OK - Geagonia v. CA

ARMANDO GEAGONIA, petitioner, v.
COURT OF APPEALS and

COUNTRY BANKERS INSURANCE CORPORATION, respondents.
G.R. No. 114427 February 6, 1995
FACTS: Petitioner Armando Geagonia obtained from the private respondent fire
insurance for his business Normans Mart which covered the following: "Stock-intrade consisting principally of dry goods such as RTW's for men and women wear
and other usual to assured's business." The policy contained the following condition:
3. The insured shall give notice to the Company of any insurance or
insurances already affected, 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 such 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.
A fire of accidental origin broke out at the public and the petitioner's insured
stock-in-trade were completely destroyed prompting him to file with the private
respondent a claim under the policy. 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 issued by the Cebu Branch of the
Philippines First Insurance Co., Inc. The basis of the private respondent's denial was
the petitioner's alleged violation of Condition 3 of the policy.
Petitioner 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 attorneys 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. Hence, this petition.
ISSUES:
1. 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.
2. Whether petitioner is precluded from recovering insurance claims.
HELD:
1. The Court agrees with the Court of Appeals 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. 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. The reason for this is that, except for
riders which may later be inserted, the insured sees the contract already in
its final form and has had no voice in the selection or arrangement of the
words employed therein. With these principles in mind, the Court is of the
opinion that Condition 3 of the subject policy is not totally free from
ambiguity and must, perforce, 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.

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ARMANDO GEAGONIA, petitioner, v.

COURT OF APPEALS and

respondent conclusively proves this knowledge. His testimony to the contrary

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