Pioneer v Yap G.R. No. L-36232 December 19, 1974

J. Fernandez

Facts:Respondent Oliva Yap was the owner of a store in a two-storey building where she sold shopping bags and footwear. Chua Soon Poon, her son-in-law, was in charge of the store.Yap took out a Fire Insurance Policy No. 4216 from Pioneer Insurance with a value of P25,000.00 covering her stocks, office furniture, fixtures and fittings.Among the conditions in the policy executed by the parties are the following: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… Any false declaration or breach or this condition will render this policy null and void.Another insurance policy for P20,000.00 issued by Great American covering the same properties. The endorsement recognized co-insurance by Northwest for the same value.Oliva Yap took out another fire insurance policy for P20,000.00 covering the same properties from the Federal Insurance Company, Inc., which was procured without notice to and the written consent of Pioneer.A fire broke out in the building, and the store was burned. Yap filed an insurance claim, but the same was denied for a breach.Oliva Yap filed a case for payment of the face value of her fire insurance policy. The insurance company refused to pay because she never informed Pioneer of another insurer. The trial court decided in favor of Yap. The CA affirmed.

Issue:Whether or not petitioner should be absolved from liability on the Pioneeer policy on account of any violation of the co-insurance clause

Held: No. Petition dismissed.

Ratio:There was a violation. The insurance policy for P20,000.00 issued by the Great American, ceased to be recognized by them as a co-insurance policy. The endorsement shows the clear intention of the parties to recognize on the date the endorsement was made, the existence of only one co-insurance, the Northwest one. The finding of the Court of Appeals that the Great American Insurance policy was substituted by the Federal Insurance policy is indeed contrary to said stipulation.Other insurance without the consent of Pioneer would 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 validity of a clause in a fire insurance policy to the effect that the procurement of additional insurance without the consent of the insurer renders the policy void is in American jurisprudence.Milwaukee Mechanids' Lumber Co., vs. Gibson- "The rule in this state and practically all of the states is to the effect that a clause in a policy to the effect that the procurement of additional insurance without the consent of the insurer renders the policy void is a valid provision.” In this jurisdiction, General Insurance & Surety Corporation vs. Ng Hua- “The annotation then, must be deemed to be a warranty that the property was not insured by any other policy. Violation thereof entitled the insurer to rescind. Furthermore, even if the annotations were overlooked the defendant insurer would still be free from liability because there is no question that the policy issued by

General Indemnity has not been stated in nor endorsed on Policy No. 471 of defendant. The obvious purpose of the aforesaid requirement in the policy is to prevent over-insurance and thus avert the perpetration of fraud where a fire would be profitable to the insured.“

Insurance Code – Ambiguity – Contract of Adherence

Qua Chee Gan owns four warehouses in Albay. He was using these warehouses to house crops like copra and hemp. All warehouses were insured by Law Union and Rock Insurance for the amount of P370,000.00. The insurance states that Qua Chee Gan should install 11 hydrants in the warehouses’ premises. Qua Chee Gan installed only two, but Law Union nevertheless went on with the insurance policy and collected premium from Qua Chee Gan. The insurance contract also provides that “oil” should not be stored within the premises of the warehouses.

In 1940, three of the warehouses were destroyed by fire. The damage caused amounted to P398k. Qua Chee Gan demanded insurance pay from Law Union but the latter refused as it alleged that after investigation from their part, they found out that Qua Chee Gan caused the fire. Law Union in fact sued Qua Chee Gan for Arson.

Qua Chee Gan was acquitted in the arson case. He then demanded that Law Union pay up. This time, Law Union averred that the insurance contract is void because Qua Chee Gan failed to install 11 hydrants; and that gasoline was found in one of the warehouses.

ISSUE: Whether or not the insurance contract is void.

HELD: No. Law Union cannot exempt itself from paying Qua Chee Gan because it is estopped from invoking the same. It is a well settled rule of law that an insurer which with knowledge of facts entitling it to treat a policy as no longer in force, receives and accepts a premium on the policy, estopped to take advantage of the forfeiture.

Also, gasoline is not one of those items specifically prohibited from the premises of the warehouses. What was mentioned was the word “oil” which could mean anything (from palm oil to lubricant and not gasoline or kerosene). This ambiguity is to be interpreted against Law Union because a contract of insurance is a contract of adhesion. Further, oil is incidental to Qua Chee Gan’s business, it being used for motor fuel.

Fieldmen's Insurance v. vda. de Songco

FIELDMEN’S INSURANCE v. MERCEDES VARGAS vda. DE SONGCO, et al. and CA1968 / Fernando / Review of CA decision

Federico Songco, a man of scant education [first grader], owned a private jeepney. He was induced by Fieldmen’s Insurance agent Benjamin Sambat to apply for a Common Carrier’s Liability Insurance Policy covering his motor vehicle. [As testified by Songco’s son Amor later,] Federico said that his vehicle is an ‘owner’ private vehicle and not for passengers, but agent Sambat said that they can insure whatever kind of vehicle because their company is not owned by the government, so they could do what they please whenever they believe a vehicle is insurable. Songco paid an annual premium and he was issued a Common Carriers Accident Insurance Policy. After the policy expired,

he renewed the policy. During the effectivity of the renewed policy, the insured vehicle while being driven by Rodolfo Songco [duly licensed driver and Federico’s son] collided with a car. As a result, Federico and Rodolfo died, while Carlos (another son) and his wife Angelita, and a family friend sustained physical injuries. The lower court held that Fieldmen’s Insurance cannot escape liability under a common carrier insurance policy on the pretext that what was insured was a private vehicle and not a common carrier, the policy being issued upon the agent’s insistence. CA affirmed the lower court.

CA DECISION AFFIRMED; FIELDMEN’S INSURANCE IS LIABLE

From Qua Chee Gan v. Law Union and Rock Insurance – Where inequitable conduct is shown by an insurance firm, it is estopped from enforcing forfeitures in its favor, in order to forestall fraud or imposition on the insured. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall the innocent party due to its injurious reliance.

Fieldmen’s Insurance incurred legal liability under the policy. Since some of the conditions in the policy were impossible to comply with under the existing conditions at the time and inconsistent with the known facts, the insurer is estopped from asserting breach of such conditions. Except for the fact that the passengers were not fare-paying, their status as beneficiaries under the policy is recognized. Even if the be assumed that there was an ambiguity, such must be strictly interpreted against the party that caused them.

The contract of insurance is one of perfect good faith (uberrima fides) not for the insured alone, but equally so for the insurer; in fact, it is more so for the latter, since its dominant bargaining position carries with it stricter responsibility.

Young vs Midland Textile Insurance Co.March 31, 1915Insurance: warranty(Insurance)Plaintiff : YoungDefendant: Midland Textile Insurance Company.Ponente: JohnsonFACTS: Young: owner of candy and fruit store in Escolta which occupied a building as both aresidence and bodega. Entered into contract of insurance with Midland, in which insurer promised to pay P3,000 incase residence and bodega and its contents should be destroyed by fire.o One of the conditions (WARRANTY B): During the pendency of this policy, no hazardousgoods be stored/kept for sale, and no hazardous trade/process be carried on, in thebuilding to which this insurance applies, or in any building connected therewith.

Young: places 3 boxes filled withfireworksin said residence and bodega. Building was partially destroyed by fire. Both partiesagreedthat the fireworkscome within the term “hazardous goods” and that thefireworks in no way contributed to the fire. Allegation of insured: Young contends that they were not “stored” and placing them theredoes not violate the contract. That he only placed them there because he was notified thathe cannot use them for the Chinese New Year and in order that he might later send them toa friend in the province.ISSUES/HELD:(1) Whether or not the fireworks were “stored” therefore, makes the policy void. YES. (2) Whether insured should be allowed to recover since the storage of the fireworks did notcontribute to the damage occasioned by the fire. NO.RATIO:(1) Whether the goods were stored depends upon the intention of the party. Nearly allcasescited by TC were cases where the article was being put to somereasonable/actual use, which would not void the policy. (ex. small quantities for sale likegasoline, gunpowder; or for actual use like oil, paints; or for lighting the purposes). Dictionarydefinition: to deposit for preservation/safe keeping; put away for future use. (diff from TC definitions in small quantities/for daily use.

In this case, the fireworks were placed in the bodega for “future use/consumption” or forsafe keeping, and NOT for present/daily use. They were “stored” in the bodega as the word isgenerally defined.(2) The fact that it did not contribute to the fireis beside the point if the “storing” was inviolation of the contract. Placing of the firecracker increased the risk. Insured had not paid the premium based uponthe increased risk, neither had the insurer issued a policy upon the theory of a different risk. Insured enjoyed the insurance policy upon one risk, when it was issued for an entirelydifferent one. It was a direct injury to the insurer and changes the basis of the insurance contract

G.R. No. L-2294             May 25, 1951Lessons Applicable: Disqualification: Public Enemy (Insurance)

FACTS:

October 1, 1941: Christern Huenefeld and co., inc. (Christern), a company whose major stockholders are German, paid P1M and obtained a fire policy from Filipinas Cia. de Seguros (Filipinas)

December 10, 1941: U.S. declared a war against Germany February 27, 1942 (during the japanese occupation): the building

and insured merchandise were burnedo their claimed from Filipinas and the salvage goods were

auctioned for P92,650 who refused since Christen was organized under the Philippine laws, it was under American jurisdiction which is an enemy of the Germans

April 9, 1943: The Director of Bureau of Financing ordered Filipinas to pay the P92,650 to Christen and it did. 

