Gulf Resorts, Inc. vs. Philippine Charter Insurance Corporation; G.R. No. 156167. May 16, 2005


Gulf Resorts, owner of Plaza Resorts, had its properties insured originally with the American Home Assurance Company. The first 4 policies provides that any loss from earthquake shock was extended only to petitioner’s 2 swimming pool. 

The Gulf entered an insurance agreement with PCIC provided that the policy (wording and rates) shall be the same with AHAC. In the policy, the shock endorsement provided that : 

In consideration of the payment by the insured to the company of the sum included additional premium the Company agrees, notwithstanding what is stated in the printed conditions of this policy due to the contrary, that this insurance covers loss or damage to shock to any of the property insured by this Policy occasioned by or through or in consequence of earthquake. 

After the earthquake, petitioner advised respondent that it would be making a claim under its Insurance Policy No. 31944 for damages on its properties. The respondent stated that “except for the 2 swimming pools, all affected items have no coverage for earthquake shocks.

Petitioner filed a complaint with the regional trial court for the payment of claims and losses incurred due to continuing losses sustained by plaintiff on account of defendant’s refusal to pay the claims. The RTC after trial ruled in favor of the respondent,

Petitioner avers that the policy’s earthquake shock endorsement clearly covers all of the properties insured and not only the swimming pools. It used the words “any property insured by this policy,” and it should be interpreted as all inclusive. Petitioner contends that pursuant to this rider, no qualifications were placed on the scope of the earthquake shock coverage. Thus, the policy extended earthquake shock coverage to all of the insured properties.

Respondent contends that the rider limits its liability for loss to the two swimming pools of petitioner.


WON the scope of the earthquake shock coverage shall cover all the properties since there is no qualification placed.


NO. It is basic that all the provisions of the insurance policy should be examined and interpreted in consonance with each other. All its parts are reflective of the true intent of the parties. The policy cannot be construed piecemeal. Certain stipulations cannot be segregated and then made to control; neither do particular words or phrases necessarily determine its character. Petitioner cannot focus on the earthquake shock endorsement to the exclusion of the other provisions. All the provisions and riders, taken and interpreted together, indubitably show the intention of the parties to extend earthquake shock coverage to the two swimming pools only.

In sum, there is no ambiguity in the terms of the contract and its riders. Petitioner cannot rely on the general rule that insurance contracts are contracts of adhesion which should be liberally construed in favor of the insured and strictly against the insurer company which usually prepares it. A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his signature or his “adhesion” thereto. Through the years, the courts have held that in these types of contracts, the parties do not bargain on equal footing, the weaker party’s participation being reduced to the alternative to take it or leave it. Thus, these contracts are viewed as traps for the weaker party whom the courts of justice must protect. Consequently, any ambiguity therein is resolved against the insurer, or construed liberally in favor of the insured.

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