GULF RESORTS, INC. vs.

PHILIPPINE CHARTER INSURANCE CORPORATION

G.R. No. 156167. May 16, 2005

Facts: Petitioner Gulf Resorts who owned Playa Resorts, entered into an insurance contract with
the respondent American Home Assurance Company which insured Plaza Resort’s properties
against loss or damage due to earthquakes. An earthquake struck Central Luzon and Northern
Luzon and the properties in Playa Resort were damaged including the two swimming pools. Gulf
Resorts filed a demand for settlement of the damage to all of its properties in the Agoo Playa
Resort, but American Home Assurance Company denied on the ground that its insurance policy
only covered the two swimming pools of Playa Resort against earthquake shock, and not the other
properties damaged by the said earthquake. Gulf Resort contended that pursuant to this rider, no
qualifications were placed on the scope of the earthquake shock coverage, and thus, the policy
extended earthquake shock coverage to its properties. Gulf Resorts filed a complaint with the RTC
where it asked for payment for P5, 427,779.00 as amount of the damaged properties, attorney
fees, lost income, etc. However, the RTC ruled in favor of American Home Assurance Company. The
Court of Appeals affirmed the trial court’s decision.

Issue: Whether or not the insurance policy earthquake shock coverage extends to other property
aside from the two swimming pools.

Held: No. The insurance policy issued to Gulf Resorts is only limited to the two swimming pools and
the other properties of Playa Resort are not covered by the property insurance issued by American
Home Assurance Company. There is no ambiguity in the insurance contract and the earthquake
shock rider, as Gulf Resorts stated that the swimming pools are the only items covered by the
insurance against loss due to earthquakes. The Court stated that provisions in the insurance policy
should be examined and interpreted in consonance with each other, and should not be construed
piecemeal. All parts of the insurance contract reflect the true intent of the parties. The Supreme
Court also defined contracts of adhesion as contracts where one party prepares the stipulations in
the contract while the other party merely affixes his/her signature thereto, Any ambiguity is
resolved against the insurer, who prepared the contract and construed liberally in the insured’s
favor. However, since the policy and its riders are clear about the insurance coverage against
earthquake shock, the Gulf Resorts cannot use the doctrine of contract of adhesion and liberal
interpretation of insurance contract in the insured’s favor in case of ambiguity.