Filipinas filed with the CFI the P92,650 paid to Christern CA affirmed CFI: dismissed the action Filed a petition for certiorari

ISSUE: W/N Christern is a public enemy and therefore ceased to be insured

HELD: YES. Ordered to pay Filipinas P77,208.33, Philippine currency, less the amount of the premium, in Philippine currency, that should be returned by the Filipinas  for the unexpired term of the policy in question, beginning December 11, 1941

Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public enemy may be insured

Effect of war, generally. — All intercourse between citizens of belligerent powers which is inconsistent with a state of war is prohibited by the law of nations. Such prohibition includes all negotiations, commerce, or trading with the enemy; all acts which will increase, or tend to increase, its income or resources; all acts of voluntary submission to it; or receiving its protection; also all acts concerning the transmission of money or goods; and all contracts relating thereto are thereby nullified. It further prohibits insurance upon trade with or by the enemy, upon the life or lives of aliens engaged in service with the enemy; this for the reason that the subjects of one country cannot be permitted to lend their assistance to protect by insurance the commerce or property of belligerent, alien subjects, or to do anything detrimental too their country's interest. The purpose of war is to cripple the power and exhaust the resources of the enemy, and it is inconsistent that one country should destroy its enemy's property and repay in insurance the value of what has been so destroyed, or that it should in such manner increase the resources of the enemy, or render it aid, and the commencement of war determines, for like reasons, all trading intercourse with the enemy, which prior thereto may have been lawful. All individuals therefore, who compose the belligerent powers, exist, as to each other, in a state of utter exclusion, and are public enemies

In the case of an ordinary fire policy, which grants insurance only from year, or for some other specified term it is plain that when the parties become alien enemies, the contractual tie is broken and the contractual rights of the parties, so far as not vested.

However, elementary rules of justice (in the absence of specific provision in the Insurance Law) require that the premium paid by the respondent for the period covered by its policy from December 11, 1941, should be returned by the petitioner 

Geagonia v CA G.R. No. 114427 February 6, 1995 Facts: Geagonia, owner of a store, obtained from Country Bankers fire insurance policy for

P100,000.00. The 1 year policy and covered thestock trading of dry goods. The policy noted the requirement that "3.  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 or properties consisting of stocks in trade, goods in process and/or inventories only hereby insured, and unless notice be given and the particulars of such insurance or insurances be stated therein or endorsed in this policy pursuant to Section 50 of the Insurance Code, by or on behalf of the Company before the occurrence of any loss or damage, all benefits under this policy shall be deemed forfeited, provided however, that this condition shall not apply when the total insurance or insurances in force at the time of the loss or damage is not more than P200,000.00."

The petitioners’ stocks were destroyed by fire. He then filed a claim which was subsequently denied because the petitioner’s stocks were covered by two other fire

insurance policies for Php 200,000 issued by PFIC. The basis of the private respondent's denial was the petitioner's alleged violation of Condition 3 of the policy.

Geagonia then filed a complaint against the private respondent in the Insurance Commission for the recovery of P100,000.00 under fire insurance policy and damages. He claimed that he knew the existence of the other two policies. But, he said that he had no knowledge of the provision in the private respondent's policy requiring him to inform it of the prior policies and this requirement was not mentioned to him by the private respondent's agent.  

The Insurance Commission found that the petitioner did not violate Condition 3 as he had no knowledge of the existence of the two fire insurance policies obtained from the PFIC; that it was Cebu Tesing Textiles w/c procured the PFIC policies w/o informing him or securing his consent; and that Cebu Tesing Textile, as his creditor, had insurable interest on the stocks.

The Insurance Commission then ordered the respondent company to pay complainant the sum of P100,000.00 with interest and attorney’s fees.

CA reversed the decision of the Insurance Commission because it found that the petitioner knew of the existence of the two other policies issued by the PFIC.

Issues: 1. WON the petitioner had not disclosed the two insurance policies when he obtained

the fire insurance and thereby violated Condition 3 of the policy. 2. WON he is prohibited from recovering Held: Yes. No. Petition Granted Ratio: 1. The court agreed with the CA that the petitioner knew of the prior policies issued

by the PFIC. His letter of 18 January 1991 to the private respondent conclusively proves this knowledge. His testimony to the contrary before the Insurance Commissioner and which the latter relied upon cannot prevail over a written admission made ante litem motam. It was, indeed, incredible that he did not know about the prior policies since these policies were not new or original.

2. Stated differently, provisions, conditions or exceptions in policies which tend to work a forfeiture of insurance policies should be construed most strictly against those for whose benefits they are inserted, and most favorably toward those against whom they are intended to operate.  

With these principles in mind, Condition 3 of the subject policy is not totally free from ambiguity and must be meticulously analyzed. Such analysis leads us to conclude that (a) the prohibition applies only to double insurance, and (b) the nullity of the policy shall only be to the extent exceeding P200,000.00 of the total policies obtained.

Furthermore, by stating within Condition 3 itself that such condition shall not apply if the total insurance in force at the time of loss does not exceed P200,000.00, the private respondent was amenable to assume a co-insurer's liability up to a loss not exceeding P200,000.00. What it had in mind was to discourage over-insurance. Indeed, the rationale behind the incorporation of "other insurance" clause in fire policies is to prevent over-insurance and thus avert the perpetration of fraud. When a property owner obtains insurance policies from two or more insurers in a total amount that exceeds the property's value, the insured may have an inducement to destroy the property for the purpose of collecting the insurance. The public as well as the insurer

is interested in preventing a situation in which a fire would be profitable to the insured.