INSURANCE CASE DIGEST

FILIPINAS COMPAÑIA DE SEGUROS V. CHRISTERN, HUENEFELD & CO., INC.

G.R. No. L-2294. May 25, 1951

FACTS:

Christern, Huenefeld & Co., Inc. obtained from the Filipinas Cia. de Seguros a fire policy covering
merchandise contained in a building located at Binondo, Manila. During the Japanese military
occupation, the building and insured merchandise were burned. The respondent submitted to the
petitioner its claim under the policy. The petitioner refused to pay the claim on the ground that the
policy had ceased to be in force on the date US declared war against Germany.

The theory of the petitioner is that the insured merchandise were burned up after the policy issued in
1941 in favor of the respondent corporation has ceased to be effective because of the outbreak of the
war between the United States and Germany on December 10, 1941, and that the payment made by the
petitioner to the respondent corporation during the Japanese military occupation was under pressure.
After trial, the Court of First Instance of Manila dismissed the action without pronouncement as to costs.
Upon appeal to the Court of Appeals, the judgment of the Court of First Instance of Manila was affirmed,
with costs. The case is now before us on appeal by certiorari from the decision of the Court of Appeals.

The Court of Appeals overruled the contention of the petitioner that the respondent corporation
became an enemy when the United States declared war against Germany, relying on English and
American cases which held that a corporation is a citizen of the country or state by and under the laws
of which it was created or organized. It rejected the theory that nationality of Private Corporation is
determined by the character or citizenship of its controlling stockholders.

ISSUE:

Whether the policy in question became null and void upon the declaration of war between the United
States and Germany.

RULING:

The nationality of a private corporation is determined by the character or citizenship of its controlling
stockholders. Where majority of the stockholders of a corporation were German subjects, the
corporation became an enemy corporation upon the outbreak of the war between the United States
and Germany.

The Philippine Insurance Law (Act No. 2427, as amended), in section 8, provides that "anyone except a
public enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as
soon as an insured becomes a public enemy.
Where an insurance policy ceases to be effective by reason of war, which has made the insured an
enemy, the premiums paid for the period covered by the policy from the date war is declared, should be
returned.

The respondent having become an enemy corporation on December 10, 1941, the insurance policy
issued in its favor on October 1, 1941, by the petitioner (a Philippine corporation) had ceased to be valid
and enforceable, and since the insured goods were burned after December 10, 1941, and during the
war, the respondent was not entitled to any indemnity under said policy from the petitioner. However,
elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the
premium paid by the respondent for the period covered by its policy from December 11, 1941, should
be returned by the petitioner.
ARMANDO GEAGONIA vs. COURT OF APPEALS and COUNTRY BANKERS INSURANCE CORPORATION
G.R. No. 114427 February 6, 1995

FACTS:

The petitioner is the owner of Norman’s Mart located in the public market of San Francisco, Agusan del
Sur. He obtained from the private respondent fire insurance policy for P100,000.00. The period of the
policy was from 22 December 1989 to 22 December 1990. The petitioner declared in the policy under
the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for
P50,000.00. From 1989 to 1990, the petitioner had in his inventory stocks amounting to P392,130.50.
The policy contained the several conditions.

On 27 May 1990, fire of accidental origin broke out at the public market of San Francisco, Agusan del
Sur. The petitioner’s insured stocks-in-trade were completely destroyed prompting him to file with the
private respondent a claim under the policy. On 28 December 1990, the private respondent denied the
claim because it found that at the time of the loss the petitioner’s stocks-in-trade were likewise covered
by fire insurance policies for P100,000.00 each, issued by the Cebu Branch of the PFIC. These policies
indicate that the insured was Mr. Armando Geagonia.

The basis of the private respondent’s denial was the petitioner’s alleged violation of Condition 3 of the
policy. The petitioner then filed a complaint against the private respondent with the Insurance
Commission for the recovery of P100,000.00 under fire insurance policy No. F-14622 and for attorney’s
fees and costs of litigation. He attached as Annex “M” thereof his letter of 18 January 1991 which asked
for the reconsideration of the denial. He admitted in the said letter that at the time he obtained the
private respondent’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 the private respondent’s policy requiring
him to inform it of the prior policies; this requirement was not mentioned to him by the private
respondent’s 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

In its answer, the private respondent specifically denied the allegations in the complaint and set up as its
principal defense the violation of Condition 3 of the policy.

ISSUE:

Whether the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he
obtained the fire insurance policy from the private respondent, thereby, for not disclosing such fact,
violating Condition 3 of the policy.

RULING:

Yes. The Court held that the petitioner knew of the prior policies issued by the PFIC. 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 the policy. However, in order to constitute a violation,
the other insurance must be upon same subject matter, the same interest therein, and the same risk.
VICENTE E. TANG vs. HON. COURT OF APPEALS and PHILIPPINE AMERICAN LIFE INSURANCE COMPANY
G.R. No. L-48563 May 25, 1979

FACTS:

Lee See Guat, a widow, 61 years old, and an illiterate who spoke only Chinese, applied for an insurance
on her life for P60,000 with the respondent Company. The application consisted of two parts, both in
the English language. The second part of her application dealt with her state of health and because her
answers indicated that she was healthy, the Company issued her the policy, effective October 23, 1965,
with her nephew Vicente E. Tang, as her beneficiary.

Lee See Guat again applied with the respondent Company for an additional insurance on her life for
P40,000. Considering that her first application had just been approved, no further medical examination
was made . The second policy was issued to Lee See Guat with the same Vicente E. Tang as her
beneficiary.

Lee See Guat died of lung cancer. Thereafter, the beneficiary of the two policies, Vicente E. Tang claimed
for their face value in the amount of P100,000 which the insurance company refused to pay on the
ground that the insured was guilty of concealment and misrepresentation at the time she applied for the
two policies.

ISSUE:
Whether or not the concealment practiced by the insured is in violation of the Insurance Law.

RULING:
No. Lee See Guat was illiterate and spoke only Chinese, she could not be held guilty of concealment of
her health history because the applications for insurance were in English and the insurer has not proved
that the terms thereof had been fully explained to her.

The obligation to show that the terms of the contract had been fully explained to the party who is
unable to read or understand the language of the contract, when fraud or mistake is alleged, devolves
on the party seeking to enforce it. Here the insurance company is not seeking to enforce the contracts;
on the contrary, it is seeking to avoid their performance. It is petitioner who is seeking to enforce them
even as fraud or mistake is not alleged. Accordingly, respondent company was under no obligation to
prove that the terms of the insurance contracts were fully explained to the other party. Even if we were
to say that the insurer is the one seeking the performance of the contracts by avoiding paying the claim,
it has to be noted as above stated that there has been no imputation of mistake or fraud by the illiterate
insured whose personality is represented by her beneficiary the petitioner herein. In sum, Art. 1332 is
inapplicable to the case at bar.