Armando Geagonia  is the owner of Norman’s Mart located in the public market of San Francisco, Agusan del Sur. He obtained from Country Bankers Insurance Corporation 

a fire insurance policy for P100,000.00. The period of the policy was from 1989 to 1990 and covered the stock-in-trade consisting principally of dry goods such as RTW’s for men and women wear and other usual to assured’s business.” Geagonia declared in the policy under the subheading entitled CO-INSURANCE that Mercantile Insurance Co., Inc. was the co-insurer for P50,000.00. 

Thereafter, fire of accidental origin broke out at the public market of San Francisco, Agusan del Sur. Geagonia’s insured stocks-in-trade were completely destroyed prompting him to file with the CBIC a claim under the policy. CBIC denied the claim because it found that at the time of the loss of the stocks-in-trade were likewise covered by fire insurance policies for P100,000.00 each, issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). These policies indicate that the insured was “Messrs. Discount Mart (Mr. Armando Geagonia, Prop.)” with a mortgage clause. The basis of CBIC’s denial was the alleged violation of Condition 3 of the policy which states that 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. 

Thus, The Geagonia  filed a complaint with the Insurance Commissionfor the recovery of P100,000.00 under fire insurance policy No. F14622. He admitted in the said letter that at the time he obtained the CBIC’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 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. 

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 which procured the PFIC policies without informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks. These findings were based on the petitioner’s testimony that he came to know of the PFIC policies only when he filed his claim with the private respondent and that Cebu Tesing Textile obtained them and paid for their premiums without informing him thereof.  This decision was reversed by the CA. Hence, this petition. 



Whether CBIC is liable to the insurance policy of Geagonia. 


Yes. Even if Geaginia had knowledge of the prior policies issued by the PFIC, he may still claim against CBIC. Condition 3 of the subject policy is not totally free from ambiguity and must, perforce, be meticulously analyzed. Such analysis leads the SC to conclude that the prohibition applies only to double insurance, and the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained. 

Here, The first conclusion is supported by the portion of the condition referring to other insurance “covering any of the property or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured,” and the portion regarding the insured’s declaration on the subheading CO-INSURANCE that the co-insurer is Mercantile Insurance Co., Inc. in the sum of P50,000.00. 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 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 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.

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 (Case No. 3340) for the recovery of P100,000.00 under fire insurance policy No. F14622 and for attorney’s fees and costs of litigation. 

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



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 the same subject matter, the same interest therein, and the same risk.

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