way of compensation for loss of earning during plaintiffs

15. Western Guaranty vs. CA

incapacity to work;
G.R. No. 91666, July 20, 1990 c) the sum of P10,000.00 as and by way of moral
TOPIC: Construction/Interpretation of Insurance Contracts damages ; d) the sum of P10,000.00 as and by way of
attorney's fees ;and e) the cost of suit.
FACTS:
Western on a Petition for Review alleging that the
Respondent Priscilla E. Rodriguez while crossing Court of Appeals erred in holding petitioner liable
Airport Road on a pedestrian lane on her way to work was Western's position that it cannot be held liable for loss of
struck by a De Dios passenger bus owned by respondent earnings, moral damages and attorney's fees because
De Dios Transportation Co., Inc., then driven by one these items are not among those included in the Schedule
Walter Saga y Aspero. The bus driver disregarded the stop of Indemnities set forth in the insurance policy, which
signal given by a traffic policeman to allow pedestrians to provides that:
cross the road. Priscilla was throw, hitting her forehead.
She was treated and hospitalized.Her face was
Schedule of Indemnities for Death and/or Bodily
permanently disfigured, causing her serious anxiety and
moral distress. Respondent bus company was insured Injury:
with petitioner Western Guaranty Corporation ("Western") The following schedule of indemnities should be
observed in the settlement of claims for death, bodily
Respondent Priscilla Rodriguez filed a complaint for injuries of, professional fees and hospital charges, for
damages before the RTC of Makati against De Dios services rendered to traffic accident victims under CMVLI
Transportation Co. and Walter A. Saga. Respondent De coverage:
Dios in turn, filed a third-party complaint against its
insurance carrier, Western. On 6 August 1985, the trial DEATH Amount
court rendered a decision in favor of respondent Priscilla INDEMNITY
P12,000.00
E. Rodriguez and defendant to pay, jointly and severally,
PERMANENT
and for the third-party defendant to pay to the plaintiff, DISABLEMENT
by way of contribution, indemnity or subrogation
whatever amount may be left unpaid by the defendant De
Dios Transportation Company, Inc. to the extent of not Loss of two P6,000.00
limbs
more than P50,000.00, as follows: a) The sum of
P2,776.00 as actual damages representing doctor's fees,
hospitalization and medicines; b) the sum of P1,500.00 by
 Loss of both There was also a schedule of indemnities that
hands, or all specified a certain amount for a certain type of injury as
fingers and well as hospital service payments.”
And as provided in the policy, it will be seen that the
above quoted Schedule of Indemnities establishes
both thumbs 6,000.00
monetary limits which Western may invoke in case of
occurrence of the particular kinds of physical injury there
Loss of both 6,000.00 listed, e.g.: loss of both feet P 6,000.00; loss of one foot
feet P2,400.00; loss of sight of one eye P1,800.00
It must be stressed, however, that the Schedule of
Loss of one 6,000.00 Indemnities does not purport to limit, or to enumerate
hand and one
exhaustively, the species of bodily injury occurrence of
foot
which generate liability for petitioner Western. A car
accident may, for instance, result in injury to internal
XXXX (Mahaba to
organs of a passenger or third party, without any
pero ganto ung concept ung para may amount lang
accompanying amputation or loss of an external member
intended for injuries, basta walang specified dito na mg
(e.g., a foot or an arm or an eye). But such internal
damages. Specific lang sila)
injuries are surely covered by Section I of the Master
Policy, since they certainly constitute bodily injuries.
ISSUE:
The Schedule of Indemnities does not purport to
Is Western liable for paying loss of earnings,
restrict the kinds of damages that may be awarded
moral damages and attorney's fees even these items were
against Western once liability has arisen. Section 1,
not among those included in the schedule of Indemnities
quoted above, does refer to certain "Limits of Liability"
set forth in the insurance policy?
which in the case of the third party liability section of the
Master Policy, is apparently P50,000.00 per person per
RULING:
accident. Within this over-all quantitative limit, all kinds
of damages allowable by law" — actual or compensatory
Yes. It should be noted that the Policy provides:
damages"; "moral damages'; "nominal damages";
“Section 1. Liability to the Public — Company will, subject
"temperate or moderate damages"; "liquidated damages";
to the Limits of Liability, pay all sums necessary to
and "exemplary damages" — may be awarded by a
discharge liability of the insured in respect of —
competent court against the insurer once liability is
(a) death of or bodily injury to or damage to
shown to have arisen, and the essential requisites or
property of any passenger as defined herein.
conditions for grant of each species of damages are
present. It appears to us self-evident that the Schedule of
Indemnities was not intended to be an enumeration,
much less a closed enumeration, of the specific kinds of
damages which may be awarded under the Master Policy
Western has issued.
