Pioneer Insurance and Surety Corporation vs. Yap (Insurance Law)

Pioneer Insurance and Surety Corporation vs. Yap

(Insurance Law)

61 SCRA 426 (G.R. No. L-36232)

December 19, 1974

Petitioners:	Pioneer Insurance and Surety Corporation
Respondents:	Oliva Yap, represented by her attorney-in-fact, Chua Soon Poon

J. Fernandez:

FACTS:

Respondent Oliva Yap was the owner of a store in a two-storey building located in Manila.

On April 19, 1962, respondent Yap took out a fire policy from Pioneer Insurance for ₱25,000.00 covering her stocks, officer furniture fixtures and fittings of every kind and description. Among the conditions in the policy was:

“The Insured shall give notice to the Company of any insurance or insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this Policy shall be forfeited.” (Italics supplied)”

At the time of the insurance on April 19, 1962 of Policy No. 4219 in favor of respondent Yap, an insurance policy for P20,000.00 issued by the Great American Insurance Company covering the same properties was noted on said policy as co-insurance.

On September 26, 1962, respondent Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties, this time from the Federal Insurance Company, Inc., which new policy was, however, procured without notice to and the written consent of petitioner Pioneer Insurance & Surety Corporation and, therefore, was not noted as a co-insurance in Policy No. 4219.

On December 19, 1962, a fire broke out in the building housing respondent Yap’s above-mentioned store, and the said store was burned. Respondent Yap filed an insurance claim, but the same was denied in petitioner’s letter of May 17, 1963, on the ground of “breach and/or violation of any and/or all terms and conditions” of Policy No. 4219.

ISSUE:

Whether or not petitioner should be absolved from liability on the policy.

HELD:

Yes. By the plain terms of the policy, other insurance without the consent of petitioner would ipso facto avoid the contract. It required no affirmative act of election on the part of the company to make operative the clause avoiding the contract, wherever the specified conditions should occur. Its obligations ceased, unless, being informed of the fact, it consented to the additional insurance.

The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud. The public, as well as the insurer, is interested in preventing the situation in which a fire would be profitable to the insured.