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Artex v. Wellington!

Facts:! Artex insured its buildings, stocks and machineries to Wellington against loss by fire or lighting for P24,306,509; subsequently, an additional insurance was made for the property for P833,034 and P5,200,000 for business interruption loss. The buildings, stocks and machineries of the spinning department of Artex were gutted by fire hence a notice of loss was sent to Wellington which referred the loss to its adjusters. The adjusters reported that the total property loss was P10,106,554.40 and an additional P3,000,000 for business interruption loss. Wellington paid Artex the sum of P6,481,870.07 of the property loss suffered and P1,864,134.08 on its business interruption loss, leaving a balance of P3,624,683.43 and P1,748,460.00, respectively. Thus an action for collection was filed before the trial court. In its decision, the court ordered Wellington to pay the balances for property and business interruption losses. Hence this petition for review by Wellington contending that the causes of action of Artex should be directed to the reinsurer.!

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Issue:! May the insured sue the reinsurer of the insurer for the enforcement of the insurance contract?! Ruling:! No, because there is no privity of contract between the insured and the reinsurer. A third party not privy to a contract that contains no stipulations pour autrui in its favor may not sue enforcement of the contract. ! Unless there is a specific grant in, or assignment of, reinsurance contract in favor of the insured or a manifest intention of the contracting parties to the insurance contrary to grant such benefit or favor to the insured, not being privy to the reinsurance contract, has no cause of action against the reinsurer. It is expressly provided in section 91 the Insurance Act 1 that "(T)he original insured has no interest in a contract of insurance." ! In this case, the Court finds that no single clause in the reinsurance contracts has been cited by Wellington that would justify its claim that they contained a stipulation pour autrui in favor of Artex, and whereby Artex is deemed to have agreed to look solely to the reinsurers for indemnity in case of loss.!