Pacific Timber Export Corp v. CA and Workmens Insurance Company, Inc. No.

L-38613 February 25, 1982 De Castro, J. Doctrine: A cover note issued in advance of the issuance of a marine policy is binding as an insurance contract although no separate premium was paid. Nature: Petition to review the decision of the Court of Appeals Facts: March 19, 1963 Pacific Timber Export Corp secured temporary insurance from Workmens Insurance Company for its exportation of 1,250,000 board feet of Philippine lauan and Apitong logs to be shipped from Diapitan Bay, Quezon Province to Okinawa and Tokyo, Japan o Cover Note No. 1010 was issued insuring the said cargo subject to the terms and conditions of the 2 marine cargo policies issued on April 2, 1963 March 29, 1963 after the issuance of the cover note but before the issuance of the two marine policies, some of the logs intended to be exported were lost during loading operations in the Diapitan Bay. April 4, 1963 Pacific Timber in a letter informed the insurance company about the loss of approximately 32 pieces of logs during loading, which letter the insurance company received on April 15; and subsequently submitted a claim amounting to P19,286.79 July 17, 1963 Workmens Insurance requested the First Philippine Adjustment Corp to inspect the loss and assess the damage. The adjustment company submitted its Report on August 23, 1963 and found that the loss of 30 pcs of logs is not covered by the policies. However, the loss of 30 pcs of logs is within the 1,250,000 board feet covered by the Cover Note. It submitted a computation of the probable liability of the insurance company in the amount of P11,042.04. January 13, 1964 the claim was denied on the ground that the investigation revealed that the entire shipment logs covered by two marine policies were received in good order at their point of destination. It further stated that the said loss may not be considered as covered under the Cover Note because the said Note had become null and void by virtue of the issuance of the Marine policies. The denial of the claim was brought to the Insurance Commissioner and the Commissioner observed that it is only fair and equitable to indemnify the insured under the Cover Note and advised early settlement of the said marine loss and salvage claim. June 26, 1964 the insurance company informed the Insurance Commissioner that it is denying the claim on the ground that the cover note is null and void for lack of valuable consideration. Issue: Was the Insurance Company correct in denying the claim based on the Cover Note issued without consideration? No. Ruling: The Cover Note was not without consideration.

The Cover Note was issued with a consideration when, by express stipulation, the cover note is made subject to the terms and conditions of the marine policies, and the payment of premiums is one of the terms of the policies. o The fact that no separate premium was paid on the Cover Note before the loss insured against occurred, does not militate against the validity of petitioners contention, for no such premium could have been paid, since by the nature of the Cover Note, it did not contain, as all Cover Notes do not contain particulars of the shipment that would serve as basis for the computation of the premiums. o No separate premiums are intended or required to be paid on a Cover Note. o The petitioner paid in full all the premiums after the issuance of the two regular marine insurance policies, thereby leaving no account unpaid due on the insurance coverage, which must be deemed to include the Cover Note. The adjuster went as far as submitting his report to respondent, as well as its computation of the liability on the insurance coverage. The non-payment of premium on the Cover Note is, therefore, no cause for the petitioner to lose what is due it as if there had been payment of premium, for non-payment by it was not chargeable against its fault. The liability on the note would have been already arisen even before payment of premium. This is how the cover note as a binder should legally operate, otherwise, it would serve no practical purpose. o It is supported by the doctrine that where a policy is delivered without requiring payment of the premium, the presumption is that a credit was intended and policy is valid. The defense of delay cannot be sustained. o The law requires this ground of delay to be promptly and specifically asserted when a claim on the insurance agreement is made. o In this case, instead of invoking the ground of delay, it took steps clearly indicative that this particular ground for objection to the claim was never in its mind. Sec 84 of the Insurance Act provides: o Sec. 84 Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of his or if he omits to take objection promptly and specifically upon that ground. o Waiver can successfully be raised against private respondent. o