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133 Fieldmen's Insurance v. Asian Surety MP

1) Asian Surety ceded 7 insurance agreements to Fieldmen's Insurance between 1960-1961. Fieldmen's later attempted to terminate the agreement effective December 31, 1961. 2) In February 1962, a fire damaged a GSIS property that was covered by one of the ceded policies from July 1961-July 1962. Asian sought coverage from Fieldmen's. 3) The Supreme Court ruled Fieldmen's was still liable because the policy covering the GSIS property was already in effect prior to the termination of the agreement between the companies. Any cessions in place at termination must be honored until their natural expiry dates.

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Jovelan V. Escaño
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91 views1 page

133 Fieldmen's Insurance v. Asian Surety MP

1) Asian Surety ceded 7 insurance agreements to Fieldmen's Insurance between 1960-1961. Fieldmen's later attempted to terminate the agreement effective December 31, 1961. 2) In February 1962, a fire damaged a GSIS property that was covered by one of the ceded policies from July 1961-July 1962. Asian sought coverage from Fieldmen's. 3) The Supreme Court ruled Fieldmen's was still liable because the policy covering the GSIS property was already in effect prior to the termination of the agreement between the companies. Any cessions in place at termination must be honored until their natural expiry dates.

Uploaded by

Jovelan V. Escaño
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Fieldmen’s Insurance v.

Asian Surety
GR L-23447, July 31, 1970

Emergency Recit:
Asian Surety ceded 7 insurance agreements to Fieldmen’s Insurance. Fieldmen’s eventually
terminated the agreement. However, after the expiration of the agreement between the parties, a
fire burned GSIS properties covered by one of the agreements. The SC held that Fieldmen’s is liable
because the policy involving the properties was already in effect prior to the termination of the
agreement between Asian Surety and Fieldmen’s. As such, the term of the GSIS policy must be
honored since it was still in effect even after the termination of the agreement.

Facts:
 Between April 11, 1960-January 9, 1961, Asian Surety and Fieldmen’s Insurance entered into 7
reinsurance agreements
 These agreements would be in force until cancelled by either party (with at least 3 months
prior notice). Once a notice of cancellation is sent, such cancellation takes effect on Dec. 31 of
that year.
 Sep. 19, 1961: Fieldmen’s gave notice to Asian that it wanted to be released from the
agreement, to be effective Dec. 31, 1961.
 This letter was received by Asian Surety on Sep. 25, 1961. Asian Surety did not reply.
 Dec. 7, 1961: Fieldmen’s sent another letter, restating its position that it would no longer be at
risk for any reinsurance/cession given by Asian until Dec. 31, 1961.
 Feb. 17, 1962: Fieldmen’s reminded Asian of the Dec. 7 letter and cancellation of all reinsurance
treaties and cessions.
 February 16, 1962: Meanwhile, GSIS property was burned. This GSIS property was covered by one
of the cessions (an insurance policy effective from July 1, 1961-July 1, 1962)
 Asian then notified Fieldmen’s of the loss, and sought to pass the liability to Fieldmen’s.
 Asian stated that their agreement was still in effect because there was no prior 3-month notice
of cancellation, because they counted the period from the Dec. 7 letter.
 Fieldmen’s, however, stated that their first notice was given on Sep. 19, hence the 3-month
notice was sufficient to terminate the contract on Dec. 31 of that year.
 Asian Surety says it never received the Sep. 19 letter, and even if it did, the letter only stated a
desire to cancel the treaties, not a formal notice of cancellation.
 RTC ruled in favor of Asian Surety. Fieldmen’s is liable because the GSIS policy was
already in effect (July 1, 1961-July 1, 1962) prior to the cancellation. CA affirmed.
Issue: Was Fieldmen’s still liable for the cessions issued prior to the termination of the
contracts?
Held: YES. CA decision affirmed.
 Under their agreement (Art. 10 of the Facultative-Obligatory Reinsurance Treaty Fire), it
provides that: in the event of termination of the agreement, Fieldmen’s liability under current
cessions shall continue in full force and effect until their natural expiry.
 It can be seen from the agreements that mere cancellation of the agreements does not mean
that Fieldmen’s liability stops.
 Any cession in effect must be honored until the cession’s expiry date.
 Since the cession covering the GSIS property was in effect from July 1, 1961, Fieldmen’s was
liable thereon because it was an agreement was already in place when Fieldmen’s sought to
terminate the agreement.

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