The reading urged by Western of the Schedule of
Indemnities comes too close to working fraud upon both
the insured and the third party beneficiary of Section 1,
quoted above. For Western's reading would drastically
and without warning limit the otherwise unlimited (save
for the over-all quantitative limit of liability of P50,000.00
per person per accident) and comprehensive scope of
liability assumed by the insurer Western under Section 1:
"all sums necessary to discharge liability of the insured in
respect of [bodily injury to a third party]". This result-
which is not essentially different from taking away with
the left hand what had been given with the right hand we
must avoid as obviously repugnant to public policy. If
what Western now urges is what Western intended to
achieve by its Schedule of Indemnities, it was incumbent
upon Western to use language far more specific and
precise than that used in fact by Western, so that the
insured, and potential purchasers of its Master Policy,
and the Office of the Insurance Commissioner, may be
properly informed and act accordingly.
Petitioner Western would have us construe the
Schedule of Indemnities as comprising contractual
limitations of liability which, as already noted, is
comprehensively defined in Section 1 — Liability to the
Public" — of the Master Policy. It is wellsettled, however,
that contractual limitations of liability found in
insurance contracts should be regarded by courts with
a jaundiced(not easily convinced) eye and extreme
care and should be so construed as to preclude the
insurer from evading compliance with its just
obligations.
An insurance contract is a contract of adhesion.
The rule is well entrenched in our jurisprudence that the
terms of such contract are to be construed strictly
against the party which prepared the contract, which
in this case happens to be petitioner Western.
16. Rizal Surety & Insurance Company vs. Court of
Appeals
G.R. No. 112360, July 18, 2000
 Rizal Surety & Insurance Company issued Fire
Insurance Policy No. 45727 in favor of Transworld
Knitting Mills, Inc., for One Million Five Hundred
Thousand Pesos, covering the period from August
14, 1980 to March 13, 1981.The same pieces of
property insured with the petitioner were also
insured with New India Assurance Company, Ltd.
 On January 12, 1981, fire broke out in the
compound of Transworld, razing the middle portion
of its four-span building and partly gutting the left
and right sections thereof. A two-storey building,
behind said four-span building where fun and
amusement machines and spare parts were stored,
was also destroyed by the fire.

 Transworld filed its insurance claims with Rizal
Surety & Insurance Company and New India
Assurance Company but to no avail.
 Private respondent brought against the said
insurance companies an action for collection of
sums of money and damages.
 It is petitioner's submission that the fire insurance
policy litigated upon protected only the contents of
the main building (four-span), and did not include
those stored in the two-storey annex building. On
the other hand, the private respondent theorized
that the so called "annex" was not an annex but
was actually an integral part of the four-span
building and therefore, the goods and items stored
therein were covered by the same fire insurance
policy.
SC RULING:
Resolution of the issues posited here hinges on the proper
interpretation of the stipulation in subject fire insurance
policy regarding its coverage, which reads:
"xxx contained and/or stored during the currency of this
Policy in the premises occupied by them forming part of
the buildings situate (sic) within own Compound xxx"
Therefrom, it can be gleaned unerringly that the fire
insurance policy in question did not limit its coverage
to what were stored in the four-span building. As
opined by the trial court of origin, two requirements
must concur in order that the said fun and amusement
machines and spare parts would be deemed protected by
the fire insurance policy under scrutiny, to wit:
"First, said properties must be contained and/or stored in
the areas occupied by Transworld and second, said areas
must form part of the building described in the policy
xxx"
Both the trial court and the Court of Appeals found that
the so called "annex" was not an annex building but an
integral and inseparable part of the four-span building
described in the policy and consequently, the machines
and spare parts stored therein were covered by the fire
insurance in dispute.
Verily, the two-storey building involved, a permanent
structure which adjoins and intercommunicates with the
"first right span of the lofty storey building", formed part
thereof, and meets the requisites for compensability
under the fire insurance policy sued upon.
