herrera:

 

FACTS:

 

Private respondent Panama Sawmill Co. (Panama) bought, in Palawan, 1208 pieces of apitong logs, with a total volume of 2,000 cubic meters. It hired Transpacific Towage, Inc., to transport the logs by the sea to Manila and insured it against loss for ₱ 1 million pesos with petitioner Oriental Assurance Corp.

 

The logs were loaded on 2 barges: 1) on barge PCT-7000, 610 pieces of logs with a volume of 1000 cubic meters; and 2) Barge TPAC-1000, 598 pieces of logs, also with a volume of 1000 cubic meters. The two barges were towed by the tugboat, MT “Seminole.” During the voyage rough seas and strong winds caused damage to Barge TPAC-1000 resulting in the loss of 497 pieces of logs out of the 598 pieces loaded thereon.

 

Panama demanded payment for the loss but Oriental refused on the ground that its contract liability on the ground that its contract liability was to “TOTAL LOSS ONLY.”

 

ISSUE:

 

Whether or not Oriental Insurance can be held liable under its marine insurance policy based on the theory of a divisible contract of insurance and, consequently, a constructive loss.

 

HELD:

 

Yes. The terms of the contract constitute the measure of the insurer’s liability and compliance therewith is a condition precedent to the insured’s right to recovery from the insurer. (Perla Compania de Seguros, Inc. vs. Court of Appeals, G.R. No. 78860, May 28, 1990, 185 SCRA 741). Whether a contract is entire or severable is a question of intention to be determined by the language employed by the parties. The policy in question shows that the subject matter insured was the entire shipment of 2,000 cubic meters of apitong logs. The fact that the logs were loaded on two different barges did not make the contract several and divisible as to the items insured. The logs on the two barges were not separately valued or separately insured. Only one premium was paid for the entire shipment, making for only one cause or consideration. The insurance contract, therefore, be considered indivisible.

 

The basis thus used is, in our opinion, reversible error. The requirements for the application of Section 139 of the Insurance Code, quoted above, have not been met. The logs involved, although place in two barges, were not separately valued by the policy, nor separately insure. Resultantly, the logs lost in barge TPAC-1000 in relation to the total number of logs loaded on the same barge can not be made the basis for determining the constructive total loss. The logs having been insured as one inseparable unit, the correct basis for determining the existence of constructive total loss is the totality of the shipment of logs. Of the entirety of 1,208, pieces of logs, only 497 pieces thereof were lost or 41.45% of the entire shipment. Since the cost of those 497 pieces does not exceed 75% of the value of all 1,200 pieces of logs, the shipment can not be said to has sustained a constructive total loss under Section 139 (a) of the Insurance Code.

 

Geagonia vs. Court of Appeals (Insurance Law)

 

Geagonia vs. Court of Appeals

(Insurance Law)

241 SCRA 152 (G.R. No. 114427)

February 6, 1995

 

Petitioners:	Armando Geagonia
Respondents:	Court of Appeals and Country Bankers Insurance Corpoation

 

J. Davide, Jr.:

 

FACTS:

 

The Petitioner’s is the owner of Norman’s Mart located at the public market. He obtained from the private respondent’s Country Banker’s Insurance Corp. fire insurance policy No. F-14622 for ₱100,000.00.

 

The Petitioner declared in the policy under the subheading entitled co-insurance that Mercantile Insurance Co. Inc., was the co-insurer for ₱50,000.00.

 

The policy contained the following condition:

 

“3. The insured shall give notice to the Company of any insurance or insurances already effected, and unless such notice be given and the particulars of such insurance or insurances be stated therein, all benefits under this policy shall be deemed forfeited.”

 

When a fire of accidental origin broke out at the public market, petitioner’s insured stocks-in-trade were completely destroyed prompting him to file with private respondent a claim under the policy. Private respondent denied the claim because it found that at the time of loss the petitioner’s stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144 for ₱100,000.00 each issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). These policies indicate that the insured was “Messrs. Discount Mart (Mr. Armando Geagonia, Prop.) with a mortgage clause reading: “Mortgagee; loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy.

 

ISSUE:

 

Whether or not the incorporation of Condition 3 in the policy is allowed by Sec. 75 of the Insurance Code which precludes the petitioner to recover from the two insurance policies.

 

HELD:

 

Yes. Condition 3 of the private respondent’s Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that “[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.” Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or “other insurance” clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid policy. However, in order to constitute a violation, the other insurance must be upon the same subject matter, the same interest therein, and the same risk.

 

As to a mortgaged property, the mortgagor and mortgagee have each an independent insurable interest therein and both interests may be covered by one policy, or each may take out a separate policy covering his interest, either at the same or at a separate times. The mortgagor’s insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee’s insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee.

 

It is a cardinal rule in insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture.