PILAR DE LIM V SUN LIFE
ASSURANCE COMPANY OF CANADA
FACTS:
1. 1917: Luis Lim made an application
for insurance with Sun Life and
designated his wife Pilar (plaintiff –
appellant) as beneficiary for 5k;
 He paid the first premium
(433php) and upon such
payment, he was issued a
“provisional policy”
 He died later, after the issuance
of the provisional policy but
before the approval of the
application by the home office of
the insurance company;
2. Pilar (the wife) brought suit based on
the provisional policy to recover 5k
from the insurance company;
3. CFI dismissed because of lack of
cause of action.
2. The wife relies on Joyce on
ISSUE: W/N the provisional policy can
insure by itself. (NO)
Held:
A provisional policy that only acts as
a receipt of premium payment is not
enough to bind the insurer during the
interim period. The provisional policy to
be a binding contract must have been
complete that leaves nothing to be done,
nothing to be completed, nothing to be
passed upon, or determined before it
shall take effect.
Ratio (reading #1 is enough):
1. Court said there appeared a
vagueness in the provisional contract
but resolved to state that it was a
provisional policy for four months
subject to the affirmative condition
“that the company shall confirm this
agreement by issuing a policy on
said application when the same shall
be submitted to the head office in
Montreal”;
a. Also, it is stipulated that the
agreement should not go into
effect until the home office of the
company should confirm it by
issuing a policy;
b. Thus, it amounts to nothing but
an acknowledgment on behalf of
the company, that it has received
from the person named therein
the sum of money agreed upon as
the first year's premium upon a
policy to be issued upon the
application, if the application is
accepted by the company.
Insurance who has three rules
concerning the agent’s receipt
pending approval or issuance of
policy;
a. If the act of acceptance of the
risk by the agent and the giving
by him of a receipt, is within the
scope of the agent's authority,
and nothing remains but to issue
a policy, then the receipt will
bind the company;
 SC says it doesn’t apply
because there’s an express
condition in the contract;
b. Where an agreement is made
between the applicant and the
agent whether by signing an
 application containing such solicitor) stipulate expressly that
condition, or otherwise, that no the insurance shall become
liability shall attach until the effective only when the
principal approves the risk and a "application shall be approved
receipt is given buy the agent, and the policy duly signed by the
such acceptance is merely secretary at the head office of the
conditional, and it subordinated company and issued." It
to the act of the company in constituted no agreement at all
approving or rejecting; so in life for preliminary or temporary
insurance a "binding slip" or insurance;
"binding receipt" does not insure
of itself. GEAGONIA VS. COURT OF
 SC believes that this is the APPEALS
one applicable;
c. Where the acceptance by the FACTS:
agent is within the scope of his Armando Geagonia is the owner of
authority a receipt containing a Norman's Mart located in the public
contract for insurance for a market of San Francisco, Agusan del
specific time which is not Sur.
absolute but conditional, upon
acceptance or rejection by the  He obtained from Country
principal, covers the specified Bankers Insurance
period unless the risk is declined Corporation fire insurance
within that period. policy for P100k.
3. It is a recognized custom that upon  The period of the policy was
receipt of the application, the insurer from 1989 to 1990 and
enterers into a contract with the covered the following:
applicant in the so-called “binding o "Stock-in-trade
receipt” for temporary insurance consisting principally
pending the consideration of the of dry goods such as
application, to last until the policy be RTW's for men and
issued or the application rejected; it women wear and
is even held that it such contracts other usual to
may rest in parol; assured's business."
a. Wife’s counsel that such  Geagonia declared in the
preliminary contract for policy under the subheading
temporary insurance was entered entitled CO-INSURANCE
into but SC says otherwise; that Mercantile Insurance
b. The clause in the application Co., Inc. was the co-insurer
(and receipt given by the for P50k.
 From 1989 to 1990, AT THE TIME OF THE
Geagonia had in his LOSS OR DAMAGE IS
inventory stocks amounting NOT MORE THAN
to 392k P200k”
 The policy contained the
following condition, that  On 27 May 1990, FIRE OF
"THE INSURED SHALL ACCIDENTAL ORIGIN
GIVE NOTICE TO THE BROKE OUT
COMPANY OF ANY  Geagonia's INSURED
INSURANCE OR STOCKS-IN-TRADE
INSURANCES ALREADY WERE COMPLETELY
EFFECTED, OR WHICH DESTROYED prompting
MAY SUBSEQUENTLY BE him to file with Country
EFFECTED, covering any of Bankers a claim under the
the property or properties policy.
consisting of stocks in trade,  Country Bankers denied the
goods in process and/or claim because it found that at
inventories only hereby the time of the loss
insured, and unless notice be Geagonia's stocks-in-trade
given and the particulars of were likewise covered by the
such insurance or insurances 2 fire insurance policies for
be stated therein or endorsed P100,000.00 each, issued by
in this policy Philippines First Insurance
 CONDITION 3 : Co., Inc. (PFIC).
PURSUANT TO SECTION  The basis of COUNTRY
50 OF THE INSURANCE BANKERS' DENIAL WAS