So also, considering that the two-storey building
aforementioned was already existing when subject fire
insurance policy contract was entered into on January
12, 1981, having been constructed sometime in
1978, petitioner should have specifically excluded the
said two-storey building from the coverage of the fire
insurance if minded to exclude the same but if did not,
and instead, went on to provide that such fire insurance
policy covers the products, raw materials and supplies
stored within the premises of respondent Transworld
which was an integral part of the four-span building
occupied by Transworld, knowing fully well the existence
of such building adjoining and intercommunicating with
the right section of the four-span building.
Article 1377 of the New Civil Code provides: Thee
interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.
Insurance policies are to be construed strictly and
most strongly against the insurer, and liberally in favor
of the insured so as to effect the dominant purpose of
indemnity or payment to the insured, especially where
forfeiture is involved, and the reason for this is that the
insured usually has no voice in the selection or
arrangement of the words employed and that the
language of the contract is selected with great care
and deliberation by experts and legal advisers
employed by, and acting exclusively in the interest of,
the insurance company.
Also, this rigid application of the rule on ambiguities has
become necessary in view of current business practices.
The courts cannot ignore that nowadays monopolies,
cartels and concentration of capital, endowed with
overwhelming economic power, manage to impose upon
parties dealing with them cunningly prepared
'agreements' that the weaker party may not change one
whit, his participation in the 'agreement' being reduced to
the alternative to 'take it or leave it'. 'Contracts by
adherence' (contrats [sic] d'adhesion), in contrast to
these entered into by parties bargaining on an equal
footing, such contracts (of which policies of insurance and
international bills of lading are prime example) obviously
call for greater strictness and vigilance on the part of
courts of justice with a view to protecting the weaker
party from abuses and imposition, and prevent their
becoming traps for the unwary.
WHEREFORE, the Decision, dated July 15, 1993, and the
Resolution, dated October 22, 1993, of the Court of
Appeals are AFFIRMED in toto.
20. MALAYAN INSURANCE COMPANY, INC., v. PAP
CO., LTD. (PHIL. BRANCH)
G.R. No. 200784 August 7, 2013
TOPIC: Insurable Interest (which is waley sa discussion ni
SC, so I guess implied ung story sa insurable interest?)
Summary
(Kung) Malayan (ka na) denied the Insurance claim
of PAP Co. on the ground the insured properties were
transferred from Sanyo building to Pace Pacific. According
to Malayan, PAP Co. violated sections 27,45, and 74 of
insurance code for the concealment of the new place of
the properties, hence PAP must not be entitled to claim.
Supreme Court ruled in favor Malayan
FACTS
On May 13, 1996, Malayan Insurance Company
(Malayan) issued Fire Insurance Policy No. F-00227-
000073 to PAP Co., Ltd. (PAP Co.) for the latter’s
machineries and equipment located at Sanyo Precision
Phils. Bldg., Phase III, Lot 4, Block 15, PEZA, Rosario,
Cavite (Sanyo Building). The insurance, which was for
Fifteen Million Pesos (P15,000,000.00) and effective for a
period of one (1) year, was procured by PAP Co. for Rizal
Commercial Banking Corporation (RCBC), the mortgagee
of the insured machineries and equipment.
After the passage of almost a year but prior to the
expiration of the insurance coverage, PAP Co. renewed the
policy on an "as is" basis. Pursuant thereto, a renewal
policy, Fire Insurance Policy No. F-00227-000079, was
issued by Malayan to PAP Co. for the period May 13, 1997
to May 13, 1998.
On October 12, 1997 and during the subsistence of the
renewal policy, the insured machineries and equipment
were totally lost by fire. Hence, PAP Co. filed a fire
insurance claim with Malayan in the amount insured.
In a letter, dated December 15, 1997, Malayan denied the
claim upon the ground that, at the time of the loss, the
insured machineries and equipment were transferred by
PAP Co. to a location different from that indicated in the
policy. Specifically, that the insured machineries were
transferred in September 1996 from the Sanyo Building
to the Pace Pacific Bldg., Lot 14, Block 14, Phase III,
PEZA, Rosario, Cavite (Pace Pacific). Contesting the
denial, PAP Co. argued that Malayan cannot avoid liability
as it was informed of the transfer by RCBC, the party
duty-bound to relay such information. However, Malayan
reiterated its denial of PAP Co.’s claim. Distraught, PAP
Co. filed the complaint below against Malayan.
