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  • Geagonia Vs CA

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    Nath Antonio
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    1. Geagonia obtained a Php 100,000 fire insurance policy from Country Bankers that required informing them of any other insurance policies, otherwise benefits would be forfeited if total insurance exceeded Php 200,000. 2. Geagonia's store was destroyed by fire. He had two other Php 100,000 fire insurance policies from PFIC that he did not disclose. 3. The Court ruled that while Geagonia violated the disclosure condition, the policy would only be void if total insurance exceeded Php 200,000. Since the total was only Php 300,000, Geagonia could recover up to Php 200,000 from Country Bankers as a co-insurer

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    Geagonia vs CA

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    1. Geagonia obtained a Php 100,000 fire insurance policy from Country Bankers that required informing them of any other insurance policies, otherwise benefits would be forfeited if total insurance exceeded Php 200,000. 2. Geagonia's store was destroyed by fire. He had two other Php 100,000 fire insurance policies from PFIC that he did not disclose. 3. The Court ruled that while Geagonia violated the disclosure condition, the policy would only be void if total insurance exceeded Php 200,000. Since the total was only Php 300,000, Geagonia could recover up to Php 200,000 from Country Bankers as a co-insurer

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    330 views2 pages

    Geagonia Vs CA

    Uploaded by

    Nath Antonio
    1. Geagonia obtained a Php 100,000 fire insurance policy from Country Bankers that required informing them of any other insurance policies, otherwise benefits would be forfeited if total insurance exceeded Php 200,000. 2. Geagonia's store was destroyed by fire. He had two other Php 100,000 fire insurance policies from PFIC that he did not disclose. 3. The Court ruled that while Geagonia violated the disclosure condition, the policy would only be void if total insurance exceeded Php 200,000. Since the total was only Php 300,000, Geagonia could recover up to Php 200,000 from Country Bankers as a co-insurer

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    of 2

    G.R. No.

    114427 February 6, 1995


    ARMANDO GEAGONIA, petitioner,
    vs.
    COURT OF APPEALS and COUNTRY BANKERS INSURANCE
    CORPORATION, respondents.
    Ponente: Davide, Jr., J.
    Doctrines:
    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 [Geagonia vs. Court of Appeals, 241 SCRA 152(1995)]
    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 the same subject matter, the same interest
    therein, and the same risk.
    It is a cardinal rule on 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 construction which would result in the 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.
    A double insurance exists where the same person is insured by several
    insurers separately in respect of the same subject and interest.A double
    insurance exists where the same person is insured by several insurers
    separately in respect of the same subject and interest. As earlier stated,
    the insurable interests of a mortgagor and a mortgagee on the mortgaged
    property are distinct and separate. Since the two policies of the PFIC do
    not cover the same interest as that covered by the policy of the private

    respondent, no double insurance exists. The non-disclosure then of the


    former policies was not fatal to the petitioner's right to recover on the
    private respondent's policy.
    Furthermore, 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, the private respondent was amenable to assume a coinsurer's liability up to a loss not exceeding P200,000.00. What it had in
    mind was to discourage overinsurance. Indeed, the rationale behind the
    incorporation of "other insurance" clause in fire policies is to prevent overinsurance 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.

    Facts:
    1.
    Geagonia, owner of a store, obtained from Country Bankers fire
    insurance policy for P100,000.00, for 1 year policy and covered the stock
    trading of dry goods.
    a. The policy noted the requirement that:
    "3. 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 or properties consisting of stocks in trade, goods
    in process and/or inventories only hereby insured, and unless notice be given
    and the particulars of such insurance or insurances be stated therein or
    endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on
    behalf of the Company before the occurrence of any loss or damage, all
    benefits under this policy shall be deemedforfeited, provided however, that
    this 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."
    2. The petitioners stocks were destroyed by fire.
    a. He then filed a claim which was subsequently denied because the
    petitioners stocks were covered by two other fire insurance policies for Php
    200,000 issued by PFIC.

    3. The basis of the private respondent's denial was the petitioner's alleged
    violation of Condition 3 of the policy.
    4. Geagonia then filed a complaint against the private respondent in the
    Insurance Commission for the recovery of P100,000.00 under fire
    insurance policy and damages.
    a. He claimed that he knew the existence of the other two policies.
    b. But, he said that he had no knowledge of the provision in the private
    respondent's policy requiring him to inform it of the prior policies and this
    requirement was not mentioned to him by the private respondent's agent.
    5. The Insurance Commission found that the petitioner 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
    w/c procured the PFIC policies w/o informing him or securing his consent; and
    that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks.
    a. The Insurance Commission then ordered the respondent company to pay
    complainant the sum of P100,000.00 with interest and attorneys fees.
    6. CA reversed the decision of the Insurance Commission because it found
    that the petitioner knew of the existence of the two other policies issued by the
    PFIC.
    Issues:
    1. Whether the petitioner had not disclosed the two insurance policies when
    he obtained the fire insurance and thereby violated Condition 3 of the policy.
    YES!
    2. Whether he is prohibited from recovering. NO!
    Held:
    1.
    The court agreed with the CA that the petitioner knew of the prior
    policies issued by the PFIC. His letter of 18 January 1991 to the private
    respondent conclusively proves this knowledge. His testimony to the contrary
    before the Insurance Commissioner and which the latter relied upon cannot
    prevail over a written admission made ante litem motam. It was, indeed,

    incredible that he did not know about the prior policies since these policies
    were not new or original.
    2.
    Stated differently, provisions, conditions or exceptions in policies
    which tend to work a forfeiture of insurance policies should be
    construed most strictly against those for whose benefits they are
    inserted, and most favorably toward those against whom they are
    intended to operate.
    With these principles in mind, Condition 3 of the subject policy is not
    totally free from ambiguity and must be meticulously analyzed. Such analysis
    leads us to conclude that (a) the prohibition 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.
    Furthermore, 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, the private respondent wasamenable to assume a coinsurer's liability up to a loss not exceeding P200,000.00. 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 overinsurance 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.
    WHEREFORE, the instant petition is hereby GRANTED. The decision of the
    Court of Appeals in CA-G.R. SP No. 31916 is SET ASIDE and the decision of
    the Insurance Commission in Case No. 3340 is REINSTATED. Costs against
    private respondent Country Bankers Insurance Corporation. SO ORDERED.

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