Santa Ana vs. Commercial Union (1930) Company, Limited in case No.
Company, Limited in case No. 31263; the Globe and Rutgers Fire
Facts:
1. In 1923, Sta. Ana built his house in Pasig and insured it against fire for
(1) P3,000 to Phoenix Assurance Company and (2) P6,000 to Guardian
Assurance Company, Limited, for a period of one year.
2. In November 1925, Santa Ana mortgaged this house to Garcia for
P5,000, for a period of two years, the contract being drawn up as a retro
sale for the sum of P5,000. The 2 policies were endorsed to Garcia.
3. In December 1925, Santa Ana reinsured said house with the defendant
companies, the Globe and Rutgers Fire Insurance Company of New
York,
and the Commercial Union Assurance Company Limited of London, thr
ough their common agent duly authorized to represent them in the
Philippine Islands, the Pacific Commercial Company which was to be
effective for one year.
4. On September 20, 1926, Santa Ana took out another insurance policy
on the house in question for P6,000 in the "Filipinas, Compania de
Seguros, which issued the one-year policy upon receiving from Sta.
Ana premium thereon.
5. Twelve hours before the expiration of the policies issued by the
Phoenix Assurance Company and the Guardian Assurance Company,
Limited for P3,000 and P6,000 respectively, the entire house was
burned.
6. Santa Ana gave notice in due time of the loss to each and every one
of the companies in which he had insured the house and demanded pay
ment of the respective policies.
7. The insurance companies refused payment on the ground that the claim
of P21,000 filed by him was fraudulent, being in excess of the real
value of the insured property; that none of said companies had been
informed of the existence of the other policies in the other
companies, and that the fire was intentional.
8. Sta.
Ana filed civil cases in RTC against The Commercial Union Assurance
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Insurance Company of New York in case No. 31264; and the Phoenix
Assurance Company, Limited, the Guardian Assurance Company,
Limited, and the "Filipinas, Compania de Seguros", incase No. 31322.
All the defendants are absolved in their alleged liabilities by the RTC.
Hence this petition.
ISSUE:Can the insured claim against the insurance companies?
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, the SC held 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. Since the policy is null and void,
plaintiff cannot recover from the defendants insurance companies.
 The SC upheld the finding of the trial court that the policies provide
that no other insurance should be admitted upon the property thereby
assured without the consent of said companies duly given by
endorsement.
Ang Giok Chip v Springfield G.R. No. L-33637 December 31, 1931
J. Malcolm
Facts:
Ang insured his warehouse for the total value of Php 60,000. One of these,
amounting to 10,000, was with Springfield Insurance Company. His
warehouse burned down, then he attempted to recover 8,000 from Springfield
for the indemnity. The insurance company interposed its defense on a rider in
the policy in the form of Warranty F, fixing the amount of hazardous good that
can be stored in a building to be covered by the insurance. They claimed that
Ang violated the 3 percent limit by placing hazardous goods to as high as 39
percent of all the goods stored in the building. His suit to recover was granted
by the trial court. Hence, this appeal.
Issue: Whether a warranty referred to in the policy as forming part of the
contract of insurance and in the form of a rider to the insurance policy, is null
and void because not complying with the Philippine Insurance Act.
Held: No. The warranty is valid. Petition dismissed.
Ratio:
The Insurance Act, Section 65, taken from California law, states:
"Every express warranty, made at or before the execution of a policy, must be
contained in the policy itself, or in another instrument signed by the insured
and referred to in the policy, as making a part of it."
Warranty F, indemnifying for a value of Php 20,000 and pasted on the left
margin of the policy stated:
It is hereby declared and agreed that during the currency of this policy no
hazardous goods be stored in the Building to which this insurance applies or in
any building communicating therewith, provided, always, however, that the
Insured be permitted to stored a small quantity of the hazardous goods
specified below, but not exceeding in all 3 per cent of the total value of the
whole of the goods or merchandise contained in said warehouse, viz; . . . .
Also, the court stated a book that said, "any express warranty or condition is
always a part of the policy, but, like any other part of an express contract, may
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be written in the margin, or contained in proposals or documents expressly
referred to in the policy, and so made a part of it."
