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Development Insurance v IAC G.R. No.

71360 July
16, 1986

A fire occurred in the building of Philippine Union. It

sued for recovery of damages from the petitioner
on the basis of an insurance contract between
The petitioner failed to answer on time despite the
numerous extensions it asked for. It was declared
in default by the trial court.
A judgment of default was subsequently rendered
on the strength of the evidence given by the
private respondent, which was allowed damages.
The petitioner moved to lift the order of default. Its
motion was denied.
It went to the appellate court, which affirmed
the decision of the trial court. Hence this appeal.

ISSUE: WON the Philippine Union required to jointly

indemnify the building? NO
HELD: Petition dismissed.
The policy insured the private respondent's
building against fire for P2,500,000.00.
The petitioner argued that the respondent must
share the difference between that amount and the
face value of the policy and the loss sustained for 5.8
million under Condition 17 of the policy. The building
was insured at P2,500,000.00 by agreement of the
insurer and the insured.

The agreement is known as an open policy and is

subject to the express condition that:
In the event of loss, whether total or partial, it
is understood that the amount of the loss shall be
subject to appraisal and the liability of the company, if
established, shall be limited to the actual loss, subject
to the applicable terms, conditions, warranties and
clauses of this Policy, and in no case shall exceed the
amount of the policy.
Section 60 of the Insurance Code defines an
open policy is one in which the value of the thing
insured is not agreed upon but is left to be ascertained
in case of loss." This means that the actual loss, as
determined, will represent the total indemnity due the
insured from the insurer except only that the total
indemnity shall not exceed the face value of the policy.
The actual loss has been ascertained in this
case. Hence, applying the open policy clause as
expressly agreed upon, the private respondent is
entitled to indemnity in the total amount of
The refusal of its vice-president to receive the
private respondent's complaint was the first indication
of the petitioner's intention to prolong this case and
postpone the discharge of its obligation to the private
respondent under this agreement. They still evaded
payment for 5 years.