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Insurance Case Digest: Pacific Timber v. CA (1982)

G.R. No. L-38613  February 25, 1982

Lessons Applicable: Rules on cover notes (if premium CANNOT yet be computed) (Insurance)
Laws Applicable: Section 84 of the Insurance Code


  • March 19, l963: Pacific Timber secured temporary insurance from Workmen's Insurance Company, Inc. for its exportation of 1,250,000 board feet of Philippine Lauan and Apitong logs to be shipped from the Diapitan Bay, Quezon Province to Tokyo, Japan.
  • Workmen's  issued Cover Note insuring the cargo "Subject to the Terms and Conditions of the Workmen's Insurance Company, Inc."
  • April 2, 1963: regular marine cargo policies were issued for a total of 1,195.498 bd. ft.  Due to the bad weather some of the logs were lost during loading operations.  45 pieces of logs were salvaged, but 30 pieces were lost.  Pacific informed Workmen's who refused stating that the logs covered in the 2 marine policies were received in good order at the point of destination and that the cover note was null and void upon the issuance of the Marine Policies
  • CFI: cover note is valid
  • CA:  reversed
ISSUE: W/N the cover note is valid despite the absence of premium payment upon it

HELD: YES. CA set aside. CFI reinstated

  • it was not necessary to ask for payment of the premium on the Cover Note , for the loss insured against having already occurred, the more practical procedure is simply to deduct the premium from the amount due on the Cover Note
  • Had all the logs been lost during the loading operations, but after the issuance of the Cover Note, liability on the note would have already arisen even before payment of premium
  • cover note as a "binder"
    • 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
  • it sent its adjuster to investigate and assess the loss to determine if petitioner was guilty of delay in communicating the loss but there was none
  • Section 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