payable becomes a debt as soon as the risk attaches.

In the PUNO, J.:
subject policy, no premium payments were made with
regard to earthquake shock coverage, except on the two Before the Court is the petition for certiorari under Rule 45 of
G.R. No. 156167. May 16, 2005.* swimming pools. There is no mention of any premium the Revised Rules of Court by petitioner GULF RESORTS,
GULF RESORTS, INC., petitioner, vs. PHILIPPINE payable for the other resort properties with regard to INC., against respondent PHILIPPINE CHARTER
CHARTER INSURANCE CORPORATION, respondent. earthquake shock. This is consistent with the history of INSURANCE CORPORATION. Petitioner assails the
petitioner’s previous insurance policies from AHAC-AIU. appellate court decision1 which dismissed its two appeals
Insurance;  It is basic that all the provisions of the
Same;  Contracts of Adhesion;  Words and Phrases;  A and affirmed the judgment of the trial court.
insurance policy should be examined and interpreted in
contract of adhesion is one wherein a party, usually a For review are the warring interpretations of petitioner
consonance with each other.—It is basic that all the
corporation, prepares the stipulations in the contract, while and respondent on the scope of the insurance company’s
provisions of the insurance policy should be examined and
the other party merely affixes his signature or his “adhesion” liability for earthquake damage to petitioner’s properties.
interpreted in consonance with each other. All its parts are
thereto; The Supreme Court will only rule out blind Petitioner avers that, pursuant to its earthquake shock
reflective of the true intent of the parties. The policy cannot
adherence to terms where facts and circumstances will endorsement rider, Insurance Policy No. 31944 covers all
be construed piecemeal. Certain stipulations cannot be
show that they are basically one-sided.—In sum, there is no damages to the properties within its resort caused by
segregated and then made to control; neither do particular
ambiguity in the terms of the contract and its riders. earthquake. Respondent contends that the rider limits its
words or phrases necessarily determine its character.
Petitioner cannot rely on the general rule that insurance liability for loss to the two swimming pools of petitioner.
Petitioner cannot focus on the earthquake shock
contracts are contracts of adhesion which should be liberally
endorsement to the exclusion of the other provisions. All the
construed in favor of the insured and strictly against the The facts as established by the court a quo, and affirmed by
provisions and riders, taken and interpreted together,
insurer company which usually prepares it. A contract of the appellate court are as follows:
indubitably show the intention of the parties to extend
adhesion is one wherein a party, usually a corporation, [P]laintiff is the owner of the Plaza Resort situated at Agoo,
earthquake shock coverage to the two swimming pools only.
prepares the stipulations in the contract, while the other La Union and had its properties in said resort insured
Same;  Elements;  Words and Phrases;  A contract of
party merely affixes his signature or his “adhesion” thereto. originally with the American Home Assurance Company
insurance is an agreement whereby one undertakes for a
Through the years, the courts have held that in these type of (AHAC-AIU). In the first four insurance policies issued by
consideration to indemnify another against loss, damage or
contracts, the parties do not bargain on equal footing, the AHAC-AIU from 1984-85; 1985-86; 1986-1987; and 1987-88
liability arising from an unknown or contingent event.—A
weaker party’s participation being reduced to the alternative (Exhs. “C”, “D”, “E” and “F”; also Exhs. “1”, “2”, “3” and “4”
careful examination of the premium recapitulation will show
to take it or leave it. Thus, these contracts are viewed as respectively), the risk of loss from earthquake shock was
that it is the clear intent of the parties to extend earthquake
traps for the weaker party whom the courts of justice must extended only to plaintiff’s two swimming pools, thus,
shock coverage only to the two swimming pools. Section
protect. Consequently, any ambiguity therein is resolved “earthquake shock endt.” (Item 5 only) (Exhs. “C-1”; “D-1,”
2(1) of the Insurance Code defines a contract of insurance
against the insurer, or construed liberally in favor of the and “E” and two (2) swimming pools only (Exhs. “C-1”; ‘D-1”,
as an agreement whereby one undertakes for a
insured. The case law will show that this Court will only rule “E” and “F-1”). “Item 5” in those policies referred to the two
consideration to indemnify another against loss, damage or
out blind adherence to terms where facts and circumstances (2) swimming pools only (Exhs. “1-B”, “2-B”, “3-B” and “F-
liability arising from an unknown or contingent event. Thus,
will show that they are basically one-sided. Thus, we have 2”); that subsequently AHAC(AIU) issued in plaintiff’s favor
an insurance contract exists where the following elements
called on lower courts to remain careful in scrutinizing the Policy No. 206-4182383-0 covering the period March 14,
concur: 1. The insured has an insurable interest; 2. The
factual circumstances behind each case to determine the 1988 to March 14, 1989 (Exhs. “G” also “G-1”) and in said
insured is subject to a risk of loss by the happening of the
efficacy of the claims of contending parties. In Development policy the earthquake endorsement clause as indicated in
designated peril; 3. The insurer assumes the risk; 4. Such
Bank of the Philippines v. National Merchandising Exhibits “C-1”, “D-1”, Exhibits “E” and “F-1” was deleted and
assumption of risk is part of a general scheme to distribute
Corporation, et al., the parties, who were acute the entry under Endorsements/Warranties at the time of
actual losses among a large group of persons bearing a
businessmen of experience, were presumed to have issue read that plaintiff renewed its policy with AHAC (AIU)
similar risk; and 5. In consideration of the insurer’s
assented to the assailed documents with full knowledge. for the period of March 14, 1989 to March 14, 1990 under
promise, the insured pays a premium.
Policy No. 206-4568061-9 (Exh. “H”) which carried the entry
Same;  Same; Same;  Premium; An insurance PETITION for review on certiorari of a decision of the Court under “Endorsement/Warranties at Time of Issue”, which
premium is the consideration paid an insurer for undertaking of Appeals. read “Endorsement to Include Earthquake Shock (Exh. “6-B-
to indemnify the insured against a specified peril.—An 1”) in the amount of P10,700.00 and paid P42,658.14 (Exhs.
insurance premium is the consideration paid an insurer for The facts are stated in the opinion of the Court. “6-A” and “6-B”) as premium thereof, computed as follows:
undertaking to indemnify the insured against a specified      Siguion Reyna,  Montecillo & Ongsiako for petitioner.
     Conrado R. Ayuyao for respondent. Ite P7,691,000.00 - on the Clubhouse only @ .
peril. In fire, casualty, and marine insurance, the premium
m 392%; TOTAL 45,159.92; computed under par. 29 of the policy (Annex “B”) until fully
and “4-A-1”; “G-2” and “5-C-1”; “6-C-1”; issued by AHAC paid;
  1,500,000.00 - on the furniture, etc.
(Exhs. “C”, “D”, “E”, “F”, “G” and “H”) and in Policy No.
contained in the
31944 issued by defendant, the shock endorsement provide 1. 2.)The sum of P428,842.00 per month, representing
building above-mentioned (sic): continuing losses sustained by plaintiff on account
@ .490%; In consideration of the payment by the insured to the of defendant’s refusal to pay the claims;
  393,000.00 - on the two swimming pools, company of the sum included additional premium the 2. 3.)The sum of P500,000.00, by way of exemplary
Company agrees, notwithstanding what is stated in the damages;
only (against the peril of
printed conditions of this policy due to the contrary, that this 3. 4.)The sum of P500,000.00 by way of attorney’s
earthquake shock only) @ insurance covers loss or damage to shock to any of the fees and expenses of litigation;
0.100% property insured by this Policy occasioned by or through or 4. 5.)Costs.11
  116,600.00 other buildings include as in consequence of earthquake (Exhs. “1-D”, “2-D”, “3-A”, “4-
B”, “5-A”, “6-D” and “7-C”); Respondent filed its Answer with Special and Affirmative
follows:
  a) Tilter House - P19,800.00 - 0.551% that in Exhibit “7-C” the word “included” above the Defenses with Compulsory Counterclaims.12
underlined portion was deleted; that on July 16, 1990 an On February 21, 1994, the lower court after trial ruled in
  b) Power House P41,000.00 - 0.551% favor of the respondent, viz.:
earthquake struck Central Luzon and Northern Luzon and
- plaintiff’s properties covered by Policy No. 31944 issued by “The above schedule clearly shows that plaintiff paid only a
  c) House Shed - P55,000.00 - 0.540% defendant, including the two swimming pools in its Agoo premium of P393.00 against the peril of earthquake shock,
  P100,000.00 for furniture, fixtures, lines Playa Resort were damaged.2 the same premium it paid against earthquake shock only on
the two swimming pools in all the policies issued by
air-con After the earthquake, petitioner advised respondent that it AHAC(AIU) (Exhibits “C”, “D”, “E”, “F” and “G”). From this
and operating equipment would be making a claim under its Insurance Policy No. fact the Court must consequently agree with the position of
31944 for damages on its properties. Respondent instructed defendant that the endorsement rider (Exhibit “7-C”) means
petitioner to file a formal claim, then assigned the that only the two swimming pools were insured against
that plaintiff agreed to insure with defendant the properties investigation of the claim to an independent claims adjuster, earthquake shock.
covered by AHAC (AIU) Policy No. 206-4568061-9 (Exh. Bayne Adjusters and Surveyors, Inc.3 On July 30, 1990, Plaintiff correctly points out that a policy of insurance is a
“H”) provided that the policy wording and rates in said policy respondent, through its adjuster, requested petitioner to contract of adhesion hence, where the language used in an
be copied in the policy to be issued by defendant; that submit various documents in support of its claim. On August insurance contract or application is such as to create
defendant issued Policy No. 31944 to plaintiff covering the 7, 1990, Bayne Adjusters and Surveyors, Inc., through its ambiguity the same should be resolved against the party
period of March 14, 1990 to March 14, 1991 for Vice-President A.R. de Leon,4 rendered a preliminary responsible therefor, i.e., the insurance company which
P10,700,600.00 for a total premium of P45,159.92 (Exh. “I”); report5 finding extensive damage caused by the earthquake prepared the contract. To the mind of [the] Court, the
that in the computation of the premium, defendant’s Policy to the clubhouse and to the two swimming pools. Mr. de language used in the policy in litigation is clear and
No. 31944 (Exh. “I”), which is the policy in question, Leon stated that “except for the swimming pools, all affected unambiguous hence there is no need for interpretation or
contained on the right-hand upper portion of page 7 thereof, items have no coverage for earthquake shocks.”6 On August construction but only application of the provisions therein.
the following: 11, 1990, petitioner filed its formal demand 7 for settlement of From the above observations the Court finds that only
the damage to all its properties in the Agoo Playa Resort. the two (2) swimming pools had earthquake shock coverage
Rate-Various   and were heavily damaged by the earthquake which struck
On August 23, 1990, respondent denied petitioner’s claim on
Premium P37,420.60 F/L the ground that its insurance policy only afforded earthquake on July 16, 1990. Defendant having admitted that the
  2,061.52 – Typhoon shock coverage to the two swimming pools of the damage to the swimming pools was
  1,030.76 – EC resort.8 Petitioner and respondent failed to arrive at a appraised by defendant’s adjuster at P386,000.00,
settlement.9 Thus, on January 24, 1991, petitioner filed a defendant must, by virtue of the contract of insurance, pay
  393.00 – ES plaintiff said amount.
complaint10 with the regional trial court of Pasig praying for
Doc. Stamps 3,068.10 the payment of the following: Because it is the finding of the Court as stated in the
F.S.T. 776.89 _\1.)The sum of P5,427,779.00, representing losses immediately preceding paragraph that defendant is liable
Prem. Tax 409.05 sustained by the insured properties, with interest thereon, as only for the damage caused to the two (2) swimming pools
and that defendant has made known to plaintiff its
willingness and readiness to settle said liability, there is no However, after carefully perusing the documentary evidence DAMAGES WITH INTEREST THEREON AT THE RATE
basis for the grant of the other damages prayed for by of both parties, We are not convinced that the last two (2) CLAIMED, ATTORNEY’S FEES AND EXPENSES OF
plaintiff. As to the counterclaims of defendant, the Court insurance contracts (Exhs. “G” and “H”), which the plaintiff- LITIGATION.
does not agree that the action filed by plaintiff is baseless appellant had with AHAC (AIU) and upon which the subject
and highly speculative since such action is a lawful exercise insurance contract with Philippine Charter Insurance Petitioner contends:
of the plaintiff’s right to come to Court in the honest belief Corporation is said to have been based and copied (Exh. First, that the policy’s earthquake shock endorsement
that their Complaint is meritorious. The prayer, therefore, of “I”), covered an extended earthquake shock insurance on all clearly covers all of the properties insured and not only the
defendant for damages is likewise denied. the insured properties. swimming pools. It used the words “any property insured by
WHEREFORE, premises considered, defendant is xxx this policy,” and it should be interpreted as all inclusive.
ordered to pay plaintiffs the sum of THREE HUNDRED We also find that the Court a quo was correct in not Second, the unqualified and unrestricted nature of the
EIGHTY SIX THOUSAND PESOS (P386,000.00) granting the plaintiff-appellant’s prayer for the imposition of earthquake shock endorsement is confirmed in the body of
representing damage to the two (2) swimming pools, with interest—24% on the insurance claim and 6% on loss of the insurance policy itself, which states that it is “[s]ubject to:
interest at 6% per annum from the date of the filing of the income allegedly amounting to P4,280,000.00. Since the Other Insurance Clause, Typhoon
Complaint until defendant’s obligation to plaintiff is fully paid. defendant-appellant has expressed its willingness to pay the Endorsement, Earthquake Shock Endt., Extended Coverage
No pronouncement as to costs.”13 damage caused on the two (2) swimming pools, as the Endt., FEA Warranty & Annual Payment Agreement On
Court a quo and this Court correctly found it to be liable only, Long Term Policies.”17
Petitioner’s Motion for Reconsideration was denied. Thus, it then cannot be said that it was in default and therefore
petitioner filed an appeal with the Court of Appeals based on liable for interest. Third, that the qualification referring to the two swimming
the following assigned errors:14 Coming to the defendant-appellant’s prayer for an pools had already been deleted in the earthquake shock
A. THE TRIAL COURT ERRED IN FINDING THAT attorney’s fees, long-standing is the rule that the award endorsement.
PLAINTIFF-APPELLANT CAN ONLY RECOVER FOR THE thereof is subject to the sound discretion of the court. Thus, Fourth, it is unbelievable for respondent to claim that it
DAMAGE TO ITS TWO SWIMMING POOLS UNDER ITS if such discretion is well-exercised, it will not be disturbed on only made an inadvertent omission when it deleted the said
FIRE POLICY NO. 31944, CONSIDERING ITS appeal (Castro, et al. v. CA, et al., G.R. No. 115838, July 18, qualification.
PROVISIONS, THE CIRCUMSTANCES SURROUNDING 2002). Moreover, being the award thereof an exception Fifth, that the earthquake shock endorsement rider
THE ISSUANCE OF SAID POLICY AND THE rather than a rule, it is necessary for the court to make should be given precedence over the wording of the
ACTUATIONS OF THE PARTIES SUBSEQUENT TO THE findings of facts and law that would bring the case within the insurance policy, because the rider is the more deliberate
EARTHQUAKE OF JULY 16, 1990. exception and justify the grant of such award (Country expression of the agreement of the contracting parties.
B. THE TRIAL COURT ERRED IN DETERMINING Bankers Insurance Corp. v. Lianga Bay and Community Sixth, that in their previous insurance policies, limits were
PLAINTIFF-APPELLANT’S RIGHT TO RECOVER UNDER Multi-Purpose Coop., Inc., G.R. No. 136914, January 25, placed on the endorsements/warranties enumerated at the
DEFENDANT-APPELLEE’S POLICY (NO. 31944; EXH “I”) 2002). Therefore, holding that the plaintiff-appellant’s action time of issue.
BY LIMITING ITSELF TO A CONSIDERATION OF THE is not baseless and highly speculative, We find that the Seventh, any ambiguity in the earthquake shock
SAID POLICY ISOLATED FROM THE CIRCUMSTANCES Court a quo did not err in granting the same. endorsement should be resolved in favor of petitioner and
SURROUNDING ITS ISSUANCE AND THE ACTUATIONS against respondent. It was respondent which caused the
OF THE PARTIES AFTER THE EARTHQUAKE OF JULY WHEREFORE, in view of all the foregoing, both appeals ambiguity when it made the policy in issue.
16, 1990. are hereby DISMISSED and judgment of the Trial Court Eighth, the qualification of the endorsement limiting the
C. THE TRIAL COURT ERRED IN NOT HOLDING hereby AFFIRMED in toto. No costs.15 earthquake shock endorsement should be interpreted as a
THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE caveat on the standard fire insurance policy, such as to
DAMAGES CLAIMED, WITH INTEREST COMPUTED AT Petitioner filed the present petition raising the following remove the two swimming pools from the coverage for the
24% PER ANNUM ON CLAIMS ON PROCEEDS OF issues:16 risk of fire. It should not be used to limit the respondent’s
POLICY. A. WHETHER THE COURT OF APPEALS CORRECTLY liability for earthquake shock to the two swimming pools
HELD THAT UNDER RESPONDENT’S INSURANCE only.
On the other hand, respondent filed a partial appeal, POLICY NO. 31944, ONLY THE TWO (2) SWIMMING Ninth, there is no basis for the appellate court to hold
assailing the lower court’s failure to award it attorney’s fees POOLS, RATHER THAN ALL THE PROPERTIES that the additional premium was not paid under the extended
and damages on its compulsory counterclaim. COVERED THEREUNDER, ARE INSURED AGAINST THE coverage. The premium for the earthquake shock coverage
After review, the appellate court affirmed the decision of RISK OF EARTHQUAKE SHOCK. was already included in the premium paid for the policy.
the trial court and ruled, thus: B. WHETHER THE COURT OF APPEALS Tenth, the parties’ contemporaneous and subsequent
CORRECTLY DENIED PETITIONER’S PRAYER FOR acts show that they intended to extend earthquake shock
coverage to all insured properties. When it secured an the AHAC-AIU policy provided by petitioner. Although the costs was given to petitioner before the adjuster knew the
insurance policy from respondent, petitioner told respondent first five policies contained the said qualification in their full coverage of its policy.
that it wanted an exact replica of its latest insurance policy rider’s title, in the last two policies, this qualification in the Petitioner anchors its claims on AHAC-AIU’s inadvertent
from American Home Assurance Company (AHAC-AIU), title was deleted. AHAC-AIU, through Mr. J. Baranda III, deletion of the phrase “Item 5 Only” after the descriptive
which covered all the resort’s properties for earthquake stated that such deletion was a mere inadvertence. This name or title of the Earthquake Shock Endorsement.
shock damage and respondent agreed. After the July 16, inadvertence did not make the policy incomplete, nor did it However, the words of the policy reflect the parties’ clear
1990 earthquake, respondent assured petitioner that it was broaden the scope of the endorsement whose descriptive intention to limit earthquake shock coverage to the two
covered for earthquake shock. Respondent’s insurance title was merely enumerated. Any ambiguity in the policy can swimming pools.
adjuster, Bayne Adjusters and Surveyors, Inc., likewise be easily resolved by looking at the other provisions, Before petitioner accepted the policy, it had the
requested petitioner to submit the necessary documents for specially the enumeration of the items insured, where only opportunity to read its conditions. It did not object to any
its building claims and other repair costs. Thus, under the the two swimming pools were noted as covered for deficiency nor did it institute any action to reform the policy.
doctrine of equitable estoppel, it cannot deny that the earthquake shock damage. The policy binds the petitioner.
insurance policy it issued to petitioner covered all of the Fourth, in its Complaint, petitioner alleged that in its Eighth, there is no basis for petitioner to claim damages,
properties within the resort. policies from 1984 through 1988, the phrase “Item 5— attorney’s fees and litigation expenses. Since respondent
Eleventh, that it is proper for it to avail of a petition for P393,000.00—on the two swimming pools only (against the was willing and able to pay for the damage caused on the
review by certiorari under Rule 45 of the Revised Rules of peril of earthquake shock only)” meant that only the two swimming pools, it cannot be considered to be in
Court as its remedy, and there is no need for calibration of swimming pools were insured for earthquake damage. The default, and therefore, it is not liable for interest.
the evidence in order to establish the facts upon which this same phrase is used in toto in the policies from 1989 to We hold that the petition is devoid of merit.
petition is based. 1990, the only difference being the designation of the two In Insurance Policy No. 31944, four key items are
On the other hand, respondent made the following swimming pools as “Item 3.” important in the resolution of the case at bar.
