PILAR DE LIM V SUN LIFE but resolved to state that it was a

ASSURANCE COMPANY OF CANADA provisional policy for four months

subject to the affirmative condition
FACTS: “that the company shall confirm this
1. 1917: Luis Lim made an application agreement by issuing a policy on
for insurance with Sun Life and said application when the same shall
designated his wife Pilar (plaintiff – be submitted to the head office in
appellant) as beneficiary for 5k; Montreal”;
 He paid the first premium a. Also, it is stipulated that the
(433php) and upon such agreement should not go into
payment, he was issued a effect until the home office of the
“provisional policy” company should confirm it by
 He died later, after the issuance issuing a policy;
of the provisional policy but b. Thus, it amounts to nothing but
before the approval of the an acknowledgment on behalf of
application by the home office of the company, that it has received
the insurance company; from the person named therein
2. Pilar (the wife) brought suit based on the sum of money agreed upon as
the provisional policy to recover 5k the first year's premium upon a
from the insurance company; policy to be issued upon the
3. CFI dismissed because of lack of application, if the application is
cause of action. accepted by the company.
2. The wife relies on Joyce on
ISSUE: W/N the provisional policy can Insurance who has three rules
insure by itself. (NO) concerning the agent’s receipt
pending approval or issuance of
Held: policy;
A provisional policy that only acts as a. If the act of acceptance of the
a receipt of premium payment is not risk by the agent and the giving
enough to bind the insurer during the by him of a receipt, is within the
interim period. The provisional policy to scope of the agent's authority,
be a binding contract must have been and nothing remains but to issue
complete that leaves nothing to be done, a policy, then the receipt will
nothing to be completed, nothing to be bind the company;
passed upon, or determined before it  SC says it doesn’t apply
shall take effect. because there’s an express
condition in the contract;
Ratio (reading #1 is enough): b. Where an agreement is made
between the applicant and the
1. Court said there appeared a
agent whether by signing an
vagueness in the provisional contract
 application containing such solicitor) stipulate expressly that
condition, or otherwise, that no the insurance shall become
liability shall attach until the effective only when the
principal approves the risk and a "application shall be approved
receipt is given buy the agent, and the policy duly signed by the
such acceptance is merely secretary at the head office of the
conditional, and it subordinated company and issued." It
to the act of the company in constituted no agreement at all
approving or rejecting; so in life for preliminary or temporary
insurance a "binding slip" or insurance;
"binding receipt" does not insure
of itself. GEAGONIA VS. COURT OF
 SC believes that this is the APPEALS
one applicable;
c. Where the acceptance by the FACTS:
agent is within the scope of his Armando Geagonia is the owner of
authority a receipt containing a Norman's Mart located in the public
contract for insurance for a market of San Francisco, Agusan del
specific time which is not Sur.
absolute but conditional, upon
acceptance or rejection by the  He obtained from Country
principal, covers the specified Bankers Insurance
period unless the risk is declined Corporation fire insurance
within that period. policy for P100k.
3. It is a recognized custom that upon  The period of the policy was
receipt of the application, the insurer from 1989 to 1990 and
enterers into a contract with the covered the following:
applicant in the so-called “binding o "Stock-in-trade
receipt” for temporary insurance consisting principally
pending the consideration of the of dry goods such as
application, to last until the policy be RTW's for men and
issued or the application rejected; it women wear and
is even held that it such contracts other usual to
may rest in parol; assured's business."
a. Wife’s counsel that such  Geagonia declared in the
preliminary contract for policy under the subheading
temporary insurance was entered entitled CO-INSURANCE
into but SC says otherwise; that Mercantile Insurance
b. The clause in the application Co., Inc. was the co-insurer
(and receipt given by the for P50k.
 From 1989 to 1990, AT THE TIME OF THE
Geagonia had in his LOSS OR DAMAGE IS
inventory stocks amounting NOT MORE THAN
to 392k P200k”
 The policy contained the
following condition, that  On 27 May 1990, FIRE OF
"THE INSURED SHALL ACCIDENTAL ORIGIN
GIVE NOTICE TO THE BROKE OUT
COMPANY OF ANY  Geagonia's INSURED
INSURANCE OR STOCKS-IN-TRADE
INSURANCES ALREADY WERE COMPLETELY
EFFECTED, OR WHICH DESTROYED prompting
MAY SUBSEQUENTLY BE him to file with Country
EFFECTED, covering any of Bankers a claim under the
the property or properties policy.
consisting of stocks in trade,  Country Bankers denied the
goods in process and/or claim because it found that at
inventories only hereby the time of the loss
insured, and unless notice be Geagonia's stocks-in-trade
given and the particulars of were likewise covered by the
such insurance or insurances 2 fire insurance policies for
be stated therein or endorsed P100,000.00 each, issued by
in this policy Philippines First Insurance
 CONDITION 3 : Co., Inc. (PFIC).
PURSUANT TO SECTION  The basis of COUNTRY
50 OF THE INSURANCE BANKERS' DENIAL WAS
CODE, BY OR ON GEAGONIA'S ALLEGED
BEHALF OF THE VIOLATION OF
COMPANY BEFORE THE CONDITION 3 OF THE
OCCURRENCE OF ANY POLICY.
LOSS OR DAMAGE, ALL  Geagonia then filed a
BENEFITS UNDER THIS complaint against Country
POLICY SHALL BE Bankers with the Insurance
DEEMED FORFEITED, Commission for the recovery
PROVIDED HOWEVER, of P100k under the fire
THAT THIS CONDITION insurance policy and for
SHALL NOT APPLY attorney's fees and costs of
WHEN THE TOTAL litigation.
INSURANCE OR  He attached his letter of 18
INSURANCES IN FORCE January 1991 which asked for
 the reconsideration of the
denial. that it was Cebu Tesing
 He admitted in the said letter Textiles which procured the
that at the time he obtained PFIC policies without
Country Bankers's fire informing him or securing his
insurance policy he knew that consent; and that Cebu
the two policies issued by the Tesing Textile, as his
PFIC were already in creditor, had insurable
existence; interest on the stocks.
 However, he had no
knowledge of the provision in These findings were based on
Country Bankers' policy Geagonia's testimony that he
requiring him to inform it of came to know of the PFIC
the prior policies; policies only when he filed
 This requirement was not his claim with Country
mentioned to him by Country Bankers and that Cebu
Bankers' agent; and had it Tesing Textile obtained them
been so mentioned, he would and paid for their premiums
not have withheld such without informing him
information. thereof.
 He further asserted that the
total of the amounts claimed The Insurance Commission
under the three policies was ordered Country Bankers to
below the actual value of his pay Geagonia the sum of
stocks at the time of loss, P100k
which was P1,000,000.00.
MR to IC – DENIED
COURT DECISIONS :
CA - REVERSED THE
IC - THE INSURANCE DECISION OF THE IC
COMMISSION FOUND BECAUSE IT FOUND
THAT GEAGONIA DID THAT GEAGONIA
NOT VIOLATE KNEW OF THE
CONDITION 3 AS HE EXISTENCE OF THE
HAD NO KNOWLEDGE TWO OTHER POLICIES
OF THE EXISTENCE OF ISSUED BY THE PFIC.
THE TWO FIRE
INSURANCE POLICIES
OBTAINED FROM THE
PFIC;
ISSUES: shall be payable to MESSRS.
1) Whether the non-disclosure of TESING TEXTILES, Cebu City as
other insurance policies violate their interest may appear subject to
condition 3 of the policy, so as to the terms of the policy." THIS IS
deny Geagonia from recovering on CLEARLY A SIMPLE LOSS
the policy. PAYABLE CLAUSE, NOT A
2) Whether the violation of STANDARD MORTGAGE
Condition 3 of the policy renders the CLAUSE.
policy void.
The Court concludes that (a) the
RULING: prohibition in Condition 3 of the
Condition 3 of Country Bankers's subject policy applies only to double
Policy is a condition which is not insurance, and (b) the nullity of the
proscribed by law. policy shall only be to the extent
exceeding P200,000.00 of the total
Its incorporation in the policy is policies obtained.
allowed by Section 75 of the
Insurance Code, Such a condition is The first conclusion is supported by
a provision which invariably appears the portion of the condition referring
in fire insurance policies and is to other insurance "covering any of
intended to prevent an increase in the the property or properties consisting
moral hazard. of stocks in trade, goods in process
and/or inventories only hereby
It is commonly known as the insured," and the portion regarding
additional or "other insurance" the insured's declaration on the
clause and has been upheld as valid subheading CO-INSURANCE that
and as a warranty that no other the co-insurer is Mercantile
insurance exists. Its violation would Insurance Co., Inc. in the sum of
thus avoid the policy. P50,000.00.

