FACTS

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.

There should not be any misapprehension as to the distinction between a reinsurance treaty, on the one hand, and a reinsurance policy or a reinsurance cession, on the other.

• A reinsurance policy is thus a contract of indemnity one insurer makes with another to protect the first insurer from a risk it has already assumed.
• A reinsurance treaty is merely an agreement between two insurance companies whereby one agrees to cede and the other to accept reinsurance business pursuant to provisions specified in the treaty. The practice of issuing policies by insurance companies includes, among other things, the issuance of reinsurance policies on standard risks and also on substandard risks under special arrangements.

FACTS

The defendant, Wellington Insurance Co., Inc. insured for P24,346,509.00 the buildings, stocks and machinery of plaintiff Artex Development Co., Inc., against loss or damage by fire or lighting upon payment by plaintiff of the corresponding premiums. On August 2, 1963, said properties were insured for an additional sum of P883,034.00. On May 12, 1963 defendant insured plaintiff against business interruption (use and occupancy) for P5,200,000.00.

On September 22, 1963, the buildings, stocks and machineries of plaintiff’s spinning department were burned. The notice of the loss and damage was given the defendant, and the loss was referred to the H. H. Bayne Adjustment Co. and the Allied Adjustment Co.