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ARMANDO GEAGONIA v. CA

FACTS:

Armando Geagonia, the petitioner, is the owner of Norman's Mart located in San Francisco, Agusan del Sur. On December 22, 1989, he obtained a fire insurance policy from Country Bankers Insurance Corporation for P100,000. The policy covered his stocks-in-trade consisting of dry goods and other items. Geagonia declared in the policy that Mercantile Insurance Co., Inc. was the co-insurer for P50,000. Geagonia had other fire insurance policies from the Philippines First Insurance Co., Inc. for P100,000 each, with Cebu Tesing Textiles listed as the mortgagee.

In May 1990, a fire broke out, destroying Geagonia's stocks-in-trade. He filed a claim with Country Bankers but it was denied because it was found that Geagonia's stocks were also covered by the PFIC policies at the time of the loss. Geagonia filed a complaint against Country Bankers before the Insurance Commission, asserting that he had no knowledge of the PFIC policies and that Cebu Tesing Textiles obtained them without informing him. The Insurance Commission ruled in favor of Geagonia, ordering Country Bankers to pay him P100,000 with interest and attorney's fees. Country Bankers appealed to the Court of Appeals, which reversed the decision, stating that Geagonia knew about the PFIC policies and violated Condition 3 of the Country Bankers policy. Geagonia then filed a petition before the Supreme Court.

ISSUES:

  1. Whether or not the petitioner had prior knowledge of the two insurance policies issued by the PFIC when he obtained the fire insurance policy from the private respondent, thereby violating Condition 3 of the policy.

  2. If the petitioner had knowledge of the prior policies, whether he is precluded from recovering under the fire insurance policy.

  3. Whether the loss payable clause in the insurance policies is a simple loss payable clause or a standard mortgage clause.

  4. Whether the violation of Condition 3 of the policy would result in the forfeiture of insurance coverage.

  5. Whether there is double insurance in this case.

  6. Whether or not the insured has the right to recover the total amount of insurance from multiple insurers despite the property's value being less than the total amount of insurance.

  7. Whether or not the insured has the right to double recovery by claiming from multiple insurers.

RULING:

  1. The Court of Appeals disagreed with the Insurance Commission's finding that the petitioner had no knowledge of the prior policies. The Court of Appeals found that the petitioner did have knowledge of the prior policies based on his letter to the private respondent. The Court held that the petitioner's letter, which was attached to his complaint and made an integral part thereof, was a judicial admission and binding on the petitioner. Therefore, the petitioner is precluded from denying knowledge of the prior policies.

  2. The Court of Appeals ruled that the petitioner is precluded from recovering under the fire insurance policy due to his violation of Condition 3 of the policy which prohibits other insurances on the same subject matter, interest, and risk. This condition is allowed by Section 75 of the Insurance Code and has been upheld as valid. Since the prior policies were on the same subject matter, interest, and risk, the petitioner's violation of Condition 3 avoids the fire insurance policy.

  3. The loss payable clause in the insurance policies is a simple loss payable clause, not a standard mortgage clause.

  4. The violation of Condition 3 of the policy would not result in the forfeiture of insurance coverage. The nullity of the policy would only apply to the extent exceeding P200,000.00 of the total policies obtained.

  5. There is no double insurance in this case since the insurable interests of the mortgagor and the mortgagee on the mortgaged property are distinct and separate.

  6. No, the insured does not have the right to recover the total amount of insurance from multiple insurers when the property's value is less than the total amount of insurance.

  7. No, the insured does not have the right to double recovery by claiming from multiple insurers.

PRINCIPLES:

  • Judicial admission is a conclusive statement or concession made by a party in a case, either in the pleadings or through evidence, which is binding on the party making it.

  • Insurance policies may include conditions that declare a violation of specified provisions as grounds for voiding the policy. Such conditions are valid and aimed at preventing an increase in moral hazard.

  • The additional or "other insurance" clause in fire insurance policies is intended to prevent multiple insurances on the same subject matter, interest, and risk. Violation of this clause avoids the policy.

  • In the case of a mortgaged property, both the mortgagor and mortgagee have independent insurable interests. Separate insurances covering different interests may be obtained by both parties.

  • The mortgagee can be made the beneficial payee in a fire insurance policy through various methods, such as assignment of the policy, a mortgage clause in the policy, or attaching a rider or standard mortgage clause.

  • The principle of indemnity prohibits the insured from recovering more than the actual loss or the value of the property insured.

  • The doctrine of overinsurance prevents the insured from obtaining insurance policies that exceed the property's value for the purpose of profiting from its destruction.

  • The insurer and the public have an interest in preventing situations where the insured would have an inducement to destroy the property for the purpose of collecting insurance.