However, in order to constitute a A DOUBLE INSURANCE EXISTS

violation, the other insurance must WHERE THE SAME PERSON IS
be upon the same subject matter, the INSURED BY SEVERAL
same interest therein, and the same INSURERS SEPARATELY IN
risk. RESPECT OF THE SAME
SUBJECT AND INTEREST. Since
The fire insurance policies issued by the insurable interests of a mortgagor
the PFIC name Geagonia as the and a mortgagee on the mortgaged
assured and contain a mortgage property are distinct and separate;
clause which reads: "Loss, if any, the two policies of the PFIC do not
cover the same interest as that
covered by the policy of Country What it had in mind was to
Bankers, no double insurance exists. discourage over-insurance. Indeed,
The non-disclosure then of the the rationale behind the
former policies was not fatal to incorporation of "other insurance"
Geagonia's right to recover on clause in fire policies is to prevent
Country Bankers' policy. over-insurance and thus avert the
perpetration of fraud.
Held [2]: Unlike the "other
insurance" which reads "The insured When a property owner obtains
shall give notice to the company of insurance policies from two or more
any insurance or insurances already insurers in a total amount that
effected, or which may subsequently exceeds the property's value, the
be effected covering any of the insured may have an inducement to
property hereby insured, and unless destroy the property for the purpose
such notice be given and the of collecting the insurance.
particulars of such insurance or
insurances be stated in or endorsed The public as well as the insurer is
on this Policy by or on behalf of the interested in preventing a situation in
Company before the occurrence of which a fire would be profitable to
any loss or damage, all benefits the insured.
under this Policy shall be forfeited";

Condition 3 in Country Bankers'

policy F-14622 does not absolutely
declare void any violation thereof. It
expressly provides that the 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."

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, Country Bankers was
amenable to assume a co-insurer's
liability up to a loss not exceeding
P200,000.00.