RTC: ordering Malayan to pay PAP Company Ltd (PAP) an
indemnity for the loss under the fire insurance policy as
well as for attorney’s fees.
CA: Affirmed RTC but deleted attorney’s fees
Malayan Argument:
It cannot be held liable because PAP committed
concealment, misrepresentation and breach of an
affirmative warranty under the renewal policy when it
transferred the location of the insured properties without
informing it. Such transfer affected the correct
estimation of the risk which should have enabled
Malayan to decide whether it was willing to assume
such risk and, if so, at what rate of premium. The
transfer also affected Malayan’s ability to control the
risk by guarding against the increase of the risk
brought about by the change in conditions,
specifically the change in the location of the risk.
Malayan claims that PAP concealed a material fact
in violation of Section 27 of the Insurance Code8 when
it did not inform Malayan of the actual and new
location of the insured properties. In fact, before the
issuance of the renewal policy on May 14, 1997, PAP even
informed it that there would be no changes in the renewal
policy. (AS IS)
Malayan also argues that PAP is guilty of breach of
warranty under the renewal policy in violation of
Section 74 of the Insurance Code when, contrary to its
affirmation in the renewal policy that the insured
properties were located at the Sanyo Factory, these were
already transferred to the Pace Factory. Malayan adds
that PAP is guilty of misrepresentation upon a material
fact in violation of Section 45 of the Insurance Code
when it informed Malayan that there would be no changes
in the original policy, and that the original policy would
be renewed on an "as is" basis.
According to Malayan, the Sanyo Factory was occupied as
a factory of automotive/computer parts by the assured
and factory of zinc & aluminum die cast and plastic gear
for copy machine by Sanyo Precision Phils., Inc. with a
rate of 0.449% under 6.1.2 A, while Pace Factory was
occupied as factory that repacked silicone sealant to
plastic cylinders with a rate of 0.657% under 6.1.2 A.
PAP Argument
On the other hand, PAP counters that there is no
evidence of any misrepresentation, concealment or
deception on its part and that its claim is not fraudulent.
It insists that it can still sue to protect its rights and
interest on the policy notwithstanding the fact that the
proceeds of the same was payable to RCBC, and that it
can collect interest at the rate of 12% per annum on the
proceeds of the policy because its claim for indemnity was
unduly delayed without legal justification.
ISSUE
Is PAP Co. entitled to insurance claim?
RULING
No. It is settled that provides in renewal provision:
9. Under any of the following circumstances
the insurance ceases to attach as regards the
property affected unless the insured, before the
occurrence of any loss or damage, obtains the
sanction of the company signified by endorsement
upon the policy, by or on behalf of the Company:
xxx xxx xxx
(c) If property insured be removed to any
building or place other than in that which is
herein stated to be insured.12
Evidently, by the clear and express condition in the
renewal policy, the removal of the insured property to
any building or place required the consent of Malayan.
Any transfer effected by the insured, without the
insurer’s consent, would free the latter from any
liability.
The respondent failed to notify, and to obtain the consent
of, Malayan regarding the removal
The records are bereft of any evidence that Malayan was
notified of the transfer of the insured properties from the
Sanyo factory to the Pace factory. The Court found
nothing that would show that Malayan was duly notified
of the transfer of the insured properties.
What PAP did to prove that Malayan was notified
was to show that it relayed the fact of transfer to RCBC,
the entity which made the referral and the named
beneficiary in the policy. Malayan and RCBC might have
been sister companies, but such fact did not make one an
agent of the other. The fact that RCBC referred PAP to
Malayan did not clothe it with authority to represent and
bind the said insurance company. After the referral, PAP
dealt directly with Malayan. Granting that any notice to
RCBC was binding on Malayan, PAP’s claim that it
notified RCBC and Malayan was not indubitably
established.
The Court agrees with Malayan that the transfer to
the Pace Factory exposed the properties to a hazardous
environment and negatively affected the fire rating stated
in the renewal policy. The increase in tariff rate from
0.449% to 0.657% put the subject properties at a greater
risk of loss. Such increase in risk would necessarily entail
an increase in the premium payment on the fire policy.
Unfortunately, PAP chose to remain completely
silent on this very crucial point. Despite the importance of
the issue, PAP failed to refute Malayan’s argument on the
increased risk.
