Case Summary (G.R. No. 249832)
Key Dates
- December 22, 1989: Country Bankers issues Fire Policy No. F-14622 covering stocks-in-trade for P 100,000 (term to December 22, 1990)
- May 27, 1990: Fire destroys petitioner’s insured stocks
- December 28, 1990: Country Bankers denies claim, citing undisclosed PFIC policies
- June 21, 1993: Insurance Commission rules in favor of petitioner, orders payment of P 100,000 plus interest and P 10,000 attorney’s fees
- December 29, 1993: Court of Appeals reverses Insurance Commission, holds violation of “other insurance” clause
- February 6, 1995: Supreme Court renders final decision under the 1987 Constitution
Applicable Law
- 1987 Philippine Constitution
- Insurance Code (P.D. No. 1460), Section 50 (disclosure of other insurance), Section 75 (validity of forfeiture clauses)
- Rule 45, Rules of Court (judicial review of quasi-judicial decisions)
Facts of the Case
Petitioner obtained from Country Bankers Fire Policy No. F-14622 for P 100,000 on December 22, 1989, covering his stock-in-trade of dry goods. He declared Mercantile Insurance Co. as co-insurer for P 50,000. Unbeknownst to Country Bankers, two earlier fire policies (Nos. GA-28146 and GA-28144, P 100,000 each) had been issued by Phil. First Insurance Co., naming petitioner as assured with a mortgage clause in favor of Cebu Tesing Textiles. Condition 3 of Country Bankers’ policy required disclosure of existing or subsequent insurance over the same property, unless total coverage did not exceed P 200,000. After the May 27, 1990 fire, petitioner’s P 100,000 claim was denied on grounds of non-disclosure.
Insurance Commission Decision
The Insurance Commission found that petitioner had no knowledge of the PFIC policies, which were procured by Cebu Tesing Textiles without his consent or awareness. Cebu Tesing’s insurable interest as creditor justified those policies. The Commission held that Condition 3 was not violated and ordered Country Bankers to pay P 100,000 with interest from filing date, plus P 10,000 attorney’s fees.
Court of Appeals Ruling
The Court of Appeals reversed, concluding that petitioner knew of the prior PFIC policies. It relied chiefly on petitioner’s January 18, 1991 letter to Country Bankers admitting awareness of those policies at the time he took out Fire Policy No. F-14622 and acknowledging that his own agent had not informed him of the disclosure requirement. Based on that admission, the CA held that petitioner breached Condition 3 and forfeited his right to indemnity.
Issues on Review
- Whether petitioner’s letter of January 18, 1991 constitutes a binding judicial admission on knowledge of prior insurance
- Whether petitioner violated Condition 3 of Fire Policy No. F-14622 by failing to disclose existing PFIC policies
- Whether non-disclosure should forfeit the entire policy benefit or only coverage exceeding P 200,000 under the co-insurance exception
Supreme Court’s Analysis
- Judicial Admission: The letter was attached to the Insurance Commission complaint as Annex “M,” constituting a binding judicial admission, not requiring formal introduction.
- Validity of Condition 3: Section 75 of the Insurance Code permits terms declaring specified breaches to avoid the policy. Condition 3 is a valid “other insurance” clause, designed to prevent moral hazard and over-insurance.
- Insurable Interests: Mortgagor (petitioner) and mortgagee (Cebu Tesing) hold distinct insurable interests. PFIC policies, bearing
Case Syllabus (G.R. No. 249832)
Factual Background
- Petitioner Armando Geagonia owns Norman’s Mart in San Francisco, Agusan del Sur.
- On December 22, 1989, he obtained Fire Insurance Policy No. F-14622 from Country Bankers Insurance Corporation (CBIC) for ₱100,000.00, covering stock-in-trade (principally dry goods, ready-to-wear for men and women, and other usual items).
- The policy period ran from December 22, 1989 to December 22, 1990.
- Under “CO-INSURANCE,” Geagonia declared Mercantile Insurance Co., Inc. as co-insurer for ₱50,000.00.
- At the time of issuance, his total inventory amounted to ₱392,130.50, including goods from Zenco Sales, F. Legaspi Gen. Merchandise, and Cebu Tesing Textiles (on credit).
Condition 3 of the CBIC Policy
- Required the insured to notify CBIC of any existing or subsequent insurance on the same property, with particulars endorsed in the policy, pursuant to Section 50 of the Insurance Code.
- Provided that failure to notify would forfeit all benefits unless total insurance in force at time of loss did not exceed ₱200,000.00.
The Fire Loss and Claim Denial
- On May 27, 1990, an accidental fire destroyed Geagonia’s insured stocks-in-trade.
- Geagonia filed a claim under Policy No. F-14622; CBIC denied it on December 28, 1990.
- CBIC found two prior PFIC policies (Nos. GA-28146 and GA-28144, ₱100,000.00 each) covering the same stock-in-trade, naming “Discount Mart (Mr. Armando Geagonia, Prop.)” as assured, with a mortgage clause in favor of Cebu Tesing Textiles.
- CBIC’s denial was based on alleged violation of Condition 3 for non-disclosure of those PFIC policies.
Proceedings Before the Insurance Commission
- Geagonia filed Complaint No. 3340 with the Insurance Commission seeking ₱100,000.00, attorney’s fees, and costs.
- In a letter dated January 18, 1991 (Annex “M”), he admitted knowledge of the PFIC policies at the time he secured CBIC coverage but claimed ignorance of the notification requirement and asserted he would have disclosed if informed.
- The Insurance Commission found:
• Geagonia did not know of the PFIC policies when he obtained CBIC coverage;
• Cebu Tesing Textiles procured and paid for the PFIC policies without Ge