“It is well settled that a rider attached to a policy is a part of the contract, to the
same extent and with like effect as it actually embodied therein. In the second
place, it is equally well settled that an express warranty must appear upon the
face of the policy, or be clearly incorporated therein and made a part thereof by
explicit reference, or by words clearly evidencing such intention.”
The court concluded that Warranty F is contained in the policy itself, because
by the contract of insurance agreed to by the parties it was made to be a part. It
wasn’t a separate instrument agreed to by the parties.
The receipt of the policy by the insured without objection binds him. It was his
duty to read the policy and know its terms. He also never chose to accept a
different policy by considering the earlier one as a mistake. Hence, the rider is
valid.
Young vs. Midland Textile insurance company
[G.R. No. 9370. March 31, 1915.]
Facts:
The purpose of the present action is to recover the sum of P3,000 upon an
insurance policy. The lower court rendered a judgment in favor of the plaintiff
and against the defendant for the sum of P2,708.78, and costs. From that
judgment the defendant appealed to this court.
The undisputed facts upon which said action is based are as follows:
The plaintiff occupied a building at '321 Calle Claveria, as a residence and
bodega (storehouse). On the 29th of May, 1912, the defendant, in consideration
of the payment of a premium of P60, entered into a contract of insurance with
the plaintiff promising to pay to the plaintiff the sum of P3,000, in case said
residence and bodega and contents should be destroyed by fire. One of the
conditions of said contract was that no hazardous goods be stored or kept in the
building.
On the 4th or 5th of February, 1913, the plaintiff placed in said residence and
bodega three boxes which belonged to him and which were filled with
fireworks for the celebration of the Chinese new year.
On the 18th day of March, 1913, said residence and bodega and the contents
thereof were partially destroyed. Fireworks were found in a part of the building
not destroyed by the fire; that they in no way contributed to the fire, or to the
loss occasioned thereby.
Issue:
Whether or not the placing of said fireworks in the building insured, under the
conditions above enumerated, they being "hazardous goods," is a violation of
the terms of the contract of insurance.
Held:
Yes.
The word "stored" has been defined to be a deposit in a store or warehouse for
preservation or safe keeping; to put away for future use, especially for future
consumption; to place in a warehouse or other place of deposit for safe
keeping. Said definition does not include a deposit in a store, in small
quantities, for daily use. "Daily use" precludes the idea of deposit for
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preservation or safe keeping, as well as a deposit for future consumption or safe
keeping.
A violation of the terms of a contract of insurance, by either party, will
constitute the basis for a termination of the contractual relations, at the election
of the other. The right to terminate the contractual relations exists even though
the violation was not the direct cause of the loss. In the present case, the
deposit of the "hazardous goods," in the building insured, was a violation of the
terms of the contract. Although the hazardous goods did not contribute to the
loss, the insurer, at his election, was relieved from liability Said deposit created
a new risk, not included in the terms of the contract. The insurer had neither
been paid, nor had he entered into a contract, to cover the increased risk.
Contracts of insurance are contracts of indemnity, upon the terms and
conditions specified therein. Parties have a right to impose such reasonable
conditions at the time of the making of the contract as they deem wise and
necessary. The rate of premium is measured by the character of the risk
assumed. The insurer, for a comparatively small consideration, undertakes to
guarantee the insured against loss or damage, upon the terms and conditions
agreed upon, and upon no other. When the insurer is called upon to pay, in case
of loss, he may justly insist upon a fulfillment of the terms of the contract. If
the insured cannot bring himself within the terms and conditions of the
contract, he is not entitled to recover for any loss suffered. The terms of the
contract constitute the measure of the insurer's liability. If the contract has been
terminated, by a violation of its terms on the part of the insured, there can be no
recovery. Compliance with the terms of the contract is a condition precedent to
the right of recovery. Courts cannot make contracts for the parties. While
contracts of insurance are construed most favorably to the insured yet they
must be construed according to the sense and meaning of the terms which the
parties themselves have used. Astute and subtle distinctions should not be
permitted, when the language of the contract is plain and unambiguous. Such
distinctions tend to bring the law itself into disrepute.
The judgment of the lower court is revoked and the defendant is relieved from
any responsibility under said complaint, and, without any finding as to costs.
