Case Summary (G.R. No. L-2548)
Summary of Facts
On March 19, 1963, Pacific Timber Export Corporation obtained a temporary insurance cover (Cover Note No. 1010) from Workmen’s Insurance Company to insure the export cargo of 1,250,000 board feet of Philippine Lauan and Apitong logs shipping from Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan. Subsequently, on April 2, 1963, the insurer issued two marine cargo insurance policies numbered 53 HO 1032 and 53 HO 1033, covering a slightly different amount of logs (1,195,498 board feet). Before the issuance of these policies but after the cover note, approximately 30 pieces of logs were lost due to bad weather during loading onto the SS Woodlock. The petitioner promptly informed the respondent of the loss on April 4, 1963, though actual receipt by the respondent occurred on April 15, 1963.
Development of Claims and Adjustments
The petitioner submitted a formal claim under the marine policies, demanding P19,286.79 for the loss. The defendant commissioned an adjustment company to inspect and assess the loss. The report concluded that the loss of 30 logs was not covered under the two marine policies—since those policies insured only the logs loaded on board—but was within the coverage of the initial Cover Note for $70,000. The insurer’s probable liability was computed at P11,042.04. Despite this, the insurance company denied liability on January 13, 1964, on the ground that the Cover Note became null and void after the issuance of the marine policies. The petitioner escalated the dispute to the Insurance Commissioner, who advised settlement, but the insurer continued denying the claim citing lack of valuable consideration for the Cover Note.
Issues on Appeal
The main issues raised by the petitioner against the Court of Appeals’ reversal of the trial court ruling were:
- Whether the Cover Note was valid and supported by valuable consideration despite the absence of a separate premium payment specifically for it; and
- Whether the insurer validly invoked unreasonable delay in giving notice of loss as a defense.
Validity and Consideration of the Cover Note
The Court upheld the petitioner’s argument that the Cover Note was valid and supported by valuable consideration. The Cover Note was expressly subject to the terms and conditions of the subsequently issued marine policies, where premium payment was stipulated. It is recognized that Cover Notes, by their nature as temporary insurance binders, do not contain all shipment particulars necessary for premium computation, and thus no separate premium is collected for them upfront. The petitioner duly paid all premiums for the comprehensive insurance coverage after the issuance of the marine policies. Hence, the Cover Note is integrated into the overall insurance contract and is not a mere preliminary or null document.
Furthermore, the loss of logs during loading operations, which occurred after issuance of the Cover Note but before the marine policies, falls squarely within the Cover Note’s risk coverage. The insurer had its own adjuster conduct an investigation and prepare a computation of liability based on the Cover Note coverage, evidencing acknowledgment of its validity. The Court reasoned that non-payment of premium specifically for the Cover Note cannot invalidate the coverage, especially since at the time of loss it was impractical or impossible to calculate and demand such premium.
Rejection of Delay in Notice Defense
The Court also rejected the insurer’s defense based on alleged delay in notice of loss. The insurer failed to promptly and specifically object to the delay as required under Section 84 of the Insurance Act, which mandates waiver of this defense if it is not asserted promptly. On the contrary, the insurer’s actions demonstrated that it treate
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Case Syllabus (G.R. No. L-2548)
Facts and Procedural History
- On March 19, 1963, petitioner Pacific Timber Export Corporation secured a temporary insurance Cover Note No. 1010 from respondent Workmen's Insurance Company, Inc., for the exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs, to be shipped from Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan.
- Two regular marine cargo policies (Nos. 53 HO 1032 and 53 HO 1033) were issued subsequently on April 2, 1963, covering 1,395 logs equivalent to 1,195,498 board feet, less than the initial amount stated in the Cover Note.
- Before issuance of the marine policies but after the Cover Note, 30 pieces of logs were lost during loading operations onto the vessel SS Woodlock at Diapitan Bay amid bad weather.
- On April 4, 1963, petitioner notified respondent of the loss of approximately 32 pieces of logs via letter, which was only received by the respondent on April 15, 1963.
- Petitioner submitted a Claim Statement demanding P19,286.79 under the marine policies.
- Respondent requested an inspection and assessment of the loss, leading to a report concluding that the loss was not covered by the marine policies since they insured only the amount loaded aboard the vessel, but was instead covered by the Cover Note.
- Respondent denied the claim on January 13, 1964, arguing the Cover Note was null and void due to issuance of the marine policies, which replaced it, and challenged timely notice of loss.
- Petitioner elevated the controversy to the Insurance Commissioner and subsequently filed suit.
- The Court of First Instance ruled in favor of petitioner, ordering payment of P11,042.04 with 12% interest from April 15, 1963, attorney’s fees of P3,000, and costs.
- The Court of Appeals reversed, declaring the Cover Note null and void for lack of valuable consideration and dismissed petitioner’s complaint.
- This petition for review challenges the Court of Appeals' reversal.
Issues Presented
- Whether the Cover Note issued by respondent was null and void for lack of valuable consideration.
- Whether respondent waived the defense of unreasonable delay in notification of loss under the insurance contract.
- The proper legal effect and binding nature of the Cover Note in relation to the subsequently issued marine insurance policies.
- The applicability of Section 84 of the Insurance Act concerning waiver of objection on grounds of delay in no