34. GEAGONIA v.

CA (1995) (Double Insurance, Overinsurance, Multiple Interests)

Luciano, Noel

Facts:
1. Armando Geagonia is the owner of Norman’s Mart located in the public market of
San Francisco.
2. Geagonia obtained from Country Bankers Insurance Corp.(CBIC) a fire
insurance policy for P100,000 covering stocks-in-trade consisting principally of
dry goods such as RTWs for men and women
3. The policy contained a condition (Condition 3) that imposes upon the insured the
duty to give notice to Country Bankers of any insurance already affected, or
which may be effected, covering the same property. And unless such notice be
given and the insurer endorses before the loss or damage, all benefits under the
policy will be forfeited.
4. A fire of accidental origin completely destroyed Geagonia’s stock-in-trade.
Geagonia thus filed for the claim.
5. CBIC denied the claim because it found out that at the time of the loss, the goods
are also insured by 2 fire insurance policies at P100,000 each with Philippines
First Insurance Co. (PFIC)
a. It appears that the PFIC policies were procured by Cebu Testing Textiles in
its capacity as creditor of Geagonia as security for the former’s credit in the
form of mortgage over the said stocks-in-trade
6. Geagonia then filed a complaint against CBIC for the recovery of P100,000 under
the fire insurance policy.
7. The Insurance Commissioner found that Geagonia did not violate Condition 3 as
he had no knowledge of the existence of the 2 fire insurance policies obtained
from PFIC since it was Cebu Testing Textiles which procured the said policies
without informing him.
8. The CA reversed the finding of the Commissioner and held that Geagonia knew
of the existence of the 2 other policies issued by PFIC.

Issues: WON Geagonia is precluded from recovering from the CBIC policy for violation
of Condition 3.

Held: NO, he may recover. There is no violation of Condition 3.

Geagonia knew of the prior policies issued by PFIC. His letter to CBIC
conclusively proves this knowledge. It was indeed incredible that he did not know about
the prior policies since these policies were not new or original. In fact, these had been
renewed twice.

On Condition 3. The condition is not prescribed by law. Its incorporation in the

policy is allowed by Sec. 75 of the Insurance Code. Such condition is a provision which
appears in fire insurance policies and is intended to prevent 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. 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.

Insurable interest over mortgaged property. As to a mortgaged property, the

mortgagor and the mortgagee have each an independent insurable interest therein and
both interests may be covered by one policy, or each may take out a separate policy
covering his interest, either at the same or at separate times. The mortgagor's insurable
interest covers the full value of the mortgaged property, even though the mortgage debt
is equivalent to the full value of the property. The mortgagee's insurable interest is to the
extent of the debt, since the property is relied upon as security thereof, and in insuring
he is not insuring the property but his interest or lien thereon. His insurable interest is
prima facie the value of the mortgaged and extends only to the amount of the debt, not
exceeding the value of the mortgaged property. Thus, separate insurances covering
different insurable interests may be obtained by the mortgagor and mortgagee.

Analysis of Condition 3. After an analysis, the Court concluded that: (1) the
prohibition in Condition 3 applies only to double insurance, and (2) the nullity of the
policy shall only be to the extent exceeding P200,000 of the total policies obtained. 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 COINSURANCE that the coinsurer is Mercantile
Insurance Co., Inc. in the sum of P50,000.00.

Double Insurance. A double insurance exists where the same person is insured
by several insurers separately in respect of the same subject and interest. Since, the
insurable interests of a mortgagor and a mortgagee on the mortgaged property are
distinct and separate, 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
nondisclosure then of the former policies was not fatal to the petitioner's right to recover
on the private respondent's policy.

Petition granted. CA decision set aside. Insurance Commissioner decision reinstated.