counter arguments:18 Fifth, in order for the earthquake shock endorsement to
First, none of the previous policies issued by AHAC-AIU be effective, premiums must be paid for all the properties First, in the designation of location of risk, only the two
from 1983 to 1990 explicitly extended coverage against covered. In all of its seven insurance policies, petitioner only swimming pools were specified as included, viz.:
earthquake shock to petitioner’s insured properties other paid P393.00 as premium for coverage of the swimming ITEM 3–393,000.00 – On the two (2) swimming pools only
than on the two swimming pools. Petitioner admitted that pools against earthquake shock. No other premium was paid (against the peril of earthquake shock only) 20
from 1984 to 1988, only the two swimming pools were for earthquake shock coverage on the other properties. In
insured against earthquake shock. From 1988 until 1990, addition, the use of the qualifier “ANY” instead of “ALL” to Second, under the breakdown for premium payments,21 it
the provisions in its policy were practically identical to its describe the property covered was done deliberately to was stated that:
earlier policies, and there was no increase in the premium enable the parties to specify the properties included for PREMIUM RECAPITULATION
paid. AHAC-AIU, in a letter19 by its representative Manuel C. earthquake coverage. ITEM NOS. AMOUNT RATES PREMIUM
Quijano, categorically stated that its previous policy, from
xxx      
which respondent’s policy was copied, covered only Sixth, petitioner did not inform respondent of its requirement
earthquake shock for the two swimming pools. that all of its properties must be included in the earthquake 3 393,000.00 0.100%-E/S 393.0022
Second, petitioner’s payment of additional premium in shock coverage. Petitioner’s own evidence shows that it only Third, Policy Condition No. 6 stated:
the amount of P393.00 shows that the policy only covered required respondent to follow the exact provisions of its 6. This insurance does not cover any loss or damage
earthquake shock damage on the two swimming pools. The previous policy from AHAC-AIU. Respondent complied with occasioned by or through or in consequence, directly or
amount was the same amount paid by petitioner for this requirement. Respondent’s only deviation from the indirectly of any of the following occurrences, namely:—
earthquake shock coverage on the two swimming pools from agreement was when it modified the provisions regarding (a) Earthquake, volcanic eruption or other convulsion of
1990-1991. No additional premium was paid to warrant the replacement cost endorsement. With regard to the issue nature.23
coverage of the other properties in the resort. under litigation, the riders of the old policy and the policy in Fourth, the rider attached to the policy, titled “Extended
issue are identical. Coverage Endorsement (To Include the Perils of Explosion,
Third, the deletion of the phrase pertaining to the limitation Seventh, respondent did not do any act or give any Aircraft, Vehicle and Smoke),” stated, viz.:
of the earthquake shock endorsement to the two swimming assurance to petitioner as would estop it from maintaining ANNUAL PAYMENT AGREEMENT ON
pools in the policy schedule did not expand the earthquake that only the two swimming pools were covered for LONG TERM POLICIES
shock coverage to all of petitioner’s properties. As per its earthquake shock. The adjuster’s letter notifying petitioner to
agreement with petitioner, respondent copied its policy from present certain documents for its building claims and repair
THE INSURED UNDER THIS POLICY HAVING an insurance contract exists where the following elements A. Yes, sir.
ESTABLISHED AGGREGATE SUMS INSURED IN concur:
CROSS EXAMINATION OF LEOPOLDO
EXCESS OF FIVE MILLION PESOS, IN CONSIDERATION
OF A DISCOUNT OF 5% OR 7 1/2 % OF THE NET MANTOHAC
1. 1.The insured has an insurable interest;
PREMIUM x x x POLICY HEREBY UNDERTAKES TO 2. 2.The insured is subject to a risk of loss by the TSN, November 25, 1991
CONTINUE THE INSURANCE UNDER THE ABOVE happening of the designated peril; pp. 23-26
NAMED x x x AND TO PAY THE PREMIUM. 3. 3.The insurer assumes the risk; Q. For the period from March 14, 1988 up to
Earthquake Endorsement 4. 4.Such assumption of risk is part of a general
In consideration of the payment by the Insured to the March 14, 1989, did you personally
scheme to distribute actual losses among a large
Company of the sum of P. . . . . . . . . . . . . . . . . additional group of persons bearing a similar risk; and arrange for the procurement of this
premium the Company agrees, notwithstanding what is 5. 5.In consideration of the insurer’s promise, the policy?
stated in the printed conditions of this Policy to the contrary, insured pays a premium.26 (Emphasis ours) A. Yes, sir.
that this insurance covers loss or damage (including loss or
damage by fire) to any of the property insured by this Policy Q. Did you also do this through your
occasioned by or through or in consequence of Earthquake. An insurance premium is the consideration paid an insurer insurance agency?
Provided always that all the conditions of this Policy shall for undertaking to indemnify the insured against a specified
peril.27 In fire, casualty, and marine insurance, the premium A. If you are referring to Forte Insurance
apply (except in so far as they may be hereby expressly
payable becomes a debt as soon as the risk attaches. 28 In Agency, yes.
varied) and that any reference therein to loss or damage by
fire should be deemed to apply also to loss or damage the subject policy, no premium payments were made with Q. Is Forte Insurance Agency a department
occasioned by or through or in consequence of regard to earthquake shock coverage, except on the two or division of your company?
Earthquake.24 swimming pools. There is no mention of any premium
payable for the other resort properties with regard to A. No, sir. They are our insurance agency.
