Fieldmen’s Insurance Co., Inc. vs. Asian Surety & Insurance Co., Inc; No. L-23447. July 31, 1970
The Asian Surety & Insurance (Asian) and the Fieldmen’s Insurance Company (Fieldmen), as the reinsurer, entered into seven (7) reinsurance agreements or treaties. The agreements or treaties were to take effect from certain specific dates and were to be in force until cancelled by either party upon previous notice of at least three (3) months by registered mail to the other party, the cancellation to take effect as of the 31st of December of the year in which the notice was given.
On September 19, 1961, FIELDMEN’S, by means of registered mail, served notice to ASIAN to be relieved from all participation in various treaties effective December 31, 1961. On December 7, 1961, FIELDMEN’S sent another letter expressing such intention. However, Asian did not acknowledge the letters.
On February 16, 1962, one of the riks reinsured with FIELDMEN’S issued in favor of the Government Service Insurance System, became a liability when the insured property was burned. The agreement was supposed to expire on July 1, 1962. The next day, ASIAN immediately notified FIELDMEN’S of said fire loss.
FIELDMEN filed a petition for declaratory relief to seek a declaration that all the reinsurance contracts entered into between them had terminated as of December 31, 1961 upon sending multiples of letter of termination.
ASIAN denied having received FIELDMEN’S letter and argued that even assuming it did, FIELDMEN’S could not have terminated the reinsurance treaties as of December 31, 1961 because the (a) letter was not a formal notice of cancellation as contemplated in their reinsurance agreements and (b) the liability of FIELDMEN’S shall continue to have full force and effect until the stated expiry dates of such policies or cessions.
The RTC upheld ASIAN’S position that all cessions of reinsurance made by it to FIELDMEN’S prior to the cancellation of the reinsurance treaties continued in full force and effect until expiry dates. The Court of Appeals affirmed the decision.
Whether or not said cancellation had the effect of terminating the liability of FIELDMEN’S as reinsurer with respect to policies or cessions issued prior to the termination of the principal reinsurance contracts or treaties.
NO. Of the six reinsurance contracts under consideration two contain provisions, which clearly and expressly recognize the continuing effectivity of policies ceded under them for reinsurance notwithstanding the cancellation of the contracts themselves. Insofar as the two reinsurance agreements with the express stipulations aforequoted are concerned, there is clearly no merit in FIELDMEN’S claim that their cancellation carried with it ipso facto the termination of all reinsurance cessions thereunder. Such cessions continued to be in force until their respective dates of expiration. Since it was under one of said agreements, namely, the Facultative Obligatory Reinsurance Treaty-Fire, that the reinsurance cession corresponding to the GSIS policy had been made, FIELDMEN’S cannot avoid liability which arose by reason of the burning of the insured property.
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