64- United Merchants v Country Bankers Facts: United Merchants was a

manufacturer and retailer of Christmas lights. It insured (fire policy) its

Christmas lights stored in the warehouse with Country Bankers. The
warehouse was burned down hence United sought indemnity from Country.
Country rejected the claim on the ground of Condition 15 of the policy which
states that If the claim be in any respect fraudulent, or if any false declaration
be made or used in support thereof, or if any fraudulent means or devices are
used by the Insured or anyone acting in his behalf to obtain any benefit under
this Policy; or if the loss or damage be occasioned by the willful act, or with
the connivance of the Insured, all the benefits under this Policy shall be
forfeited. CBIC alleged that UMCs claim was fraudulent because UMCs
Statement of Inventory showed that it had no stocks in trade as of 31
December 1995, and that UMCs suspicious purchases for the year 1996 did
not even amount to P25,000,000.00. UMCs GIS and Financial Reports
further revealed that it had insufficient capital, which meant UMC could not
afford the allegedP50,000,000.00 worth of stocks in trade. United answered
back saying that they have a certificate from the Bureau of Fire Protection
which states that: The Bureau further certifies that no evidence was gathered
to prove that the establishment was willfully, feloniously and intentionally set
on fire. Issue: Whether UMC is entitled to claim from CBIC the full coverage
of its fire insurance policy. Held: No! If loss is proved apparently within a
contract of insurance, the burden is upon the insurer to establish that the loss
arose from a cause of loss which is excepted or for which it is not liable, or
from a cause which limits its liability. In the present case, CBIC failed to
discharge its primordial burden of establishing that the damage or loss was
caused by arson, a limitation in the policy. Nevertheless, just because the
defense failed to prove arson does not mean that fraud does not exist. In fact,
fraud exists in this case. The Court ruled that the submission of false invoices
to the adjusters establishes a clear case of fraud and misrepresentation which
voids the insurers liability as per condition of the policy. A fraudulent
discrepancy between the actual loss and that claimed in the proof of loss voids
the insurance policy. Mere filing of such a claim will exonerate the insurer.
Considering that all the circumstances point to the inevitable conclusion that
UMC padded its claim and was guilty of fraud, UMC violated Condition No. 15
of the Insurance Policy. Thus, UMC forfeited whatever benefits it may be
entitled under the Insurance Policy, including its insurance claim.