Petitioner contends that pursuant to this rider, no earthquake shock. This is consistent with the history of Q. And they are independent of your
qualifications were placed on the scope of the earthquake petitioner’s previous insurance policies from AHAC-AIU. As company insofar as operations are
shock coverage. Thus, the policy extended earthquake borne out by petitioner’s witnesses: concerned?
shock coverage to all of the insured properties. CROSS EXAMINATION OF LEOPOLDO A. Yes, sir, they are separate entity.
MANTOHAC
It is basic that all the provisions of the insurance policy Q. But insofar as the procurement of the
should be examined and interpreted in consonance with TSN, November 25, 1991 insurance policy is concerned they are of
each other.25 All its parts are reflective of the true intent of pp. 12-13 course subject to your instruction, is that
the parties. The policy cannot be construed piecemeal. Q. Now Mr. Mantohac, will it be correct to
Certain stipulations cannot be segregated and then made to not correct?
state also that insofar as your insurance
control; neither do particular words or phrases necessarily A. Yes, sir. The final action is still with us
determine its character. Petitioner cannot focus on the policy during the period from March 4, although they can recommend what
earthquake shock endorsement to the exclusion of the other 1984 to March 4, 1985 the coverage on insurance to take.
provisions. All the provisions and riders, taken and earthq uake shock was limited to the two
interpreted together, indubitably show the intention of the Q. In the procurement of the insurance
swimming pools only?
parties to extend earthquake shock coverage to the two police (sic) from March 14, 1988 to March
swimming pools only. A. Yes, sir. It is limited to the two swimming 14, 1989, did you give written
pools, specifically shown in the warranty,   instruction to Forte Insurance Agency
A careful examination of the premium recapitulation will there is a provision here that it was only
show that it is the clear intent of the parties to extend advising it that the earthquake shock
for item 5.
earthquake shock coverage only to the two swimming pools. coverage must extend to all properties of
Section 2(1) of the Insurance Code defines a contract of Q. More specifically Item 5 states the Agoo Playa Resort in La Union?
insurance as an agreement whereby one undertakes for a amount of P393,000.00 corresponding to A. No, sir. We did not make any written
consideration to indemnify another against loss, damage or the two swimming pools only?
liability arising from an unknown or contingent event. Thus, instruction, although we made an oral
 instruction to that effect of extending the the riders, clauses, warranties or endorsements to which the against earthquake shock as provided for in
policy is subject, as required under Section 50, paragraph 2
coverage on (sic) the other properties of each of the six (6) policies extend to the two (2)
of the Insurance Code.
the company. We also hold that no significance can be placed on the swimming pools only?
Q. And that instruction, according to you, deletion of the qualification limiting the coverage to the two WITNESS:
was very important because in April 1987 swimming pools. The earthquake shock endorsement   Because it says here in the policies, in the
cannot stand alone. As explained by the testimony of Juan
there was an earthquake tremor in La enumeration “Earthquake Shock Endorsement,
Baranda III, underwriter for AHAC-AIU:
Union? in the Clauses and Warranties: Item 5 only
DIRECT EXAMINATION OF JUAN BARANDA III30
A. Yes, sir. (Earthquake Shock Endorsement),” sir.
TSN, August 11, 1992
Q. And you wanted to protect all your ATTY. MEJIA:
pp. 9-12
properties against similar tremors in the   Witness referring to Exhibit “C-1”, your Honor.
Atty. Mejia:
[future], is that correct? WITNESS:
  We respectfully manifest that the same Exhibits
A. Yes, sir.   We do not normally cover earthquake shock
“C” to “H” inclusive have been previously
Q. Now, after this policy was delivered to endorsement on stand alone basis. For
marked by counsel for defendant as Exhibit[s]
you did you bother to check the swimming pools we do cover earthquake
“1-6” inclusive. Did you have occasion to
provisions with respect to your shock. For building we covered it for full
review of (sic) these six (6) policies issued by
instructions that all properties must be earthquake coverage which includes
your company [in favor] of Agoo Playa Resort?
covered again by earthquake shock earthquake shock…
WITNESS:
endorsement? COURT:
Q. Yes[,] I remember having gone over these
A. Are you referring to the insurance policy   As far as earthquake shock endorsement you
policies at one point of time, sir.
issued by American Home Assurance do not have a specific coverage for other things
  Now, wach (sic) of these six (6) policies
Company marked Exhibit “G”? other than swimming pool? You are covering
marked in evidence as Exhibits “C” to “H”
Atty. Mejia: Yes. building? They are covered by a general
respectively carries an earthquake shock
Witness   insurance?
endorsement[?] My question to you is, on the
: WITNESS:
basis on (sic) the wordings indicated in Exhibits
A. I examined the policy and seeing that the   Earthquake shock coverage could not stand
“C” to “H” respectively what was the extent of
warranty on the earthquake shock alone. If we are covering building or another we
the covera ge [against] the peril of earthquake
endorsement has no more limitation can issue earthquake shock solely but that the
shock as provided for in each of the six (6)
referring to the two swimming pools only, moment I see this, the thing that comes to my
policies?
I was contented already that the previous mind is either insuring a swimming pool,
  xxx
limitation pertaining to the two swimming foundations, they are normally affected by
WITNESS:
pools was already removed. earthq uake but not by fire, sir.
