Geagonia vs. Court of Appeals (Insurance Law)

 

Geagonia vs. Court of Appeals

(Insurance Law)

241 SCRA 152 (G.R. No. 114427)

February 6, 1995

 

Petitioners:	Armando Geagonia
Respondents:	Court of Appeals and Country Bankers Insurance Corpoation

 

J. Davide, Jr.:

 

FACTS:

 

The Petitioner’s is the owner of Norman’s Mart located at the public market. He obtained from the private respondent’s Country Banker’s Insurance Corp. fire insurance policy No. F-14622 for ₱100,000.00.

 

The Petitioner declared in the policy under the subheading entitled co-insurance that Mercantile Insurance Co. Inc., was the co-insurer for ₱50,000.00.

 

The policy contained the following condition:

 

“3. The insured shall give notice to the Company of any insurance or insurances already effected, and unless such notice be given and the particulars of such insurance or insurances be stated therein, all benefits under this policy shall be deemed forfeited.”

 

When a fire of accidental origin broke out at the public market, petitioner’s insured stocks-in-trade were completely destroyed prompting him to file with private respondent a claim under the policy. Private respondent denied the claim because it found that at the time of loss the petitioner’s stocks-in-trade were likewise covered by fire insurance policies No. GA-28146 and No. GA-28144 for ₱100,000.00 each issued by the Cebu Branch of the Philippines First Insurance Co., Inc. (hereinafter PFIC). These policies indicate that the insured was “Messrs. Discount Mart (Mr. Armando Geagonia, Prop.) with a mortgage clause reading: “Mortgagee; loss, if any, shall be payable to Messrs. Cebu Tesing Textiles, Cebu City as their interest may appear subject to the terms of this policy.

 

ISSUE:

 

Whether or not the incorporation of Condition 3 in the policy is allowed by Sec. 75 of the Insurance Code which precludes the petitioner to recover from the two insurance policies.

 

HELD:

 

Yes. Condition 3 of the private respondent’s Policy No. F-14622 is a condition which is not proscribed by law. Its incorporation in the policy is allowed by Section 75 of the Insurance Code which provides that “[a] policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.” Such a condition is a provision which invariably appears in fire insurance policies and is intended to prevent an increase in the moral hazard. It is commonly known as the additional or “other insurance” clause and has been upheld as valid and as a warranty that no other insurance exists. Its violation would thus avoid policy. However, in order to constitute a violation, the other insurance must be upon the same subject matter, the same interest therein, and the same risk.

 

As to a mortgaged property, the mortgagor and mortgagee have each an independent insurable interest therein and both interests may be covered by one policy, or each may take out a separate policy covering his interest, either at the same or at a separate times. The mortgagor’s insurable interest covers the full value of the mortgaged property, even though the mortgage debt is equivalent to the full value of the property. The mortgagee’s insurable interest is to the extent of the debt, since the property is relied upon as security thereof, and in insuring he is not insuring the property but his interest or lien thereon. His insurable interest is prima facie the value mortgaged and extends only to the amount of the debt, not exceeding the value of the mortgaged property. Thus, separate insurances covering different insurable interests may be obtained by the mortgagor and the mortgagee.

 

It is a cardinal rule in insurance that a policy or insurance contract is to be interpreted liberally in favor of the insured and strictly against the company, the reason being undoubtedly, to afford the greatest protection which the insured was endeavoring to secure when he applied for insurance. It is also a cardinal principle of law that forfeitures are not favored and that any forfeiture of the policy benefits for the person claiming thereunder, will be avoided, if it is possible to construe the policy in a manner which would permit recovery, as, for example, by finding a waiver for such forfeiture.

 

 

 

Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc. (Insurance Law)

Union Manufacturing Co., Inc. vs. Philippine Guaranty Co., Inc.

(Insurance Law)

47 SCRA 271 (G.R. No. L-27932)

October 30, 1972

Petitioners:	Republic Bank
Respondents:	Philippine Guaranty Co., Inc.

J. Fernando:

FACTS:

On January 12, 1962, the Union Manufacturing Co., Inc. obtained certain loans from the Republic Bank in the total sum of ₱415,000.00. To secure the payment thereof, UMC executed real and chattel mortgage on certain properties.

The Republic Bank procured from the defendant Philippine Guaranty Co., Inc. an insurance coverage on loss against fire for ₱500,000.00 over the properties of the UMC, as described in defendants cover note dated September 25, 1962, with the annotation that loss or damage, if any, under said Cover Note is payable to Republic Bank as its interest may appear, subject however to the printed conditions of said defendants’ Fire Insurance Policy Form.

On September 6, 1964, a fire occurred in the premises of UMC and on October 6, 1964, UMC filed its fire claim with the PGC Inc., thru its adjuster, H. H. Bayne Adjustment Co., which was denied by said defendant in its letter dated November 26, 1964 on the following ground: “Policy Condition No. 3 and/or the other Insurance Clause of the policy was violated because you did not give notice to us of the other insurance which you had taken from New India for ₱ 80,000.00. Sincere Insurance for ₱ 25,000.00 and Manila Insurance for ₱ 200,000.00 with the result that these insurances, of which we became aware of only after the fire were not endorsed on our policy.

ISSUE:

Whether or not Republic Bank can recover.

HELD:

No. Without deciding- whether notice of other insurance upon the same property must be given in writing, or whether a verbal notice is sufficient to render an insurance valid which requires such notice, whether oral or written, we hold that in the absolute absence of such notice when it is one of the conditions specified in the fire insurance policy, the policy is null and void. (Santa Ana vs. Commercial Union Ass. Co., 55 Phil. 128).

If the insured has violated or failed to perform the conditions of the contract, and such a violation or want of performance has not been waived by the insurer, then the insured cannot recover. Courts are not permitted to make contracts for the parties. The functions and duty of the courts consist simply in enforcing and carrying out the contracts actually made.

While it is true, as a general rule, that contracts of insurance are construed most favorably to the insured, yet contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties themselves have used. If such terms are clear and unambiguous they must be taken and understood in their plain, ordinary and popular sense.

The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitles the insurer to rescind. xxx The materiality of non-disclosure of other insurance policies is not open to doubt.

The insurance contract may be rather onerous, but that in itself does not justify the abrogation of its express terms, terms which the insured accepted or adhered to and which is the law between the contracting parties.

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.