American Home Assurance Company v. Tantuco Enterprises
Facts:
Tantuco Enterprises (Tantuco) was a domestic corporation engaged in
the manufacture of coconut oil. It maintained two coconut oil mills (old and
new) for the purpose of its business. These two buildings were covered under
fire insurance policies issued by American Home Assurance Company
(American) – the one being insured for Php 3 million and the new one for Php
6 million.
One night, the new mill was gutted by fire. Afterwards, Tantuco sent a
letter to American claiming for the insurance proceeds under the fire insurance
policy issued by the latter. But American declined the claim, stating that no
insurance policy was issued to cover the new one, because the two insurance
policies issued in favor of Tantuco were for the old one.
Thus, a complaint for specific performance with claims for damages
was filed by Tantuco with the Regional Trial Court (RTC), which rendered a
decision in favor or Tantuco, directing American to pay Tantuco the insurance
proceeds. This decision was affirmed by the Court of Appeals (CA). Hence, the
petition for review with the Supreme Court (SC).
American argued that the insurance policy which purportedly covered
the new mill contained not the description of the new mill but of the old mill.
Thus, since the insurance contract is the law between the parties, it should be
interpreted that the parties’ intention was to insure the old mill, not the new
mill. Also, granting the description in the policy was incorrect, Tantuco failed
to bring the matter to American, despite the fact that it had already been 3 years
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from the time of the perfection of the contract. It was argued that Tantuco was
already in estoppel.
Issue:
Is the argument of American tenable?
Ruling and Discussion:
No, the argument of American is not tenable.
The Court said that, in construing the words descriptive of a building
insured, the greatest liberality is shown by the courts in giving effect to the
insurance. In view of the custom of insurance agents to examine buildings
before writing policies upon them, and since a mistake as to the identity and
character of the building is extremely unlikely, the courts are inclined to
consider that the policy of insurance covers any building which the parties
manifestly intended to insure, however inaccurate the description may be.
Therefore, despite the mis-description in the policy, it was construed
that the parties intended that the new oil mill was to be insured, since it was
stated therein. Also, it was ratiocinated that it would be absurd to construe that
Tantuco opted to insure twice the old mill, while leaving the new mill
uninsured. It is to be noted that a second agreement over the same realty results
in over-insurance. Further, it was found that the mis-description was attributed
to the misunderstanding between the general agent of American and the policy
issuing clerk. Thus, the discrepancy happened during the preparation of the
written agreement.
Anent the argument of estoppel, the Court said that American could not
invoke estoppel as it was responsible for the non-correction of the description.
It was found that, from the testimonies, the agent of Tantuco brought the matter
up with the general agent of American, who said that “what is important is the
words ‘new oil mill’.” It is therefore evident that what the parties intended, in
the first place, was to insure the new mill under the file insurance policy
concerned, and not the old mill.
Therefore, American should pay the insurance proceeds to Tantuco.
Qua Chee Gan vs Law Union and Rock Insurance Co., Ltd.
Facts: 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 premiums 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
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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.
Pioneer Insurance and Surety Corp.(PISC) v. Olivia Yap (1974)
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
ipso facto the policy void.
Facts:
Olivia Yap was the owner of a store in a 2 storey building where she
sold shopping bags and footwears. Chua Soon Poon, Yap’s son-in-law was in
charge of the store. Yap took out a Fire Insurance from Pioneer Insurance
(PISC) with a face value of 25K covering her stocks, office furnitures, etc.
Among the conditions in the policy was the co-insurance clause wherein
without the consent of PISC, no other insurance may be availed of by Yap. A
violation of such condition results to the nullity of the insurance. Nonetheless,
two other insurance was taken by Yap for the same property, these are: 1) For
P20K with Great American insurance with the consent of PISC; and 2) For
P20K with Federal Insurance without the written consent of PISC.
 One fateful night, a fire broke out in the building. Upon claim by Yap
of the insurance proceeds, PISC denied on the ground that there has been a
violation of the co-insurance clause. RTC and CA ruled in favor of Yap.
Issue:
WON PISC should be absolved from liability on the Fire Insurance on
account of the violation of the co-insurance clause.
Ruling and Discussion:
Yes, PISC is absolved from its liability by reason of Yap’s violation of
the co-insurance clause contained in the Policy.