  The extent of the coverage is only up to the two
Petitioner also cited and relies on the attachment of the DIRECT EXAMINATION OF JUAN BARANDA III
phrase “Subject to: Other Insurance Clause, Typhoon (2) swimming pools, sir.
TSN, August 11, 1992
Endorsement, Earthquake Shock Endorsement, Q. Is that for each of the six (6) policies namely:
Extended Coverage Endorsement, FEA Warranty & pp. 23-25
Exhibits “C”, “D”, “E”, “F”, “G” and “H”?
Annual Payment Agreement on Long Term Policies” 29 to Q. Plaintiff’s witness, Mr. Mantohac testified and
A. Yes, sir.
the insurance policy as proof of the intent of the parties to he alleged that only Exhibits “C”, “D”, “E” and
extend the coverage for earthquake shock. However, this ATTY. MEJIA:
“F” inclusive [remained] its coverage against
phrase is merely an enumeration of the descriptive titles of   What is your basis for stating that the coverage
 earthquake shock to two (2) swimming pools WITNESS: yours Mr. Witness, what exactly did you tell
only but that Exhibits “G” and “H” re   No, we don’t, sir. Atty. Omlas (sic) to copy from Exhibit “H” for
spectively extend the coverage against Q. That is why the phrase “earthquake shock to purposes of procuring the policy from Philippine
earthquake shock to all the properties indicated the two (2) swimming pools only” was placed, Charter Insurance Corporation?
in the respective schedules attached to said is it not? A. I told him that the insurance that they will have
policies, what can you say about that testimony A. Yes, sir. to get will have the same provisions as this
of plaintiff’s witness? ATTY. ANDRES: American Home Insurance Policy No. 206-
WITNESS:       Will you not also agree with me that these 4568061-9.
  As I have mentioned earlier, earthquake shock exhibits, Exhibits “G” and “H” which you have Q. You are referring to Exhibit “H” of course?
cannot stand alone without the other half of it. I pointed to during your direct-examination, the A. Yes, sir, to Exhibit “H”.
assure you that this one covers the two phrase “Item no. 5 only” meaning to (sic) the Q. So, all the provisions here will be the same
swimming pools with respect to earthquake two (2) swimming pools was deleted from the except that of the premium rates?
shock endorsement. Based on it, if we are policies issued by AIU, is it not? A. Yes, sir. He assured me that with regards to the
going to look at the premium there has been no   xxx insurance premium rates that they will be
change with respect to the rates. Everytime ATTY. ANDRES: charging will be limited to this one. I (sic) can
(sic) there is a ren ewal if the intention of the   As an insurance executive will you not attach even be lesser.
insurer was to include the earthquake shock, I any significance to the deletion of the qualifying CROSS EXAMINATION OF LEOPOLDO
think there is a substantial increase in the phrase for the policies? MANTOHAC
premium. We are not only going to consider the WITNESS: TSN, January 14, 1992
two (2) swimming pools of the other as stated   My answer to that would be, the deletion of that pp. 12-14
in the policy. As I see, there is no increase in particular phrase is inadvertent. Being a Atty. Mejia:
the amount of the premium. I must say that the company underwriter, we do not cover. . it was Q. Will it be correct to state[,] Mr. Witness, that you
coverage was not broaden (sic) to include the inadvertent because of the previous policies made a comparison of the provisions and scope
other items. that we have issued with no specific of coverage of Exhibits “I” and “H” sometime in
COURT: attachments, premium rates and so on. It was the third week of March, 1990 or thereabout?
  They are the same, the premium rates? inadvertent, sir. A. Yes, sir, about that time.
WITNESS: The Court also rejects petitioner’s contention that Q. And at that time did you notice any discrepancy
respondent’s contemporaneous and subsequent acts to the
  They are the same in the sence (sic), in the or difference between the policy wordings as
issuance of the insurance policy falsely gave the petitioner
amount of the coverage. If you are going to do assurance that the coverage of the earthquake shock well as scope of coverage of Exhibits “I” and “H”
some computation based on the rates you will endorsement included all its properties in the resort. respectively?
arrive at the same premiums, your Honor. Respondent only insured the properties as intended by the A. No, sir, I did not discover any difference
petitioner. Petitioner’s own witness testified to this
CROSS-EXAMINATION OF JUAN BARANDA III inasmuch (sic) as I was assured already that
agreement, viz.:
TSN, September 7, 1992 the policy wordings and rates were copied from
CROSS EXAMINATION OF LEOPOLDO
pp. 4-6 the insurance policy I sent them but it was only
MANTOHAC
ATTY. ANDRES: when this case erupted that we discovered
TSN, January 14, 1992
  Would you as a matter of practice [insure] some discrepancies.
pp. 4-5
swimming pools for fire insurance? Q. With respect to the items declared for insurance
Q. Just to be clear about this particular answer of
 coverage did you notice any discrepancy at any confirmed to me indeed only Item 3 which were factual circumstances behind each case to determine the
efficacy of the claims of contending parties. In Development
time between those indicated in Exhibit “I” and the two swimming pools have coverage for
Bank of the Philippines v. National Merchandising
those indicated in Exhibit “H” respectively? earthquake shock. Corporation, et al.,35 the parties, who were acute
A. With regard to the wordings I did not notice any   xxx businessmen of experience, were
difference because it was exactly the same Q. Now, may we know from you Engr. de Leon presumed to have assented to the assailed documents with
full knowledge.
