Geagonia V CA G.R. No. 114427 February 6, 1995

Geagonia v CA G.R. No.
114427 February 6, 1995
Facts:
Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for P100,000.00. The 1 year policy and covered
the stock trading of dry goods.
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 deemed forfeited, 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."
The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s
stocks were covered by two other fire insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's
denial was the petitioner's alleged violation of Condition 3 of the policy.
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. He claimed that he knew the existence of the other two policies. 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.
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.
The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 with interest
and attorney’s fees.
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. WON the petitioner had not disclosed the two insurance policies when he obtained the fire insurance and thereby violated
Condition 3 of the policy.
2. WON he is prohibited from recovering
Held: Yes. No. Petition Granted
Ratio:
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 was amenable to assume a co-insurer'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 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.
Same; Same; Separate insurances covering different insurable interests may be obtained by the mortgagor and the
mortgagee.—As to a mortgaged property, the mortgagor and the mortgagee have each an independent insurable
interest therein and both interests may be covered by one policy, or each may take out a separate policy covering
his interest, either at the same or at separate times. The mortgagor's insurable interest covers the full value of the
mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The
mortgagee's insurable interest is to the extent of the debt, since the property is relied upon as security thereof,
and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie
the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged
property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and
the mortgagee.
Same; A policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the
company.—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.
Same; Double Insurance; 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.
Same; Same; The rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-
insurance and thus avert the perpetration of fraud.—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 co-insurer'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 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
Geagonia vs. Court of Appeals, 241 SCRA 152, G.R. No. 114427 February 6, 1995

Geagonia V CA G.R. No. 114427 February 6, 1995

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Geagonia V CA G.R. No. 114427 February 6, 1995

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Geagonia v CA G.R. No.

114427 February 6, 1995

The policy noted the requirement that

2. WON he is prohibited from recovering

Held: Yes. No. Petition Granted

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