Additional insurance, unless consented to, or unless a waiver was
shown, ipso facto avoided the contract, and the fact that the company had not,
after notice of such insurance, cancelled the policy, did not justify the legal
conclusion that it had elected to allow it to continue in force. The reason behind
such requirement is to prevent over-insurance and thus avert the perpetration of
fraud.
In the instant case, it is without doubt that the insured has taken up
another insurance with Federal Insurance over the same property and over the
same risk without the consent of PISC. Hence, Yap violated the conditions of
the policy resulting to PISC being absolved of its liability.
Prudential Guarantee Assurance Inc. vs. Trans Asia Shipping Lines
G.R. No. 151890
June 20, 2006
Facts:
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Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee
and Assurance Inc. insured said vessel for loss/damage of the hull and
machinery arising from perils of fire and explosion beginning from the period
of July 1, 1993 until July 1, 1994. While the policy was in force, a fire broke
out. Trans Asia file its notice of claim for damages sustained by the vessel. It
also reserved its right to subsequently notify Prudential as to the full amount of
the claim upon final survey and determination by the average adjuster Richard
Hogg International of the damage sustained by the reason of fire. Trans Asia
executed a document denominated "Loan and Trust Receipt" amounting to Php
3,000,000. Prudential Guarantee and Assurance Inc. denied the former's claim
and requested for the return of the said amount. The insurance company
contends that there was a breach in the policy conditions, specifically,
"Warranted Vessel Classed and Class Maintained".
The trial court held that Trans Asia failed to prove its compliance with the
terms of the warranty. It further explained that the concealment made by Trans
Asia is sufficient to avoid the policy. Prudential, as the injured party, is entitled
to rescind to rescind the contract. The trial court dismissed the complaint and
directed Trans Asia to return the "loan" extended by Prudential.
The Court of Appeals reversed the decision of the trial court. It contends that
Prudential had the burden to show that there was a breach in the warranty and
which it failed to do so. The Court considered Prudential's admission that, at
the time the insurance contract was entered into, the vessel was properly
classed by the Bureau Veritas, a classification recignized by the industry. It
further contends that then subject warranty was in a form of a rider, hence, such
contract should be counstrued against Prudential. Finally, it interpreted the
transaction between the parties as one of subrogation, instead of a loan. Thus,
the amount given to Trans Asia was considered to be a partial payment to its
claim under the policy.
Issue/s:
1.) WON there was a breach in the warranty of the contract. > In 1952, General issued a fire policy to Ng Hua to cover the contents of the
2.) WON such contract partakes the nature of a loan. Central Pomade Factory owned by him.
Held: > There was a provision in the policy that should there be any insurance
already effected or to be subsequently procured, the insured shall give notice to
The Supreme Court held that:
the insurer.
1.) Prudential failed to establish that Trans Asia had violated and breached the
> Ng Hua declared that there was non. The very next day, the building and the
policy condition provided in the insurance contract. The latter was able to
goods stored therein burned.
establish proof of loss and coverage of the loss. Prudential also made a
categorical admission at the time of the procurement of the insurance contract > Subsequently, the claim of Ng Hua for the proceeds was denied by General
that the vessel was properly classified by the Bureau Veritas. since it discovered that Ng Hua had obtained an insurance from General
Indemnity for the same goods and for the same period of time.
Assuming that there was a breach in the policy, the renewal of the insurance
policy for two consecutive years after the loss is deemed as a waiver on the part
of Prudential. Breach of a warranty or of a condition renders the contract
Issue:
defeasible at the option of the insurer; but if he so elects, he may waive his
privilege and power to rescind by the mere expression of an intention so to do. Whether or not General Insurance can refuse to pay the proceeds.
2.) the amount granted by Prudential to Trans Asia, evidenced by a document
denominated as a "Loan and Trust Receipt", constitued partial payment on the
policy. Under said agreement, Prudential is obligated to hand over to Trans Held:
Asia "whatever recovery the latter may make" and the latter to deliver to the Yes.
former "all document necessary to prove its interest in the said property."
Prudential was given the right of subrogation to whatever net recovery Trans Violation of the statement which is to be considered a warranty entitles the
Asia may obtain from third parties resulting from the fire. insurer to rescind the contract of insurance. Such misrepresentation is fatal.

PETITION DENIED.

Gen. Insurance & Surety Corp v. NG Hua - Misrepresentation

106 PHIL 1117
Facts:

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