Development Insurance v IAC G.R. No. 71360 July 16, 1986

J. Cruz

Facts:

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 them. 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: Was Philippine Union required to jointly indemnify the building?

Held: No. Petition dismissed.

Ratio:

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 P508,867.00.

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.