Gulf Resorts, Inc. v. Philippine Charter Insurance Corporation
REITERATIONFacts
The Antecedents: Gulf Resorts, Inc. (petitioner) owned Plaza Resort and had its properties insured. Initially, insurance policies from American Home Assurance Company (AHAC-AIU) from 1984-1988 extended earthquake shock coverage only to petitioner's two swimming pools. Subsequently, AHAC-AIU issued policies where the earthquake endorsement clause was either deleted or included with specific limitations. For the period March 14, 1989, to March 14, 1990, a policy included an endorsement to include earthquake shock. Petitioner then obtained Policy No. 31944 from Philippine Charter Insurance Corporation (respondent) for the period March 14, 1990, to March 14, 1991, with a premium breakdown showing a specific amount for earthquake shock (ES). On July 16, 1990, an earthquake struck Central and Northern Luzon, damaging petitioner's properties, including the two swimming pools. Procedural History: Petitioner filed a claim with respondent for damages to all its properties. Respondent denied the claim, asserting that the policy only covered the two swimming pools for earthquake shock. The Regional Trial Court (RTC) ruled in favor of the respondent, ordering payment only for the damage to the swimming pools (P386,000.00). The Court of Appeals (CA) affirmed the RTC's decision, dismissing both petitioner's and respondent's appeals. The Petition: Petitioner filed a petition for certiorari with the Supreme Court, assailing the CA's decision, arguing that the earthquake shock endorsement covered all insured properties and not just the swimming pools, and that the CA erred in denying its prayer for other damages, interest, attorney's fees, and expenses of litigation.
Issue(s)
Whether the Court of Appeals correctly held that under respondent's Insurance Policy No. 31944, only the two (2) swimming pools, rather than all the properties covered thereunder, are insured against the risk of earthquake shock. Whether the Court of Appeals correctly denied petitioner's prayer for damages with interest thereon at the rate claimed, attorney's fees and expenses of litigation.
Ruling
The petition is devoid of merit. The judgment of the Court of Appeals is affirmed, and the petition for certiorari is dismissed.
Ratio Decidendi
On the extent of earthquake shock coverage: The Court held that Insurance Policy No. 31944, including its riders and endorsements, must be interpreted as a whole to ascertain the parties' true intent. Key provisions, including the designation of Item 3 specifying "On the two (2) swimming pools only (against the peril of earthquake shock only)" and the premium recapitulation showing a specific premium of P393.00 for earthquake shock (E/S) on Item 3, clearly indicated that the coverage was limited to the two swimming pools. The Court emphasized that an insurance premium is the consideration for the insurer's promise to indemnify, and no premium was paid for earthquake shock coverage on other properties. This was consistent with the history of previous policies from AHAC-AIU, where coverage was also limited to the swimming pools. The deletion of a qualifying phrase in a rider was deemed inadvertent and did not expand the coverage, especially when other policy provisions and the lack of corresponding premium payments indicated a contrary intent. The Court rejected the argument that the policy was a contract of adhesion to be liberally construed in favor of the insured, as the petitioner, being an experienced businessman, had the opportunity to review the policy and had specifically requested that it mirror its previous policy from AHAC-AIU, which also limited the coverage. On the denial of other damages, interest, attorney's fees, and expenses of litigation: The Court affirmed the appellate court's denial of these claims. Since the respondent was willing and able to pay for the damage to the two swimming pools, it was not considered in default, thus negating liability for interest. Furthermore, the award of attorney's fees is discretionary and requires findings of fact and law justifying its grant, which were not sufficiently established in this case. The Court found no basis to grant exemplary damages or litigation expenses as the respondent's action was not baseless or filed in bad faith.
Main Doctrine
The interpretation of an insurance policy, including its riders and endorsements, must consider all provisions in consonance with each other to ascertain the true intent of the parties. The payment of premium is a crucial element in the assumption of risk by the insurer, and the absence of premium for a specific peril on certain properties indicates that such peril is not covered for those properties.