55 – New Life Enterprises and Julian Sy v. CA, et al.

Facts: Julian Sy and Jose Sy Bang formed a partnership under the business name New Life Enterprises for the
purpose of selling construction materials. Julian acquired fire insurance policies for New Life’s stocks with
each of the private respondents, namely, Western Guaranty Corporation, Reliance Surety and Insurance, Co.,
Inc., and Equitable Insurance Corporation resulting in the stocks being insured in the total amount of
P1,550,000. Later, the building occupied by New Life was gutted by fire. Thus, Julian filed claims for the
proceeds of the policies with the private respondents. All three insurance companies denied his claims on the
ground of breach of policy conditions. Because of the denial of the claims, petitioners filed separate civil
actions for the collection of the insurance proceeds.

Issue: Were the claims properly denied due to breach of policy conditions?

Held: Yes.

Condition No. 3 of said insurance policies, otherwise known as the "Other Insurance Clause," is uniformly
contained in all the insurance contracts of petitioners. It pertinently states that the insured must give notice
to the insurance company of any other policies effected or which may subsequently be effected covering the
same properties subject of the policy and unless such notice is given before the loss of the insured property,
the benefits under the policy is deemed forfeited.

Petitioners admit that the coverage by other insurance or co-insurance subsequently arranged by them were
neither stated nor endorsed in the policies of the three (3) private respondents. They claim, however, that
they are not to be blamed for the omissions because their insurance agents knew about the existence of the
additional coverage and that they were not informed about the disclosure requirements. However,
knowledge of the petitioners’ agents is not the notice that Condition No. 3 requires to be made.

Moreover, Condition No. 15 of the insurance contracts uniformly provide that if any false declaration be made
by the insured, all benefits under the policies shall be forfeited.

Additionally, insofar as the liability of Reliance is concerned, it is not denied that the complaint for recovery
was filed more than 1 year from the petitioners’ receipt of Reliance’s letter of denial of the claim. Thus, the
action should be deemed barred in light of Condition No. 27 of the policy which provides that if a claim is
rejected and an action is not commenced within 12 months after receipt of the notice of denial or rejection,
the action shall be deemed to have been abandoned. The SC has already held in previous cases that such a
condition in an insurance contract is valid because of the importance of evaluating a claim for insurance while
evidence as to the origin and cause of destruction have not yet disappeared.

-Monci