P393,000.00 on the two (2) swimming pools your basis, if any, for stating that except for the
We cannot apply the general rule on contracts of
only against the peril of earthq uake shock swimming pools all affected items have no adhesion to the case at bar. Petitioner cannot claim it did not
which I understood before that this provision will coverage for earthquake shock? know the provisions of the policy. From the inception of the
have to be placed here because this particular   xxx policy, petitioner had required the respondent to
copy verbatim the provisions and terms of its latest
provision under the peril of earthquake shock A. I based my statement on my findings, because
insurance policy from AHAC-AIU. The testimony of Mr.
only is requested because this is an insurance upon my examination of the policy I found out Leopoldo Mantohac, a direct participant in securing the
policy and therefore cannot be insured against that under Item 3 it was specific on the wordings insurance policy of petitioner, is reflective of petitioner’s
fire, so this has to be placed. that on the two swimming pools only, then knowledge, viz.:
The verbal assurances allegedly given by respondent’s enclosed in parenthesis (against the peril[s] of DIRECT EXAMINATION OF LEOPOLDO
representative Atty. Umlas were not proved. Atty. Umlas MANTOHAC36
earthquake shock only), and secondly, when I
categorically denied having given such assurances.
examined the summary of premium payment TSN, September 23, 1991
Finally, petitioner puts much stress on the letter of only Item 3 which refers to the swimming pools pp. 20-21
respondent’s independent claims adjuster, Bayne Adjusters have a computation for premium payment for Q. Did you indicate to Atty. Omlas (sic) what kind
and Surveyors, Inc. But as testified to by the representative of policy you would want for those facilities in
earthquake shock and all the other items have
of Bayne Adjusters and Surveyors, Inc., respondent never
no computation for payment of premiums. Agoo Playa?
meant to lead petitioner to believe that the endorsement for
earthquake shock covered properties other than the two A. Yes, sir. I told him that I will agree to that
swimming pools, viz.: In sum, there is no ambiguity in the terms of the contract and renewal of this policy under Philippine Charter
its riders. Petitioner cannot rely on the general rule that
DIRECT EXAMINATION OF ALBERTO DE LEON Insurance Corporation as long as it will follow
insurance contracts are contracts of adhesion which should
(Bayne Adjusters and Surveyors, Inc.) be liberally construed in favor of the insured and strictly the same or exact provisions of the previous
TSN, January 26, 1993 against the insurer company which usually prepares it.31 A insurance policy we had with American Home
pp. 22-26 contract of adhesion is one wherein a party, usually a Assurance Corporation.
corporation, prepares the stipulations in the contract, while
Q. Do you recall the circumstances that led to your Q. Did you take any step Mr. Witness to ensure
the other party merely affixes his signature or his “adhesion”
discussion regarding the extent of coverage of thereto. Through the years, the courts have held that in that the provisions which you wanted in the
the policy issued by Philippine Charter these type of contracts, the parties do not bargain on equal American Home Insurance policy are to be
Insurance Corporation? footing, the weaker party’s participation being reduced to the incorporated in the PCIC policy?
alternative to take it or leave it. Thus, these contracts are
A. I remember that when I returned to the office A. Yes, sir.
viewed as traps for the weaker party whom the courts of
after the inspection, I got a photocopy of the justice must protect.32 Consequently, any ambiguity therein Q. What steps did you take?
insurance coverage policy and it was indicated is resolved against the insurer, or construed liberally in favor A. When I examined the policy of the Philippine
under Item 3 specifically that the coverage is of the insured.33 Charter Insurance Corporation I specifically told
The case law will show that this Court will only rule out
only for earthquake shock. Then, I rem ember I him that the policy and wordings shall be copied
blind adherence to terms where facts and circumstances will
had a talk with Atty. Umlas (sic), and I relayed show that they are basically one-sided.34 Thus, we have from the AIU Policy No. 206-4568061-9.
to him what I had found out in the policy and he called on lower courts to remain careful in scrutinizing the
Respondent, in compliance with the condition set by the
petitioner, copied AIU Policy No. 206-4568061-9 in drafting
its Insurance Policy No. 31944. It is true that there was
variance in some terms, specifically in the replacement cost
endorsement, but the principal provisions of the policy
remained essentially similar to AHAC-AIU’s policy.
Consequently, we cannot apply the “fine print” or “contract of
adhesion” rule in this case as the parties’ intent to limit the
coverage of the policy to the two swimming pools only is not
ambiguous.37
IN VIEW WHEREOF, the judgment of the Court of
Appeals is affirmed. The petition for certiorari is dismissed.
No costs.
SO ORDERED.
     Austria-Martinez, Callejo, Sr., Tinga and Chico-
Nazario, JJ., concur.
Petition dismissed, judgment affirmed.
Notes.—In an accident insurance, the insured’s
beneficiary has the burden of proof in demonstrating that the
cause of death is due to the covered peril. (Vda. de Gabriel
vs. Court of Appeals, 264 SCRA 137 [1996])
It is usually the man who insures himself with the wife or
future wife as beneficiary instead of the other way around.
(People vs. Yip Wai Ming, 264 SCRA 224 [1996])