It can also be said that with the transfer of the location of
the subject properties, without notice and without
Malayan’s consent, after the renewal of the policy, PAP
clearly committed concealment, misrepresentation and a
breach of a material warranty.
Malayan is entitled to rescind the insurance contract
 Considering that the original policy was renewed on
an "as is basis," it follows that the renewal policy
carried with it the same stipulations and limitations.
The terms and conditions in the renewal policy provided,
among others, that the location of the risk insured
against is at the Sanyo factory in PEZA. The subject
insured properties, however, were totally burned at the
Pace Factory. Although it was also located in PEZA, Pace
Factory was not the location stipulated in the renewal
policy. There being an unconsented removal, the transfer
was at PAP’s own risk. Consequently, it must suffer the
consequences of the fire.
30. ARMANDO GEAGONIA vs. COURT OF APPEALS and
COUNTRY BANKERS INSURANCE CORPORATION
G.R. No. 114427
February 6, 1995
Topic: Special Provisions on Mortgagee and Mortgagors
| Insurable Interests | Double Insurance
Concentrate on the application of Condition 3 in the
Insurance Policy.
FACTS:
Geagonia is the owner of Norman's Mart. In 1989, he
obtained from the Country Bankers Insurance
Corporation (Country Bankers) fire insurance policy
P100k.
The period of the policy was from 22 December 1989 to
22 December 1990 and covered the following:
"Stock-in-trade consisting principally of dry goods
such as RTW's for men and women wear and other
usual to assured's business."
The petitioner declared in the policy under the
subheading entitled CO-INSURANCE that Mercantile
Insurance Co., Inc. was the co-insurer for P50,000.00.
From 1989 to 1990, Geagonia had this in his inventory:
Zenco Sales, Inc.P55,698.
00
F. Legaspi Gen. 86,432.5
Merchandise 0
Cebu Tesing 250,000. (on
Textiles 00 credit)
————
—
P392,13
0.50
The policy contained the following condition:
Condition 3. The insured shall give notice to the
Company of any insurance or insurances already
affected, 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 such 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.
In May 1990, fire of accidental origin broke out at the
public market and petitioner's insured stock-in-trade were
completely destroyed prompting him to file with the private
respondent a claim under the policy.
Country Bankers denied the claim because the loss of the
stocks-in-trade were likewise covered by two fire insurance
policies for P100,000.00 each, issued by the Cebu Branch
of the Philippines First Insurance Co., Inc. (PFIC). These
policies indicate that the insured was "Messrs. Discount
Mart (Mr. Armando Geagonia, Prop.)" with a mortgage
clause reading:
MORTGAGE: Loss, if any shall be payable to Messrs.
Cebu Tesing Textiles, Cebu City as their interest may
appear subject to the terms of this policy. CO-
INSURANCE DECLARED: P100,000. — Phils. First
CEB/F 24758.
The basis of the private respondent's denial was the
petitioner's alleged violation of Condition 3 of the policy.
Geagonia filed a complaint against the Country Bankers
with the Insurance Commission for the recovery of P100k
under fire insurance policy. He attached a letter which
asked for the reconsideration of the denial.
Geagonia’s Arguments
He admitted in the letter that at the time he obtained the
private respondent's fire insurance policy he knew that
the two policies issued by the PFIC were already in
existence; however, he had no knowledge of the
provision in the private respondent's policy requiring
him to inform it of the prior policies; this requirement
was not mentioned to him by the private respondent's
agent; and had it been mentioned, he would not have
withheld such information.
Country Bankers’ Arguments
It set up a defense on the violation of Condition 3 of the
policy.
Insurance Commission’s Decision
IC 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 which procured the PFIC policies
without informing him or securing his consent; and that
Cebu Tesing Textile, as his creditor, had insurable
interest on the stocks
Court of Appeal’s Decision
CA reversed the decision of the IC because it found that
the petitioner knew of the existence of the two other
policies issued by the PFIC.
Geagonia’s allegation of lack of knowledge of the
provisions insurances is belied by his letter to petitioner
Geagonia’s Arguments
He claims that the said letter was not offered in evidence
and thus should not have been considered in deciding the
case. However, a copy of this letter was attached to the
petitioner's complaint in I.C. Case as Annex "M" thereof
and made integral part of the complaint. It has attained
the status of a judicial admission and since its due
execution and authenticity was not denied by the other
party, the petitioner is bound by it even if it were not
introduced as an independent evidence.