CODE, BY OR ON GEAGONIA'S ALLEGED
BEHALF OF THE VIOLATION OF
COMPANY BEFORE THE CONDITION 3 OF THE
OCCURRENCE OF ANY POLICY.
LOSS OR DAMAGE, ALL  Geagonia then filed a
BENEFITS UNDER THIS complaint against Country
POLICY SHALL BE Bankers with the Insurance
DEEMED FORFEITED, Commission for the recovery
PROVIDED HOWEVER, of P100k under the fire
THAT THIS CONDITION insurance policy and for
SHALL NOT APPLY attorney's fees and costs of
WHEN THE TOTAL litigation.
INSURANCE OR  He attached his letter of 18
INSURANCES IN FORCE January 1991 which asked for
 the reconsideration of the
denial.
 He admitted in the said letter
that at the time he obtained
Country Bankers's fire
insurance policy he knew that
the two policies issued by the
PFIC were already in
existence;
 However, he had no
knowledge of the provision in
Country Bankers' policy
requiring him to inform it of
the prior policies;
 This requirement was not
mentioned to him by Country
Bankers' agent; and had it
been so mentioned, he would
not have withheld such
information.
 He further asserted that the
total of the amounts claimed
under the three policies was
below the actual value of his
stocks at the time of loss,
which was P1,000,000.00.
COURT DECISIONS :
IC - THE INSURANCE
COMMISSION FOUND
THAT GEAGONIA DID
NOT VIOLATE
CONDITION 3 AS HE
HAD NO KNOWLEDGE
OF THE EXISTENCE OF
THE TWO FIRE
INSURANCE POLICIES
OBTAINED FROM THE
PFIC;
that it was Cebu Tesing
Textiles which procured the
PFIC policies without
informing him or securing his
consent; and that Cebu
Tesing Textile, as his
creditor, had insurable
interest on the stocks.
These findings were based on
Geagonia's testimony that he
came to know of the PFIC
policies only when he filed
his claim with Country
Bankers and that Cebu
Tesing Textile obtained them
and paid for their premiums
without informing him
thereof.
The Insurance Commission
ordered Country Bankers to
pay Geagonia the sum of
P100k
MR to IC – DENIED
CA - REVERSED THE
DECISION OF THE IC
BECAUSE IT FOUND
THAT GEAGONIA
KNEW OF THE
EXISTENCE OF THE
TWO OTHER POLICIES
ISSUED BY THE PFIC.
ISSUES:
1) Whether the non-disclosure of
other insurance policies violate
condition 3 of the policy, so as to
deny Geagonia from recovering on
the policy.
2) Whether the violation of
Condition 3 of the policy renders the
policy void.
RULING:
Condition 3 of Country Bankers's
Policy is a condition which is not
proscribed by law.
Its incorporation in the policy is
allowed by Section 75 of the
Insurance Code, 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 the 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.
The fire insurance policies issued by
the PFIC name Geagonia as the
assured and contain a mortgage
clause which reads: "Loss, if any,
shall be payable to MESSRS.
TESING TEXTILES, Cebu City as
their interest may appear subject to
the terms of the policy." THIS IS
CLEARLY A SIMPLE LOSS
PAYABLE CLAUSE, NOT A
STANDARD MORTGAGE
CLAUSE.
The Court concludes that (a) the
prohibition in Condition 3 of the
subject policy applies only to double
insurance, and (b) the nullity of the
policy shall only be to the extent
exceeding P200,000.00 of the total
policies obtained.
The first conclusion is supported by
the portion of the condition referring
to other insurance "covering any of
the property or properties consisting
of stocks in trade, goods in process
and/or inventories only hereby
insured," and the portion regarding
the insured's declaration on the
subheading CO-INSURANCE that
the co-insurer is Mercantile
Insurance Co., Inc. in the sum of
P50,000.00.
A DOUBLE INSURANCE EXISTS
WHERE THE SAME PERSON IS
INSURED BY SEVERAL
INSURERS SEPARATELY IN
RESPECT OF THE SAME
SUBJECT AND INTEREST. Since
the insurable interests of a mortgagor
and a mortgagee on the mortgaged
property are distinct and separate;
the two policies of the PFIC do not
cover the same interest as that
covered by the policy of Country
Bankers, no double insurance exists.
The non-disclosure then of the
former policies was not fatal to
Geagonia's right to recover on
Country Bankers' policy.
Held [2]: Unlike the "other
insurance" which reads "The insured
shall give notice to the company of
any insurance or insurances already
effected, or which may subsequently
be effected covering any of the
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 benefits
under this Policy shall be forfeited";
What it had in mind was to
discourage over-insurance. Indeed,
the rationale behind the
incorporation of "other insurance"
clause in fire policies is to prevent
over-insurance and thus avert the
perpetration of fraud.
When a property owner obtains
insurance policies from two or more
insurers in a total amount that
exceeds the property's value, the
insured may have an inducement to
destroy the property for the purpose
of collecting the insurance.
The public as well as the insurer is
interested in preventing a situation in
which a fire would be profitable to
the insured.

Condition 3 in Country Bankers'

policy F-14622 does not absolutely
declare void any violation thereof. It
expressly provides that the condition
"shall not apply when the total
insurance or insurances in force at
the time of the loss or damage is not
more than P200,000.00."

By stating within Condition 3 itself

that such condition shall not apply if
the total insurance in force at the
time of loss does not exceed
P200,000.00, Country Bankers was
amenable to assume a co-insurer's
liability up to a loss not exceeding
P200,000.00.