GR 156167; (May, 2005) (Digest)
G.R. No. 156167 ; May 16, 2005
GULF RESORTS, INC., petitioner, vs. PHILIPPINE CHARTER INSURANCE CORPORATION, respondent.
FACTS
Petitioner Gulf Resorts, Inc. owned the Agoo Playa Resort in La Union. Its properties were originally insured with American Home Assurance Company (AHAC). The first four AHAC policies (1984-1988) explicitly limited earthquake shock coverage to the resort’s two swimming pools only, as indicated by the endorsement “earthquake shock endt. (Item 5 only),” with Item 5 referring solely to the pools. A subsequent AHAC policy (1988-1989) deleted this endorsement, and the next renewal (1989-1990) included a general “Endorsement to Include Earthquake Shock.” When petitioner later obtained Policy No. 31944 from respondent Philippine Charter Insurance Corporation for 1990-1991, it stipulated that the policy wording and rates be copied from the latest AHAC policy. The issued policy contained a breakdown showing a premium of only P393.00 for “ES” (Earthquake Shock), identical to the premium historically charged exclusively for the two swimming pools.
On July 16, 1990, an earthquake damaged the resort’s properties, including the clubhouse and swimming pools. Petitioner claimed for all damaged properties. Respondent denied the claim, contending coverage was limited to the two swimming pools. The trial court ruled for the respondent, a decision affirmed by the Court of Appeals.
ISSUE
Whether Insurance Policy No. 31944 issued by respondent covers all resort properties for earthquake damage, or is limited to the two swimming pools only.
RULING
The Supreme Court ruled that the earthquake shock coverage under Policy No. 31944 is limited to the two swimming pools. The legal logic rests on the principle that insurance contracts are construed based on the parties’ intent as manifested by the clear terms of the policy. The policy’s premium breakdown distinctly listed a separate and specific premium of P393.00 for “ES,” which corresponded exactly to the premium amount historically and exclusively allocated for earthquake coverage on the swimming pools in all preceding policies. This consistent practice established a mutual understanding of the coverage limitation.
The Court rejected petitioner’s argument for a broader interpretation, noting the policy was not a contract of adhesion in this instance. Petitioner had specifically required respondent to copy the terms and wordings from the prior AHAC policy. The intent to limit coverage was therefore clear and unambiguous from the policy’s face and the consistent premium structure. Consequently, respondent’s liability for earthquake damage was correctly confined to the two swimming pools. The petition was denied.