ISSUES:
(a) Whether the petitioner had prior knowledge of the two
insurance policies issued by the PFIC when he
 obtained the fire insurance policy from the private
respondent, thereby, for not disclosing such fact,
violating Condition 3 of the policy, and
(b) If he had, whether he is precluded from recovering
therefrom.
RULING:
The petitioner knew of the prior policies issued by the
PFIC.
His letter 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. The policies were renewals.
Condition 3 is a condition which is not proscribed by
law. Its incorporation in the policy is allowed by Section
75 of the Insurance Code which provides that "[a] policy
may declare that a violation of specified provisions thereof
shall avoid it, otherwise the breach of an immaterial
provision does not avoid the policy."
Such a condition is a provision which invariably appears
in fire insurance policies and is intended to prevent an
increase in the moral hazard. It is commonly known as
the additional or "other insurance" clause and has
been upheld as valid and as a warranty that no other
insurance exists. Its violation would thus avoid
the policy.
However, in order to constitute a violation, the other
insurance must be upon same subject matter, the
same interest therein, and the same risk.
As to a mortgaged property, the MORTGAGOR and the
MORTGAGEE have each an INDEPENDENT
INSURABLE INTEREST therein and both interests may
be one policy, or each may take out a separate policy
covering his interest, either at the same or at
separate times.
The mortgagor's insurable interest covers the full value
of the mortgaged property, even though the mortgage debt
is equivalent to the full value of the property.
The mortgagee's insurable interest is to the extent of
the debt, since the property is relied upon as security
thereof, and in insuring he is not insuring the property
but his interest or lien thereon. His insurable interest
is prima facie the value mortgaged and extends only
to the amount of the debt, not exceeding the value of
the mortgaged property.
Thus, separate insurances covering different insurable
interests may be obtained by the mortgagor and the
mortgagee.
In the policy obtained by the mortgagor with loss
payable clause in favor of the mortgagee as his
interest may appear, the mortgagee is only a
beneficiary under the contract, and recognized as
such by the insurer but not made a party to the contract
himself. Hence, any act of the mortgagor which defeats
his right will also defeat the right of the mortgagee. This
kind of policy covers only such interest as the mortgagee
has at the issuing of the policy.
On the other hand, a mortgagee may also procure a
policy as a contracting party in accordance with the terms
of an agreement by which the mortgagor is to pay the
premiums upon such insurance. It has been noted,
however, that although the mortgagee is himself the
insured, as where he applies for a policy, fully informs the
authorized agent of his interest, pays the premiums, and
obtains on the assurance that it insures him, the policy is
in fact in the form used to insure a mortgagor with loss
payable clause.
Going back to the case..
The fire insurance policies issued by the PFIC name the
petitioner as the assured and contain a mortgage clause
which reads:
Loss, if any, shall be payable to MESSRS. TESING
TEXTILES, Cebu City as their interest may appear
subject to the terms of this policy.
This is clearly a simple loss payable clause, not a
standard mortgage clause.
It is a cardinal rule on insurance that a policy or
insurance contract is to be interpreted liberally in favor of
the insured and strictly against the company, to afford
the greatest protection which the insured was
endeavoring to secure when he applied for insurance.
It is also a cardinal principle of law that forfeitures are
not favored and that any construction which would result
in the forfeiture of the policy benefits for the person
claiming thereunder, will be avoided, if it is possible to
construe the policy in a manner which would permit
recovery, as, for example, by finding a waiver for such
forfeiture.
With these principles, Condition 3 of the subject policy is
not totally free from ambiguity and must, perforce, 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.
The first conclusion is supported by the condition
referring to other insurance "covering any of the property
or properties consisting of stocks in trade, goods in
process and/or inventories only hereby insured," and the
portion regarding the insured's declaration on the
subheading CO-INSURANCE that the co-insurer is
Mercantile Insurance Co., Inc. in the sum of P50,000.00
A double insurance exists where the same person is
insured by several insurers separately in respect of the
same subject and interest. As earlier stated, the insurable
interests of a mortgagor and a mortgagee on the
mortgaged property are distinct and separate. Since the
two policies of the PFIC do not cover the same
interest as that covered by the policy of the private
respondent, no double insurance exists. The non-
disclosure then of the former policies was not fatal to the
petitioner's right to recover on the private respondent's
policy.
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.